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
----------
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the Fiscal Year Ended December 31, 2005
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
Commission File Number 1-3215
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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)
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 ERISA have been omitted because they are not required or are not
applicable.
Exhibits:
23. Consent of PricewaterhouseCoopers LLP, dated June 26, 2006
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: R. J. Darretta
------------------------------------
R. J. Darretta
Chairman, Pension Committee
June 26, 2006
JOHNSON & JOHNSON SAVINGS PLAN
----------
FINANCIAL STATEMENTS AND
SUPPLEMENTAL SCHEDULE
DECEMBER 31, 2005 AND 2004
JOHNSON & JOHNSON
SAVINGS PLAN
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE
DECEMBER 31, 2005 AND 2004
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 - 13
Supplemental Schedule*:
Schedule H, line 4i - Schedule of Assets (Held at
End of Year) 14
* Other supplemental schedules required by Section 2520.103.10 of the
Department of Labor's Rules and Regulations for Reporting and Disclosure
under ERISA have been omitted because they are not required or are not
applicable.
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 statements 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") as of December 31, 2005 and
2004, and the changes in net assets available for benefits for the year ended
December 31, 2005 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
-------------------------------------
Florham Park, New Jersey
June 23, 2006
JOHNSON & JOHNSON
SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2005 AND 2004
2005 2004
-------------- --------------
ASSETS
Interest in Johnson & Johnson Pension
and Savings Plans Master Trust, at fair value $6,168,455,033 $5,661,156,588
Participant loans 65,996,981 58,418,387
-------------- --------------
Total investments 6,234,452,014 5,719,574,975
Receivables
Employee contributions 14,705,377 12,848,207
Employer contributions 4,940,006 4,531,522
-------------- --------------
Total receivables 19,645,383 17,379,729
============== ==============
Total assets 6,254,097,397 5,736,954,704
============== ==============
LIABILITIES
Accrued interest -- 466,126
Accrued expenses 1,573,030 3,184,101
Note payable to Johnson & Johnson -- 5,919,055
-------------- --------------
Total liabilities 1,573,030 9,569,282
-------------- --------------
Net assets available for benefits $6,252,524,367 $5,727,385,422
============== ==============
The accompanying notes are an integral part of these financial statements.
-2-
JOHNSON & JOHNSON
SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2005
2005
--------------
ADDITIONS TO NET ASSETS ATTRIBUTED TO
Investment Income
Plan's interest in the Johnson & Johnson Pension
and Savings Plans Master Trust net
appreciation $ 142,212,413
Contributions
Employee contributions 435,085,662
Employer contributions 141,283,181
Asset transfer due to plan merger 109,201,097
--------------
Total additions 827,782,353
--------------
DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO
Benefits paid to participants 292,531,013
Administrative expenses 9,645,775
Employee Stock Ownership Plan transfers 466,620
--------------
Total deductions 302,643,408
--------------
Net increase 525,138,945
--------------
NET ASSETS AVAILABLE FOR BENEFITS
Beginning of year 5,727,385,422
--------------
End of year $6,252,524,367
==============
The accompanying notes are an integral part of these financial statements.
-3-
JOHNSON & JOHNSON
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF THE PLAN
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 Johnson & Johnson Pension and Savings
Plans Master 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 25% 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). As of December 31, 2005, all shares have been allocated and the net
assets are $487,286,792. 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.
Each participant is entitled to exercise voting rights attributable to the
shares allocated to his or her account. The Company is entitled to exercise
voting rights attributable to unallocated shares.
-4-
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) $14,000 for 2005. The
maximum contributions to a participant's account, including participant
pre-tax and post-tax contributions and the employer match is $42,000 for
2005.
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 $4,000 in 2005. 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 Company Match 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, Johnson & Johnson 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 J&J Stock Fund unless
specific elections are made to receive payment via check. Participants who
had their dividends reinvested in the J&J 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 does not include shares owned in
the Employee Stock Ownership Plan Fund. The 2005 dividend pass-through
amount paid to participants of $3,365,845 is reflected as benefits paid to
participants in the Statement of Changes in Net Assets Available for
Benefits.
All other dividend and interest income is reinvested by the Trustee.
VESTING
A participant's interest in their 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.
-5-
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 their 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 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.
-6-
JOHNSON & JOHNSON
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
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.
INVESTMENT VALUATION AND INCOME RECOGNITION
The Plan's interest in the Trust is stated at fair value. Generally, it
represents securities traded on a national securities exchange, which 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 based on the frequency of their valuations.
Benefit responsive guaranteed and synthetic investment contracts are
recorded at contract value, which approximates fair value (Note 5).
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 Trust and includes the net appreciation
(depreciation) in 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 can 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 Plan 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
-7-
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, 2005 and 2004 in
various currencies. At December 31, 2005 and 2004, the notional amount
outstanding for these contracts in the Trust was $15,175,043 and
$11,869,143, respectively, and the net currency (loss)/gain recognized
during 2005 and 2004 by the Trust was ($155,355) and ($808,790),
respectively. The Trust holds no other material derivative financial
instruments at December 31, 2005 and 2004.
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.
-8-
JOHNSON & JOHNSON
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
3. NON-PARTICIPANT DIRECTED INVESTMENTS
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,
-------------------------------------------------------
2005 2004
-------------------------- --------------------------
Allocated Unallocated Allocated Unallocated
------------ ----------- ------------ -----------
Assets
Investments at fair value $487,286,792 $-- $517,503,588 $13,492,570
Receivables -- -- 1,510,601 (1,510,601)
Liabilities -- -- (6,385,181) --
------------ --- ------------ -----------
Net assets J&J common stock $487,286,792 $-- $512,629,008 $11,981,969
============ === ============ ===========
DECEMBER 31, 2005
---------------------------
ALLOCATED UNALLOCATED
------------ ------------
Changes in net assets
Investment income $ 10,274,165 $ 27,041
Plan merger 23,180,165 --
Net depreciation in fair value (22,554,641) (8,511,021)
Benefits paid to participants (22,132,389) --
Transfers to participant-directed investments (14,109,516) (3,497,989)
------------ ------------
$(25,342,216) $(11,981,969)
============ ============
-9-
JOHNSON & JOHNSON
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
4. INVESTMENTS IN PLAN TRUST
Effective January 1, 2003, the Johnson & Johnson Savings Plan Trust merged
with the Johnson & Johnson Pension Trust Fund to form a single Master
Trust, the Johnson & Johnson Pension and Savings Plans Master Trust. The
Plan holds approximately 51.63% and 52.71%, respectively of the Trust's net
assets as of December 31, 2005 and 2004.
Net assets, income, and expenses are allocated to the Plan based on the
total of each participant's share in the respective funds.
AS OF DECEMBER 31,
---------------------------------
2005 2004
--------------- ---------------
Investments at fair value
Short term investment funds $ 525,961,309 $ 551,013,386
U.S. Government and Agency securities 1,203,887,637 856,971,117
Corporate debt 384,540,272 313,196,278
Preferred stocks 12,642,943 11,061,328
Commons stock 7,248,778,441 6,822,053,563
Equities and other 1,718,940,364 1,348,404,513
Investments at contract value
Deposits in group annuity contracts and synthetic GICs 1,037,128,055 973,552,848
--------------- ---------------
Total Trust investments 12,131,879,021 10,876,253,033
Receivables 91,846,840 75,006,869
Liabilities (273,456,135) (211,812,708)
--------------- ---------------
Net assets held in the Trust, at fair value $11,950,269,726 $10,739,447,194
=============== ===============
-10-
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,
2005
------------
Net appreciation in fair value of investments
Short term investment funds $ 311,514
U.S. Government and Agency securities (8,112,371)
Corporate debt (15,656,090)
Preferred stocks 2,051,876
Common stocks 191,591,423
Equities and other 95,164,399
------------
265,350,751
------------
Interest 129,122,943
Dividends 172,796,316
------------
Net investment gain $567,270,010
============
5. GUARANTEED AND SYNTHETIC INVESTMENT CONTRACTS
The Trust holds investments in guaranteed and synthetic investment
contracts. These investments are recorded at their contract values. This
represents cost plus accrued interest of guaranteed investment contracts
and fair value of the collateral plus the benefit responsive wrap value for
synthetics, as the contracts are fully benefit-responsive. Participants may
ordinarily direct the withdrawal or transfer of all or a portion of their
investment at contract value. There are currently no reserves against
contract values for credit risk of the contract issuers or otherwise.
The average yield of these contracts was approximately 4.21% and 4.12% for
2005 and 2004, respectively. The crediting interest rate was approximately
4.37% for 2005 and 4.22% for 2004. The crediting interest rate of these
contracts is the annual return of the contracts before plan expenses, while
the average yield includes plan expenses. The crediting interest rate for
the investment contracts is either agreed upon in advance with the issuer
or varies based on an agreed upon formula, but cannot be less than zero.
The fair value of guaranteed and synthetic investment contracts for the
Plan at December 31, 2005 and 2004 was $1,029,731,370 and $964,899,533,
respectively.
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 (FSP). The FSP
clarifies the definition of fully benefit-responsive investment contracts
for contracts held by defined contribution plans. The FSP also establishes
enhanced financial statement presentation and disclosure requirements for
defined contribution plans subject to the FSP effective for financial
statements issued for periods ending after December 15, 2006.
-11-
JOHNSON & JOHNSON
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
Management intends to adopt the FSP in the Plan's financial statements for
the year ended December 31, 2006 and does not believe the adoption will
have a material affect on the plans financial statements.
6. TAX STATUS
The Internal Revenue Service has determined and informed the Company by a
letter dated December 31, 2002, that the Plan is 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 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 the 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,
2005 the total market value of investments in the institutional commingled
funds managed by State Street was $683,197,397.
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, 2005 the market value of investments in the Johnson & Johnson
Common Stock Fund was $1,747,855,998.
In connection with the formation of the Plan's ESOP feature, the Plan
borrowed $100 million from Johnson & Johnson for the purpose of purchasing
J&J 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 proceeds of shares sold to the Company or on the open market will be
used to satisfy the outstanding principal and interest. 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 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
Effective November 8, 2005, the ALZA Corporation Tax Deferral Investment
Plan was merged into the Plan. Participant account balances totaling
$109,201,097 were transferred into the Plan. In addition, there were
outstanding participant loans totaling $1,175,039 transferred into the
Plan. The assets from the ALZA Corporation Tax Deferral Investment Plan
were liquidated and the money was transferred to the investments in the
Plan with similar investment objectives, unless redirected by the
participant.
-12-
JOHNSON & JOHNSON
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
9. 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,
--------------------------------
2005 2004
-------------- ---------------
Net assets available for benefits per the financial
statements $6,254,422,349 $ 5,727,385,422
Amounts allocated to withdrawing participants (1,507,717) (1,266,698)
-------------- ---------------
Net assets available for benefits per the Form 5500 $6,252,914,632 $ 5,726,118,724
============== ===============
YEAR ENDED
DECEMBER 31,
2005
------------
Benefits paid to participants per the financial statements $292,997,633
Add: Amounts allocated to withdrawing participants at
December 31, 2005 1,507,717
Less: Amounts allocated to withdrawing participants at
December 31, 2004 (1,266,698)
------------
Benefits paid to participants per the Form 5500 $293,238,652
============
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, 2005 but not yet paid as of that date.
-13-
JOHNSON & JOHNSON
SAVINGS PLAN
SCHEDULE H, LINE 4I - SCHEDULE OF ASSETS (HELD AT END OF YEAR)
DECEMBER 31, 2005
DESCRIPTION OF INVESTMENT INCLUDING
IDENTITY OF ISSUE, BORROWER, LESSOR, MATURITY DATE, RATE OF INTEREST,
OR SIMILAR PARTY COLLATERAL, PAR OR MATURITY VALUE COST CURRENT VALUE
------------------------------------ --------------------------------------- ---- -------------
Plan's interest in the Trust Plan's interest in the Johnson & Johnson
Pension and Savings Plans Master Trust $6,168,455,033
*Participant loans Interest rates ranging from 3.8% to 10.5% -- 65,996,981
Maturities ranging from 2006-2010
* Represents party-in-interest transactions.
-14-