2003 FORM 10-K ZIMMER HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements  (Continued) The accumulated benefit obligation for U.S. and Puerto Rico defined benefit retirement pension plans was $35.1 million and $22.2 million as of December 31, 2003 and 2002, respectively. The accumulated benefit obligation for non-U.S. defined benefit retirement plans was $115.6 million and $15.0 million as of December 31, 2003 and 2002, respectively. The Company’s weighted-average asset allocations for the U.S. and Puerto Rico defined benefit retirement plans at December 31, 2003 and 2002, by asset category are as follows: The weighted average actuarial assumptions used in accounting for the Company’s postretirement benefit plans were as follows: Changes in benefit obligations, from the Distribution to December 31, 2003 for the Company’s postretirement benefit plans, were (in millions): The U.S. and Puerto Rico defined benefit retirement plans’ overall investment strategy is to maximize total returns by emphasizing long-term growth of principal while avoiding excessive risk. The Company has established target ranges of assets held by the plans of 50 to 75 percent for equity securities and 30 to 50 percent for debt securities. The plans strive to have sufficiently diversified assets so that adverse or unexpected results from one asset class will not have an unduly detrimental impact on the entire portfolio. The investments in the plans are rebalanced quarterly. As of December 31, 2003 and 2002, the Company’s pension plans’ assets did not hold any direct investment in the Company’s common stock. The Company estimates that its minimum funding requirements by law for the U.S. and Puerto Rico defined benefit retirement plans to not be significant. However, the Company expects to voluntarily contribute between $10 million to $15 million to these plans during 2004. As of December 31, 2003 and 2002, the Company had no assets in its postretirement benefit plans. A one percentage point change in the assumed health care cost trend rates would have no significant effect on the service and interest cost components of net postretirement benefit expense and the accumulated postretirement benefit obligation. The effect of a change in the healthcare cost trend rate is tempered by a cap that limits medical costs to be paid by the Company. Included in the consolidated statement of earnings for the year ended December 31, 2001 is an allocation of $6.0 million from the Company’s former parent for expenses specifically attributable to the Company’s employees’ participation in its retirement and postretirement benefit plans for periods prior to the Distribution. The Company also sponsors defined contribution plans for substantially all of the U.S. and Puerto Rico employees and employees in other countries. The benefits of these plans relate to local customs and practices in the countries concerned. The Company contributed $4.8 million, $3.5 million and $3.0 million of expense to these plans for the years ended December 31, 2003, 2002 and 2001, respectively. The components of net periodic expense for the year ended December 31 for the Company’s postretirement benefit plans subsequent to the Distribution are as follows (in millions): The components of earnings before taxes consist of the following (in millions): 14. INCOME TAXES  50 Plan assets at December 31 Asset Category 2003 2002 Equity Securities 65% 65% Debt Securities 35 35 Total 100% 100% December 31, 2003 2002 2001 Discount rate – Benefit obligation 6.75% 7.00% 7.25% Discount rate – Net periodic benefit cost 7.00 7.25 7.25 Initial health care cost trend rate 9.00 10.00 9.00 Ultimate health care cost trend rate 5.00 5.00 5.00 First year of ultimate trend rate 2012 2012 2008 December 31, 2003 2002 Benefit obligation – beginning of year $ 20.5 $ 18.1 Service cost 1.3 1.1 Interest cost 1.5 1.2 Actuarial loss 1.7 0.1 Benefit obligation – end of year $ 25.0 $ 20.5 Funded status $(25.0) $(20.5) Unrecognized prior service cost (0.1) (0.1) Unrecognized actuarial loss 3.7 2.1 Net amount recognized $(21.4) $(18.5) Accrued benefit liability recognized $(21.4) $(18.5) 2003 2002 2001 United States operations $307.6 $292.0 $200.4 Foreign operations 129.9 96.9 40.5 Total $437.5 $388.9 $240.9 December 31, 2003 2002 2001 Service cost $ 1.3 $ 1.1 $ 0.5 Interest cost 1.5 1.2 0.5 Amortization of unrecognized actuarial (gain) loss 0.1 – – Net periodic benefit cost $ 2.9 $ 2.3 $ 1.0