to the maximum allowable period of five years under U.S. accounting rules. Management considers the three-month period long enough to minimize the effects of distortions from day-to-day market volatility and still be contemporaneous to the end of the year. For other plans, market value of assets as of the measurement date is used in calculating the pension expense.

     The discount rate assumptions used to determine U.S. and international pension and postretirement benefit plan obligations and expense reflect the prevailing rates available on high-quality fixed-income debt instruments. At December 31, 2005, the company selected a 5.5 percent discount rate based on Moody’s Aa Corporate Bond Index and a cash flow analysis using the Citigroup Pension Discount Curve for the major U.S. pension and postretirement benefit plans. The discount rates at the end of 2004 and 2003 were 5.8 percent and 6 percent, respectively.

     An increase in the expected long-term return on plan assets or the discount rate would reduce pension plan expense, and vice versa. Total pension expense for 2005 was approximately $600 million. As an indication of the sensitivity of pension expense to the long-term rate of return assumption, a 1 percent increase in the expected rate of return on assets of the company’s primary U.S. pension plan, which accounted for about 53 percent of the companywide pension obligation, would have reduced total pension plan expense for 2005 by approximately $50 million. A 1 percent increase in the discount rate for this same plan would have reduced total benefit plan expense for 2005 by approximately $130 million. The actual rates of return on plan assets and discount rates may vary significantly from estimates because of unanticipated changes in the world’s financial markets.

     In 2005, the company’s pension plan contributions were approximately $1 billion (nearly $800 million to the U.S. plans). In 2006, the company expects contributions to be approximately $500 million. Actual contribution amounts are dependent upon plan-investment results, changes in pension obligations, regulatory environments and other economic factors. Additional funding may be required if investment returns are insufficient to offset increases in plan obligations.

     Pension expense is recorded on the Consolidated Statement of Income in “Operating expenses” or “Selling, general and administrative expenses” and applies to all business segments. Depending upon the funding status of the different plans, either a long-term prepaid asset or a long-term liability is recorded. Any unfunded accumulated benefit obligation in excess of recorded liabilities is recorded in “Other comprehensive income.” See Note 21 to the Consolidated Financial Statements, beginning on page FS-50, for the pension-related balance sheet effects at the end of 2005 and 2004.

     For the company’s OPEB plans, expense for 2005 was about $200 million and was also recorded as “Operating expenses” or “Selling, general and administrative expenses” in all business segments.

     Effective January 1, 2005, the company amended its main U.S. postretirement medical plan to limit future increases in