Notes to Consolidated Financial Statements 41 The Procter & Gamble Company and Subsidiaries The following table sets forth the aggregate change in plan assets: Pension plan assets are comprised of a diversified mix of assets including corporate equities, government securities and corporate debt  securities. Other retiree assets are comprised of Company stock, net of  Series B ESOP debt, of $2,243 and $1,335, as of June 30, 2002 and  2001, respectively. The accrued pension and other retiree benefit costs recognized in the  accompanying Consolidated Balance Sheet are computed as follows: $^{(1) }$Five year trend rate assumption was adjusted in 2002 to reflect market trends. Rate  is assumed to decrease to 5.0% by 2009 and remain at that level thereafter. Rate is  applied to current plan costs net of Medicare; estimated initial rate for “gross eligible   charges” (charges inclusive of Medicare) is 9.1% for 2002 and 8.0% for 2001. Assumptions, which are reflected on a weighted average basis of individual country plans, for the postretirement benefit calculations are  as follows: The Company evaluates its actuarial assumptions on an annual basis.  These assumptions are revised based on an evaluation of long-term  trends and market conditions that may have an impact on the cost of  providing retirement benefits.  The projected benefit obligation, accumulated benefit obligation and  fair value of plan assets for the pension plans with accumulated benefit  obligations in excess of plan assets were $1,718, $1,385 and $276, respectively, as of June 30, 2002, and $1,414, $1,124 and $230, respectively, as of June 30, 2001. The underfunding of pension benefits primarily is a function of the different funding incentives that exist outside of the U.S. In certain  countries where the Company has major operations, there are no legal  requirements or financial incentives provided to companies for pension  fund contributions. In these instances, the associated pension liabilities  are typically financed directly from the Company’s cash as they become  due, rather than via the creation of a separate pension fund. Both the  benefit and the financing costs have been reflected in net earnings. Years Ended June 30  Other Retiree Benefits  Pension Benefits  Change in Plan Assets Fair value of plan assets   at beginning of year Actual return on plan assets Acquisitions/(Divestitures) Employer contributions Participants’ contributions Settlements Currency exchange Benefit payments Fair value of plan assets   at end of year  $1,432  (150) 18 116 7 (22) 78  (147)  1,332  $1,691 (88) (19) 81 4 (3) (98) (136)  1,432  $1,449 947 – 38 22 – (1) (108)  2,347  $1,274 235 – 14 18 – 1 (93)  1,449 2002 2001 2002 2001 Years Ended June 30  Other Retiree Benefits  Pension Benefits  2002 Funded Status Funded status at   end of year Unrecognized net actuarial loss (gain)  Unrecognized transition amount Unrecognized prior   service cost Net amount recognized Prepaid benefit cost Accrued benefit cost Intangible asset Accumulated other  comprehensive income Net liability recognized $ ( 1,638) 571 14 21  (1,032) 94  (1,250) 18 106  (1,032 ) $(1,135) 243 17 20 (855) 75  (1,006) 16 60 (855) $212 (579) – (1) (368) 2 (370) – – (368)  $(128) (418) – (8) (554) 2 (556) – – (554) 2001  2002 2001  2001 2002 Weighted Average  Assumptions Discount rate Expected return  on plan assets Rate of compensation  increase Initial health care  cost trend rate  (1) Years Ended June 30  5.9% 8.3% 4.1% –  7.3% 10.0% – 8.8%  5.6% 8.6% 3.5% –  7.0% 9.5% – 11.3% Pension Benefits Other Retiree Benefits 2002 2001 Millions of dollars except per share amounts