Honeywell 2004 Annual Report Download - page 109

HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)
losses in excess of 10 percent of the greater of the market-related value of plan assets or the plans projected benefit obligation are
recognized over a six-year period.
Our U.S. pension plans assets were $11.5 and $10.9 billion and our non-U.S. pension plans assets were $1.6 and $1.4 billion at
December 31, 2004 and 2003, respectively. Our asset allocation and target allocation for our pension plans assets are as follows:
Percentage of Plans
Assets at
December 31,
Long-term
Target
Allocation
Asset Category 2004 2003
Equity securities 61% 58% 40-65%
Debt securities, including cash 33 35 30-45
Real estate 4 5 2-8
Other 2 2 2-6
100% 100%
Equity securities include Honeywell common stock of $214 and $544 million at December 31, 2004 and 2003, respectively. An
independent fiduciary holds and makes all investment decisions with respect to the Honeywell common stock.
Our asset investment strategy focuses on maintaining a diversified portfolio, using various asset classes, in order to achieve our
long-term investment objectives on a risk adjusted basis. Our actual invested positions in various securities change over time based on
short and longer-term investment opportunities. To achieve our objectives, our U.S. investment policy requires that our U.S. Master
Retirement Trust be invested as follows: (a) no less than 30 percent be invested in fixed income securities; (b) no more than 10 percent
in high-yield securities; (c) no more than 10 percent in private real estate investments; and (d) no more than 6 percent in other
investment alternatives involving limited partnerships of various types. There is no stated limit on investments in publically-held U.S.
and international equity securities. Our non-U.S. investment policies are different for each country, but the long-term investment
objectives remain the same.
Our expected rate of return on plan assets of 9 percent is a long-term rate based on historic plan asset returns over varying long-
term periods combined with current market conditions and broad asset mix considerations. The expected rate of return is a long-term
assumption and generally does not change annually.
Our general funding policy for qualified pension plans is to contribute amounts at least sufficient to satisfy regulatory funding
standards. In 2004, 2003 and 2002, we made voluntary contributions of $40, $670 and $830 million, respectively, to our U.S. defined
benefit pension plans to improve the funded status of our plans. The contributions in 2002 included $700 million of Honeywell
common stock. Assuming that actual plan asset returns are consistent with our expected rate of 9 percent in 2005 and beyond, and that
interest rates remain constant, we would not be required to make any contributions to our U.S. pension plans for the foreseeable
future. We expect to contribute approximately $28 million in cash to our non-U.S. defined benefit pension plans in 2005. These
contributions do not reflect benefits to be paid directly from Company assets.
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