CHAIRMAN’S LETTER  To Our  Shareholders 2010  will be remembered as a year in which our company was  severely tested on numerous fronts. Yet our people continued the hallmark work of Johnson & Johnson: finding new ways to care for the health and well-being of people around the world. There were challenges we fully expected, particularly those  related to the continuing global economic downturn and loss of  patent exclusivity on some of our major pharmaceutical products. And there was a challenge we did not expect: the painful and  disappointing experience of the McNeil Consumer Healthcare  product recalls. Despite the trying moments of  2010 , our people introduced  new products, advanced our pipelines and expanded businesses  in emerging markets. We remain steeped in our tradition of caring  for others, driven by values deeply rooted in Our Credo. While we  face near-term business pressures, we enter  2011  on a strong  foundation to achieve long-term sustainable growth. while maintaining investments for future revenue and earnings  growth. With these investments, we are developing a number of exciting new products that have the potential to address  significant unmet health care needs. Worldwide sales for  2010  were $ 61 . 6  billion, a decrease of  1 . 3  percent operationally (reflecting the challenges noted as well  as the  53 rd accounting week included in the  2009  results).  Adjusted earnings were $ 13 . 3  billion 1 , an increase of  2 . 9  percent  despite a sales decline. Adjusted earnings per share increased  2 . 8  percent 1 . In a tough global economy, we maintained our financial  discipline. We generated free cash flow of approximately $ 14  billion 2  and held our AAA credit rating. We also executed a  $ 1 . 1  billion debt offering at the lowest interest rate for long-term  corporate debt in history. We had a one-year decline in total shareholder return of about half a percent. Over longer time frames, we continue to  compare favorably to most stock indices, beating all major sector  performance benchmarks on a three-year and  10 -year basis. The one-year decline in shareholder return was disappointing,  but reflects both the uncertainty around health care reform that  hampered many in our sector and the impact of our consumer  product recalls. We continued to deliver earnings growth in  2010,  with many of our businesses performing well in light of the macroeconomic  conditions. Several factors impacted the health care industry in  general and Johnson & Johnson. Medical devices and consumer  businesses felt the effects of a continued economic slowdown. In health care, we anticipate continuing to feel those effects in  2011 . There were costs associated with U.S. health care reform,  which was implemented early in the year. In addition, we faced  lost sales and remediation costs resulting from our consumer  over-the-counter product recalls, as well as generic competition  in our pharmaceuticals business. Despite these headwinds, we continued to grow earnings  Our people dedicate themselves to providing the most trusted  brands and high-quality products to help others around the world.  MCNEIL CONSUMER HEALTHCARE 2010 RESULTS WILLIAM C. WELDON Chairman, Board of Directors, and Chief Executive Officer 2009 2010 2006 2007 $1.620 $1.930 2008 $1.795 $2.110 $1.455 DIVIDENDS PAID PER SHARE  (in dollars) 2009 2010 2006 2007 $4.40 $3.63 $4.78 $3.73 DILUTED EARNI NGS PER SH ARE  (in dollars) 2008 $4.57 $61.9 NET SALES  (in billions of dollars) 2009 2010 2006 2007 $53.3 $61.1 $61.6 $63.7 2008 CHAIRMAN’S LETTER 1