NOTES TO THE FINANCIAL STATEMENTS NOTE 22. Retirement Benefits (Continued)  Pension Benefits  Health Care and  U.S. Plans  Non-U.S. Plans  Life Insurance  2004  2003  2004  2003  2004  2003 Assumptions Used to Determine Net Benefit Cost for the Year Ending December 31 Discount rate 6.25% 6.75% 5.61% 5.65% 6.25% 6.75% Expected return on assets 8.75% 8.75% 8.38% 8.40% 6.20% 6.00% Average rate of increase in compensation 4.50% 5.20% 3.98% 3.98% 4.50% 5.20% Weighted Average Asset  Allocation at December 31 Equity securities 72.7% 72.2% 62.4% 63.7% 54.3% 0.0% Debt securities 26.7% 26.3% 36.4% 34.5% 45.7% 100.0% Real estate 0.0% 0.2% 0.9% 1.1% 0.0% 0.0% Other assets 0.6% 1.3% 0.3% 0.7% A one percentage point increase/(decrease) in the assumed health care cost trend rate would increase/(decrease) the  postretirement health care benefit obligation by approximately $5.2 billion/$(4.2) billion and the service and interest  component of health care expense by $330 million/$(260) million. The actual retiree health care cost trend for 2004 was 9%. Our policy for funded plans is to contribute annually, at a minimum, amounts required by applicable laws, regulations, and  union agreements. We do from time to time make contributions beyond those legally required. Pension. In 2004, we made over $2.3 billion of cash contributions to our funded pension plans. During 2005, we expect to  contribute $2.8 billion to our worldwide pension plans, including about $300 million of benefit payments paid directly by  the Company in respect of unfunded plans. Based on current assumptions and regulations, we do not expect to have a legal  requirement to fund our major U.S. pension plans in 2005. We also do not expect to be required to pay any variable-rate  premiums for our major plans to the Pension Benefit Guaranty Corporation in 2005. Health Care and Life Insurance. In 2004, we contributed $2.8 billion to our previously established VEBA for U.S. hourly retiree  health care and life insurance benefits. During 2005, we expect to contribute $200 million to the VEBA. The following table presents estimated future gross benefit payments and subsidy receipts related to the Medicare Prescription  Drug, Improvement and Modernization Act of 2003 (in millions): Pension Benefits U.S. Plans Non-U.S. Plans Health Care and Life Insurance Benefit Payments Benefit Payments Benefit Payments Subsidy Receipts 2005 $  2,740 $  1,290 $  1,660 $  - 2006 2,800 1,300 1,790 (80) 2007 2,870 1,320 1,930 (90) 2008 2,940 1,350 2,060 (100) 2009 2,990 1,410 2,180 (110) 2010 - 2014 15,320 7,840 12,270 (650) Estimated Future Benefit Payments Plan Contributions Plan Asset Information Pension. Our investment strategy for pension assets has a long-term horizon and is tolerant of return volatility, in keeping with the  long-term nature of the liabilities. The target asset allocation for our major plans worldwide generally is 70% equities, 30% fixed  income. The present allocation to alternative investments (e.g., private equity) is below 1%. All assets are externally managed and  investment managers have discretion to invest globally within their respective mandates. A diverse array of investment processes  within asset classes reduces volatility. Most assets are actively managed; manager skill and broad mandates have generally  produced long-term returns in excess of common market indices. Ford securities comprised less than one-half of one percent of the  value of our worldwide pension plan assets during 2004 and 2003. 8 6