Weighted-average assumptions used to determine  benefit obligations at December 31,  Pension Benefits  Other Benefits  2004  2003  2004  2003  Discount rate 5.75% 6.15% 5.75% 6.15% Rate of compensation increase  3.00%  3.00%  n/a  n/a  Weighted-average assumptions used to determine net  periodic benefit cost for years ended December 31,  Pension Benefits  Other Benefits  2004  2003  2004  2003  Discount rate  6.15%  6.50%  6.15%  6.50%  Expected long-term return on assets  9.50%  9.50%  n/a  n/a  Rate of compensation increase  3.00%  3.00%  n/a  n/a  The pension expense for pension plans is calculated based upon a number of actuarial assumptions established on January  1 of the applicable year, detailed in the table above, including a weighted-average discount rate, rate of increase in future  compensation levels and an expected long-term rate of return on Plan assets. The discount rate used by the Company for valuing  pension liabilities is based on a review of high quality corporate bond yields with maturities approximating the remaining life of the  projected benefit obligations. The discount rate on this basis has decreased from 6.15% at December 31, 2003 to 5.75% at  December 31, 2004. This will have the effect of increasing pension expense in 2005 by approximately $1.9 million. Although  future changes to the discount rate are unknown, had the discount rate increased or decreased 50 basis points, the pension liability  would have decreased $13.2 million or increased $14.5 million, respectively. In developing our expected long-term rate of return  assumption on plan assets which consist mainly of U.S. equity and debt securities, we evaluated input from our actuaries and  investment consultants as well as long-term inflation assumptions. Projected returns by such consultants are based on broad equity  and bond indices. We also considered our historical 15 year compound return of 10.1%, which has been in excess of these broad  equity and bond benchmark indices. Our expected long-term rate of return on Plan assets is based on an asset allocation assumption  of 60% with equity managers, with an expected long-term rate of 11%, 25% with fixed income managers, with an expected long- term rate of return of 6.75% and 15% with high yield bond managers, with an expected rate of return of 8.5%. At December 31,  2004, our asset allocation was 65% with equity managers and 35% with fixed income managers, including high yield managers. We  believe that our long-term asset allocation on average will approximate 60% with equity managers and 40% with fixed income  managers. We regularly review our actual asset allocation and periodically rebalance our investments to our targeted allocation  when considered appropriate. Based on this methodology the Company’s expected long-term rate of return assumption is 9.5% in  2004 and 2003. The Company has also adopted an unfunded Supplemental Employee Retirement Plan ("SERP"), which provides  for the payment of the portion of annual pension which cannot be paid from the retirement plan as a result of regulatory limitations  on average compensation for purposes of the benefit computation. The largest non-U.S. pension plan, in accordance with local  custom, is unfunded and had an accumulated benefit obligation of approximately $41,903 and $34,434 at December 31, 2004 and  2003, respectively. Such obligation is included in the Consolidated Balance Sheets and the tables above. In accordance with the provisions of FAS No. 87, the Company has recognized a minimum pension liability at December  31, 2004 of $117,252 ($103,823 at December 31, 2003) for circumstances in which a pension plan's accumulated benefit obligation  exceeded the fair value of the plan's assets and accrued pension liability. Such liability was partially offset by an intangible asset  equal to the unrecognized prior service cost, with the net change of $3,837 ($103 at December 31, 2003), recorded as a reduction in  shareholders' equity, net of related deferred tax benefits. The Company made a $20,000 voluntary cash contribution to the U.S. Pension Plan in 2004 and paid benefit payments of  $13,978 . The Company estimates that based on current actuarial calculations it will make a cash contribution to the U.S. Pension  Plan in 2005 of $10,000. Cash contributions in subsequent years will depend on a number of factors including performance of plan  assets. 50  A M P H E N O L C O R P O R A T I O N 2 0 0 4 A N N U A L R E P O R T 