Notes to Consolidated Financial Statements

(Continued)

Note 15.
Benefit Plans:

(Continued)

Components of Net Periodic Benefit Cost

Net periodic pension (income) cost consisted of the following for the years ended December 31, 2003, 2002 and 2001:

		U.S. Plans									Non-U.S. Plans
	(in millions)		2003				2002		2001			2003			2002		2001
	Service cost		$ 234				$ 215		$ 189			$ 140			$ 105		$ 100
	Interest cost		579				590		595			217			183		174
	Expected return
	on plan assets		(936)				(943)		(961)			(257)			(209)		(205)
	Amortization:
	Net gain on
	adoption of
	SFAS No.87						(1)		(10)
	Unrecognized
	net loss       (gain) from
	experience
	differences		46				23		(34)			29			7		(3)
	Prior service
	cost		16				14		22			11			9		7
	Termination,   settlement and
	curtailment		68				133		(12)						28
	Net periodic   pension cost
	(income)		$    7				$   31		$(211)			$ 140			$  123		$   73

During 2003, 2002 and 2001, employees left Altria Group, Inc. under voluntary early retirement and workforce reduction programs, and through the Miller transaction. These events resulted in settlement losses, curtailment losses and termination benefits of $17 million and $112 million for the U.S. plans in 2003 and 2002, respectively. In addition, retiring employees of KFNA elected lump-sum payments, resulting in settlement losses of $51 million and $21 million in 2003 and 2002, respectively, and settlement gains of $12 million in 2001. During 2002, early retirement programs in the international tobacco business resulted in additional termination benefits of $28 million for the non-U.S. plans.

The following weighted-average assumptions were used to determine Altria Group, Inc.’s net pension cost for the years ended December 31:

		U.S. Plans									Non-U.S. Plans
			2003				2002		2001			2003			2002		2001
	Discount rate		6.50%				7.00	%	7.75%			4.99%			5.38%		5.52%
	Expected rate of   return on plan
	assets		9.00				9.00		9.00			7.81			7.94		7.93
	Rate of   compensation
	increase		4.20				4.50		4.50			3.30			3.68		3.81

Altria Group, Inc.’s expected rate of return on plan assets is determined by the plan assets’ historical long-term investment performance, current asset allocation and estimates of future long-term returns by asset class.

ALG and certain of its subsidiaries sponsor deferred profit-sharing plans covering certain salaried, non-union and union employees. Contributions and costs are determined generally as a percentage of pre-tax earnings, as defined by the plans. Certain other subsidiaries of ALG also maintain defined contribution plans. Amounts charged to expense for defined contribution plans totaled $235 million, $222 million and $231 million in 2003, 2002 and 2001, respectively.

Plan Assets

Altria Group, Inc.’s U.S. pension plans asset allocation at December 31, 2003 and 2002, was as follows:

			Percentage of Fair Value of Plan Assets at December 31
	U.S. Plans Asset Category		2003				2002
	Equity securities		71%				61%
	Debt securities		26				34
	Real estate		1				1
	Other		2				4
	Total		100%				100%

Altria Group, Inc.’s investment strategy is based on an expectation that equity securities will outperform debt securities over the long term. Accordingly, the composition of Altria Group, Inc.’s plan assets is broadly characterized as a 70%/30% allocation between equity and debt securities. The strategy utilizes indexed U.S. equity securities and actively managed investment grade debt securities (which constitute 80% or more of debt securities) with lesser allocations to high-yield and international debt securities.

Altria Group, Inc. attempts to mitigate investment risk by rebalancing between equity and bond asset classes as Altria Group, Inc.’s contributions and monthly benefit payments are made.

Altria Group, Inc. presently plans to make contributions, to the extent that they are tax deductible, in order to maintain plan assets in excess of the accumulated benefit obligation of its funded domestic plans. Currently, Altria Group, Inc. anticipates making contributions of approximately $100 million in 2004, based on current tax law. However, this estimate is subject to change as a result of current tax proposals before Congress, as well as asset performance significantly above or below the assumed long-term rate of return on pension assets.