and in Part II: Other Information; Item 1, Legal Proceedings in our Form 10-Q filings. Normal, ongoing defense costs of the Company or settlements and accruals on legal matters made in the normal course of our business would not be considered certain significant items.

Reconciliation

Financial Condition, Liquidity and Capital Resources

Net Financial Assets

Our net financial asset position as of December 31 follows:

On May 11, 2007, we issued the following notes to be used for general corporate purposes:

• $1.2 billion equivalent, senior, unsecured, euro-denominated notes, due May 15, 2017, which pay interest annually, beginning May 15, 2008, at a fixed rate of 4.55%.

The notes were issued under a securities registration statement filed with the Securities and Exchange Commission (SEC) in March 2007.

Credit Ratings

Two major corporate debt-rating organizations, Moody’s Investors Service (Moody’s) and Standard & Poor’s (S&P), assign ratings to our short-term and long-term debt. The following chart reflects the current ratings assigned to our senior, unsecured non-credit enhanced long-term debt and commercial paper issued directly by us by each of these agencies:

Short-term investments as of December 31, 2006, reflect the receipt of proceeds of $16.6 billion from the sale of our Consumer Healthcare business on December 20, 2006.

We rely largely on operating cash flow, short-term investments, long-term debt and short-term commercial paper borrowings to provide for the working capital needs of our operations, including our R&D activities. We believe that we have the ability to obtain both short-term and long-term debt to meet our financing needs for the foreseeable future.

Investments

Our short-term and long-term investments consist primarily of high-quality, investment-grade available-for-sale debt securities. Our long-term investments include debt securities that totaled $2.6 billion as of December 31, 2007, which have maturities ranging substantially from one to five years. Wherever possible, cash management is centralized and intercompany financing is used to provide working capital to our operations. Where local restrictions prevent intercompany financing, working capital needs are met through operating cash flows and/or external borrowings. Our portfolio of short-term investments as of December 31, 2006, reflects the receipt of proceeds from the sale of our Consumer Healthcare business of $16.6 billion. Our portfolio of short-term investments was reduced in 2007 and the proceeds were used to fund items such as the taxes due on the gain from the sale of our Consumer Healthcare business, completed in December 2006, share repurchases, dividends and capital expenditures in 2007.

Long-Term Debt Issuance

On December 10, 2007, we issued the following notes to be used for general corporate purposes, including the payment of maturing debt:

• $1.3 billion equivalent, senior, unsecured, euro-denominated notes, due December 15, 2014, which pay interest annually, beginning December 15, 2008, at a fixed rate of 4.75%.

On October 19, 2007, Moody’s affirmed our Aa1 rating, its second- highest investment grade rating, but revised our