ployee groups. The Company contributes to voluntary employee benefit association (VEBA) trusts to fund certain U.S. retiree health and welfare benefit obligations. The Company uses its fiscal year- end as the measurement date for these plans. the Company recognized a $16.9 million curtailment gain related to a change in certain retiree health care benefits from employer- provided defined benefit plans to multiemployer defined contribu- tion plans. Net gains from curtailment and special termination benefits recognized in 2001 were recorded as a component of re- structuring charges. Refer to Note 3 for further information. The aggregate change in accumulated postretirement benefit obli- gation, change in plan assets, and funded status were: The weighted average actuarial assumptions used to determine benefit obligations were: The weighted average actuarial assumptions used to determine annual net periodic benefit cost were: The Company determines the overall expected long-term rate of return on VEBA trust assets in the same manner as that described for pension trusts in Note 9. The assumed health care cost trend rate is 8.5% for 2004, decreas- ing gradually to 4.5% by the year 2008 and remaining at that level thereafter. These trend rates reflect the Company’s recent historical experience and management’s expectation that future rates will continue to decline. A one-percentage point change in assumed health care cost trend rates would have the following effects: Components of postretirement benefit expense were: In December 2003, the Medicare Prescription Drug Improvement and Modernization Act of 2003 (the Act) became law. The Act in- troduces a prescription drug benefit under Medicare Part D, as well as a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to Medicare Part D. As permitted by FASB FSP 106-1, management has elected to defer recognition of the effects of the Act in ac- counting for and making disclosures for the Company’s postretire- ment benefit plans until authoritative guidance is issued. Refer to Note 1 for further information. All gains and losses, other than those related to curtailment or special termination benefits, are recognized over the average re- maining service period of active plan participants. During 2002, Kellogg Company 45 (millions) 2003 2002 2001 Service cost $1 2.5 $ 11.9 $ 10.7 Interest cost 60.4 60.3 49.7 Expected return on plan assets (32.8) (26.8) (24.5) Amortization of unrecognized prior service cost (2.5) (2.3) (1.1) Recognized net (gains) losses  12.3 9.2 (2.3) Curtailment and special termination benefits - net gain — (16.9) (.2) Postretirement benefit expense $49.9 $3 5.4 $ 32.3 (millions) 2003 2002 Change in accumulated benefit obligation Accumulated benefit obligation at beginning of year $ 908.6 $895.2 Acquisition adjustment — (2.2) Service cost 12.5 11.9 Interest cost 60.4 60.3 Actuarial loss 78.4 90.2 Amendments (5.9) (97.3) Benefits paid (51.4) (50.4) Foreign currency adjustments 3.4 .4 Other .6 .5 Accumulated benefit obligation at end of year $1,006.6 $908.6 Change in plan assets Fair value of plan assets at beginning of year $ 280.4 $ 212.6 Actual return on plan assets 69.6 (27.5) Employer contributions 10 1.8 137.3 Benefits paid (50.1) (42.5) Other .5 .5 Fair value of plan assets at end of year $4 0 2.2 $280.4 Funded status ($ 604.4) ($ 628.2) Unrecognized net loss 295.6 265.6 Unrecognized prior service cost (32.0) (28.7) Accrued postretirement benefit cost recognized as a liability ($ 340.8) ($ 391.3) 2003 2002 2001 Discount rate 6.0% 6.9% 7.3% 2003 2002 2001 Discount rate 6.9% 7.3% 7.5% Long-term rate of return on plan assets 9.3% 10.5% 10.5% One percentage One percentage (millions) point increase point decrease Effect on total of service and interest cost components $ 9.5 ($ 8.2) Effect on postretirement benefit obligation $ 118.2 ($ 101.0) Obligations and funded status Assumptions Expense