5. Investments
At December 31, 2008 and 2007 the cost and fair values of the investments are summarized as follows (in thousands):
| 2008 | 2007 | |||
|---|---|---|---|---|
| Cost | Fair Value | Cost | Fair Value | |
| Johnson & Johnson common stock 15,878,126 and 42,343,491 shares in 2008 and 2007, respectively | $9,482 | $949,987 | $25,288 | $2,824,311 |
| Other equity investments | ||||
| Domestic equities | 1,681,631 | 1,332,806 | 2,206,650 | 2,448,859 |
| Global equities | 2,233,047 | 1,625,147 | 437,697 | 619,620 |
| Alternative investments–limited partnerships | 3,158,383 | 2,642,182 | 2,915,822 | 3,451,865 |
| Fixed income investments | 554,298 | 504,353 | 786,599 | 831,734 |
| $7,636,841 | $7,054,475 | $6,372,056 | $10,176,389 | |
Other equity investments includes approximately $135 million transferred at 2007 year-end and held in non-interest bearing or money market accounts by several limited partnerships pending investment subscription start dates of January 1, 2008.
Included in Domestic equities and Global equities at December 31, 2008 and 2007 were approximately $102 million and $241 million, respectively, of securities on loan pursuant to securities lending agreements. Cash collateral received for securities on loan was $107 million and $261 million at December 31, 2008 and 2007, respectively. Original collateral received on Domestic and Global securities lent was at least 102% of market value. All cash collateral received is invested in approved money market and short term funds.
Pursuant to its limited partnership agreements, as of December 31, 2008 and 2007, the Foundation had commitments of approximately $2,274 million and $2,493 million, respectively, which are expected to be funded over the next three to five years.
Financial Instruments such as those described above involve, to varying degrees, elements of market risk and credit risk in excess of the amounts recorded on the balance sheet. For the Foundation, market risk represents the potential loss due to the decrease in the value of financial instruments, credit risk represents the maximum potential loss due to possible non-performance of contract terms by obligors and counterparties.
Management does not anticipate that losses, if any, resulting from its market or credit risks would materially affect the financial position and operations of the Foundation.
The Foundation invests in a variety of fixed income securities and contractual instruments, which by their nature are interest rate sensitive. Changes in interest rates will affect the value of such securities and contractual instruments.
The net realized gains on sales of securities for 2008 and 2007 were as follows (in thousands):
| 2008 | 2007 | |
|---|---|---|
| Johnson & Johnson common stock | $1,702,589 | $861,549 |
| Other securities, net | 88,084 | 639,930 |
| Less, Federal and state tax | (18,369) | (36,300) |
| $1,772,304 | $1,465,179 |
The following table summarizes the financial assets reported on the Foundation’s statement of financial position by caption and by level within the valuation hierarchy under SFAS 157 as of December 31, 2008:
| Unadjusted Quoted Market Price (Level 1) |
Significant Other Observable Inputs (Level 2) |
Unobservable Inputs (Level 3) |
Total | |
|---|---|---|---|---|
| Cash equivalents1 | $ – | $224,023 | $ – | $ 224,023 |
| Cash equivalents held as collateral | – | 107,190 | – | 107,190 |
| Investments | ||||
| Johnson & Johnson common stock | 949,987 | – | – | 949,987 |
| Other equity investments | 565,154 | 180,659 | 4,854,322 | 5,600,135 |
| Fixed income investments | – | 244,414 | 259,939 | 504,353 |
| $1,515,141 | $756,286 | $5,114,261 | $7,385,688 |
1Total does not include $9.782 million held in non-interest bearing cash accounts at year-end.
The following table includes a rollforward of amounts for which the Foundation has classified
within level 3:
| Balance at December 31, 2007 | $ 5,320,984 |
|---|---|
| Transfers in/out | 53,265 |
| Purchases and sales, net | 1,182,322 |
| Realized and unrealized gains (losses), net | (1,442,310) |
| Balance at December 31, 2008 | $ 5,114,261 |
All net realized and unrealized gains (losses) in the table above are reflected in the accompanying statement of activities.