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	Notes to Consolidated Financial Statements (Section 4 of 7)
	On This Page: | 9. Pension and Postretirement Benefits | 10. Savings and Investment Plans | 11. Lease Commitments |
	9. Pension and Postretirement Benefits Our pension plans cover most employees worldwide. Benefits depend on years of service and employee final average earnings. Participants vest in their benefits after as few as five years of service. Our postretirement plans in the U.S. provide medical and life insurance benefits to retirees and their eligible dependents. Employees are eligible for benefits if they meet age and service requirements and qualify for retirement benefits. We reserve the right to modify or terminate these plans. Our funding policy is: to contribute annually to U.S. pension plans at a rate intended to remain at a level percentage of compensation. Since the major U.S. plan is overfunded, we have not made a contribution since 1992. to fund international pension plans as required by local government and tax requirements We do not fund postretirement plans, but contribute to the plans as benefits are paid. In 1997, the U.S. pension plan was amended to improve the benefit provisions. These changes contributed to most of the increases in the projected benefit obligation and the unrecognized prior service costs of the U.S. plan. The following tables present the benefit obligations of the plans, the funded status of the pension plans and the assumptions used:   Pension Postretirement (percentages) 1997 1996 1995 1997 1996 1995  Assumptions:   Discount rate:     U.S. plans 7.0 7.5 7.5 7.0 7.5 7.5      International plans 5.9 6.5 6.4         Rate of increase in   salary levels:     U.S. plans 4.5 4.5 5.5           International plans 3.9 4.2 4.3       (millions of dollars)             Fair value of plan assets $ 2,793 $ 2,410 $ 2,168        Actuarial present value   of accumulated   benefit obligation:     Vested 1,821 1,606 1,558            Non-vested 270 242 216            Total 2,091 1,848 1,774        Effect of future salary   increases 583 282 288        Projected benefit obligation 2,674 2,130 2,062        Postretirement benefit   obligation for:     Retirees       $ 180 $ 188 $ 197     Fully eligible       active plan participants       33 33 32      Other active plan       participants       74 64 61  Accumulated postretirement   benefit obligation       287 285 290  Plan assets in excess of / (less than)   benefit obligation 119 280 106  (287) (285) (290)  Unrecognized overfunding   at date of adoption (10) (15) (18)  — — —  Unrecognized net (gains) / losses (86) (14) 129  (24) (19) (3)  Unrecognized prior service   costs / (gains) 310 70 95  (83) (108) (133)  Minimum liability adjustment (196) (159) (180)  — — —  Prepaid/(accrued)   costs included in   the Balance Sheet $  137 $  162 $  132  $  (394) $  (412) $  (426)  The figures above include the following amounts for partially funded international pension plans: (millions of dollars) 1997 1996 1995  Fair value of plan assets $294 $319 $326  Accumulated benefit obligation $553 $615 $620  The pension plan trustees invest plan assets primarily in stocks, bonds and short-term investments. At December 31, 1997, the major U.S. plan held approximately 3.5 million shares of our common stock with a fair value of approximately $261 million. The plan received approximately $3 million in dividends on these shares in 1997. The annual cost related to these plans and the assumptions used consist of the following:   Pension Postretirement (percentages) 1997 1996 1995 1997 1996 1995  Assumptions:   Expected long-term rate   of return on plan assets:     U.S. plans 10.0 10.0 10.0           International plans 7.5 7.8 8.1        (millions of dollars)              Expected return on   plan assets:   Actual return $(491) $(325) $ (415)          Deferred return 283 133 245        Net expected return (208) (192) (170)        Service cost — benefits   earned during   the period 105 93 81  $    7 $    6 $    5  Interest cost on benefit   obligation 145 139 131  19 20 22  Net amortization and   deferral 31 30 46  (25) (24) (24)  Net periodic cost $   73 $   70 $   88  $    1 $    2 $    3  An average increase of 8.2% in the cost of covered health care benefits was assumed for 1998 and is projected to decrease to 5.2% after seven years and to then remain at that level. A 1% increase in the medical trend rate assumed for postretirement benefits would cause an increase of $13.1 million in the accumulated benefit obligation at December 31, 1997 and an increase in the periodic cost of $.9 million. 10. Savings and Investment Plans We have savings and investment plans for most employees in the U.S., Puerto Rico, the U.K. and Ireland. Employees may contribute a portion of their salaries to the plans and we match a portion of the employee contributions. Our contributions were $41 million in 1997, $36 million in 1996 and $33 million in 1995. 11. Lease Commitments We lease properties for use in our operations. In addition to rent, the leases require us to pay directly for taxes, insurance, maintenance and other operating expenses, or to pay higher rent when operating expenses increase. Rental expense, net of sublease income, was $139 million in 1997, $122 million in 1996 and $118 million in 1995. This table shows future minimum rental commitments under noncancellable leases at December 31, 1997:             After (millions of dollars) 1998 1999 2000 2001 2002 2002  Lease commitments $ 45 $ 42 $ 33 $ 24 $ 23 $ 286

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