Occidental Petroleum 2003 Annual Report Download - page 76

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Benefit obligation -- beginning of year $ 357 $ 337 $ 501 $ 453 $ 14 $ 12
Service cost -- benefits earned during the period 13 10 6 6 1 --
Interest cost on projected benefit obligation 23 26 33 33 1 1
Actuarial loss 19 10 52 59 4 2
Foreign currency exchange rate changes 3 (11) -- -- -- --
Benefits paid (22) (21) (48) (50) (1) (1)
Plan amendments (1) 2 -- -- -- --
Cost recovery percentage -- 6 -- -- -- --
Divestitures -- (3) -- -- -- --
Special termination benefits -- 1 -- -- -- --
------ ------ ------ ------ ------ ------
Benefit obligation -- end of year $ 392 $ 357 $ 544 $ 501 $ 19 $ 14
============================================================ ====== ====== ====== ====== ====== ======
The following table sets forth the reconciliation of the beginning and
ending balances of the fair value of plan assets for Occidental's defined
benefit pension and postretirement benefit plans:
Pension Benefits Postretirement Benefits
---------------- -------------------------
Funded Plans
-------------------------
For the years ended December 31, (in millions) 2003 2002 2003 2002
============================================================ ====== ====== ========== ==========
CHANGES IN PLAN ASSETS:
Fair value of plan assets -- beginning of year $ 251 $ 255 $ -- $ --
Actual return on plan assets 48 (1) -- --
Foreign currency exchange rate changes 1 (3) -- --
Employer contribution 31 23 2 1
Benefits paid (22) (21) (1) (1)
Divestitures -- (2) -- --
------ ------ ---------- ----------
Fair value of plan assets -- end of year $ 309 $ 251 $ 1 $ --
============================================================ ====== ====== ========== ==========
The following table sets forth the asset allocation of Occidental's
domestic defined benefit pension and funded postretirement benefit plans at
December 31, 2003 and 2002.
Pension Benefits Postretirement Benefits
---------------- -------------------------
Funded Plans
-------------------------
For the years ended December 31, 2003 2002 2003 2002
============================================================ ====== ====== ========== ==========
ASSET CATEGORY:
Equity securities 61 % 55 % -- % -- %
Debt securities 39 45 100 100
------ ------ ---------- ----------
Total 100 % 100 % 100 % 100 %
============================================================ ====== ====== ========== ==========
Occidental employs a total return investment approach whereby a mix of
equity and fixed income investments is used to maximize the long-term return of
plan assets at a prudent level of risk. The investments are monitored by
Occidental's Investment Committee in its role as fiduciary. The Investment
Committee, consisting of senior executives of the company, selects and employs
various external professional investment management firms to manage specific
assignments across the spectrum of asset classes. The resulting aggregate
investment portfolio contains a diversified blend of equity and fixed-income
investments. Furthermore, equity investments are diversified across U.S. and
non-U.S. stocks, as well as differing styles and market capitalizations. Other
asset classes such as private equity and real estate may be used to enhance
long-term returns while improving portfolio diversification. Investment
performance is measured and monitored on an ongoing basis through quarterly
investment and manager guideline compliance reviews, annual liability
measurements, and periodic studies.
59
The projected benefit obligation, accumulated benefit obligation and fair
value of plan assets for defined benefit pension plans with accumulated benefit