CVS Caremark Corporation (CVS)

Vendor Funds

The Business historically recognizes vendor funds for merchandising and buying activities as a reduction of Cost of revenues when the related products are sold in accordance with Emerging Issues Task Force (“EITF”) Issue 02-16, “Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor.” The Business receives vendor funds for a variety of merchandising activities: placement of the vendors’ products in the Business’ advertising; display of the vendors’ products in prominent locations in the Business’ stores; introduction of new products into the Business’ distribution system and retail stores; exclusivity rights in certain categories that have slower-turning products; and to compensate for temporary price reductions offered to customers on products held for sale at retail stores. The amount of vendor funds reducing the Business’ inventory (“inventory offset”) as of February 2, 2006 and May 4, 2006 was $49.

Vendor Funds

The Business historically recognizes vendor funds for merchandising and buying activities as a reduction of Cost of revenues when the related products are sold in accordance with Emerging Issues Task Force (“EITF”) Issue 02-16, “Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor.” The Business receives vendor funds for a variety of merchandising activities: placement of the vendors’ products in the Business’ advertising; display of the vendors’ products in prominent locations in the Business’ stores; introduction of new products into the Business’ distribution system and retail stores; exclusivity rights in certain categories that have slower-turning products; and to compensate for temporary price reductions offered to customers on products held for sale at retail stores. The amount of vendor funds reducing the Business’ inventory (“inventory offset”) as of February 2, 2006 and May 4, 2006 was $49.