Shown below is an analysis of Ford Credit’s allowance for credit losses related to finance receivables and operating leases for  the years ended December 31 (dollar amounts in billions): MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The decrease in the allowance for credit losses of approximately $500 million primarily reflected significantly improved charge- off performance in the United States, specifically fewer repossessions and a lower average loss per repossession in the Ford,  Lincoln and Mercury brand U.S. retail installment sale and operating lease portfolio. Ford Credit’s emphasis on purchasing  higher quality receivables, enhancements to its collection practices and higher used vehicle prices resulted in a reduction in net  charge-offs and the associated provision for credit losses. The following table summarizes the activity related to off-balance sheet sales of receivables reported as revenues for the periods indicated (in millions except for ratios): The decrease in investment and other income related to sales of receivables reflected lower levels of outstanding sold  receivables compared with 2003.  Sales of finance receivables through off-balance sheet securitizations have the impact on earnings of recalendarizing and  reclassifying net financing margin (i.e., financing revenue less interest expense) and credit losses related to the sold receivables,  compared with how they would have been reported if Ford Credit continued to report the sold receivables on-balance sheet  and funded them through asset-backed financings. Recalendarization effects occur initially when the gain or loss on sales of  receivables is recognized in the period the receivables are sold. Over the life of the securitization transaction, Ford Credit  recognizes income from residual interest in securitization transactions, interest income from retained securities, servicing fees  and other receivable sale income. 3 3 2004 Over/(Under) 2004 2003 2003 Net gain on sales of receivables $ 155 $ 373 $ (218) Income on interest in sold wholesale receivables and retained securities 588 679 (91)  Servicing fees 372 618 (246) Income from residual interest and other 815 941 (126) Investment and other income related to sales of receivables 1,930 2,611 (681) Less: Whole-loan income (91) (234)  143 Income related to off-balance sheet securitizations  $  1,839 $   2,377 $ (538) Memo: Finance receivables sold $  6,933 $  19,296 $  (12,363) Servicing portfolio as of period-end 39,573 54,170 (14,597) Pre-tax gain per dollar of retail receivables sold 2.2% 1.9% (0.3) pts. 2004 2003 Allowance for Credit Losses Balance, beginning of year $  2.9 $  3.0  Provision for credit losses  0.9 1.9 Deductions Charge-offs  1.8 2.4 Recoveries (0.5)  (0.5) Net charge-offs 1.3 1.9 Other changes, principally amounts related to finance receivables sold and translation adjustments  0.1  0.1  Net deductions 1.4 2.0 Balance, end of year $  2.4 $   2.9 Allowance for credit losses as a percentage of end-of-period net receivables*  1.83% 2.26% * Includes net investment in operating leases.