Hershey Foods (HSY)

Post-Retirement Benefit Plans

Other post-retirement benefit plan costs and related assumptions were as follows:

The use of a different discount rate assumption can significantly affect net periodic other post-retirement benefit cost:

Other post-retirement benefit obligations and assumptions were as follows:

Post-Retirement Benefit Plans

Other post-retirement benefit plan costs and related assumptions were as follows:

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Table of Contents

The use of a different discount rate assumption can significantly affect net periodic other post-retirement benefit cost:

Other post-retirement benefit obligations and assumptions were as follows:

Post-Retirement Benefit Plans

Other post-retirement benefit plan costs and related assumptions were as follows:

The use of a different discount rate assumption can significantly affect net periodic other post-retirement benefit cost:

Other post-retirement benefit obligation assumptions were as follows:

Post-Retirement Benefit Plans

Other post-retirement benefit plan costs and related assumptions were as follows:

The use of a different discount rate assumption can significantly affect net periodic other post-retirement benefit cost:

Other post-retirement benefit obligation assumptions were as follows:

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Post-Retirement Benefit Plans

Other post-retirement benefits costs relate primarily to health care and life insurance benefits. Net periodic other post-retirement benefits costs for the Company sponsored plans were $24.3 million, $23.9 million and $23.7 million in 2004, 2003 and 2002, respectively. For the calculation of net periodic other post-retirement benefits costs, discount rate assumptions of 6.0%, 6.3% and 7.0% were used for 2004, 2003 and 2002, respectively. The use of a different discount rate assumption can significantly impact net periodic other post-retirement benefits costs. A one percentage point decrease in the discount rate assumption would have increased 2004 net periodic other post-retirement benefits costs by $1.5 million and a one percentage point increase in the discount rate assumption would have decreased 2004 net periodic other post-retirement benefits costs by $1.3 million.

The Company used discount rate assumptions of 5.7% and 6.0% to value the other post-retirement benefits obligations as of December 31, 2004 and 2003, respectively. A one percentage point decrease in the discount rate assumption would have increased the December 31, 2004 other post-retirement benefits obligations by $36.4 million and a one percentage point increase in the discount rate assumption would have decreased the December 31, 2004 other post-retirement benefits obligations by $30.4 million.

On December 8, 2003, the President of the United States signed into law the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “2003 Medicare Act”). The 2003 Medicare Act introduced a prescription drug benefit under Medicare (“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. The Company believes that certain prescription drug benefits offered under post-retirement health care plans will qualify for the subsidy under Medicare Part D. The Federal subsidy to be provided by the 2003 Medicare Act reduced net periodic benefits costs in 2004 by approximately $3.0 million and lowered the accumulated post-retirement benefits obligation by approximately $25.2 million.

Other critical accounting policies employed by the Company include the following: