initiate and communicate any plans to restructure our Oracle-based operations during fiscal 2007. Restructuring expenses in fiscal 2007 relate to notifications made pursuant to the Fiscal 2006 Oracle Restructuring Plan.

 

Fiscal 2006 Compared to Fiscal 2005:   Restructuring expenses decreased in fiscal 2006 due to lower headcount terminations and related severance costs. Additionally, the restructuring program in fiscal 2005 included $21 million of facility exit and termination costs.

 

Interest Expense:

 

Fiscal 2007 Compared to Fiscal 2006:   Interest expense increased in fiscal 2007 due to higher average borrowings in fiscal 2007 related to our $5.75 billion aggregate principal amount of senior notes issued in January 2006 (of which $1.5 billion was redeemed by us in May 2007), our $2.1 billion of commercial paper issuances (of which approximately $1.4 billion remained outstanding as of May 31, 2007) and our $2.0 billion of senior notes issued in May 2007.

 

Fiscal 2006 Compared to Fiscal 2005:   Interest expense increased in fiscal 2006 compared to fiscal 2005 due to higher average borrowings related to the $5.75 billion senior notes issued in January 2006 as well as outstanding balances under our commercial paper program and unsecured loan facility, both of which were repaid in fiscal 2006.

 

Non-Operating Income, net:   Non-operating income, net consists primarily of interest income, net foreign currency exchange gains (losses), net investment gains related to marketable securities and other investments as well as the minority interests’ share in the net profits of i-flex and Oracle Japan.



Fiscal 2007 Compared to Fiscal 2006:   Non-operating income, net increased in fiscal 2007 primarily due to higher interest income attributable to an increase in average interest rates (the weighted average interest rate earned on cash, cash equivalents and marketable securities increased from 3.04% in fiscal 2006 to 3.97% in fiscal 2007), partially offset by higher minority interests’ share in the net profits of i-flex and Oracle Japan.

 

Fiscal 2006 Compared to Fiscal 2005:   Non-operating income, net increased in fiscal 2006 as a result of higher foreign currency gains on our Japanese net investment hedge and the Chinese currency revaluation, $14 million of equity in earnings associated with our interest in i-flex and higher gains on sales of equity securities. Interest income decreased slightly due to lower average cash, cash equivalents and marketable securities balances, partially offset by higher interest rates. The weighted average interest rate earned on cash, cash equivalents and marketable securities increased from 1.93% in fiscal 2005 to 3.04% in fiscal 2006.

 

Provision for Income Taxes:   The effective tax rate in all periods is the result of the mix of income earned in various tax jurisdictions that apply a broad range of income tax rates. The provision for income taxes differs from the tax computed at the federal statutory income tax rate due primarily to state taxes and earnings considered as indefinitely reinvested in foreign operations. Future effective tax rates could be adversely affected if earnings are lower