JOHNSON & JOHNSON — Annual Report 2009

Jun 25, 2009

11-K 1 y77898e11vk.htm FORM 11-K 11-K PAGEBREAK

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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, 2008

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 25, 2009

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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/ Kaye Foster-Cheek
	Kaye Foster-Cheek
	Chairman, Pension Committee

June 25, 2009

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JOHNSON & JOHNSON RETIREMENT SAVINGS PLAN

FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE

DECEMBER 31, 2008 AND 2007

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Johnson & Johnson Retirement Savings Plan

Index to Financial Statements December 31, 2008 and 2007

	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 - 15
Supplemental Schedule*:
Schedule H, line 4i — Schedule of Assets (Held at
End of Year)	16

*
EX-23

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Report of Independent Registered Public Accounting Firm

To the Participants of the Johnson & Johnson Retirement Savings Plan and the Pension 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 Johnson & Johnson Retirement Savings Plan (the “Plan”) at December 31, 2008 and December 31, 2007, and the changes in net assets available for benefits for the year ended December 31, 2008 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 24, 2009

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Johnson & Johnson Retirement Savings Plan

Statements of Net Assets Available for Benefits December 31, 2008 and 2007

	2008
Assets
Interest in Johnson & Johnson Pension
and Savings Plans Master Trust, at fair value	$ 160,791,297	$	176,958,131
Total investments	160,791,297		176,958,131
Total assets	160,791,297		176,958,131
Liabilities
Payable for securities purchased	349,930
Accrued expenses	97,684		95,016
Total liabilitites	447,614		95,016
Net assets available for benefits, at fair value	160,343,683		176,863,115
Adjustment from fair value to contract value for
fully benefit-responsive investment contracts	(150,486	)	(99,121	)
Net assests available for benefits	$ 160,193,197	$	176,763,994

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, 2008

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	$ (26,574,451	)
Contributions
Employee contributions	16,144,275
Employer contributions	6,336,401
Total additions	(4,093,775	)
Deductions from net assets attributed to:
Benefits paid to participants	11,902,818
Administrative expenses	574,204
Total deductions	12,477,022
Net increase/(decrease)	(16,570,797	)
Net assets available for benefits
Beginning of year	176,763,994
End of year	$ 160,193,197

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, maintained
by Banco Popular de Puerto Rico. 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, 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 participants. Participating employees may contribute a minimum of 3%
up to a maximum of 10% 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 $8,000 in 2008
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 2008. 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.
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. |
| For all other funds the Trustee reinvests all dividend and interest income. |

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

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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
	Benefits are paid to participants upon termination of employment, retirement, or long-term
disability. 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 over a period of years
selected by the participant.
	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.
	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.
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.
	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 majority of the
securities are traded on a national securities exchange and 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, which may include the
investment manager. Estimated fair market value for these securities, primarily fixed
income, are typically made using pricing matrices, models or bids from brokers/dealers.
Where readily available, multiple pricing sources are used by the custodian bank to verify these estimates.

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

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Johnson & Johnson Retirement Savings Plan

Notes to Financial Statements

| 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 State Street, 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. |
| --- |
| 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
other security to support forward foreign exchange contracts. The Trust accounts for
forward foreign exchange contracts at fair value. The Trust had
forward foreign exchange contracts
outstanding at December 31, 2008 and 2007 in various currencies. At December 31, 2008 and
2007, the notional amount outstanding for these contracts in the Trust was $21,719,902 and
$7,090,172, respectively, and the net currency gain/(loss) recognized during 2008 and 2007
by the Trust was $137,863 and $31,996, respectively. The Trust held no other material
derivative financial instruments at December 31, 2008 and 2007. |
| In March 2008, the FASB issued SFAS Statement No. 161, Disclosures about Derivative
Instruments and Hedging Activities , an amendment of FASB Statement No. 133, to enhance the
disclosure regarding the Trust’s derivative and hedging activities, to improve the
transparency of financial reporting. This statement is effective for fiscal years beginning
after November 15, 2008. The adoption of SFAS No. 161 will have no impact on the Trust’s
financial position, financial performance, and cash flows. |

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

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Johnson & Johnson Retirement Savings Plan

Notes to Financial Statements

| Fair Value Measurements |
| --- |
| In September 2006, the FASB issued SFAS 157, “Fair Value Measurements,” which is
effective for fiscal years beginning after November 15, 2007. SFAS 157 defines fair value,
establishes a framework for measuring fair value and expands disclosures about assets and
liabilities measured at fair value. SFAS 157 establishes the following: |

| • | Defines fair value as the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the
measurement date, and establishes a framework for measuring fair value; |
| --- | --- |
| • | Establishes a three-tier hierarchy for fair value measurements based upon the
transparency of inputs to the valuation of an asset or liability as of the
measurement date; |
| • | Eliminates large position discounts for financial instruments quoted in active
markets; and |
| • | Expands disclosures about instruments measured at fair value. |

| The Plan adopted SFAS No. 157 in the fiscal first quarter of 2008, the impact of which is
discussed in Note 4. |
| --- |
| 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. |
| Reporting of Fully Benefit-Responsive Investment Contracts |
| On December 29, 2005, the 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. The Statement of
Changes in Net Assets Available for Benefits is prepared on a contract value basis. |

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

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Johnson & Johnson Retirement Savings Plan

Notes to Financial Statements

| 3. |
| --- |
| The assets of the Plan are maintained in the Johnson & Johnson Pension and Savings Plans
Master Trust. The Plan holds approximately 1.42% and 1.22%, respectively of the Trust’s net
assets as of December 31, 2008 and 2007. 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, — 2008	2007
Investments at fair value
Short term investment funds	$ 615,064,003	$	605,589,905
U.S. Government and Agency securities	999,402,502		1,004,959,948
Corporate debt	605,765,016		585,744,054
Preferred stock	5,885,986		13,447,079
Common stock	6,172,253,997		8,706,451,063
Common Collective Trusts	1,225,453,603		2,394,683,035
Equities and other *	178,449,770		211,810,333
Deposits in group annuity contracts and synthetic GICs	1,582,063,704		1,130,884,176
Total Trust investments at fair value	11,384,338,581		14,653,569,593
Receivables	108,472,125		120,905,382
Liabilities	(207,830,548	)	(299,589,886	)
Adjustment from fair value to contract value for
fully benefit-responsive investment contracts	(10,405,457	)	(13,390,868	)
Net assets held in the Trust	$ 11,274,574,701	$	14,461,494,221

• At December 31, 2008 the Trust has unfunded commitments of underlying funds of $53,726,755 outstanding. These commitments are expected to be satisfied by distributions from existing investments.

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

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Johnson & Johnson Retirement 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,
	2008
Net appreciation/(depreciation) in fair value of investments
Short term investment funds	$ 127,387
U.S. Government and Agency securities	21,851,948
Corporate debt	(120,264,082	)
Preferred stock	(12,870,109	)
Common stock	(2,820,735,126	)
Common Collective Trusts	(783,225,552	)
Equities and other	(36,252,855	)
	(3,751,368,389	)
Interest	128,805,127
Dividends	214,603,154
Net investment income	$ (3,407,960,108	)

| 4. |
| --- |
| The Plan’s valuation methodologies were applied to all of the trust investments carried at
fair value, effective January 1, 2007. The Plan has an established and well-documented
process for determining fair values. 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. |
| Valuation Hierarchy |
| SFAS 157 establishes a three-level valuation hierarchy for disclosure of fair value
measurements. The three levels are defined based on the inputs to the valuation methodology
as follows: |

| • | 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. |

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

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Johnson & Johnson Retirement Savings Plan

Notes to Financial Statements

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. 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 — 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 — 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 investments are public investment vehicles valued
using the Net Asset Value (NAV) provided by the fund administrator. 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. Assets in the Level 2 category have a quoted market
price in a market that is not active. |
| • | Guaranteed insurance contracts (GICs) — 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, Agencies, Fixed Income and Asset-Backed Securities. The
synthetic guaranteed investment contract and related investments are classified as Level 2.
The synthetic GIC contracts had a fair value of $590,498,037 and $454,418,527 at December
31, 2008 and 2007, respectively. See Note 5 of these financial statements for further
information on these contracts. |
| • | Other assets — Other assets are represented primarily by limited partnerships, as well
as commercial loans and commercial 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 accompanying notes are an integral part of these financial statements.

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Johnson & Johnson Retirement Savings Plan

Notes to Financial Statements

Most limited partnerships represent investments in private equity and similar funds that are valued by the general partners. These, as well as any other assets valued using unobservable inputs, are classified as Level 3.

Master Trust investments measured at fair value

	Quoted market — prices inputs	Observable — Inputs	Unobservable — Inputs
December 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

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

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Johnson & Johnson Retirement Savings Plan

Notes to Financial Statements

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, 2008.

						and synthetic
						insurance
	Corporate debt	Common stocks		Other assets		contracts
Balance December 31, 2007	$ 12,090,931	$	1,404,825	$	98,821,844	$	676,465,649
Realized gains (losses)	(55,141	)	1,245		(2,815,476	)	6,565,253
Unrealized gains (losses) for assets
still held at December 31, 2008	(18,303,203	)	61,343		7,043,596		8,761,085
Purchases, sales, issuances and
settlements, net	16,085,156		(996,746	)	(4,909,333	)	299,773,724
Balance, December 31, 2008	$ 9,817,743	$	470,667	$	98,140,631	$	991,565,711

| 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
$968,022,313 and $668,248,591 at December 31, 2008 and 2007, respectively. The fair value of
the traditional GICs, as determined by using discounted cash flows, was $991,565,725 and
$676,465,649 at December 31, 2008 and 2007, 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 $603,635,992 and $449,244,716 at December 31, 2008 and 2007, respectively.
The fair value of the synthetic GICs is based on the fair value of
the underlying pool of securities, and at December 31, 2008 and
2007 was
$590,498,037 and $454,418,527, respectively. |
| The crediting interest rates for the synthetic GIC is calculated on a quarterly basis using
the contract value, and the market value, yield |

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

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Notes to Financial Statements

| | 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, 2008
and 2007 was 5.20% and 5.03%, 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; and the initiation of an extended termination (immunization) of
the synthetic GIC contract. |
| | The average market value yield of the contracts for 2008 and 2007 was 5.07% and 4.86%,
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 2008 and 2007 was 5.00% and 4.60%, 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 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. |

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

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Notes to Financial Statements

7.	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, 2008 the total market value of investments in the institutional
commingled funds in the Plan managed by State Street was $10,631,356.
	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,
2008 and 2007, the market value of investments in Johnson & Johnson Common
Stock was $105,434,175 and $108,572,385, respectively.
During the year ended December 31, 2008, the Plan made purchases of $17,079,780 and sales
of $7,026,456 of the Company’s common stock. The total dividend income received during 2008
was $3,032,857.
8.	Reconciliation of Financial Statements to Form 5500
	The following is a reconciliation of net assets available for benefits per the financial
statements to the Form 5500:

	December 31, — 2008	2007
Net assets available for benefits
per the financial statements	$ 160,193,197	$	176,763,994
Amounts allocated to withdrawing participants	(61,581	)	(50,105	)
Adjustment of synthetic GIC values from
contract value to fair value	(190,004	)	38,297
Net assets available for benefits per the Form 5500	$ 159,941,612	$	176,752,186

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, 2008 — $ 11,902,818
Add: Amounts allocated to withdrawing participants at
December 31, 2008 (not yet paid)	61,581
Less: Amounts allocated to withdrawing participants
at December 31, 2007	(50,105	)
Benefits paid to participants per the Form 5500	$ 11,914,294

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

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Notes to Financial Statements

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

Total investment income per the financial statements	December 31, 2008 — $ (26,574,451	)
Net change
in adjustment from contract value to fair value
for synthetic GIC value	$ (228,301	)
Total investment income per the Form 5500	$ (26,802,752	)

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

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Schedule H, line 4i — Schedule of Assets (Held at End of Year) December 31, 2008

	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	*	*	$ 160,791,297
	Pension and Savings Plans Master Trust

** Not applicable

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

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