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 non-operating 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 for 2007, 2006 and 2005 include the following components: (Dollars n Milion) Service cost Interest cost Expected return on plan assets Amortization of prior service cost Amortization of net transition asset Recognized actuarial losses Curtailments and settlements Net periodic benefit cost Retirement Plard 2007 2006 $ 597 552 656 570 (701) 10 10 1 (1) 186 251 5 4 $ 646 685 (809) Other Benefit Plans 2007 2006 $140 122 149 136 (2) (3) (7) (7) 2005 462 488 (579) 12 (2) 219 2 602 2005 56 87 (3) (7) 66 74 25 $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 (Dollars in 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. Retirement Plans 2007 2006 2005 Other Benefit Plans 2007 2006 2005 6.50% 6.00 5.75 6.50% 6.00 5.75 (Dollarsin Millions) U.S. 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 9.00 4.50 9.00 4.50 5.50% 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 The Company's discount rates are determined by considering current yield curves representing high quality, long-term fixed income instru- ments. The resulting discount rates are consistent with the duration of plan liabilities. The expected 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 2007 2006 Health care cost trend rate assumed for next year 9.00% 9.00 Rate to which the cost trend rate is assumed to decline (ultimate trend) 5.00% 4.50 Year the rate reaches the ultimate trend rate 2014 2012 A one-percentage-point change in assured health care cost trend rates would have the following effect: One Percentage One Percentage- Point IncreasePoint Degrease (Dours in one) Health Care Plans Total interest and service cost Postretirement benefit obligation $ 35 320 $ (27) (259) Net periodic benefit costs for the Company's defined benefit retirement plans and other benefit plans for 2007, 2006 and 2005 include the following components: (Dollars n Milion) Service cost Interest cost Expected return on plan assets Amortization of prior service cost Amortization of net transition asset Recognized actuarial losses Curtailments and settlements Net periodic benefit cost Retirement Plard 2007 2006 $ 597 552 656 570 (701) 10 10 1 (1) 186 251 5 4 $ 646 685 (809) Other Benefit Plans 2007 2006 $140 122 149 136 (2) (3) (7) (7) 2005 462 488 (579) 12 (2) 219 2 602 2005 56 87 (3) (7) 66 74 25 $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 (Dollars in 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. Retirement Plans 2007 2006 2005 Other Benefit Plans 2007 2006 2005 6.50% 6.00 5.75 6.50% 6.00 5.75 (Dollarsin Millions) U.S. 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 9.00 4.50 9.00 4.50 5.50% 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 The Company's discount rates are determined by considering current yield curves representing high quality, long-term fixed income instru- ments. The resulting discount rates are consistent with the duration of plan liabilities. The expected 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 2007 2006 Health care cost trend rate assumed for next year 9.00% 9.00 Rate to which the cost trend rate is assumed to decline (ultimate trend) 5.00% 4.50 Year the rate reaches the ultimate trend rate 2014 2012 A one-percentage-point change in assured health care cost trend rates would have the following effect: One Percentage One Percentage- Point IncreasePoint Degrease (Dours in one) Health Care Plans Total interest and service cost Postretirement benefit obligation $ 35 320 $ (27) (259)