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HONEYWELL INTERNATIONAL INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

(Dollars in millions, except per share amounts)

We are authorized to issue up to 40,000,000 shares of preferred stock, without par value, and can determine the number of shares

of each series, and the rights, preferences and limitations of each series. At December 31, 2004, there was no preferred stock

outstanding.

Note 19—Other Nonowner Changes in Shareowners' Equity

Total nonowner changes in shareowners' equity are included in the Consolidated Statement of Shareowners' Equity. The changes

in Accumulated Other Nonowner Changes are as follows:

Pretax Tax After-

Tax

Year Ended December 31, 2004

Foreign exchange translation adjustments $ 351 $ — $ 351

Change in fair value of effective cash flow hedges (15) 6 (9)

Minimum pension liability adjustment (19) 4 (15)

$ 317 $ 10 $ 327

Year Ended December 31, 2003

Foreign exchange translation adjustments $ 551 $ — $ 551

Change in fair value of effective cash flow hedges — — —

Minimum pension liability adjustment 604 (235) 369

$ 1,155 $ (235) $ 920

Year Ended December 31, 2002

Foreign exchange translation adjustments $ 310 $ — $ 310

Change in fair value of effective cash flow hedges 35 (13) 22

Minimum pension liability adjustment (956) 350 (606)

$ (611) $ 337 $ (274)

The components of Accumulated Other Nonowner Changes are as follows:

December 31,

2004 2003 2002

Cumulative foreign exchange translation adjustments $ 489 $ 138 $ (413)

Fair value of effective cash flow hedges 8 17 17

Minimum pension liability (359) (344) (713)

$ 138 $(189) $(1,109)

Note 20—Stock-Based Compensation Plans

We have stock plans available to grant incentive stock options, non-qualified stock options and stock appreciation rights to officers

and employees.

Fixed Stock Options—The exercise price, term and other conditions applicable to each option granted under the stock plans are

generally determined by the Management Development and Compensation Committee of the Board. The options are granted at a price

equal to our stock's fair market value on the date of grant. The options generally become exercisable over a three-year period and

expire after ten years.