1
Exhibit 99(a)
Audited Financial Statements
THE TRW EMPLOYEE STOCK
OWNERSHIP AND STOCK SAVINGS PLAN
December 31, 1996 and 1995
2
Report of Independent Auditors
Board of Administration
The TRW Employee Stock Ownership and
Stock Savings Plan
We have audited the accompanying statements of net assets available for benefits
of The TRW Employee Stock Ownership and Stock Savings Plan as of December 31,
1996 and 1995, and the related statements of changes in net assets available for
benefits for the years then ended. 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 in accordance with generally accepted auditing
standards. 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of The TRW Employee
Stock Ownership and Stock Savings Plan as of December 31, 1996 and 1995, and the
changes in net assets available for benefits for the years then ended, in
conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplemental schedule of
assets held for investment purposes as of December 31, 1996, and the schedule of
reportable transactions for the year then ended are presented for purposes of
complying with the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974, and are
not a required part of the basic financial statements. The Fund Information in
the statement of net assets available for benefits and the statement of changes
in net assets available for benefits is presented for purposes of additional
analysis rather than to present the net assets available for benefits and
changes in net assets available for benefits of each fund. The supplemental
schedules and Fund Information have been subjected to the auditing procedures
applied in our audit of the 1996 financial statements and, in our opinion, are
fairly stated in all material respects in relation to the 1996 basic financial
statements taken as a whole.
/s/ Ernst & Young LLP
March 14, 1997
Cleveland, Ohio
1
3
The TRW Employee Stock Ownership and Stock Savings Plan
Statements of Net Assets Available for Benefits with Fund Information
December 31, 1996
TRW Stock Fund
-----------------------------------
Participant Non-Participant Equity Insured
Directed Directed Fund Return Fund
--------------------------------------------------------------------
ASSETS
Investments:
TRW Inc. Common Stock $ 370,742,743 $ 666,711,719
Guaranteed investment contracts $ 490,407,234
Bankers Trust Pyramid Equity Index Fund $ 462,068,568
Bankers Trust Pyramid Russell 2500 Index Fund
Bankers Trust Pyramid Intermediate
Government/Corporate Bond Index Fund
Bankers Trust Pyramid Directed Account Cash Fund 1,743,081 2,984,140 14,739,814
Receivable from TRW Inc. 35,005 59,928 53,091 70,324
Participant loans receivable 18,539,229 16,608,418 18,690,131
Receivable from investments sold 225,304
Prepaid expenses 32,117 54,985
Interest receivable 40,194 2,798,092
Receivable from other funds 114,197
--------------------------------------------------------------------
Total assets 391,246,566 669,810,772 478,955,381 526,705,595
LIABILITIES
Payable to other funds 9,673 744,540
Payable for investments acquired
Accrued expenses 36,332 280,911
--------------------------------------------------------------------
Total liabilities 46,005 1,025,451
--------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $ 391,246,566 $ 669,810,772 $ 478,909,376 $ 525,680,144
====================================================================
Small Company Bond
Equity Fund Index Fund Totals
------------------------------------------------------
ASSETS
Investments:
TRW Inc. Common Stock $ 1,037,454,462
Guaranteed investment contracts 490,407,234
Bankers Trust Pyramid Equity Index Fund 462,068,568
Bankers Trust Pyramid Russell 2500 Index Fund $ 96,588,565 96,588,565
Bankers Trust Pyramid Intermediate
Government/Corporate Bond Index Fund $ 20,494,132 20,494,132
Bankers Trust Pyramid Directed Account Cash Fund 19,467,035
Receivable from TRW Inc. 25,730 4,358 248,436
Participant loans receivable 5,548,400 928,693 60,314,871
Receivable from investments sold 225,304
Prepaid expenses 13,902 101,004
Interest receivable 2,838,286
Receivable from other funds 562,474 77,542 754,213
------------------------------------------------------
Total assets 102,739,071 21,504,725 2,190,962,110
LIABILITIES
Payable to other funds 754,213
Payable for investments acquired 511,352 59,948 571,300
Accrued expenses 3,099 320,342
------------------------------------------------------
Total liabilities 511,352 63,047 1,645,855
------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $ 102,227,719 $ 21,441,678 $ 2,189,316,255
======================================================
2
See notes to financial statements.
4
The TRW Employee Stock Ownership and Stock Savings Plan
Statements of Changes in Net Assets Available for Benefits with Fund Information
Year Ended December 31, 1996
TRW Stock Fund
-----------------------------------
Participant Non-Participant Equity Insured
Directed Directed Fund Return Fund
--------------------------------------------------------------------
Investment income:
Dividends--TRW Inc. Common Stock $ 8,215,685 $ 15,738,158
Interest 153,951 290,907 $ 7,678 $ 33,948,650
--------------------------------------------------------------------
Investment income 8,369,636 16,029,065 7,678 33,948,650
Contributions from TRW Inc. 41,254,275
Contributions from participants 24,865,673 29,981,056 26,837,189
Net realized gain on disposition of investments 15,525,544 29,704,812 18,095,295
Unrealized appreciation of investments 64,083,341 118,056,264 69,643,225
Transfers from other funds 59,120,384 43,307,428 72,438,679
Interest income on participant loans 1,458,285 1,404,242 1,721,664
--------------------------------------------------------------------
173,422,863 205,044,416 162,438,924 134,946,182
Less:
Withdrawals and distributions:
Cash 2,848,023 2,829,660 35,444,539 56,780,139
TRW Inc. Common Stock (621,145 participant
directed shares and 1,251,970 non-participant 28,803,604 58,079,381
directed shares)
--------------------------------------------------------------------
31,651,627 60,909,041 35,444,539 56,780,139
Distribution of dividends on TRW Inc. Common Stock 14,963,225
Administrative expenses 178,273 342,227 329,400 886,500
Transfers to other funds 51,521,760 40,856,749 94,422,989
--------------------------------------------------------------------
83,351,660 76,214,493 76,630,688 152,089,628
--------------------------------------------------------------------
Increase (decrease) in net assets for year 90,071,203 128,829,923 85,808,236 (17,143,446)
Net assets available for benefits at beginning of year 301,175,363 540,980,849 393,101,140 542,823,590
--------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS AT END OF YEAR $ 391,246,566 $ 669,810,772 $ 478,909,376 $ 525,680,144
====================================================================
Small Company Bond
Equity Fund Index Fund Totals
------------------------------------------------------
Investment income:
Dividends--TRW Inc. Common Stock $ 23,953,843
Interest $ 13 $ 36 34,401,235
------------------------------------------------------
Investment income 13 36 58,355,078
Contributions from TRW Inc. 41,254,275
Contributions from participants 15,142,506 3,179,242 100,005,666
Net realized gain on disposition of investments 2,436,307 503,664 66,265,622
Unrealized appreciation of investments 11,162,184 15,145 262,960,159
Transfers from other funds 39,764,356 9,620,094 224,250,941
Interest income on participant loans 452,468 84,801 5,121,460
------------------------------------------------------
68,957,834 13,402,982 758,213,201
Less:
Withdrawals and distributions:
Cash 8,310,132 2,183,439 108,395,932
TRW Inc. Common Stock (621,145 participant
directed shares and 1,251,970 non-participant 86,882,985
directed shares)
------------------------------------------------------
8,310,132 2,183,439 195,278,917
Distribution of dividends on TRW Inc. Common Stock 14,963,225
Administrative expenses 105,750 28,500 1,870,650
Transfers to other funds 27,789,264 9,660,179 224,250,941
------------------------------------------------------
36,205,146 11,872,118 436,363,733
------------------------------------------------------
Increase (decrease) in net assets for year 32,752,688 1,530,864 321,849,468
Net assets available for benefits at beginning of year 69,475,031 19,910,814 1,867,466,787
------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS AT END OF YEAR $ 102,227,719 $ 21,441,678 $ 2,189,316,255
======================================================
See notes to financial statements.
3
5
The TRW Employee Stock Ownership and Stock Savings Plan
Statements of Net Assets Available for Benefits with Fund Information
December 31, 1995
TRW Stock Fund
-----------------------------------
Participant Non-Participant Equity Insured
Directed Directed Fund Return Fund
-------------------------------------------------------------------
ASSETS
Investments:
TRW Inc. Common Stock $ 285,150,030 $ 539,111,372
Guaranteed investment contracts $ 512,421,483
Bankers Trust Pyramid Equity Index Fund $ 377,675,716
Bankers Trust Pyramid Russell 2500 Index Fund
Bankers Trust Pyramid Intermediate
Government/Corporate Bond Index Fund
Bankers Trust Pyramid Directed Account Cash Fund 1,081,907 1,940,902 6,525,288
Receivable from TRW Inc. 47,051 84,407 56,359 61,110
Participant loans receivable 15,864,840 15,037,019 21,275,831
Interest receivable 58,105 2,969,349
Receivable from other funds 452,425
-------------------------------------------------------------------
Total assets 302,201,933 541,136,681 393,221,519 543,253,061
LIABILITIES
Payable to other funds 939,705 159,526
Accrued expenses 86,865 155,832 120,379 269,945
-------------------------------------------------------------------
Total liabilities 1,026,570 155,832 120,379 429,471
-------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $ 301,175,363 $ 540,980,849 $ 393,101,140 $ 542,823,590
===================================================================
Small Company Bond
Equity Fund Index Fund Totals
-------------------------------------------------------
ASSETS
Investments:
TRW Inc. Common Stock $ 824,261,402
Guaranteed investment contracts 512,421,483
Bankers Trust Pyramid Equity Index Fund 377,675,716
Bankers Trust Pyramid Russell 2500 Index Fund $ 64,724,947 64,724,947
Bankers Trust Pyramid Intermediate
Government/Corporate Bond Index Fund $ 18,567,359 18,567,359
Bankers Trust Pyramid Directed Account Cash Fund 9,548,097
Receivable from TRW Inc. 24,247 5,970 279,144
Participant loans receivable 4,513,551 952,282 57,643,523
Interest receivable 3,027,454
Receivable from other funds 250,602 396,204 1,099,231
-------------------------------------------------------
Total assets 69,513,347 19,921,815 1,869,248,356
LIABILITIES
Payable to other funds 1,099,231
Accrued expenses 38,316 11,001 682,338
-------------------------------------------------------
Total liabilities 38,316 11,001 1,781,569
-------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $ 69,475,031 $ 19,910,814 $ 1,867,466,787
=======================================================
See notes to financial statements.
4
6
The TRW Employee Stock Ownership and Stock Savings Plan
Statements of Changes in Net Assets Available for Benefits with Fund Information
Year Ended December 31, 1995
TRW Stock Fund
-----------------------------------
Participant Non-Participant Equity Insured
Directed Directed Fund Return Fund
-------------------------------------------------------------------
Investment income:
Dividends--TRW Inc. Common Stock $ 7,387,251 $ 14,198,849
Interest 168,774 324,394 $ 52,065 $ 35,421,071
-------------------------------------------------------------------
Investment income 7,556,025 14,523,243 52,065 35,421,071
Contributions from TRW Inc. 37,648,623
Contributions from participants 20,666,119 24,744,499 30,721,981
Net realized gain on disposition of investments 6,075,541 11,749,565 6,607,651
Unrealized appreciation of investments 37,014,004 68,060,707 94,567,420
Transfers from other funds 21,143,038 23,880,726 44,422,822
Interest income on participant loans 1,205,785 1,124,659 1,729,562
-------------------------------------------------------------------
93,660,512 131,982,138 150,977,020 112,295,436
Less:
Withdrawals and distributions:
Cash 1,767,498 2,128,278 16,450,704 40,077,113
TRW Inc. Common Stock (354,708 participant
directed shares and 773,078 non-participant
directed shares) 13,223,504 27,965,611
-------------------------------------------------------------------
14,991,002 30,093,889 16,450,704 40,077,113
Distribution of dividends on TRW Inc. Common Stock 13,785,763
Administrative expenses 162,070 314,430 279,200 905,400
Transfers to other funds 31,236,818 19,809,959 52,530,743
-------------------------------------------------------------------
46,389,890 44,194,082 36,539,863 93,513,256
-------------------------------------------------------------------
Increase in net assets for year 47,270,622 87,788,056 114,437,157 18,782,180
Net assets available for benefits at beginning of year 253,904,741 453,192,793 278,663,983 524,041,410
-------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS AT END OF YEAR $ 301,175,363 $ 540,980,849 $ 393,101,140 $ 542,823,590
===================================================================
Small Company Bond
Equity Fund Index Fund Totals
-------------------------------------------------------
Investment income:
Dividends--TRW Inc. Common Stock $ 21,586,100
Interest $ 60 $ 16 35,966,380
-------------------------------------------------------
Investment income 60 16 57,552,480
Contributions from TRW Inc. 37,648,623
Contributions from participants 9,472,853 2,421,588 88,027,040
Net realized gain on disposition of investments 320,904 88,688 24,842,349
Unrealized appreciation of investments 13,142,214 2,358,192 215,142,537
Transfers from other funds 21,467,113 9,328,697 120,242,396
Interest income on participant loans 293,488 72,605 4,426,099
-------------------------------------------------------
44,696,632 14,269,786 547,881,524
Less:
Withdrawals and distributions:
Cash 3,038,017 813,435 64,275,045
TRW Inc. Common Stock (354,708 participant
directed shares and 773,078 non-participant
directed shares) 41,189,115
-------------------------------------------------------
3,038,017 813,435 105,464,160
Distribution of dividends on TRW Inc. Common Stock 13,785,763
Administrative expenses 104,300 15,100 1,780,500
Transfers to other funds 11,872,824 4,792,052 120,242,396
-------------------------------------------------------
15,015,141 5,620,587 241,272,819
-------------------------------------------------------
Increase in net assets for year 29,681,491 8,649,199 306,608,705
Net assets available for benefits at beginning of year 39,793,540 11,261,615 1,560,858,082
-------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS AT END OF YEAR $ 69,475,031 $ 19,910,814 $ 1,867,466,787
=======================================================
See notes to financial statements.
5
7
The TRW Employee Stock Ownership and Stock Savings Plan
Notes to Financial Statements
December 31, 1996
A. SIGNIFICANT ACCOUNTING POLICIES
Investments in the TRW Stock Fund consist primarily of TRW Inc. (TRW) common
stock, which is traded on the New York Stock Exchange and valued at the last
reported sales price on the last business day of the fiscal year.
Investments in the Equity Fund are valued at the redemption price established by
the Trustee, which is based on the fair value of the Bankers Trust Pyramid
Equity Index Fund assets. This Fund is constructed and maintained with the
objective of providing investment results which approximate the overall
performance of the Standard & Poor's Composite Index of 500 stocks. Income is
accumulated and reinvested in the Fund and included in the determination of unit
values.
The Insured Return Fund consists of fully benefit responsive investment
contracts with insurance companies, banks and other financial institutions and
short-term investment funds. Benefit responsive contracts provide contract value
payments for participant disbursements, loans and investment transfers as
allowed under the plan. There are exceptions for payments to participants who,
as a result of a corporate event, cease to be employed by TRW. A corporate event
includes a divestiture of an operating unit (for example, a subsidiary or a
division), a significant special early retirement program or other corporate
action that could be construed as causing increased Plan payments to
participants.
Investment contracts provide a stated rate of interest on principal for a stated
period of time. All investment contracts are accounted for at contract value
because they are fully benefit responsive. In accordance with Statement of
Position 94-4, which the Plan adopted effective January 1, 1995, contract value
equals fair value because no event has occurred that affects the value of any
contracts. The investment contracts are of three types: general account,
separate account, and synthetic investment contracts. Investment contracts in
the general account of an insurance company where assets are not specifically
identifiable have fixed rates of interest or an indexed rate of interest for the
life of the contract. Investment contracts in separate accounts of an insurance
company have underlying assets that are specifically identifiable and held for
the benefit of the Plan. Under synthetic investment contracts, the Plan owns
assets with an investment contract from an insurance company, bank or other
financial institution surrounding the asset. Both separate account and synthetic
contracts have periodic interest rate resets (monthly, quarterly, or
semi-annually) based on the performance of the underlying assets. All separate
account and synthetic contracts have a guaranteed return of principal. As of
December 31, 1996 and 1995, approximately $106 and $158 million was invested in
general account assets, $137 and $124 million in separate account assets, and
$247 and $230 million in assets owned by the Plan, respectively.
6
8
The TRW Employee Stock Ownership and Stock Savings Plan
Notes to Financial Statements--Continued
A. SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
The weighted average yield (excluding administrative expenses) for all
investment contracts was 6.77% in 1996 and 6.95% in 1995. The crediting interest
rate for all investment contracts was 6.79% at December 31, 1996 and 7.09% at
December 31, 1995.
Investments in the Small Company Equity Fund are valued at the redemption price
established by the Trustee, which is based on the fair value of the Bankers
Trust Pyramid Russell 2500 Index Fund assets. The Small Company Equity Fund is
constructed and maintained with the objective of providing investment results
which approximate the overall performance of the 2,500 common stocks included in
the Russell 2500 Equity Index. Income is accumulated and reinvested in the Fund
and included in the determination of unit values.
Investments in the Bond Index Fund are valued at the redemption price
established by the Trustee, which is based on the fair value of the Bankers
Trust Pyramid Intermediate Government/Corporate Bond Index Fund. The Bankers
Trust Pyramid Intermediate Government/Corporate Bond Index Fund is constructed
and maintained with the objective of providing investment results which
approximate the overall performance of the high quality U.S. government and
corporate bonds included in the Lehman Brothers Government/Corporate Index.
Income is accumulated and reinvested in the fund and included in the
determination of unit values.
The cost of securities sold is determined by the average cost method for
purposes of determining realized gains and losses.
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Certain amounts in prior year financial statements have been reclassified to
conform with current year presentation.
On October 23, 1996, TRW's Board of Directors authorized a two-for-one stock
split, effected in the form of a stock dividend, to shareholders of record as of
November 8, 1996. A total of 10,463,851 additional shares were issued to the
Plan in conjunction with the stock dividend. All historical share amounts have
been restated to reflect retroactively the stock dividend.
7
9
The TRW Employee Stock Ownership and Stock Savings Plan
Notes to Financial Statements--Continued
B. DESCRIPTION OF THE PLAN
The Plan is a defined contribution plan, and is comprised of the TRW Stock Fund,
Equity Fund, Insured Return Fund, Small Company Equity Fund and Bond Index Fund
(the Funds). Participation in the Plan is available to substantially all
domestic employees of TRW who have been employed for at least three months.
Prior to April 1, 1996, participants had to be employed for at least twelve
months to be eligible for participation in the Plan. The Plan is governed by the
Internal Revenue Code and related legislation.
PARTICIPANT CONTRIBUTIONS
The Plan allows eligible employees to contribute up to 13% of qualifying
compensation on a before-tax basis by way of salary reduction; such
contributions are made in increments of one-tenth of one percent of qualifying
compensation and could not exceed $9,500 in 1996 and $9,240 in 1995.
Participants may also elect to contribute, in increments of one percent, up to
10% of qualifying compensation on an after-tax basis. Participants can make up
to two contribution percentage changes per month. Annual contributions to a
participant's account (including before-tax, after-tax and TRW matching
contributions) and to any other defined contribution plan is limited to the
lesser of $30,000 or 25% of the participant's annual compensation reduced by the
amount of before-tax contributions.
Participants determine the funds in which to invest their contributions.
Employee contributions may be invested, in multiples of 10% percent, in one or
more of the five investment funds. Fund elections may be changed at any time.
TRW CONTRIBUTIONS
TRW contributes to the Plan, out of current or accumulated earnings, an amount
equal to 100% of each participant's before-tax contributions without exceeding
three percent of the participant's qualifying compensation. Participants
immediately vest in the TRW contributions. All TRW matching contributions are
invested in the ESOP portion of the TRW Stock Fund. TRW contributions always
remain in the TRW Stock Fund and may not be transferred. TRW contributions may
be in the form of cash or treasury or authorized and unissued shares of TRW
Common Stock. TRW Common Stock contributed is to be valued by any reasonable
method selected by TRW.
8
10
The TRW Employee Stock Ownership and Stock Savings Plan
Notes to Financial Statements--Continued
B. DESCRIPTION OF THE PLAN--CONTINUED
The amount and type of TRW contributions are summarized as follows:
1996 1995
---------------------------------------
TRW Common Stock $ 17,718,967 $ 16,939,149
Cash 23,535,308 20,709,474
---------------------------------------
$ 41,254,275 $ 37,648,623
=======================================
WITHDRAWALS AND DISTRIBUTIONS
Upon termination of employment, a participant may elect to receive his or her
account, less the unpaid balance of any loan outstanding, in a single sum except
a participant whose account balance exceeds $3,500 may defer such payments until
he or she reaches age 70. Generally, distributions from the TRW Stock Fund will
be paid only in whole shares of TRW Common Stock with the balance in cash.
Participants who have less than 100 shares of TRW stock receive the value of
their shares in cash unless they elect to receive shares.
If a participant elects to defer payment of his or her account, the
undistributed account balance remains invested in the Plan. The following is the
total value of the accounts subject to deferred elections (8,144 as of December
31, 1996 and 8,243 as of December 31, 1995) that are included in the net assets
of the funds:
1996 1995
--------------------------------------------
TRW Stock Fund $ 250,232,943 $ 199,229,528
Equity Fund 110,960,560 87,771,442
Insured Return Fund 161,701,413 166,987,746
Small Company Equity Fund 17,492,623 10,933,711
Bond Index Fund 3,692,881 3,233,663
--------------------------------------------
$ 544,080,420 $ 468,156,090
============================================
9
11
The TRW Employee Stock Ownership and Stock Savings Plan
Notes to Financial Statements--Continued
B. DESCRIPTION OF THE PLAN--CONTINUED
Effective January 1, 1988, participants who have attained age 55 as of the end
of the preceding fiscal year-end and commenced participation in the Plan at
least ten years prior may elect, within an election period during each of the
succeeding five consecutive plan years, to receive a special ESOP distribution.
The amount eligible for this special distribution is 50% of the prior fiscal
year-end value (including previous withdrawals) of TRW Common Stock acquired for
the participant's account by the ESOP since 1986, reduced by any previous
withdrawals.
PARTICIPANT LOANS
Participants can borrow from $1,000 to $50,000 (in increments of $100) of their
before-tax contributions, but such borrowings cannot exceed 50% of a
participant's total Plan balance. The interest rate is fixed (prime rate at the
end of the second to last business day of the quarter plus one percent) and the
repayment period cannot be less than one year or more than five years.
OTHER
Although it has not expressed any intent to do so, TRW reserves the right to
suspend or terminate the Plan. In the event of termination, the amount of each
participant's account may be retained in trust for the benefit of the
participant.
The above description of the Plan provides only general information.
Participants should refer to the Summary Plan Description, which is available
from the Stock Savings Plan's Participant Service Center, and annual prospectus
for a more complete description of the Plan's provisions.
10
12
The TRW Employee Stock Ownership and Stock Savings Plan
Notes to Financial Statements--Continued
C. INVESTMENTS
The fair value of individual investments that represent 5% or more of the Plan's
total assets are as follows:
DECEMBER 31
1996 1995
-------------------------------------------
TRW Inc. Common Stock $ 1,037,454,462 $ 824,261,402
Bankers Trust Pyramid Equity
Index Fund 462,068,568 377,675,716
The net realized gain on disposition of investments is as follows:
TRW STOCK FUND
1996 1995
----------------------------------------
Value realized $ 86,895,164 $ 41,258,096
Average cost 41,664,808 23,432,990
----------------------------------------
NET REALIZED GAIN $ 45,230,356 $ 17,825,106
========================================
EQUITY FUND
1996 1995
----------------------------------------
Value realized $ 39,585,192 $ 20,436,097
Average cost 21,489,897 13,828,446
----------------------------------------
NET REALIZED GAIN $ 18,095,295 $ 6,607,651
========================================
SMALL COMPANY EQUITY FUND
1996 1995
----------------------------------------
Value realized $ 11,390,594 $ 2,870,027
Average cost 8,954,287 2,549,123
----------------------------------------
NET REALIZED GAIN $ 2,436,307 $ 320,904
========================================
11
13
The TRW Employee Stock Ownership and Stock Savings Plan
Notes to Financial Statements--Continued
C. INVESTMENTS--CONTINUED
BOND INDEX FUND
1996 1995
----------------------------------------
Value realized $ 5,692,322 $ 1,042,611
Average cost 5,188,658 953,923
----------------------------------------
NET REALIZED GAIN $ 503,664 $ 88,688
========================================
The net unrealized appreciation of investments included in net assets is as
follows:
TRW Stock Equity Small Company Bond Index
Fund Fund Equity Fund Fund
------------------------------------------------------------------------
Balance at December 31, 1994 $ 266,008,245 $ 65,221,084 $ 521,658 $ (19,837)
Increase for the year 105,074,711 94,567,420 13,142,214 2,358,192
------------------------------------------------------------------------
Balance at December 31, 1995 371,082,956 159,788,504 13,663,872 2,338,355
Increase for the year 182,139,605 69,643,225 11,162,184 15,145
------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1996 $ 553,222,561 $ 229,431,729 $ 24,826,056 $ 2,353,500
========================================================================
On a revalued basis, which is in accordance with Department of Labor Form 5500
requirements, the realized and unrealized gains (losses) are not available at
the date of the Report of Independent Auditors. A separate schedule will be
included in the Form 5500 when filed.
D. ADMINISTRATIVE EXPENSES
Generally, salaries and wages of the administrative staff are paid by TRW.
Expenses relating to investment advisor fees, management fees, trustee fees,
audit fees, printing and postage are paid from Plan assets. Expenses directly
attributable to any one fund are charged to that fund. Expenses not directly
attributable to any one fund are allocated to each fund in the proportion that
the market value of the assets of each fund bears to the total market value of
all Plan assets. Brokerage fees and commissions incident to the purchase or sale
of securities are paid by the fund in which they are incurred and are included
in the cost of securities purchased or sold.
12
14
The TRW Employee Stock Ownership and Stock Savings Plan
Notes to Financial Statements--Continued
E. FEDERAL INCOME TAX STATUS OF THE PLAN
The Plan is exempt from federal income taxes as a qualified profit sharing plan.
The Plan has received a favorable determination letter from the Internal Revenue
Service as to the tax qualified status of the Plan. The Plan's Board of
Administration believes that the Plan is in operational compliance with the
Internal Revenue Code of 1986 and will remain qualified and exempt from federal
income taxes.
F. TRANSACTIONS WITH PARTIES-IN-INTEREST
Party-in-interest transactions include the purchase and sale of short-term
investments managed by the Plan's Trustee, Bankers Trust Company.
At December 31, 1996 and 1995, the Bankers Trust Pyramid Equity Index Fund holds
362,916 and 164,386 shares of TRW Inc. Common Stock having a fair value of
$17,964,342 and $12,739,915, respectively.
Bankers Trust Company managed assets of the Plan of approximately $598,618,300
and $470,516,119 at December 31, 1996 and 1995, respectively, and received in
cash trustee fees of $926,388 and $543,230 in 1996 and 1995, respectively.
There were no party-in-interest transactions which were prohibited under
Department of Labor Regulations.
G. NUMBER OF PARTICIPANTS BY FUND (UNAUDITED)
The summary below sets forth the number of contributing participants by their
current investment option(s):
DECEMBER 31
1996 1995
------------------------------------
TRW Stock Fund 16,062 13,131
Equity Fund 16,438 13,779
Insured Return Fund 14,844 15,315
Small Company Equity Fund 10,631 6,871
Bond Index Fund 4,490 3,213
The total number of participants in the Plan is less than the sum of the number
of employees shown above because many are participating in more than one fund.
13
15
The TRW Employee Stock Ownership and Stock Savings Plan
Notes to Financial Statements--Continued
H. SALE OF IS&S
Effective September 19, 1996, TRW sold substantially all of the businesses in
the Information Systems and Services segment. As a result of this sale,
approximately $55.7 million was transferred to the new company's 401(k) plan on
October 4, 1996. This transfer is included with Withdrawals and Distributions in
the current year's Statements of Changes in Net Assets Available for Benefits.
14
16
The TRW Employee Stock Ownership and Stock Savings Plan
Schedule of Assets Held for Investment Purposes
December 31, 1996
Crediting Fair Value
Shares Maturity Date Interest Rate Cost (See Note A)
- --------------- --------------------------------------------------------------------
COMMON STOCK
20,958,392 TRW Inc. $ 484,231,901 $ 1,037,454,462
-----------------------------------
TOTAL COMMON STOCK 484,231,901 1,037,454,462
SHORT-TERM INVESTMENTS
Bankers Trust Pyramid Directed Account Cash Fund 19,467,035 19,467,035
-----------------------------------
TOTAL SHORT-TERM INVESTMENTS 19,467,035 19,467,035
GUARANTEED INVESTMENT CONTRACTS
Security Backed Investments:
Bankers Trust:
Contract 93-515 ALP September 30, 2000 5.41% 49,249,926 49,249,926
People's Security Life:
Contract 00212TR-11 December 1, 2000 6.42 10,086,024 10,086,024
Provident Life & Accident:
Contract 630-05575 September 1, 2003 5.71 42,565,390 42,565,390
Transamerica Life & Annuity:
Contract 76540 November 15, 2004 6.31 21,879,408 21,879,408
-----------------------------------
123,780,748 123,780,748
Separate Account Contracts:
Aetna Life Insurance Co.:
Contract 014460 November 15, 2002 7.96 32,435,373 32,435,373
Allstate Life Ins. Co.
Contract 31053 February 15, 2002 6.57 5,070,222 5,070,222
Crown Life Insurance Co.:
Contract 9005876 March 3, 1998 8.91 3,482,755 3,482,755
John Hancock Mutual Life:
Contract 7441 May 1, 2004 6.87 24,828,421 24,828,421
Contract 7441-2 July 1, 1999 7.14 23,810,848 23,810,848
Contract 8712 June 30, 2003 6.60 5,968,343 5,968,343
15
17
The TRW Employee Stock Ownership and Stock Savings Plan
Schedule of Assets Held for Investment Purposes--Continued
Crediting Fair Value
Shares Maturity Date Interest Rate Cost (See Note A)
- ------------ ------------------------------------------------------------------------
GUARANTEED INVESTMENT CONTRACTS--CONTINUED
Metropolitan Life Insurance Co:
Contract 12702 January 2, 2001 6.05% 33,809,842 33,809,842
Contract 18544-B December 31, 1998 6.65 2,043,301 2,043,301
Prudential Insurance Co. of American:
Contract 6581-1 July 11, 2001 9.35 1,077,132 1,077,132
Contract 6661-2 Oct. 11, 2001 9.32 4,034,528 4,034,528
Contract 6702-3 November 15, 2000 9.00 404,464 404,464
----------------------------------
136,965,229 136,965,229
Synthetic Investment Contracts:
CDC Investment Management Corp.
Contract 115-01 April 15, 1998 6.45 5,126,054 5,126,054
Contract 115-02 April 30, 1999 7.45 6,035,985 6,035,985
Contract 115-03 August 31, 1998 7.19 5,999,960 5,999,960
Contract 115-04 Dec. 31, 1998 8.08 5,959,866 5,959,866
Contract 115-05 June 30, 2000 7.48 4,960,092 4,960,092
Contract 115-06 July 2, 2002 6.76 8,942,901 8,942,901
People Security Life:
Contract 00025TR-1 June 25, 1997 4.74 2,294,860 2,294,860
Contract 00025TR-2 April 27, 1998 5.27 4,988,867 4,988,867
Contract 00025TR-3 September 25, 1998 5.63 3,975,924 3,975,924
Contract 00025TR-4 January 15, 1998 5.42 2,451,949 2,451,949
Contract 00025TR-5 May 26, 1998 5.24 2,495,238 2,495,238
Contract 00025TR-6 May 26, 1998 5.30 4,289,272 4,289,272
Contract 00025TR-7 July 15, 1997 5.14 1,026,423 1,026,423
Contract 00025TR-8 November 15, 2000 6.51 4,841,341 4,841,341
Contract 00025TR-9 November 15, 2000 7.20 4,743,502 4,743,502
Contract 00025TR-10 May 17, 1999 7.00 9,679,880 9,679,880
Contract 00025TR-11 February 16, 1999 7.10 970,401 970,401
Contract 00025TR-12 March 25, 1999 7.54 4,867,103 4,867,103
Contract 00025TR-13 July 16, 2001 8.59 3,913,691 3,913,691
Contract 00025TR-14 June 15, 2000 7.89 6,033,697 6,033,697
Contract 00025TR-15 March 10, 2000 6.37 5,006,768 5,006,768
16
18
The TRW Employee Stock Ownership and Stock Savings Plan
Schedule of Assets Held for Investment Purposes--Continued
Crediting Fair Value
Shares Maturity Date Interest Rate Cost (See Note A)
- ----------- ------------------------------------------------------------------------
GUARANTEED INVESTMENT CONTRACTS--CONTINUED
Provident Life & Accident:
Contract 630-05751 September 15, 2000 7.35% 14,223,477 14,223,477
Rabobank Nederland:
Contract TRW 99601 Sept. 25, 2003 7.12 5,852,450 5,852,450
Contract TRW 109501 July 2, 2001 6.20 4,975,078 4,975,078
---------------------------------
123,654,799 123,654,799
Fixed Rate and Fixed Term:
Aetna Life Insurance Company:
Contract 13822-001 April 7, 1997 9.69 17,009,110 17,009,110
Contract 13822-002 Sept. 30, 1997 9.77 8,518,069 8,518,069
Canada Life Assurance Company:
Contract 45800 June 1, 1998 5.23 5,227,075 5,227,075
Contract 45839 June 16, 1999 7.06 6,189,072 6,189,072
John Hancock Mutual Life:
Contract 5660 August 15, 1997 9.43 8,831,059 8,831,059
Contract 7314 January 14, 1999 5.40 11,676,547 11,676,547
Mass Mutual Life Insurance Company:
Contract 10062 November 3, 1997 9.70 17,561,181 17,561,181
New York Life Ins. Company:
Contract 6232 August 1, 1996 5.54 8,350,275 8,350,275
Contract GA06216 August 2, 1999 7.39 5,916,919 5,916,919
---------------------------------
89,279,307 89,279,307
Variable rate and fixed term:
John Hancock Mutual Life
Contract 7839 March 1, 2000 6.80 9,998,306 9,998,306
---------------------------------
9,998,306 9,998,306
Variable rate and term:
People Security Life:
Contract BDA0185ST March 30, 1997 5.83 6,728,845 6,728,845
---------------------------------
TOTAL GUARANTEED INVESTMENT CONTRACTS 490,407,234 490,407,234
17
19
The TRW Employee Stock Ownership and Stock Savings Plan
Schedule of Assets Held for Investment Purposes--Continued
Crediting Fair Value
Shares Maturity Date Interest Rate Cost (See Note A)
- ------------- ------------------------------------------------------------------------
COMMON TRUST FUNDS
271,817.384 Bankers Trust Pyramid Equity Index Fund 232,636,839 462,068,568
382,639.593 Bankers Trust Pyramid Russell 2500 Index Fund 71,762,509 96,588,565
9,307,603.212 Bankers Trust Pyramid Government/Corporate
Fixed Income Index Fund 18,140,632 20,494,132
-----------------------------------------
TOTAL COMMON TRUST FUNDS 322,539,980 579,151,265
Participant loans 9.25% 60,314,871 60,314,871
-----------------------------------------
TOTAL INVESTMENTS $ 1,376,961,021 $ 2,186,794,867
=========================================
18
20
The TRW Employee Stock Ownership and Stock Savings Plan
Schedule of Reportable Transactions
Year Ended December 31, 1996
Fair Value
of Asset on
Purchase Selling Cost Transaction Net Gain
Identity of Party Involved Description of Assets Price Price of Asset Date (Loss)
- ------------------------------------------------------------------------------------------------------------------------------------
SINGLE TRANSACTIONS IN EXCESS OF
5% OF THE FAIR VALUE OF PLAN ASSETS
There were no single transactions in
excess of 5% of the fair value of
Plan assets.
SERIES OF TRANSACTIONS IN EXCESS OF
5% OF THE FAIR VALUE OF PLAN ASSETS
Bankers Trust: BT Pyramid Directed Account
305 Purchases Cash Fund $191,402,653 $191,402,653 $191,402,653 $ 0
92 Sales $181,483,716 181,483,716 181,483,716 0
19