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62
expected long-term rate of return of 7.8% for both U.S. and international equities; 13% private equities with an
expected long-term rate of return of 12.8%; 28% fixed-income securities with an expected long-term rate of return
of 4.5%; and an additional rate of return of 1.3% from active investment management. These assumptions result
in an 8.75% expected rate of return on an annualized basis. The plan assets earned a rate of return in excess of
10%, 13% and 18% in 2005, 2004 and 2003, respectively. The average annual actual return on the plan assets
over the past 10 and 25 years has been 10.2% and 12.2%, respectively.
The U.S. plan’s asset allocation by asset category as of plan measurement dates follows:
Percentage
Target of Plan Assets
Asset Category Allocation 2005 2004
U.S. qualified pension plan
Domestic equity 44% 46% 46%
International equity 15 14 17
Fixed income 28 29 27
Private equity 13 99
Cash – 2 1
Total 100% 100% 100%
Postretirement benefits measurement
Domestic equity 78% 77% 79%
International equity 2 23
Fixed income 11 11 10
Private equity 8 98
Cash 1 1–
Total 100% 100% 100%
While the target asset allocations do not have a percentage allocated to cash, the plans will always have some
cash due to cash flows. The postretirement allocation shown above represents a weighted-average allocation for
U.S. plans.
The international plans’ weighted-average asset allocation as of plan measurement dates follows:
Percent of
Plan Assets
Asset Category 2005 2004
International pension plans
Domestic equity 22% 30%
Foreign equity 33 23
Real estate 32
Domestic fixed income 15 15
Foreign fixed income 99
Insurance 15 19
Cash 12
Other 2–
Total 100% 100%
The preceding asset allocations for international plans represent the top six countries by projected benefit
obligation. These countries represent approximately 90% of the total projected international benefit obligation. The
other countries’ asset allocations would not have a significant impact on the information presented.
In 2005, the Company made discretionary contributions totaling $500 million to its U.S. qualified pension plan, with
$200 million contributed in the fourth quarter of 2005, and $300 million contributed in the third quarter of 2005. In
the third quarter of 2005, the Company also transferred a portion of its Sumitomo 3M Japanese pension liabilities
and assets to the government, as allowed by a Japanese government program. This program allowed 3M to