expenditures relating to advertising and marketing activities, research and development activities, capital assets and other asset acquisitions and non-executive compensation in accordance with the provisions of the Jobs Act. The repatriation resulted in a decrease in short-term and long-term investments held overseas as the cash was repatriated and an increase in short- term borrowings overseas was used to fund the repatriation.

Investments

Our short-term and long-term investments consist primarily of mutual funds invested in debt financial instruments and high quality, liquid investment-grade available-for-sale debt securities. Our long-term investments include debt securities that totaled $2.1 billion as of December 31, 2006, which have maturities ranging substantially from one to ten 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 was reduced in the first quarter of 2006 by about $7 billion and the proceeds were primarily used to pay down short-term borrowings. In late December 2006, our portfolio of short-term investments increased

  On December 19, 2006, Moody’s downgraded our long-term debt rating to Aa1, its second highest investment grade rating, following a review initiated on December 4, 2006, citing our announcement on December 2, 2006, that we were ceasing development of torcetrapib. The downgrade reflects Moody’s assessment that the relationship between our patent exposures and our pipeline strength is no longer consistent with a Moody’s Aaa rating.

Following our December 2, 2006 announcement of our cessation of development of torcetrapib, S&P changed our rating outlook from stable to negative, noting a slowdown in sales and earnings growth as a result of major patent expirations and increased competition. S&P continues to rate our long-term debt at AAA, its highest investment grade rating, relying on our excellent position in the worldwide pharmaceutical market, highlighted by our diverse drug portfolio and large scale R&D program, together with our superior financial profile and cash-generating ability.

Our access to financing at favorable rates would be affected by a substantial downgrade in our credit ratings.

Debt Capacity

We have available lines of credit and revolving-credit agreements with a group of banks and other financial intermediaries. We maintain cash balances and short-term investments in excess of our commercial paper and other short-term borrowings. As of

December 31, 2006, we had access to $3.6 billion of lines of credit, of which $1.2 billion expire within one year. Of these lines of credit, $3.4 billion are unused, of which our lenders have committed to loan us $2.2 billion at our request. $2 billion of the unused lines of credit, which expire in 2011, may be used to support our commercial paper borrowings.

As of February 27, 2007, we had the ability to borrow approximately $1 billion by issuing debt securities under our existing