JOHNSON & JOHNSON — Regulatory Filings 2007

Jun 28, 2007

11-K 1 y36425e11vk.htm FORM 11-K 11-K 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, 2006

OR

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

Commission File Number 1-3215

JOHNSON & JOHNSON 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, as amended, have been omitted because they are not required or are not applicable.

Exhibits:

1. Consent of PricewaterhouseCoopers LLP, dated June 28, 2007

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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 SAVINGS PLAN
By:	/s/ Kaye Foster-Cheek
	K. Foster-Cheek
	Chairman, Pension Committee

June 28, 2007

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JOHNSON & JOHNSON SAVINGS PLAN

FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE

DECEMBER 31, 2006 AND 2005

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Johnson & Johnson Savings Plan

Index to Financial Statements and Supplemental Schedule December 31, 2006 and 2005

	Page(s)
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 – 14
Supplemental Schedule*:
Schedule H, line 4i – Schedule of Assets (Held at
End of Year)	15

• 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.

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Report of Independent Registered Public Accounting Firm

To the Participants, the Pension Committee and the Compensation & Benefits Committee of the Johnson & Johnson Savings Plan:

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 Savings Plan (the “Plan”) at December 31, 2006 and 2005, and the changes in net assets available for benefits for the year ended December 31, 2006 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.

As discussed in Note 2 to the financial statements, the Plan changed the manner in which it reports fully benefit-responsive investment contracts.

/s/ PricewaterhouseCoopers LLP Florham Park, New Jersey June 22, 2007

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Johnson & Johnson Savings Plan

Statements of Net Assets Available for Benefits December 31, 2006 and 2005

	2006	2005
Assets
Interest in Johnson & Johnson Pension
and Savings Plans Master Trust, at fair value	$ 7,047,873,909	$ 6,164,686,053
Participant loans	72,825,166	65,996,981
Total investments	7,120,699,075	6,230,683,034
Receivables
Employee contributions	15,532,836	14,705,377
Employer contributions	5,364,112	4,940,006
Total receivables	20,896,948	19,645,383
Total assets	7,141,596,023	6,250,328,417
Liabilities
Accrued expenses	1,741,760	1,573,030
Total liabilities	1,741,760	1,573,030
Net assets
available for benefits, at fair value	7,139,854,263	6,248,755,387
Adjustment from fair value to contract value for
fully benefit-responsive investment contracts	4,090,181	3,768,980
Net assets available for benefits	$ 7,143,944,444	$ 6,252,524,367

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

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Johnson & Johnson Savings Plan

Statement of Changes in Net Assets Available for Benefits December 31, 2006

	2006
Additions to net assets attributed to
Investment Income
Plan’s interest in the Johnson & Johnson Pension
and Savings Plans Master Trust net investment income	$ 757,471,890
Contributions
Employee contributions	439,555,934
Employer contributions	151,078,000
Asset transfer due to plan mergers	7,492,347
Total additions	1,355,598,171
Deductions from net assets attributed to
Benefits paid to participants	449,729,362
Administrative expenses	14,448,732
Total deductions	464,178,094
Net increase	891,420,077
Net assets available for benefits
Beginning of year	6,252,524,367
End of year	$ 7,143,944,444

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

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Johnson & Johnson Savings Plan

Notes to Financial Statements

| 1. |
| --- |
| General |
| The Johnson & Johnson Savings Plan (the “Plan”) is a participant directed defined
contribution plan which was established on June 1, 1982 for eligible salaried and non-union
hourly employees of Johnson & Johnson (“J&J” or the “Company”) and certain domestic
subsidiaries. The Plan was designed to enhance the existing retirement program of eligible
employees. The funding of the Plan is made through employee and Company contributions.
Prior to January 1, 2003, the assets of the Plan were maintained in the Johnson & Johnson
Savings Plan Trust and the Johnson & Johnson Pension Trust Fund, and transactions therein
were executed by the trustee, State Street Trust Company (“State Street” or “Trustee”). The
Plan’s interests in the Savings Plan Trust and the Pension Trust Fund were allocated to the
Plan based upon the total of each participant’s share in the Master Trust accounts. As of
January 1, 2003, the Johnson & Johnson Savings Plan Trust and Johnson & Johnson Pension
Trust Fund merged to form a single Master Trust, 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. |
| This brief description of the Plan is provided for general information purposes only.
Participants should refer to the Plan document for complete information. |
| Employee Stock Ownership Plan |
| Effective January 1, 1991, the Company implemented a Leveraged Employee Stock Ownership Plan
(“ESOP”) to enhance its existing 401(k) plan. The ESOP is a leveraged employee stock
ownership plan and is designed to comply with Section 4975(e)(7) and the regulations
thereunder of the Internal Revenue Code of 1986, as amended, and is subject to the
applicable provisions of the Employee Retirement Income Security Act of 1974, as amended.
The ESOP was used to fund one-third of the Company match based on employee contributions
(referred to herein as the “ESOP contribution”). Additionally, the Company could utilize
ESOP leveraged shares to fund the remaining portion of the employer match for the employee
directed contributions. |
| Initial funding for the ESOP was made through an advance from J&J of $100 million, which was
used to purchase 12,438,400 shares (adjusted for subsequent stock splits) of J&J common
stock on the open market (See Note 7). The ESOP was closed per contract on February 15,
2005. Shares were allocated to Plan participants under a formula set forth in the ESOP note
agreement relating to the advance from J&J. As of December 31, 2006, all shares have been
allocated and the net assets are $488,769,163. |
| Each participant is entitled to exercise voting rights attributable to the shares allocated
to his or her account. The Company was entitled to exercise voting rights attributable to
unallocated shares. |

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Johnson & Johnson Savings Plan

Notes to Financial Statements

| Contributions |
| --- |
| In general, full-time salaried employees and certain non-union hourly, part-time and
temporary employees can contribute to the Plan, as 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 the participants. Participating employees may contribute a minimum of
3% up to a maximum of 35% of eligible pay, as defined by the Plan. Contributions can be
pre-tax, post-tax or a combination of both. Pre-tax contributions may not exceed the
smaller of (i) 35% of a participant’s base salary or (ii) $15,000 for 2006. The maximum
contributions to a participant’s account, including participant pre-tax and post-tax
contributions and the employer match is $44,000 for 2006. |
| Effective July 1, 2002, participants age 50 and over are eligible to contribute extra
pre-tax contributions (“catch-up contribution”) above the annual IRS limitations up to
$5,000 in 2006. 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 and post-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 a participant’s contributions. The
employer matching contribution is composed of
cash, which is invested in any of nine investment funds as selected by the participating
employees. |
| Investments |
| Participants may invest in one or more of the nine investment funds offered by the Plan.
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. |
| In the third quarter of 1998, J&J incorporated a “dividend pass-through”
feature into the Plan. Up through 2001, the pass-through was distributed to each
participant via check. Effective January 1, 2002, dividends are automatically reinvested in
the Johnson & Johnson Stock Fund unless specific elections are made to receive payment via check.
Participants who had their dividends reinvested in the Johnson & Johnson Stock Fund had an opportunity in
early 2002 to receive those 2001 dividends in cash. The eligibility to receive a dividend
pass-through is contingent on the ownership of shares in the Johnson & Johnson Stock Fund,
which includes shares owned in the Employee Stock Ownership Plan Fund
(“ESOP”). The 2006 dividend
pass-through amount paid to participants of $3,789,172 is reflected as benefits paid to
participants in the Statement of Changes in Net Assets Available for Benefits. |
| All dividend and interest income is reinvested by the Trustee. |
| Vesting |
| A participant’s interest in his/her account, including participant contributions, Company
contributions and earnings thereon, will be at all times fully vested. As a result, there
are no forfeitures under the Plan. |

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Johnson & Johnson Savings Plan

Notes to Financial Statements

| Payment of Benefits |
| --- |
| Benefits are paid to participants upon termination of employment, long-term disability or
retirement. Participants can elect to defer payment until age 70 1 / 2 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. Installment payments are made over
a period of years selected by the participant. |
| A participant’s account may be distributed to his/her beneficiaries in lump sum, in
installments or maintained in the Trust upon the participant’s death only if the beneficiary
is a spouse. Otherwise, it is paid to the beneficiary in a lump sum. |
| Participants are allowed to withdraw an amount equal to their pre-August 1, 2003 post-tax
contributions and earnings thereon, and unmatched post-tax contributions made after August
1, 2003 by the employee and earnings thereon, at any time. Participants may withdraw pre-tax
contributions, post-tax matched contributions, and the employer match after August 1, 2003,
only upon meeting certain hardship conditions. The benefits to which participants are
entitled are the amounts provided by contributions (Company and participant) and investment
earnings thereon, including net realized and unrealized gains and losses which have been
allocated to the participant’s account balance. Participants have the option of receiving
all or 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. |
| Administrative Expenses |
| All third party administrative expenses are paid by the Plan, unless otherwise provided for
by the Company. |
| Participant Loans |
| Participants may borrow up to a maximum of 50% of their account balance. The minimum loan
amount is $1,000 and the maximum amount of all outstanding loans cannot exceed $50,000.
Loans bear an interest rate of prime plus 1% and are repayable within one to five years.
The collateralized balance in the participant’s account bears interest at rates that range
from 3.8% to 10.5%. Principal and interest is paid ratably through payroll deductions for
active employees. Loans must be paid within two months following retirement or termination
of employment with the Company. If the loan is not repaid in full, the unpaid balance, plus
accrued interest, will be deducted from the participant’s account balance and reported to
the IRS as a distribution. |
| 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 participants would receive the respective value in their account. |

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Johnson & Johnson Savings Plan

Notes to Financial Statements

| 2. |
| --- |
| 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. |
| Investment Valuation and Income Recognition of the Trust |
| The Plan’s interest in the Trust is stated at fair
value. Securities traded on a national securities exchange are valued at the last reported sales price on the last business day of the year. Securities
not traded on a national securities exchange are valued using
external pricing vendors. |
| 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 is the value of a single unit, which 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. |
| 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. |
| Net Appreciation (Depreciation) |
| The Plan presents, in the Statement of Changes in Net Assets
Available for Benefits, the
Plan’s interest in the net appreciation (depreciation) of the fair
value of investments held in the Trust, which consists of unrealized appreciation
(depreciation) of the underlying investments and realized gains and losses on sales of
investments. |
| Payment of Benefits |
| Benefits are recorded when paid. |
| Derivatives |
| 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. Forward foreign exchange contracts qualify as a derivative
under Statement of Financial Accounting Standard, Accounting for Derivative Instruments and
Hedging Activities (“SFAS No. 133”). 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 |

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Johnson & Johnson Savings Plan

Notes to Financial Statements

| other security to support forward foreign exchange contracts. The Trust accounts for
forward foreign exchange contracts at fair value. The Trust has forward exchange contracts
outstanding at December 31, 2006 and 2005 in various currencies. At December 31, 2006 and
2005, the notional amount outstanding for these contracts in the Trust was $3,162,281 and
$15,175,043, respectively, and the net currency (loss)/gain recognized during 2006 and 2005
by the Trust was ($94,770) and ($155,355), respectively. The Trust holds no other material
derivative financial instruments at December 31, 2006 and 2005. |
| --- |
| 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. |
| Risk 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 Statement of Net Assets Available for Benefits and the Statement of
Changes in Net Assets Available for Benefits. |
| Reporting of Fully Benefit-Responsive Investment Contracts |
| On December 29, 2005, the Financial Accounting Standards Board (“FASB”) released FASB Staff
Position Nos. AAG INV-1 and SOP 94-4-1, Reporting of Fully Benefit-Responsive Investment
Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide
and Defined-Contribution Health and Welfare and Pension Plans (the “FSP”), which became
effective for the Plan on December 31, 2006. The FSP requires that investment contracts
held by a defined-contribution plan be reported at fair value. However, 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. As required by
the FSP, 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. Prior year balances have been revised accordingly.
The Statement of Changes
in Net Assets Available for Benefits is prepared on a contract value basis. |

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Johnson & Johnson Savings Plan

Notes to Financial Statements

| 3. |
| --- |
| The ESOP includes participant directed and non-participant directed investments.
Information about the ESOP’s net assets and the significant components of the changes in net
assets of this fund is as follows: |

	As of December 31, — 2006	2005
	Allocated	Allocated
Assets
Investments at fair value	$ 488,769,163	$ 487,286,792
Receivables	—	—
Liabilities	—	—
Net assets J&J common stock	$ 488,769,163	$ 487,286,792

	For the
	Year Ended
	December 31,
	2006
	Allocated
Changes in net assets
Investment income	$ 11,226,113
Net appreciation in fair value	45,177,675
Benefits paid to participants	(32,539,106	)
Transfers to participant-directed investments	(22,382,311	)
	$ 1,482,371

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Johnson & Johnson Savings Plan

Notes to Financial Statements

| 4. |
| --- |
| Effective January 1, 2003, the assets of the Plan are
maintained in the Johnson & Johnson Pension
and Savings Plans Master Trust. The Plan holds approximately 52.65% and 51.63%,
respectively of the Trust’s net assets as of December 31,
2006 and 2005. The Plan’s sole investment is its interest in the
Trust and therefore is greater than 5% of the 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 of investments in
the Trust: |

	As of December 31, — 2006	2005
Investments at fair value
Short term investment funds	$ 538,645,020	$	525,961,309
U.S. Government and Agency securities	1,086,336,359		1,203,887,637
Corporate debt	489,780,887		384,540,272
Preferred stock	11,726,687		12,642,943
Commons stock	8,535,090,404		7,248,778,441
Equities and other	1,866,018,076		1,718,940,364
Deposits in group annuity contracts and synthetic GICs	1,063,517,625		1,033,318,956
Total Trust investments at fair value	13,591,115,058		12,128,069,922
Receivables	105,521,725		91,846,840
Liabilities	(308,776,008	)	(273,456,135	)
Adjustment from fair value to contract value for
fully benefit-responsive investment contracts	4,133,018		3,809,099
Net assets held in the Trust	$ 13,391,993,793	$	11,950,269,726

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Johnson & Johnson Savings Plan

Notes to Financial Statements

The net investment income of the Johnson & Johnson Pension and Savings Plans Master Trust was composed of the following:

	For the
	Year Ended
	December 31,
	2006
Net appreciation/(depreciation) in fair value of investments
Short term investment funds	$ 7,521,992
U.S. Government and Agency securities	(20,490,083	)
Corporate debt	12,121,276
Preferred stock	19,904,398
Common stock	841,356,587
Equities and other	322,188,937
	1,182,603,107
Interest	176,146,904
Dividends	196,561,170
Net
investment income	$ 1,555,311,181

| 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 the wrapper 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
$690,625,785 and $677,597,725 at December 31, 2006 and 2005, respectively. The fair value of
the traditional GICs, as determined by using discounted cash flows, was $685,036,934 and
$671,345,300 at December 31, 2006 and 2005, 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, corporates, and United States Treasury Notes and Bonds. The contract
value of the |

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Johnson & Johnson Savings Plan

Notes to Financial Statements

| | synthetic GIC was $377,024,858 and $359,530,330 at December 31, 2006 and 2005,
respectively. The fair value of the synthetic GICs, as determined by using discounted cash
flows, was $378,480,691 and $361,973,656 at December 31, 2006 and 2005, respectively. |
| --- | --- |
| | The crediting interest rates for the synthetic GIC is calculated on a quarterly 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, 2006 and 2005 was 4.53% and 4.37%, respectively. Effective April 2007, the
crediting rate is calculated on a monthly basis, and no longer on a quarterly basis. 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; the initiation of an extended termination (immunization) of
the synthetic GIC contract. |
| | The average market value yield of the contracts for 2006 and 2005 was 4.35% and 4.21%,
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 2006 and 2005 was 4.40% and 4.20%, 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
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. | Tax Status |
| | The Internal Revenue Service has determined and informed the Company by a letter dated
December 31, 2002, that the Plan and the Trust are in compliance with applicable sections of
the
Internal Revenue Code (“IRC”). 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 |

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Johnson & Johnson Savings Plan

Notes to Financial Statements

	of the IRC.
7.	Indebtedness and 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, 2006 the total market value of investments in the institutional
commingled funds for the Plan managed by State Street was $802,561,172.
	The Plan also invests in shares of the Company, which is managed by State Street Global
Advisors. The Company is the plan sponsor and, therefore, these transactions qualify as
party-in-interest transactions. As of December 31, 2006 the market value of investments in
the Johnson & Johnson Common Stock Fund managed by State Street was $1,809,362,464.
	In connection with the formation of the Plan’s ESOP feature, the Plan borrowed $100 million
from J&J for the purpose of purchasing Johnson & Johnson common stock. The note bears
interest at 9% and was payable through February 15, 2005. The Company was obligated to make
contributions in cash to the ESOP which, when aggregated with the ESOP’s dividends and
interest earnings, equal the amount necessary to enable the ESOP to make its regularly
scheduled payments of principal and interest due on the term loan.
	The Company has no rights on the allocated ESOP shares.
	As of December 31, 2004, the final shares were allocated to the ESOP Plan. The remainder of
the shares were allocated to the Johnson & Johnson Common Stock
Fund to fund the Company Match
according to Plan rules. Any remaining dividends were used to buy shares of stock on the
open market to fund the Company Match in the Johnson & Johnson Common Stock Fund.
8.	Assets Transfer
	As a result of business acquisitions by the Plan
Administrator the following transfers into the Plan were completed. In April 2006, the net assets of the TransForm Pharmaceuticals 401(k) Plan in the amount of
$2,140,338 were transferred into the Plan. In July 2006, the net assets of the Egea
Biosciences Retirement and Savings Plan in the amount of $334,539 were transferred into the
Plan. In September 2006, the net assets of the Closure Medical 401(k) Plan in the amount of
$4,126,108 were transferred into the Plan. In October 2006, the net assets of the LuMend,
Inc. 401(k) Retirement Plan in the amount of $732,908 were transferred into the Plan. In
December 2006, the net assets of the Ensure Medical 401(k) in the amount of $136,563 were
transferred into the Plan. After the initial ALZA Corporation Tax Deferral Investment Plan
merger was completed in November 2005, there were residual assets transferred into the Plan
in 2006 totaling $21,891. These transfers into the Plan are reflected in the Statement of
Changes in Net Assets Available for Benefits.

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Johnson & Johnson 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, — 2006	2005
Net assets available for benefits per the financial
statements	$ 7,143,944,444	$	6,252,524,367
Amounts allocated to withdrawing participants	(1,410,402	)	(1,507,717	)
Adjustment
of synthetic GIC value from contract value to fair value	1,440,744		2,417,592
Net assets available for benefits per the Form 5500	$ 7,143,974,786	$	6,253,434,242

	Year Ended
	December 31,
	2006
Benefits paid to participants per the financial statements	$ 449,729,362
Add: Amounts allocated to withdrawing participants at
December 31, 2006	1,410,402
Less: Amounts allocated to withdrawing participants at
December 31, 2005	(1,507,717	)
Benefits paid to participants per the Form 5500	$ 449,632,047

Amounts allocated to the withdrawing participants are recorded on the Form 5500 for benefit payments that have been processed and approved for payment prior to December 31, 2006 but not yet paid as of that date.

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Johnson & Johnson Savings Plan

Schedule H, line 4i – Schedule of Assets (Held at End of Year) December 31, 2006

	Description of Investment
	Including Maturity Date,
Identity of Issue, Borrower, Lessor,	Rate of Interest, Collateral,		Current
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	—	$ 7,047,873,909
*Participant loans	Interest rates ranging from 3.8% to 10.5% Maturities ranging from 2007-2011	—	72,825,166

• Represents party-in-interest transactions.

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