CARING
Comforts • Fulfills • Heals • Touches • Empowers • Transforms • Inspires • Endures

To Our Shareholders

The men and women of Johnson & Johnson come to work each day driven by a shared passion: caring. Our caring touches the lives of people around the world. It motivates us to identify unmet health care needs, reach increasing numbers of patients and consumers, and create broader solutions— not only for the most serious medical conditions but also for the general health and well-being of the world’s population.

Our caring empowers others. It touches patients and consumers across the world, and it inspires hope. It’s grounded in the fundamental tenets of Our Credo and in a decentralized management approach that keeps our people close to their customers and their markets. It drove our business success in 2008, and it mobilizes us to capitalize on new health care opportunities while we meet the challenges ahead in an unprecedented, difficult global economic setting.

2008 HIGHLIGHTS We remember 2008 as a year of extraordinary economic events that shook our financial markets and global economies.

Against this backdrop, I am proud of our accomplishments. Johnson & Johnson delivered on its financial commitments, driven by the strength of a broad base of human health care businesses.

Worldwide sales grew to $63.7 billion, an increase of 4.3 percent. Operational growth was 1.9 percent. We achieved strong adjusted earnings growth of 6.8(1) percent and adjusted earnings per share growth of 9.6(1) percent, which was higher than adjusted earnings growth due to our share-repurchase program. Free cash flow was strong at approximately $12 billion.(2) While growing our businesses, we also took thoughtful, disciplined actions to streamline and improve our cost structure.

Within our Pharmaceuticals and Cordis businesses, approximately $1.6 billion in annual savings were realized. We anticipate additional savings in 2009 from standardization initiatives we have invested in over time. Meanwhile, we remain on track to fulfill the potential of the Pfizer Consumer Healthcare acquisition, expecting to meet or exceed our target of $500 million to $600 million in cost synergies. We expect this transaction to be break-even or modestly accretive this year, one year ahead of the original schedule.

These types of actions drove gains in our adjusted segment operating profit to $17.3(3) billion, or 27.1(3) percent to sales, in 2008 compared with $15.9(3) billion, or 26.0(3) percent to sales, in 2007. Our teams did an excellent job improving margins even as the volatile economic climate began driving increases in commodity costs and shifts in consumer and patient behaviors.

We also continued with our $10 billion share-repurchase program, and as of year-end, we had purchased approximately $8.1 billion of stock.

During the turbulent economic times of 2008, Johnson & Johnson was the third-best-performing stock on the Dow Jones Industrial Average. Our shareholder returns over one-, three-, five- and ten-year periods have exceeded our major comparative indices. While delivering financial results and cost structure improvements, we have been investing in our businesses for sustained growth. We made significant strides toward strengthening our market positions in the areas in which we compete today, identifying new high-growth opportunities and broadening our capabilities into more of the $4.1 trillion health care market.

We continue to deliver on four major business priorities that remain fundamental to our long-term growth:

• Winning in Health Care
• Capitalizing on Convergence
• Accelerating Growth in Emerging Markets
• Developing Leadership and Talent ...

Read Johnson & Johnson Annual Report 2008 Online

PRINCIPAL OFFICE
One Johnson & Johnson Plaza
New Brunswick, New Jersey 08933
(732) 524-0400

OUR CREDO
We believe our first responsibility is to the doctors, nurses and patients, to mothers and fathers and all others who use our products and services. In meeting their needs, everything we do must be of high quality. We must constantly strive to reduce our costs in order to maintain reasonable prices. Customers’ orders must be serviced promptly and accurately.

Our suppliers and distributors must have an opportunity to make a fair profit.

We are responsible to our employees, the men and women who work with us throughout the world. Everyone must be considered as an individual. We must respect their dignity and recognize their merit. They must have a sense of security in their jobs.

Compensation must be fair and adequate, and working conditions clean, orderly and safe.

We must be mindful of ways to help our employees fulfill their family responsibilities.

Employees must feel free to make suggestions and complaints. There must be equal opportunity for employment, development and advancement for those qualified. We must provide competent management, and their actions must be just and ethical.

We are responsible to the communities in which we live and work and to the world community as well. We must be good citizens—support good works and charities and bear our fair share of taxes. We must encourage civic improvements and better health and education. We must maintain in good order the property we are privileged to use, protecting the environment and natural resources.

Our final responsibility is to our stockholders. Business must make a sound profit.

We must experiment with new ideas. Research must be carried on, innovative programs developed and mistakes paid for. New equipment must be purchased, new facilities provided and new products launched. Reserves must be created to provide for adverse times. When we operate according to these principles, the stockholders
should realize a fair return.

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