Summer 2004Spring 2004

FeaturesNew Year…New Format…More for You 2Making Sense of Investing 3

Focus on Funds 4

LifestylesPlanning for Retirement 6

Investment Know-How 7

Risk AssessmentWhat Type of Investor Are You? 8

NewsstandMarket Update 9Retiree Corner 9

Fund Performance Update 10

Current news

concerning your

Savings Plan

2

• Current and relevant. Each issue discusses currentretirement savings issues and highlights stories fromreal investors, just like you, who are saving forretirement.

• Educational. A new section, Focus on Funds, givesyou an in-depth look at the many different fundsavailable in the Plan. In addition to this, you’lldiscover first-hand how to make the most of yourinvestments, follow fund performance and currentmarket issues, and develop an investment strategy.

• Useful for everyone. The newsletter covers savingsand investment topics aimed at a variety ofaudiences, so you’re bound to find something thatinterests you.

> Investment Know-How keeps you informed,delivering explanations and simplifyingterminology.

> Market Update presents current issues and hottopics intended to help you make informeddecisions about your investments.

> Retiree Corner targets readers who are alreadyretired, but features information all readers maybenefit from—including valuable lessons learned.For example, this issue discusses when you arerequired by law to start receiving your benefit—something everyone should know.

> Fund Performance Update provides quarterlyupdates on each fund’s performance.

New Year…New Format…More For You

We’re excited to offer you the first issue of Trust Talk for 2004.As you can see, we’ve made a few changes to the format tobenefit you. We’ve updated the look and feel to create aformat that’s easy to follow. Our goal for each newsletter is to

provide you information that is:

Trust Talk is full of useful andinteresting topics. It’s also a goodreference tool when you havequestions about fundperformance, investmentconcepts or how much you needto save for retirement. You maywant to keep each issue so it’savailable when you needinformation.

2004 IRS Limits

• The maximum limit on tax-deferred contributionsto the Savings Plan is $13,000 for 2004.

• If you will be at least 50 years old in 2004, youmay also contribute up to an additional $3,000 asa catch-up contribution, making the maximumannual tax-deferred limit $16,000.

• Contribution changes are accepted daily andgenerally take effect within one to two pay periods.You can change your contribution by accessingthe Your Benefits Resources Web site or bycalling your Benefit Center‘s automated system.

Feature

3

1. Know how performance affects the size of yoursavings

The size of your overall savings is not just affected byhow much you (and the Company) contribute.Investment performance also plays a big role becauseyour savings will experience earnings and lossesbased on that level of performance. Any investmentearnings (or interest) stay in your account and canaccumulate more earnings. This is called compoundingand it’s one of the key ways your account balancegrows over the years. And remember, the higher therate of return, the more your savings will grow.

2. Know your investment timetable

Your investment timetable is the amount of time youhave until you will need to access your money. Whyis a timetable important? The longer your savings areinvested, the more risk you can take because youhave time to recover from any losses you experience.When selecting investments, consider your age, thecurrent stage of your career (beginning, middle, orend), and the amount of risk you are comfortablewith. Ask yourself how long it will be before youretire and how much you will need for each year ofretirement. How many years you will live after youretire also affects your investment timetable. Seepage 7 for some tips on how to decide what kind ofinvestor you are.

3. Know the link between risk and return

Over the long term (10 to 20 years), the more risk youtake, the better your expected return. For example,stocks have higher levels of risk than cash,investment/insurance contracts, and bonds. Stocks

tend to experience significant ups and downs, butover the long term should be rewarded with higherreturns. Bonds are generally more stable, but thereturns are usually modest. It may give you peace ofmind to choose slow and steady; however, choosingto invest conservatively over your entire investmenttimetable may result in your not having enough tomeet your retirement needs.

4. Look at real earnings

Take into account the inflation rate when you look atthe returns of your investment. Unless your return isgreater than the rate of inflation, you’re actually losingmoney. If you’re not sure what this means, look at thepurchasing power of $40,000 over the last 25 years: In1979, $40,000 could buy about 16 automobiles, but in2004, the same amount will buy you only one or two.Why? Inflation. The overall inflation rate for the last 20years averaged 4%, and expectations for the futuregenerally center around 3%.

5. Minimize investment risk by diversifying

They are often called the three most important wordsin investing: diversify, diversify, diversify. It can’t bestressed enough. These last few years have given us agreat lesson on the importance of diversification. Youmay have heard the phrase “don’t put all your eggs inone basket.” It not only applies to life in general, butalso specifically to investing. If you invest all yoursavings in one stock, or even one asset class, and thestock or asset class does not perform well, you couldlose a substantial amount of your investment.However, if you diversify your investment into multiplevehicles (e.g., stocks, bonds, stable value, or cash),

Making Sense of InvestingFeature

The Plan offers multiple investment options so you can createthe investment strategy that makes the most sense for you—and you don’t have to be an investment expert to do so. All youhave to do is follow a few guidelines:

4

In this issue of Trust Talk, we’ll focus on the two most conservative funds—the Fixed Income Fund (FIF) and theBond Index Fund. The following graphic shows where these funds lie on the risk/return spectrum:

In future issues of Trust Talk, we will move along this spectrum, focusing on funds in order of increasing risk/return.

Small Cap EquityLarge Cap Value Equity

Large Cap Growth Equity

Halliburton Stock

Non-U.S. Equity

S&P 500 Index

Equity Investment

Balanced

General Investment

Bond Index

Fixed Income HigherRisk,HigherReturn

LowerRisk,

LowerReturn

Focus on Funds

Fixed Income and Bond Index Funds

you are positioned to weather the ups and downs ofthe stock market. Here are a few other things toconsider:

• When bond rates go up (bond rates are generallytied to interest rates), stock returns generally godown. This is because when rates on bonds, whichare very low risk, are high, many investors pull theirmoney out of stocks to invest in bonds. Dependingon your investment timetable, you may want to thinkabout investing in both stocks and bonds to minimizeyour risk.

• Some stock funds are more volatile (experiencebigger ups and downs) than others due to the stocksthey invest in. For example, in recent years a stockfund with a significant investment in high-tech and

telecommunications companies has been morevolatile than a stock fund invested in large company“blue chip” stocks.

• We are part of a global economy. When U.S.markets experience a slump, other economies canbe experiencing a boom.

The bursting of the Internet bubble, corporate scandals,the ongoing threat of terrorism, war in Iraq, loss ofconsumer confidence, and higher unemployment havehampered the economy. However, if you know howperformance affects your retirement savings and whatyour investment timetable is, understand the linkbetween risk and return, and look at how it affects realearnings—you can make sense of it all.

5

Terms to Know:

Asset-Backed Investment Contracts—issued by a financial institution such as a bank or life insurance company. Inthe case of the Fixed Income Fund, all contracts are secured with bonds. These contracts provide a specific rate ofreturn over a specific period of time.

Diversification—the act of spreading your savings across more than one type of investment.

Inflation Rate—rate at which prices change, which affects purchasing power.

Inflation Risk—likelihood that an investment’s growth will not keep up with the rate of inflation. To maintainpurchasing power, your investments need to earn a rate of return higher than the inflation rate.

Investment Manager—also called a portfolio manager and money manager, the firm which manages a portfolio ofinvestments.

Market Risk—likelihood that an investment will go up and down in value, especially over the short term. Funds withhigher market risk tend to have more dramatic ups and downs in value than funds with lower market risk.

Security—a stock, bond, or option that represents ownership in a corporation, or a loan to a corporation orgovernment.

Market Risk ▲

Inflation Risk ▲

Potential Return ▲

Low Medium High

Market Risk ▲

Inflation Risk ▲

Potential Return ▲

Low Medium High

Fixed Income Fund Bond Index Fund Fixed Income Fund (FIF) invests primarily in contracts. Bond Index Fund invests fully in U.S. bonds.

Investment objective

To preserve your principal with a stable rate of return. To obtain returns that are approximately equal to the performance of the Lehman Aggregate Bond Index.

How are they different?The most conservative option in terms of risk and A conservative option in terms of risk, being short-term volatility. passively managed and representative of the general

U.S. bond market.A diversified fund that invests in contracts which A fund that invests in U.S. bonds, typically a combinationprovide a specified rate of return over a specified of government and corporate bonds and mortgage-backedperiod. securities, that provide a mix of interest income and

principal gain or loss.Investment returns over the short term will be relatively Investment returns will follow the general U.S. bondstable. Over the long term, returns will follow the general market, providing a mix of interest income and U.S. bond market. principal gain or loss.

Fund composition

Long-term potential risk & return

■ Asset-backedinvestment contracts

■ Investment contractspooled fund

98%

2%

100%

Now let’s look at the details of these funds as of March 31, 2004.

■ U.S. bonds

Q: How many years do we expect to live in

retirement?

A: George and Martha are currently in good health andmaintain a healthy lifestyle. As a result, based onaverage mortality rates, both George and Martha canbe expected to live to age 83. This means that Marthais projected to live for 23 years after retirement, andGeorge 21 years.

Q: How much will we need?

A: Taking the longer lifespan of Martha as a base, wecan estimate the current value of the amount they willneed during retirement as follows:

23 years X $40,000 = $920,000.

This calculation is in current dollars, which means itdoes not consider:

• Inflation, which will increase the amount of savingsGeorge and Martha actually need in retirement; and

• Investment earnings, which can increase the valueof their current savings over time.

When eligible, George and Martha can expect toreceive about $14,500 each year from Social Security(based on current Social Security average estimates*).

As we can see, George and Martha will needsubstantial savings in order to achieve their retirementgoals. This is only a ballpark estimate to give Georgeand Martha an idea of the magnitude of savings theywill need to retire. If they are close to accumulatingthis amount, they should have little problem. However,if they are not, it might be a good idea to consult afinancial planner to see what they have to do to get ontrack to meet their goals.

* Source: Social Security Administration, retirement incomeestimator, American Savings Education Council.

6

Meet George and Martha Smith. George is52 and has worked as a field inspectorfor Halliburton for almost 20 years.Martha is 50 and enjoys her part-timework as a teacher’s aide, but has no

employer-provider pension. Their children are grownand although they have been saving regularly, theyworry that they have not started planning early enoughfor retirement.

Most people define retirement as not having to worryabout finances. If you are contributing to your SavingsPlan and, like George, have several years before youretire, take the time now to identify your retirementgoals and assess your portfolio. George and Marthastart by answering these questions:

Q: When do we want to retire?

A: George and Martha would really like to retire in 10years, when George is age 62. They are not sure theywill have enough money to make that possible.

Q: Will any of our expenses change

significantly after retirement?

A: After reviewing their expenses, they realize thattheir house will be paid off when they retire, which willlower their expenses considerably. They will also nolonger have commuting expenses, and they can expecttheir clothing expenses to be reduced somewhat. Theyalso believe their tax expenses will be lower since theirincome will be considerably less. However, they willlikely have much higher medical expenses once theirgroup health plan coverage ends, which could offsetsome of the expense reductions.

Q: How much money will we need each year

to live well in retirement?

A: George and Martha have read several newspaperand magazine articles and know that experts estimateretirees need from 60-90% of their pre-retirementincome to maintain their current lifestyle duringretirement. They know they could get a detailedestimate by going to a financial planner, but for now,they just want a ballpark figure. Based on their reducedexpenses, they decide that they will need about 80% oftheir $50,000 current annual income during retirement,or $40,000 for each year of retirement.

Lifestyles

Planning for Retirement

Aggressive

Risk Capacity: High

Usual Age: 20s to 40s

Goal: Maximum growth

Profile: Accepts significant swingsin the value of investments inreturn for maximum long-termgrowth of capital

Sample Asset Allocation:

■ Stocks

■ Bonds

■ Stable value or cash

Moderate

Risk Capacity: High to moderate

Usual Age: 40s to 60s

Goal: Growth with some stability

Profile: Accepts moderate swingsin the value of investments inreturn for long-term growth ofcapital

Sample Asset Allocation:

■ Stocks

■ Bonds

■ Stable value or cash

Conservative

Risk Capacity: Low

Usual Age: 60s and older

Goal: Preservation of capital,income, and protection frominflation

Profile: Accepts relatively smallinvestment results in return forslow, stable growth of capital

Sample Asset Allocation:

■ Stocks

■ Bonds

■ Stable value or cash

7

To make the most of your retirement investments, you must understand risk and return. Risk may result from overallmarket conditions, business conditions, and changes in interest rates. Investing in several types of funds (stock,bond, stable value, etc.) provides you with greater diversification, which may provide stable returns and better long-term performance. Your challenge is to set realistic financial goals that can be met with an acceptable level of riskfor you. Please take a look at Risk Assessment on page 8 for some real life examples of different investment choices.

Understanding Risk and Return

85%

10%

5%

60%

20%

20%

30%

40%30%

Typical Investor Profiles

Investment Know-How

8

Trust Talk visits four participants to find out how they made investment choices that suited them.

Risk Assessment

What Type of Investor Are You?

Note: these investor types are for illustrative purposes only. You should always consult with a professional and base yourinvestment decisions on your individual circumstances.

Investor Type

Risk Tolerance

Goal

FavoredInvestmentChoices

Erika,single, age 28

“Retirement is a longway off but when itcomes to investing, theearlier you start, thebetter. I look at it likerock climbing: I’m goingto lose my footing everynow and then, but aslong as I takereasonable risks andstay focused on myultimate goal, I’ll be fine.

I expect the stockmarket will have its upsand downs. It’s a littleriskier than the otheroptions but that suits mejust fine. I like achallenge and I have along time to recoverfrom any market dips.”

Very Aggressive

High

Maximum Growth

Erika could consideroptions on the right sideof the investmentspectrum, such as:

• Large Cap GrowthEquity Fund

• Non-U.S Equity Fund

• Small Cap Equity Fund

• Halliburton Stock Fund

Sam, married 15 years, age 35

“I’m not an expert whenit comes to my portfolio.It’s like looking for a car.You’ve got to look at youroptions and decide whatis your biggest priority—performance or stability.

When my wife and I satdown to look at what wehave put aside forretirement so far, werealized our moneyneeded to grow. Theamount we have so farjust isn’t enough.”

Moderate toAggressive

Moderate to High

High Growth

Sam could consideroptions in the middle toright side of theinvestment spectrum,such as:

• General InvestmentFund

• Balanced Fund

• Equity Investment Fund

• Large Cap Value EquityFund

• S&P 500 Index Fund

• Large Cap GrowthEquity Fund

• Non-U.S Equity Fund

Ursula,divorced, age 45

“I’m very patient when itcomes to saving. I knowthat slow and steady willget me there in the longrun. Slowly but surely Isaved enough over theyears to have acomfortable life and putmy kids through college.

Right now I’d like to havemore control and lessrisk. But let’s face it, I’ma long way from beingready to retire.”

Conservative toModerate

Moderate to Low

Moderate Growth

Ursula could consideroptions in the middle toleft side of theinvestment spectrum,such as:

• Bond Index Fund

• General InvestmentFund

• Balanced Fund

• Equity Investment Fund

• Large Cap Value EquityFund

• S&P 500 Index Fund

Mike, married 30 years, age 55

“I’m not so muchconcerned with long-term growth as knowingI’m not putting myretirement funds injeopardy. Sure, I knowthere’s a risk that myportfolio won’t grow asfast as I need, but Iprefer stability.

Every bit we’ve gotcounts, and witheverything we’replanning, we have to becareful about money.That’s one of the reasonsI’m so securityconscious.”

Conservative

Low

Stability

Mike could consideroptions in the left side ofthe investmentspectrum, such as:

• Fixed Income Fund

• Bond Index Fund

• General InvestmentFund

• Balanced Fund

9

Market UpdateThe first quarter of 2004 represented a changeover periodfrom the strong market performance of 2003 to moresubdued expectations for 2004. Overall, it was a solidthough not exceptional quarter for equities (up over 2%)and bonds (up nearly 3%). For the previous 12 months,however, the broad domestic market was up 38% whilesmall cap stocks were up 64%.

Even though we’ve had slow growth, the economycontinued to show signs of improvement. Q4 2003 growthreached a 4.1% annual rate and the only signs of inflationare appearing at the gas pump. On the downside, therehas still been no indication that the job market isrecovering, which is one of a number of indicators leadinginvestors to lower expectations for the equities market.

Another important factor to look at for Q1 2004 isperformance of value versus growth stocks. (Growthstocks are stocks in companies who have excellentpotential for sales and earnings growth, while valuestocks are stocks in companies with a price that issignificantly below the value that a fair marketplaceshould place on the stock.) Investors still continue to bewary of growth stocks. The value indices outperformedgrowth indices by a healthy 2% in the first quarter. Duringthe quarter, growth portfolios were held back by thehealth care sector, while financials and energy stockswere among the value portfolio leaders. While value alsooutpaced growth in the small cap market, both styles didwell, with the broad small cap market up over 6% for thequarter.

Turning our attention to bonds, mixed signals in theeconomy were considered signs of possible continuedweakness, leading to modestly falling interest rates.Falling interest rates result in an increase in the price ofbonds. The broad bond market was up almost 3% in thefirst quarter. Long maturity bonds posted a strong quarter,up 5%, which was well ahead of the equity market (upover 2%).

On the international front, the dollar continues to be weak.That, combined with improving prospects in Asia(particularly in Japan), contributed to a healthy quarterwith more than 4% growth for U.S. investors who invest innon-U.S. stocks. As a point of reference, the non-U.S.markets, led by Asia, were up nearly 60% in the last 12months.

Fast Facts: Dollar Cost Averaging and Market Timing

Dollar cost averaging means that if you invest in a fundover a long period of time, you will be investing both whenthe fund price is depressed and when the fund price ismore expensive. The cost of your overall investmentaverages out somewhere between the highest and thelowest cost.

Market timing is the process of trying to buy funds whentheir prices are at their lowest and sell them when theyare at their peak. It is extremely difficult to do, even forexperts who spend all their time studying the market.

Retiree CornerWhether you’re retired, nearing retirement age, or justdreaming about it, this section is designed to help. In thisissue, we want to share some answers to questions thatretirees have posed to us recently.

When am I required to take money out of the SavingsPlan? If you continue to work past age 701⁄2, you are notrequired to take money out of your Savings Plan until youactually retire. If you are not working, normally, you wouldhave to begin withdrawals no later than April 1 of the yearafter you turn 701⁄2. This is an IRS requirement.

Can my beneficiary roll over the benefit into their ownIRA when I die? A spouse is the only beneficiary who isever allowed to roll over your retirement benefit into anIRA. The spouse can also leave the benefit in the Planuntil he or she retires, turns 701⁄2 or dies. No otherbeneficiary may do so, not even your children.

Is it a good idea to name my estate as beneficiary of myPlan benefit? Naming your estate as beneficiary limits theoptions your heirs will have for taking money out of thePlan after you die. For example, your spouse might not beable to roll over the benefit into his or her own IRA. (Onthe positive side, naming a trust as your beneficiaryallows any beneficiary to leave your benefit in the Plan.)

Can you take money out of your Savings Plan withoutpenalty after age 591⁄2 but before you actually retire? Yes,but you will have to pay ordinary income taxes at the timeof withdrawal.

Newsstand

10

General investment policyBalanced Fund EIF GIF

U.S. equities 65.0% 70.0% 43.0%Russell 3000 Index

Non-U.S. equities — 22.5% 14.0%MSCI EAFE Index

Emerging markets — 7.5% 5.0%MSCI Emerging Market Free Index

U.S. broad market bonds 35.0% — 33.0%Lehman Aggregate Bond Index

U.S. high yield bonds — — 5.0%Merrill Lynch High Yield Bond Index

Performance10 Years* 5 Years* 3 Years* 1 Year* 1st Quarter

FUND

FIF 6.6% 5.9% 5.5% 4.9% 1.1%Donaghue Money Market Index 4.0% 3.0% 1.4% 0.6% 0.1%Bond Index Fund 7.4% 7.0% 7.4% 5.3% 2.6%Lehman Aggregate Bond Index 7.5% 7.3% 7.4% 5.4% 2.7%Balanced Fund 11.7% 6.6% 6.3% 27.7% 2.2%Balanced Fund Index Composite 10.4% 3.0% 4.3% 26.0% 2.4%GIF 8.8% 4.5% 5.4% 30.2% 2.3%GIF Index Composite 8.9% 3.7% 5.5% 29.9% 3.0%Large Cap Value Equity Fund 12.9% 3.7% 4.8% 38.8% 3.2%Russell 1000 Value Index 12.6% 3.9% 4.3% 40.8% 3.0%S&P 500 Index Fund 11.6% -1.3% 0.5% 35.0% 1.7%S&P 500 Index 11.7% -1.2% 0.6% 35.1% 1.7%Large Cap Growth Equity Fund 9.5% -5.5% -4.5% 29.0% -0.1%Russell 1000 Growth Index 9.8% -6.1% -1.7% 32.2% 0.8%EIF 9.3% 1.8% 2.6% 42.1% 2.1%EIF Index Composite 9.3% 1.1% 3.5% 45.4% 3.3%Non-U.S. Equity Fund 6.4% 1.9% 3.4% 53.5% 3.6%MSCI EAFE Index 4.6% 0.5% 3.4% 57.5% 4.3%Small Cap Equity Fund N/A 10.7% 6.0% 59.4% 4.1%Russell 2000 Index 10.4% 9.7% 10.9% 63.8% 6.3%Halliburton Stock Fund 9.7% -3.1% -4.2% 48.3% 17.0%

* Annualized

Fund Performance Update

Halliburton Company Employee Benefit Master Trustfor the period ended March 31, 2004

11

Performance Notes

The Bond Index, Balanced, Large Cap Value Equity,S&P 500 Index, Large Cap Growth Equity, Non-U.S.Equity, and Small Cap Equity funds were not inexistence until April 1, 1999.

In order to provide comparative historical returns, themanagers’ return of their Halliburton Trust account areincluded in the 10-year column. If the Halliburton Trusthad not employed a manager for 10 years, the firm’scomposite account return was added. N/A indicatesthat a management firm does not have a 10-yearrecord. All rates of return are net of Trust and Planadministration expenses.

To help you better understand how your funds areperforming, the funds are compared with compositereturns or with appropriate indexes. The compositesare created by blending together index returns inproportion to the investment policy of each fund (seechart). Since there are no indexes comparable to theFIF’s investments, we compare its return with moneymarket funds tracked by Donaghue.

The performance data represent past performance,and no assurance can be made regarding futureresults.

Index Definitions*

Donaghue Money Market Index is an index of over 700money market funds.

Lehman Aggregate Bond Index is an index of U.S.bonds, including government, corporate, mortgage-backed, and asset-backed securities.

Merrill Lynch High Yield Bond Index is an index of U.S.corporate bonds that are rated less than investmentgrade but are not in default.

MSCI EAFE Index is an index of non-U.S. equitysecurities listed on the stock exchanges of Europe,Australasia, and the Far East.

MSCI Emerging Market Free Index is an index of non-U.S. stocks traded in emerging markets.

Russell 1000 Growth Index focuses on the 1,000 largestcompanies in the Russell 3000 Index that have lowerdividend yields and above-average growth rates.

Russell 1000 Value Index focuses on the 1,000 largestcompanies in the Russell 3000 Index that have higherdividend yields and below-average growth rates.

Russell 2000 Index measures the performance of the2,000 smallest companies in the Russell 3000 Index.

Russell 3000 Index measures performance of the 3,000largest U.S. companies based on total marketcapitalization. It is used as a general measure of U.S.stock market performance.

Standard & Poor’s 500 Index is a popular standard formeasuring large-cap U.S. stock market performance.The index includes a representative sample of 500leading companies in prominent industries.

* You cannot invest in any of these indexes. Fund holdings will

differ from index holdings.

The information contained in this newsletter is not meant as investment advice. You may want to consult a financialadvisor before making any investment decisions.

We encourage you to call the

Plan Administrative Office w

ithany suggestions or com

ments

regarding Trust Talk. You canexpect the next issue inAugust 2004.

8885 5/04

10200 Bellaire Drive

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