JOHNSON & JOHNSON — Annual Report 2010

Jun 25, 2010

11-K 1 y85235e11vk.htm FORM 11-K e11vk PAGEBREAK

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 11-K

FOR ANNUAL REPORTS OF EMPLOYEE STOCK PURCHASE, SAVINGS AND SIMILAR PLANS PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

þ ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2009

OR

o TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-3215

JOHNSON & JOHNSON RETIREMENT SAVINGS PLAN

(Full title of the Plan)

JOHNSON & JOHNSON ONE JOHNSON & JOHNSON PLAZA NEW BRUNSWICK, NEW JERSEY 08933

(Name of issuer of the securities held pursuant to the Plan and the address of its principal executive office)

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REQUIRED INFORMATION

ITEM 4. Financial Statements and Exhibits

Financial statements prepared in accordance with the financial reporting requirements of ERISA filed herewith are listed below in lieu of the requirements of Items 1 to 3.

Report of Independent Registered Public Accounting Firm

Financial Statements:

Statements of Net Assets Available for Benefits

Statement of Changes in Net Assets Available for Benefits

Notes to Financial Statements

Supplemental Schedule*:

Schedule H, line 4i — Schedule of Assets (Held at End of Year)

• Other supplemental schedules required by Section 2520.103.10 of the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended, have been omitted because they are not required or are not applicable.

Exhibits:

1. Consent of PricewaterhouseCoopers LLP, dated June 23, 2010

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SIGNATURES

The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.

JOHNSON & JOHNSON RETIREMENT SAVINGS PLAN
By:	/s/ Russell C. Deyo
	Russell C. Deyo
	Chairman, Pension Committee

June 23, 2010

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JOHNSON & JOHNSON RETIREMENT SAVINGS PLAN

FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE

DECEMBER 31, 2009 AND 2008

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Johnson & Johnson Retirement Savings Plan

Index to Financial Statements December 31, 2009 and 2008

| Report
of Independent Registered Public Accounting Firm | 1 |
| --- | --- |
| Financial Statements: | |
| Statements of Net Assets Available for Benefits | 2 |
| Statement of Changes in Net Assets Available for Benefits | 3 |
| Notes to Financial Statements | 4 - 15 |
| Supplemental Schedule*: | |
| Schedule H, line 4i — Schedule of Assets (Held at
End of Year) | 16 |

• Other supplemental schedules required by Section 2520.103.10 of the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended, have been omitted because they are not required or are not applicable.

/TOC

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Report of Independent Registered Public Accounting Firm

To the Participants of the Johnson & Johnson Retirement Savings Plan and the Pension and Benefits Committee of Johnson & Johnson

In our opinion, the accompanying statements of net assets available for benefits and the related statement of changes in net assets available for benefits present fairly, in all material respects, the net assets available for benefits of the Johnson & Johnson Retirement Savings Plan (the “Plan”) at December 31, 2009 and December 31, 2008, and the changes in net assets available for benefits for the year ended December 31, 2009 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental Schedule of Assets (Held at End of Year) is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan’s management. The supplemental schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

/s/ PricewaterhouseCoopers LLP New York, NY June 23, 2010

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Johnson & Johnson Retirement Savings Plan

Statements of Net Assets Available for Benefits December 31, 2009 and 2008

	2009
Assets
Interest in Johnson & Johnson Pension
and Savings Plans Master Trust, at fair value	$ 188,694,449	$	160,791,297
Total investments	188,694,449		160,791,297
Receivables
Employee contributions	133,303		—
Employer contributions	47,555		—
Total receivables	180,858		—
Total assets	188,875,307		160,791,297
Liabilities
Payable for securities purchased	—		349,930
Accrued expenses	64,209		97,684
Total liabilitites	64,209		447,614
Net assets available for benefits, at fair value	188,811,098		160,343,683
Adjustment from fair value to contract value for
fully benefit-responsive investment contracts	(824,423	)	(150,486	)
Net assests available for benefits	$ 187,986,675	$	160,193,197

The accompanying notes are an integral part of these financial statements.

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Johnson & Johnson Retirement Savings Plan

Statement of Changes in Net Assets Available for Benefits December 31, 2009

	2009
Additions to net assets attributed to
Investment Income/Loss
Plan’s interest in the Johnson & Johnson Pension and
Savings Plans Master Trust net investment income/loss	$ 20,846,966
Contributions
Employee contributions	14,590,712
Employer contributions	5,958,316
Total additions	41,395,994
Deductions from net assets attributed to:
Benefits paid to participants	13,170,736
Administrative expenses	431,780
Total deductions	13,602,516
Net increase/(decrease)	27,793,478
Net assets available for benefits
Beginning of year	160,193,197
End of year	$ 187,986,675

The accompanying notes are an integral part of these financial statements.

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Johnson & Johnson Retirement Savings Plan

Notes to Financial Statements

| 1. |
| --- |
| General |
| The Johnson & Johnson Retirement Savings Plan (the “Plan”) is a participant directed defined
contribution plan which was established on March 1, 1990 for eligible employees of certain
participating subsidiaries of Johnson & Johnson (“J&J” or the “Company”) located in Puerto
Rico which have adopted the Plan. The Plan was designed to provide eligible employees with
an opportunity to strengthen their financial security at retirement by providing an
incentive to save and invest regularly. The funding of the Plan is made through employee
and Company contributions. The assets of the Plan are held in the Johnson & Johnson Pension
and Savings Plans Master Trust (the “Trust”). The Plan’s interest in the Trust is allocated
to the Plan based upon the total of each participant’s share in the Trust. |
| State Street Bank and Trust Company (“State Street” or “Trustee”) serves as trustee, agent,
and custodian of the Plan for purposes of investment of the assets of the Trust. Banco
Popular de Puerto Rico serves as Trustee of the Plan. As such, State Street performs certain
services for the Plan, including the execution of certain participant directed investments,
which are commingled for investment purposes only with assets of other tax-qualified plans
maintained by J&J. |
| This brief description of the Plan is provided for general information purposes only.
Participants should refer to the Plan document for complete information. |
| Contributions |
| In general, salaried and hourly employees of participating J&J companies who are Puerto Rico
residents can contribute to the Plan immediately. There is no service requirement for
employee contributions. |
| Contributions are made to the Plan by participants through payroll deductions and by the
Company on behalf of participants. Participating employees may contribute a minimum of 3%
up to a maximum of 25% pre-tax and/or a minimum of 1% up to a maximum of 10% post-tax of
their base salary. Annual pre-tax contributions may not individually exceed $9,000 in 2009
under Puerto Rico law. |
| Effective January 1, 2007, participants age 50 and over are eligible to contribute extra
pre-tax contributions (“catch-up contributions”) above the annual limitations up to $1,000
in 2009. Participants can elect an amount to be contributed from each paycheck as their
catch-up contribution. This amount will be in addition to the pre-tax contribution
percentages that participants have elected.
After one year of service, participants receive an employer matching contribution equal to
75% of the first 6% of his/her pretax contributions. The employer matching contribution is
composed of cash and invested in the current investment fund mix chosen by the participant. |
| Investment |
| Participants may invest in one or more of the nine investment funds offered by the Plan.
Each of the funds represents a mix of various investments. The investment mix chosen by the
participant will apply to employee and Company matching contributions. Rollover
contributions are invested at the election of the participant. |
| Participants receive dividends on Johnson & Johnson common stock shares held in the Johnson
& Johnson Stock Fund. The dividends are automatically reinvested in the Johnson & Johnson
Stock Fund.
For all other funds the Trustee reinvests all dividend and interest income. |

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Johnson & Johnson Retirement Savings Plan

Notes to Financial Statements

	Vesting
	A participant’s interest in his/her account, including participant contributions, Company
contributions and earnings thereon, is always fully vested. As a result, there are no
forfeitures under the Plan.
	Payment of Benefits
	Participants are allowed to withdraw their post-tax contributions and earnings thereon one
time per
calendar year. Participants may withdraw pre-tax contributions only upon meeting certain
hardship
conditions. The benefits to which participants are entitled are the amounts provided by
contributions and
investment earnings thereon, including realized and unrealized gains and losses which have
been
allocated to the participant’s account balance.
	Benefits are also paid to participants upon termination of employment, long-term disability
or retirement. Participants can elect to defer payment if account balances
are greater than $5,000. Distributions are paid either in a lump sum payment, or
installment payments made on a monthly, quarterly or annual basis over a period of years
selected by the participant. Participants have the option of receiving part of their balance
in the Johnson & Johnson Stock Fund as either cash or in shares of Johnson & Johnson common
stock (plus cash for fractional shares) for lump sum distributions other than a hardship.
	A participant’s account may be distributed to his/her beneficiaries in lump sum or in
installments upon the participant’s death only if the beneficiary is a spouse. Otherwise, it
is paid to the beneficiary in a lump sum, either directly or rolled over to an IRA.
	Administrative Expenses
	All third-party administrative expenses are paid by the Plan, unless otherwise provided for
by the Company.
	Termination
	Although it has not expressed an intent to do so, the Company has the right under the Plan
to discontinue its contributions at any time and to terminate the Plan subject to the
provisions of ERISA. In the event of a partial or full Plan termination, all Plan funds
must be used exclusively for the benefit of the Plan participants, in that each participant
would receive the respective value in their account.
2.	Summary of Significant Accounting Policies
	Basis of Accounting
	The financial statements of the Plan are prepared under the accrual method of accounting in
accordance with accounting principles generally accepted in the United States of America.
Certain amounts in the prior year financial statements have been reclassified to conform to
the current presentation.
	Investment Valuation and Income Recognition of the Trust
	The Plan’s interest in the Trust is stated at fair value. The investment in the Trust
represents the Plan’s interest in the net assets of the Trust.
	As the investment funds contain various underlying assets such as stock and short-term
investments, the participant’s account balance is reported in units of participation, which
allows for immediate transfers in and out of the funds. The purchase or redemption price of
the units is determined by the Trustee, based on the current market value of the underlying
assets of the funds. Each fund’s net asset value for a single unit is computed by adding
the value of the fund’s investments, cash and other assets, and subtracting

liabilities, then dividing the result by the number of units outstanding. |

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Johnson & Johnson Retirement Savings Plan

Notes to Financial Statements

| Purchases and sales of securities are recorded on a trade-date basis. Gains and losses on
the sale of investment securities are determined on the average cost method. Dividend
income is recorded on the ex-dividend date. Interest income is recorded as earned on an
accrual basis. |
| --- |
| The Plan presents, in the Statement of Changes in Net Assets Available for Benefits, the
investment income/(loss) for the Plan’s interest in the Trust which consists of the Plan’s
allocated change in unrealized appreciation and depreciation of the underlying investments,
realized gains and losses on sales of investments and investment income/(loss). |
| Payment of Benefits |
| Benefits are recorded when paid. |
| Derivatives |
| The Plan adopted the provisions of FASB Accounting Standards Codification ASC 815-10-50 on
January 1, 2009. The adoption of the standard had no impact on
the Statements of Net Assets
Available for Benefits and Statement of Changes in Net Assets Available for Benefits. |
| The Trust will invest in securities from time to time that are denominated in currencies
other than the U.S. dollar. To hedge against adverse changes in foreign exchange rates
relating to non-U.S. dollar denominated investments, the Trust may enter into forward
foreign exchange contracts. The holder is exposed to credit risk for nonperformance and to
market risk for changes in interest and currency rates. |
| Those instruments involve, to varying degrees, elements of credit risk in excess of the
amount recognized in the Statements of Net Assets Available for Benefits. The Trust
attempts to mitigate this credit risk by utilizing the same policies in making commitments
and conditional obligations as it does for on-balance sheet instruments, and through
structured trading with reputable parties and continual monitoring
procedures. Accordingly,
the Trust does not anticipate losses for nonperformance. The Trust does not require
collateral or other security to support forward foreign exchange contracts. The Trust
accounts for forward foreign exchange contracts at fair value. |
| Use of Estimates |
| The preparation of the Plan’s financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that affect the
reported amounts of net assets available for benefits at the date of the financial
statements and the changes in net assets available for benefits during the reporting period
and, when applicable, disclosures of contingent assets and liabilities at the date of the
financial statements. Actual results could differ from those estimates. |
| Risks and Uncertainties |
| The Plan provides for various investment options in funds which can invest in a combination
of equity, fixed income securities and other investments. Investments are exposed to
various risks, such as interest rate, market and credit. Due to the level of risk
associated with certain investments, it is at least reasonably possible that changes in
risks in the near term could materially affect participants’ account balances and the
amounts reported in the Statements of Net Assets Available for Benefits and the Statement of
Changes in Net Assets Available for Benefits. |

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Johnson & Johnson Retirement Savings Plan

Notes to Financial Statements

	Reporting of Fully Benefit-Responsive Investment Contracts
	Fully benefit-responsive investment amounts are reported at fair value. Contract value is the
relevant measurement criteria for that portion of the net assets available for benefits of a
defined contribution plan attributable to fully benefit-responsive investment contracts
because contract value is the amount participants would receive if they were to initiate
permitted transactions under the terms of the Plan. The Statements of Net Assets Available
for Benefits present the fair value of the investment contracts, as well as the adjustment of
the fully benefit-responsive investment contracts from fair value to contract value. The
Statement of Changes in Net Assets Available for Benefits is prepared on a contract value
basis.
3.	Investments in the Trust
	The assets of the Plan are maintained in the Trust. The Plan holds approximately 1.30% and
1.42%, respectively of the Trust’s net assets as of December 31, 2009 and 2008. The Plan’s
sole investment is its interest in the Trust and therefore is greater than 5% of Plan
assets.
	Net assets, income, and expenses are allocated to the Plan based on the total of each
participant’s share in the respective funds.
	The following table represents the total value of investments in the Trust:

	As of December 31, — 2009	2008
Investments at fair value
Short term investment funds	$ 798,938,451	$	615,064,003
U.S. Government and Agency securities	790,967,580		999,402,502
Corporate debt	927,076,098		605,765,016
Preferred stock	13,991,681		5,885,986
Common stock	7,661,159,952		6,172,253,997
Common Collective Trusts	2,419,971,157		1,225,453,603
Deposits in group annuity contracts and synthetic GICs	1,743,038,745		1,582,063,704
Other Assets	211,966,010		178,449,770
Total Trust investments at fair value	14,567,109,674		11,384,338,581
Receivables	301,281,231		108,472,125
Liabilities	(312,026,851	)	(207,830,548	)
Adjustment from fair value to contract value for
fully benefit-responsive investment contracts	(51,412,700	)	(10,405,457	)
Net assets held in the Trust	$ 14,504,951,354	$	11,274,574,701

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Johnson & Johnson Retirement Savings Plan

Notes to Financial Statements

The net investment income of the Trust was composed of the following:

	For the
	Year Ended
	December 31, 2009
Net appreciation/(depreciation) in fair value of investments
Short term investment funds	$ (456,777	)
U.S. Government and Agency securities	(13,284,778	)
Corporate debt	103,852,376
Preferred stock	552,990
Common stock	1,398,411,739
Common Collective Trusts	641,641,931
Equities and other	(1,017,463	)
Receivables/Liabilities	786,223
	2,130,486,241
Interest	196,734,622
Dividends	169,901,231
Net investment income	$ 2,497,122,094

| 4. |
| --- |
| The Plan’s valuation methodologies were applied to all of the trust investments carried at
fair value. Fair value is based upon quoted market prices, where available. If listed prices
or quotes are not available, fair value is based upon models that primarily use, as inputs,
market-based or independently sourced market parameters, including yield curves, interest
rates, volatilities, equity or debt prices, foreign exchange rates and credit curves. |
| While the Plan believes its valuation methods are appropriate and consistent with other
market participants, the use of different methodologies or assumptions to determine the fair
value of certain financial instruments could result in a different estimate of fair value at
the reporting date. |
| Recent Accounting Pronouncements |
| In January 2010, the FASB issued ASC Update 2010-06, Fair Value Measurements and Disclosures
(Topic 820) — Improving Disclosures about Fair Value Measurements. This guidance is
effective for reporting periods beginning after December 15, 2009, except for the Level 3
disclosure requirements, which will be effective for fiscal years beginning after December
15, 2010 and interim periods within those fiscal years with early adoption permitted. The
Plan is still assessing the impact of adoption. |
| Valuation Hierarchy |
| Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 820, Fair Value Measurements and Disclosures , provides the framework for measuring fair value.
That framework provides a fair value hierarchy that prioritizes the inputs to valuation
techniques used to measure fair value. The hierarchy gives the highest priority to
unadjusted quoted prices in active markets for identical assets or liabilities (level 1
measurements) and the lowest priority to unobservable inputs (level 3 measurements). The
three levels of the fair value hierarchy under FASB ASC 820 are described as follows: |

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Johnson & Johnson Retirement Savings Plan

Notes to Financial Statements

| • | Level 1 — quoted prices (unadjusted) for identical assets or liabilities in
active markets. |
| --- | --- |
| • | Level 2 — quoted prices for identical assets or liabilities in active markets and
inputs that are observable for the asset or liability, either directly or indirectly, for
substantially the full term of the financial instrument. |
| • | Level 3 — inputs are unobservable and significant to the fair value measurement.
These are usually negotiated prices between two parties. |

| A financial instrument’s categorization within the valuation hierarchy is based upon the
lowest level of input that is significant to the fair value measurement. |
| --- |
| Following is a description of the valuation methodologies used for the investments measured at
fair value. |

| • | Short-term investments — Cash and quoted short-term instruments are valued at the
closing price or the amount held on deposit by the custodian bank where quoted prices are
available in an active market and are classified as Level 1. Other investments are through
investment vehicles valued using the Net Asset Value (“NAV”) provided by the administrator
of the fund. The NAV is based on the value of the underlying assets owned by the fund, minus
its liabilities, and then divided by the number of shares outstanding. The NAV is a quoted
price in a market that is not active and classified as Level 2. |
| --- | --- |
| • | U.S. government & agency issues — The assets are comprised of U.S. government
agency securities and U.S Treasury Bills and Notes of varying maturities. A limited number
of these investments are valued at the closing price reported on the major market on which
the individual securities are traded. Where quoted prices are available in an active market,
the investments are classified within Level 1 of the valuation hierarchy. If quoted market
prices are not available for the specific security, then fair values are estimated by using
pricing models, quoted prices of securities with similar characteristics or discounted cash
flows. When quoted market prices for a security are not available in an active market, they
are classified as Level 2. |
| • | Corporate debt — A limited number of these investments are valued at the closing
price reported on the major market on which the individual securities are traded. Where
quoted prices are available in an active market, the investments are classified as Level 1.
If quoted market prices are not available for the specific security, then fair values are
estimated by using pricing models, quoted prices of securities with similar characteristics
or discounted cash flows and are classified as Level 2. Level 3 debt instruments are priced
based on unobservable inputs, usually negotiated values agreed to by the interested parties. |
| • | Common and preferred stocks — U.S. and International common stocks are valued at the
closing price reported on the major market on which the individual securities are traded.
Substantially all common stock is classified within Level 1 of the valuation hierarchy. |
| • | Common Collective Trusts — The fair market value of all Common Collective Trust
(CCT) interests has been determined using Net Asset Value (NAV) and are used for expedience
purposes. The NAV is based on the value of the underlying assets owned by the funds, minus
its liabilities, and then divided by the number of shares
outstanding. CCTs that have a quoted market price |

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Johnson & Johnson Retirement Savings Plan

Notes to Financial Statements

in markets that are not active are classified as Level 2. A majority of the CCTs are used for liquidity purposes for both the defined benefit and defined contribution plans within the Master Trust. The CCTs are primarily passive funds that provide daily liquidity for the various Savings Plan investment options. Participant directed purchases and sales are at the NAV. At December 31, 2009 approximately 68% of the CCTs are invested in passive strategies that mimic the indices with the remainder invested in U.S. Equity and Emerging Market Equity strategies. Any Plan Sponsor sales may be subject to gate keeping restrictions.

| • | Guaranteed insurance contracts (GIC’s) — Traditional GICs are valued at fair value
by discounting the related cash flows based on current yields of similar instruments with
comparable durations while considering the creditworthiness of the issuer, and are
classified as Level 3. The fair value of the synthetic guaranteed investment contract is
based on the underlying investments held in separate account portfolios. The underlying
investments are U.S. Government, Government Agencies, Fixed Income and Asset-Backed
Securities. The synthetic guaranteed investment contract and related investments are
classified as Level 2. The synthetic GIC contract has a fair value of $726,900,000 and
$590,498,000 at December 31, 2009 and 2008, respectively. |
| --- | --- |
| • | Other assets — Other assets are represented primarily by Limited Partnerships (LP),
as well as commercial loans and mortgages that are not classified as corporate debt. Other
assets, that are exchange listed and actively traded, are classified as Level 1 while
inactively traded assets are classified as Level 2. The LPs and other assets valued using
unobservable inputs are classified as Level 3. The fair market value of all LP interests has
been determined using Net Asset Value (NAV) and used for expedience purposes. At December
31, 2009 approximately 44% of the LP investments are in U.S. Equity and Emerging Market
Equities with the remaining 56% in private equity investments. |

At December 31, 2009 and 2008, the Trust had unfunded commitments of underlying funds of the Limited Partnerships of $36,450,701 and $53,726,755 outstanding. These commitments are expected to be satisfied with new cash flows, distributions from existing funds, reinvestment of proceeds and/or from selling existing investments. The Limited Partnership investments have maturity dates ranging from December 31, 2009 through February 1, 2018 with renewal options available to the Plan.

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Johnson & Johnson Retirement Savings Plan

Notes to Financial Statements

2009 Master Trust investments measured at fair value

	Quoted market — prices inputs	Observable — inputs	Unobservable — inputs
December 31, 2009	(Level 1)	(Level 2)	(Level 3)	Total Assets
Short-term investment funds	$ 23,736,378	$ 775,202,073	$ —	$ 798,938,451
U.S. government and agency securities	—	790,967,580	—	790,967,580
Corporate debt
S&P Rated AAA to BBB-	108,000	725,857,778	1,172,734	727,138,512
S&P Rated below BBB-	—	160,212,720	3,414,956	163,627,676
S&P Not Rated	—	33,239,478	3,070,432	36,309,910
Total Corporate Debt	108,000	919,309,976	7,658,122	927,076,098
Preferred stocks	13,713,530	278,151	—	13,991,681
Common stocks
U.S. Large Cap	5,132,166,793	—	—	5,132,166,793
U.S. Mid Cap	563,759,040	557,258	—	564,316,298
U.S. Small Cap	478,737,605	—	—	478,737,605
Total U.S. Common stocks	6,174,663,438	557,258	—	6,175,220,696
International Common stocks	1,485,905,194	—	34,062	1,485,939,256
Total Common stocks	7,660,568,632	557,258	34,062	7,661,159,952
Common Collective Trusts	—	2,419,971,157	—	2,419,971,157
Other assets	1,375,272	88,376,252	122,214,486	211,966,010
Trust investments at fair value	7,699,501,812	4,994,662,447	129,906,670	12,824,070,929
Guaranteed and synthetic investment
contracts	—	726,900,000	1,016,138,745	1,743,038,745
Total Master Trust investments	$ 7,699,501,812	$ 5,721,562,447	$ 1,146,045,415	$ 14,567,109,674

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Johnson & Johnson Retirement Savings Plan Notes to Financial Statements

2008 Master Trust investments measured at fair value

	Quoted market — prices inputs	Observable — inputs	Unobservable — inputs
Decmber 31, 2008	(Level 1)	(Level 2)	(Level 3)	Total Assets
Short-term investment funds	$ 21,291,008	$ 593,772,995	$ —	$ 615,064,003
U.S. government and agency securities	266,074,688	733,327,814	—	999,402,502
Corporate debt	79,657	595,867,616	9,817,743	605,765,016
Preferred stocks	5,885,986	—	—	5,885,986
Common stocks	6,170,627,010	1,156,320	470,667	6,172,253,997
Common Collective Trusts	—	1,225,453,603	—	1,225,453,603
Other assets	3,187,299	77,121,840	98,140,631	178,449,770
Trust investments at fair value	6,467,145,648	3,226,700,188	108,429,041	9,802,274,877
Guaranteed and synthetic investment
contracts	—	590,497,993	991,565,711	1,582,063,704
Total Master Trust investments	$ 6,467,145,648	$ 3,817,198,181	$ 1,099,994,752	$ 11,384,338,581

Level 3 Gains and Losses

The table below sets forth a summary of changes in the fair value of the Plan’s Level 3 assets for the year ended December 31, 2009.

						synthetic
		Common				insurance
	Corporate debt	stocks		Other assets		contracts		Totals
Balance December 31, 2008	$ 9,817,743	$	470,667	$	98,140,631	$	991,565,711	$	1,099,994,752
Realized (losses) gains	(125,912	)	—		329,905		13,867,937		14,071,930
Unrealized gains (losses)
for assets still held at
December 31, 2009	3,668,522		(416,318	)	(4,795,324	)	(1,943,264	)	(3,486,384	)
Purchases, sales, issuances
and settlements, net	(5,702,231	)	(20,287	)	28,539,274		12,648,361		35,465,117
Balance, December 31, 2009	$ 7,658,122	$	34,062	$	122,214,486	$	1,016,138,745	$	1,146,045,415

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Johnson & Johnson Retirement Savings Plan Notes to Financial Statements

| 5. |
| --- |
| The Trust holds investments in traditional and synthetic guaranteed investment contracts
(GICs). The weighted average insurance financial strength rating of the insurers for these
contracts is AA. These investments are recorded at their fair values. The traditional
GICs’ contract value represents contributions made under the contract and reinvested income,
less any withdrawals. The synthetic GICs
are recorded at contract value, which represents the value of the underlying assets owned by
the Trust plus the amount designed to smooth the impact of normal market fluctuations on
those assets. Both the traditional and synthetic GICs are fully benefit-responsive.
Participants may under most circumstances direct the withdrawal or transfer of all or a
portion of their investment at contract value. Currently no reserves are needed against
contract values for credit risk of the contract issuers or otherwise. |
| The traditional GICs provide a fixed return on principal over a specified period of time
through fully benefit-responsive contracts issued by an insurance company, which are backed
by the general account of that insurer. The contract value of the traditional GICs was
$980,670,676 and $968,022,313 at December 31, 2009 and 2008, respectively. The fair value of
the traditional GICs, as determined by using discounted cash flows, was $1,016,138,745 and
$991,565,725 at December 31, 2009 and 2008, respectively. |
| The synthetic GIC provides a return over a period of time through a fully benefit-responsive
contract, or wrapper contract, which is backed by the underlying assets owned by the Trust.
The portfolio of assets, overall of AA+ credit quality, underlying the synthetic GIC
includes mortgages, corporate, and United States Treasury Notes and Bonds. The contract
value of the synthetic GIC was $710,955,369 and $603,635,992 at December 31, 2009 and 2008,
respectively. The fair value of the synthetic GIC’s is based on the fair value of the
underlying pool of securities, and at December 31, 2009 and 2008 was $726,900,000 and
$590,498,000, respectively. |
| The crediting interest rates for the synthetic GIC is calculated on a monthly basis using
the contract value, and the market value, yield and duration of the underlying securities,
and cannot be less than zero. |
| The crediting interest rates for the traditional GICs are agreed to in advance with the
issuer. The crediting interest rate for the contracts at December 31, 2009 and 2008 was
4.72% and 5.20%, respectively. In the event of extreme changes in interest rates, the
crediting rate may be adjusted to reflect current market condition. |
| Key factors that could influence future average interest crediting rates include, but are
not limited to: participant directed cash flows; changes in interest rates; total return
performance of the fair market value bond strategies underlying the synthetic GIC contract;
default or credit failures of any of the securities, investment contracts, or other
investments held in the Plan; and the initiation of an extended termination (immunization)
of the synthetic GIC contract. |
| The average market value yield of the contracts for 2009 and 2008 was 4.55% and 5.07%,
respectively (calculated by taking the average of the monthly market value weighted yields
of the investments). The average yield earned by the contracts that reflects the actual
interest credited to participants for 2009 and 2008 was 4.40% and 5.00%, respectively
(calculated by dividing annualized earnings credited to participants by the market value of
the Interest Income Fund). |
| There are certain events not initiated by Plan participants that limit the ability of the
Plan to transact with the issuer of a GIC at its contract value. Specific coverage provided
by each traditional GIC and synthetic GIC may be different from each issuer, and can be
found in the individual traditional GIC or synthetic GIC contracts held by the Plan.
Examples of such events include: the Plan’s failure to qualify under the
Internal Revenue
Code of 1986 as amended; full or partial termination of the Plan; involuntary termination of |

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Johnson & Johnson Retirement Savings Plan Notes to Financial Statements

| | employment as a result of a corporate merger, divestiture, spin-off, or other significant
business restructuring, which may include early retirement incentive programs or bankruptcy;
changes to the administration of the Plan which decreases employee or employer
contributions, the establishment of a competing plan by the plan sponsor, the introduction
of a competing investment option, or other Plan amendment that has not been approved by the
contract issuers; dissemination of a participant communication that is designed to induce
participants to transfer assets from this investment option; events resulting in a material
and adverse financial impact on the contract issuer, including changes in the tax code, laws
or regulations. The Plan fiduciaries do not believe that the occurrence of any of the
aforementioned events, which would limit the Plan’s ability to transact with the issuer of a
GIC at its contract value with participants, is probable. |
| --- | --- |
| 6. | Derivatives |
| | The Trust had forward foreign exchange contracts outstanding at December 31, 2009 and 2008
in various currencies. At December 31, 2009 and 2008, the notional amount outstanding for
these contracts in the Trust was $48,317,010 and $21,719,902, respectively, and is
representative of activity during the year. The fair value of these derivative instruments
is included in the Interest in Johnson & Johnson Pension and
Savings Plans Master Trust at
fair value in the Statements of Net Assets Available for Benefits. The net currency gain
recognized during 2009 and 2008 by the Trust was $758,123 and $137,863, respectively. This
amount is included in the Plan’s Interest in the Johnson & Johnson Pension and Savings Plans
Master Trust net investment income/loss on the Statement of Changes in Net Assets
Available for Benefits. The Trust held no other material derivative financial instruments at
December 31, 2009 and 2008. |
| 7. | Tax Status |
| | The Associated Free State of Puerto Rico, Property Department, has determined and informed
the Company by a letter dated March 1, 1990, that the Plan constitutes as a qualified plan
under Section 165(a) of the Puerto Rico Income Tax Act of 1954, as amended (the “ITA”), and
the Plan and the related trust accounts are exempt from Puerto Rico income taxes under
Section 165(a) and 165(e) of the ITA.
Although the Plan has been amended since receiving the determination letter, the Plan
Administrator and the Plan’s tax counsel believe that the Plan is currently designed and is
currently being operated in compliance with the applicable requirements of the Puerto Rico
tax code. Therefore, no provision for income taxes has been included in the Plan’s
financial statements. |
| 8. | Related Party Transactions |
| | Certain Plan investments are shares of institutional commingled funds managed by State
Street Global Advisors, a division of State Street. State Street is the Trustee as defined
by the Plan and, therefore, these transactions qualify as party-in-interest transactions.
As of December 31, 2009 and 2008, the total market value of investments in the institutional
commingled funds allocated to the Plan and managed by State Street was $15,301,457 and
$10,631,356, respectively. |
| | The Plan also invests in shares of the Company. The Company is the Plan sponsor and,
therefore, these transactions qualify as party-in-interest transactions. As of December 31,
2009 and 2008, the market value of investments in Johnson & Johnson Common Stock was
$112,738,898 and $105,434,175, respectively. During the year ended December 31, 2009, the
Plan made purchases of $7,793,165 and sales of $8,650,284 of the Company’s common stock.
The total dividend income received during 2009 was $3,371,255. The total of realized and
unrealized gains during 2009 was $(11,507) and $14,899,238, respectively. |

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Johnson & Johnson Retirement Savings Plan Notes to Financial Statements

9.
The following is a reconciliation of net assets available for benefits per the financial
statements to the Form 5500:

	December 31, — 2009	2008
Net assets available for benefits
per the financial statements	$ 187,986,675	$	160,193,197
Amounts allocated to withdrawing participants	(89,195	)	(61,581	)
Adjustment of synthetic GIC values from
contract value to fair value	255,678		(190,004	)
Net assets available for benefits per the Form 5500	$ 188,153,158	$	159,941,612

The following is a reconciliation of benefits paid to participants per the financial statements to the Form 5500:

Benefits paid to participants per the financial statements	December 31, 2009 — $ 13,170,736
Add: Amounts allocated to withdrawing participants at
December 31, 2009 (not yet paid)	89,195
Less: Amounts allocated to withdrawing participants
at December 31, 2008	(61,581	)
Benefits paid to participants per the Form 5500	$ 13,198,350

The following is a reconciliation of investment income per the financial statements to Form 5500:

	December 31, 2009
Total investment income per the financial statements	$ 20,846,966
Net change in adjustment from contract value to fair value
for synthetic GIC value	$ 445,683
Total investment income per the Form 5500	$ 21,292,649

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Johnson & Johnson Retirement Savings Plan Schedule H, line 4i — Schedule of Assets (Held at End of Year) December 31, 2009

	Description of Investment
	Including Maturity Date,
Identity of Issue, Borrower,	Rate of Interest, Collateral,		Current
Lessor, or Similar Party	Par or Maturity Value	Cost	Value
Plan’s interest in the Trust	Plan’s interest in the
Johnson & Johnson Pension and Savings Plans Master Trust	**	$188,694,449

** Not applicable

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