Motorola 2004 Annual Report Download - page 114

106 MOTOROLA INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions, except as noted)
assets have been measured as of December 31, 2004 for all U.S. plans and as of October 1, 2004 for all Non
U.S. plans. BeneÑts under all pension plans are valued based upon the projected unit credit cost method.
Weighted average actuarial assumptions used to determine costs for the plans were as follows:
2004 2003
December 31 U.S. Non U.S. U.S. Non U.S.
Discount rate for obligations 6.50% 5.34% 6.75% 5.39%
Investment return assumption (Regular Plan) 8.50% 6.93% 8.50% 6.66%
Investment return assumption (OÇcers Plan) 6.00% N/A 6.00% N/A
Weighted average actuarial assumptions used to determine beneÑt obligations for the plans were as follows:
2004 2003
December 31 U.S. Non U.S. U.S. Non U.S.
Discount rate for obligations 6.00% 5.44% 6.50% 5.23%
Future compensation increase rate (Regular Plan) 4.00% 4.21% 4.00% 4.11%
Future compensation increase rate (OÇcers Plan) 3.00% N/A 3.00% N/A
Discount rates are established based on prevailing market rates for high-quality Ñxed-income instruments that,
if the pension beneÑt obligation was settled at the measurement date, would provide the necessary future cash Öows
to pay the beneÑt obligation when due. At December 31, 2004, the Regular Pension Plan investment portfolio was
predominantly equity investments and the OÇcers' Pension Plan investment portfolio was predominantly Ñxed-
income securities. The Company uses long-term historical actual return experience with consideration to the
expected investment mix of the plans' assets, and future estimates of long-term investment returns to develop its
expected rate of return assumption used in calculating the net periodic pension cost.
Negative Ñnancial market returns during 2000 through 2002 resulted in a decline in the fair-market value of
plan assets. This, when combined with declining discount rate assumptions in the last several years, has resulted in a
decline in the plans' funded status. Consequently, the Company's accumulated beneÑts obligation exceeded the fair-
market value of the plan assets for various plans including the Regular Pension Plan, the OÇcers' Pension Plan and
certain non-U.S. plans.
The accumulated beneÑt obligations for the plans were as follows:
2004 2003
OÇcers OÇcers
and Non and Non
December 31 Regular MSPP U.S. Regular MSPP U.S.
Accumulated beneÑt obligation $ 4,407 $160 $1,244 $ 3,775 $ 186 $1,093
As required, after-tax charges of $188 million, $182 million and $647 million for the years ended
December 31, 2004, 2003 and 2002, respectively, were recorded to reÖect the net change in the Company's
additional minimum pension liability associated with these plans. This charge was included in Non-Owner Changes
to Equity in the consolidated balance sheets.
The Company has adopted a pension investment policy designed to meet or exceed the expected rate of return
on plan assets assumption. To achieve this, the pension plans retain professional investment managers that invest
plan assets in equity and Ñxed income securities and cash. In addition, some plans invest in insurance contracts. The
Company has the following target mixes for these asset classes, which are readjusted at least quarterly, when an
asset class weighting deviates from the target mix, with the goal of achieving the required return at a reasonable risk
level as follows:
Asset Category Target Mix
Equity securities 73%
Fixed income securities 25%
Cash and other investments 2%