1 EXHIBIT 99.7 RAYTHEON SALARIED SAVINGS AND INVESTMENT PLAN FINANCIAL STATEMENTS TO ACCOMPANY 1997 FORM 5500 ANNUAL REPORT OF EMPLOYEE BENEFIT PLAN UNDER ERISA OF 1974 FOR THE PERIOD FROM DECEMBER 17, 1997 TO DECEMBER 31, 1997 The supplemental schedules required to accompany the Plan's Form 5500 are not required since the Plan's assets are held in a Master Trust. Accordingly, detailed financial information, including the supplemental schedules, must be filed separately with the Department of Labor by the plan administrator. REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors of Raytheon Company: We have audited the accompanying statement of net assets available for plan benefits of the Raytheon Salaried Savings and Investment Plan (the "Plan") as of December 31, 1997, and the related statement of changes in net assets available for plan benefits for the period from December 17, 1997 to December 31, 1997. 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 audit. We conducted our audit 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 audit provides 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 plan benefits of the Plan as of December 31, 1997, and the changes in net assets available for plan benefits for the period from December 17, 1997 to December 31, 1997 in conformity with generally accepted accounting principles. Coopers & Lybrand LLP Boston, Massachusetts May 29, 1998 2 RAYTHEON SALARIED SAVINGS AND INVESTMENT PLAN STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS as of December 31, 1997 Assets: Master trust investments: At contract value (Notes B, E and G) $ 126,113 At fair value (Notes B, F and G) 3,228,259 --------- 3,354,372 --------- Receivables: Accrued investment income and other receivables 8,765 Cash and cash equivalents 24,181 --------- Total assets 3,387,318 --------- Liabilities: Payable for outstanding purchases 9,147 Accrued expenses and other payables 3,010 --------- Total liabilities 12,157 --------- Net assets available for plan benefits $3,375,161 ========== The accompanying notes are an integral part of the financial statements. 3 RAYTHEON SALARIED SAVINGS AND INVESTMENT PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS for the period from December 17, 1997 to December 31, 1997 Additions to net assets attributable to: Investment income (Notes B, E and G): Net appreciation of investments $ 69,196 Interest 1,407 Dividends 16,039 ---------- 86,642 ---------- Contributions and deferrals: Employee deferrals 2,300,458 Employer contributions 988,061 ---------- 3,288,519 ---------- Total additions 3,375,161 ---------- Increase in net assets 3,375,161 Net assets available for plan benefits, beginning of year -- ---------- Net assets available for plan benefits, end of year $3,375,161 ========== The accompanying notes are an integral part of the financial statements. 4 A. Description of Plan: General The following description of the Raytheon Salaried Savings and Investment Plan (the "Plan") provides only general information. Participants should refer to the plan document for a complete description of the Plan's provisions. The Plan, which was established on December 17, 1997, is a defined contribution plan covering certain employees of Raytheon Company (the "Company"). Effective December 17, 1997, employees assumed in connection with the merger of the defense business of Hughes Electronics Corporation with the Company, that participated in the Hughes Salaried Employees' Thrift and Savings Plan, became eligible to participate in the Plan. Participants have the option to rollover amounts accumulated in plans sponsored by the defense business of Hughes Electronics Corporation to the plan. The option to make a rollover election will extend until December 1, 1998. Upon election, amounts will be rolled over into funds selected by the participant. As of December 31, 1997, no rollovers had been made; however, the ultimate amount to be transferred under this option cannot be estimated at this time. To participate in the Plan, eligible employees must have three months of service and may enter the Plan only on the first day of each month. The purpose of the Plan is to provide participants with a tax-effective means of meeting both short- and long-term investment objectives. The Plan is intended to be a "qualified cash or deferred arrangement" under Sections 401(a) and 401(k) of the Internal Revenue Code (the "Code"). The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). The Plan's investments are held in the Raytheon Company Master Trust for defined contribution plans (the "Master Trust") with the assets of other defined contribution plans of Raytheon Company and subsidiaries. The trustee of the Master Trust maintains a separate account reflecting the equitable share in the Trust of each plan. Investment income and administrative expenses relating to the Master Trust are allocated to the individual plan based upon average monthly balances invested by each plan. Contributions and Deferrals Eligible employees are allowed to defer to the Plan up to 12% of their salaries. The Company contributes amounts equal to 100% of each participant's deferral, up to a maximum of 4% of the participant's salary. The contributions are invested in Raytheon Company common stock for two full plan years following the plan year for which the contributions are made, and are then allocated to participants' accounts. As of December 31, 1997, the annual employee deferral for a participant cannot exceed $9,500. Rollover contributions from other qualified plans are accepted by the Plan. Participants may invest their deferrals in increments of 1% in any combination of seven funds: (a) a Fixed Income Fund under which assets are invested primarily in contracts providing for fixed rates of interest for specified periods of time, (b) an Equity Fund which invests in shares of a mutual fund which consists primarily of income-producing equity securities, (c) a Raytheon Common Stock Fund which invests in shares of Raytheon Company Class B common stock, (d) a Stock Index Fund which invests in a commingled pool consisting primarily of equity securities and is designed to track the S&P 500 Index, (e) a Balanced Fund which invests in shares of a mutual fund which consists primarily of equity securities, bonds and money market instruments, (f) the Magellan Fund, a growth fund which invests primarily in equities of companies of all types and sizes, and (g) the Blue Chip Fund, a growth fund which invests primarily in equities of well known and established companies. Dividends and distributions from investments of the Equity Fund, the Raytheon Common Stock Fund, the Stock Index Fund, the Balanced Fund, the Magellan Fund and the Blue Chip Fund are reinvested in their respective funds; stock dividends, stock splits and similar changes are also reflected in the funds. 5 Participant Accounts Each participant's account is credited with the participant's deferral, the Company's contribution and an allocation of plan earnings. Plan earnings are allocated based on account balances by fund. Vesting Participants are immediately vested in their voluntary deferrals plus actual earnings thereon. Vesting requirements for employer contributions plus earnings thereon may vary depending upon when an employee became eligible to participate in the plan. Vesting generally occurs upon the earliest of the completion of five years of service or three years of Plan participation, or upon retirement, death, disability, or attainment of normal retirement age. Forfeitures of the nonvested portions of terminated participants' accounts are used to reduce required contributions of the Company. Distributions to Participants A participant may withdraw all or a portion of deferrals, employer contributions and related earnings upon attainment of age 59-1/2. For reasons of financial hardship, as defined in the Plan document, a participant may withdraw all or a portion of deferrals. On termination of employment, a participant will receive a lump-sum distribution unless the vested account is valued in excess of $3,500 and the participant elects to defer distribution. A retiree or a beneficiary of a deceased participant may defer the distribution until January of the year following attainment of age 65. There were no distributions to participants during the year. Loans to Participants A participant may borrow against a portion of the balance in the participant's account, subject to certain restrictions. The maximum amount of a loan is the lesser of one-half of the participant's vested account balance or $50,000. The minimum loan which may be granted is $500. The interest rate applied is equal to the prime rate published in the Wall Street Journal on the first business day in June and December of each year. Loans must be repaid over a period of up to 5 years by means of payroll deductions. In certain cases, the repayment period may be extended up to 15 years. Interest paid to the Plan on loans to participants is credited to the borrower's account in the investment fund to which repayments are made. Administrative Expenses Substantially all expenses of administering the Plan are paid by the plan participants. B. Summary of Significant Accounting Policies: The accompanying financial statements are prepared on the accrual basis of accounting. 6 The Plan's investment contracts are fully benefit-responsive and are therefore included in the financial statements at their contract value, defined as net contributions and deferrals plus interest earned on the underlying investments at contracted rates. Because the investment contracts are fully benefit-responsive, contract values approximate fair value. Investments in mutual funds and the commingled pool are valued at the closing net asset value reported on the last business day of the year. Investments in securities (common stocks) traded on a national securities exchange are valued at the last reported sales price on the last business day of the year. Cash equivalents are short-term money market instruments and are valued at cost which approximates fair value. Security transactions are recorded on trade date. Except for its investment contracts (Note E), the Plan's investments are held by bank-administered trust funds. Payables for outstanding security transactions represent trades which have occurred but have not yet settled. The Plan presents in the statement of changes in net assets the net appreciation (depreciation) in the fair value of its investments which consists of the realized gains or losses and the unrealized appreciation (depreciation) on those investments. Dividend income is recorded on the ex-dividend date. Income from other investments is recorded as earned on an accrual basis. Benefits are recorded when paid. The preparation of the financial statements in conformity with generally accepted accounting principles requires the plan administrator to make significant estimates and assumptions that affect the reported amounts of net assets and liabilities available for benefits at the date of the financial statements and the change 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 the estimates included in the financial statements. The Plan provides for various investment options in any combination of stocks, bonds, fixed income securities, mutual funds and other investment securities. Investment securities are exposed to various risks, such as interest rate, market and credit risk. Due to the level of risk associated with certain investment securities and the level of uncertainty related to changes in the value of investment securities, it is at least reasonably possible that changes in risks in the near term would materially affect participants' account balances and the amounts reported in the statement of net assets available for plan benefits and the statement of changes in net assets available for plan benefits. C. Federal Income Tax Status: Given that the Plan was established effective December 17, 1997, the Plan has not received a tax determination letter to date. Raytheon Company has submitted an application with the Internal Revenue Service under the 401(b) regulation of the Internal Revenue Code and expects to receive the determination letter by December 31, 1998. The Plan administrator and the Plan's legal counsel believe that the Plan is currently designed and being operated in compliance with the applicable requirements of the Internal Revenue Code. Therefore, no provision for income taxes has been included in the Plan's financial statements. D. Plan Termination: Although it has not expressed any intention to do so, the Company reserves the right under the Plan at any time or times to discontinue its contributions and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, amounts in participants' accounts will be distributed in a single lump sum; if the participant does not consent to an immediate distribution, the amount can be transferred to another defined contribution plan sponsored by the Company. 7 E. Investment Contracts: The Plan invests in collateralized fixed income investment portfolios (with no expiration date), three of which are managed by insurance companies and one of which is managed by an investment management firm. The credited interest rates are adjusted semiannually to reflect the experienced and anticipated yields to be earned on such investments, based on their book value. The annualized average yield and credited interest rates were as follows: Annualized Average Credited Yield Interest Rate For the year ended December 31, 1997: Bankers Trust (WBS 92-485) 6.95% 6.95% Metropolitan Life Insurance Company (GIC GA-12908) 6.86% 6.86% Metropolitan Life Insurance Company (GIC GA-13659) 6.43% 6.43% Prudential Asset Management Company (GIC 917163-001) 6.99% 6.99% The contract values are subject to limitations in certain situations including large workforce reductions and plan termination. In the financial statements, the two Metropolitan Life Insurance Company contracts are recorded as one investment option. F. Related Party Transactions: In accordance with the provisions of the Plan, Fidelity Management Trust Company (the "Trustee") acts as the Plan's agent for purchases and sales of shares of Raytheon Company Class B common stock. These transactions are performed on the Master Trust level. For the Master Trust, purchases amounted to $200,689,057 and sales amounted to $102,165,608 for the year ended December 31, 1997. 8 G. Fund Data: The following is a summary of net assets available for plan benefits by fund as of December 31, 1997: Non-Participant Participant-Directed Directed Fixed Raytheon Stock Raytheon Income Equity Common Index Balanced Magellan Blue Chip Common Fund Fund Stock Fund Fund Fund Fund Fund Stock Fund Total Assets: Master trust investments: At contract value: Bankers Trust $ 47,101 $ 47,101 Prudential Insurance Company of America 29,215 29,215 Metropolitan Life Insurance Company 49,797 49,797 At fair value: Fidelity Equity Income Fund* $534,021 534,021 Raytheon Company Common Stock* $ 92,888 $ 983,125 1,076,013 BT Pyramid Equity Index Fund* $353,515 353,515 Fidelity Balanced Fund* $236,387 236,387 Fidelity Magellan Fund* $616,257 616,257 Fidelity Blue Chip Fund* $412,066 412,066 -------- -------- ------- -------- -------- -------- -------- --------- ---------- Total investments 126,113 534,021 92,888 353,515 236,387 616,257 412,066 983,125 3,354,372 -------- -------- ------- -------- -------- -------- -------- --------- ---------- Receivables: Accrued investment income and other receivables 684 846 7,235 8,765 Cash and cash equivalents 1,239 1,681 3,469 17,792 24,181 -------- -------- ------- -------- -------- -------- -------- ---------- ---------- Total assets 127,352 534,021 95,253 357,830 236,387 616,257 412,066 1,008,152 3,387,318 -------- -------- ------- -------- -------- -------- -------- --------- ---------- Liabilities: Payable for security purchases 790 8,357 9,147 Accrued expenses and other payables 184 874 1,952 3,010 -------- -------- ------- -------- -------- -------- -------- -------- ---------- Total liabilities 974 874 10,309 12,157 -------- -------- ------- -------- -------- -------- -------- -------- ---------- Net assets available for plan benefits $127,352 $534,021 $ 94,279 $356,956 $236,387 $616,257 $412,066 $ 997,843 $3,375,161 ======== ======== ======== ======== ======== ======== ======== ========= ========== *Represents more than 5% of net assets available for plan benefits 9 G. Fund Data, continued: The following is a summary of changes in net assets available for plan benefits by fund for the period from December 17, 1997 to December 31, 1997: Non-Participant Participant-Directed Directed Fixed Raytheon Stock Raytheon Income Equity Common Index Balanced Magellan Blue Chip Common Fund Fund Stock Fund Fund Fund Fund Fund Stock Fund Total Additions to net assets attributable to: Investment income: Net appreciation (depreciation) of investments $ 17,629 $ (715) $ 12,604 $ 5,108 $ 24,196 $ 16,187 $ (5,813) $ 69,196 Interest 13 89 238 941 1,407 Dividends 1,385 14,654 16,039 -------- -------- ------- -------- -------- -------- -------- -------- ---------- 139 17,629 759 12,842 5,108 24,196 16,187 9,782 86,642 -------- -------- ------- -------- -------- -------- -------- -------- ---------- Contributions and deferrals: Employee deferrals 127,218 516,425 93,354 344,118 231,299 592,124 395,920 2,300,458 Employer contributions 988,061 988,061 -------- -------- ------- -------- -------- -------- -------- -------- ---------- 127,218 516,425 93,354 344,118 231,299 592,124 395,920 988,061 3,288,519 -------- -------- ------- -------- -------- -------- -------- -------- ---------- Total additions 127,357 534,054 94,113 356,960 236,407 616,320 412,107 997,843 3,375,161 -------- -------- ------- -------- -------- -------- -------- -------- ---------- Interfund transfers (5) (33) 166 (4) (20) (63) (41) -- -------- -------- ------- -------- -------- -------- -------- -------- ---------- Increase in net assets 127,352 534,021 94,279 356,956 236,387 616,257 412,066 997,843 3,375,161 Net assets available for plan benefits, beginning of year -- -------- -------- ------- -------- -------- -------- -------- -------- ---------- Net assets available for plan benefits, end of year $127,352 $534,021 $94,279 $356,956 $236,387 $616,257 $412,066 $997,843 $3,375,161 ======== ======== ======= ======== ======== ======== ======== ======== ========== 10 All plan investments are included under the Master Trust. At December 31, 1997, assets of the Plan represented less than 1% of the total assets under the Master Trust. The following is a summary of net assets available for plan benefits by fund under the Master Trust as of December 31, 1997: Fixed Raytheon Income Equity Common Stock Stock Index Balanced Magellan Fund Fund Fund Fund Fund Fund Assets: Investments: At contract value: Bankers Trust* $351,035,073 Prudential Insurance Company of America* 217,731,699 Metropolitan Life Insurance Company* 371,123,080 At fair value: Fidelity Equity Income Fund* $782,799,011 Raytheon Company Common Stock* $745,980,294 BT Pyramid Equity Index Fund* $484,781,406 Fidelity Balanced Fund $117,556,481 Fidelity Magellan Fund $91,863,155 Fidelity Blue Chip Fund Templeton Foreign I Fund Fidelity Investment Grade Bond Fund Fidelity Retirement Money Market Fund Loans receivable from participants ------------ ------------ ------------ ------------ ------------ ----------- Total investments 939,889,852 782,799,011 745,980,294 484,781,406 117,556,481 91,863,155 ------------ ------------ ------------ ------------ ------------ ----------- Receivables: Employer contributions Accrued investment income and other receivables 5,489,592 1,161,112 Cash and cash equivalents 9,232,100 13,498,051 4,761,268 ------------ ------------ ------------ ------------ ------------ ----------- Total assets 949,121,952 782,799,011 764,967,937 490,703,786 117,556,481 91,863,155 Liabilities: Payable for outstanding purchases 6,340,318 Accrued expenses and other payables 1,480,875 1,200,471 ------------ ------------ ------------ ------------ ------------ ----------- Total liabilities 7,821,193 1,200,471 ------------ ------------ ------------ ------------ ------------ ----------- Net assets available for plan benefits $949,121,952 $782,799,011 $757,146,744 $489,503,315 $117,556,481 $91,863,155 ============ ============ ============ ============ ============ =========== Percentage of Master Trust that are plan assets of the Raytheon Salaried Savings and Investment Plan ^ ^ ^ ^ ^ ^ *Represents more than 5% of net assets available for plan benefits ^Represents less than 1% of plan assets under the Master Trust + As of December 31, 1997, there were no loans outstanding in the Raytheon Salaried Savings and Investment Plan. N/A: The Templeton Foreign I Fund, Investment Grade Bond Fund, and Retirement Money Market Fund are not available to the Raytheon Salaried Savings and Investment Plan. 11 Templeton Investment Retirement Blue Chip Foreign I Grade Money Market Fund Fund Bond Fund Fund Loan Fund Total Assets: Investments: At contract value: Bankers Trust* $351,035,073 Prudential Insurance Company of America* 217,731,699 Metropolitan Life Insurance Company* 371,123,080 At fair value: Fidelity Equity Income Fund* 782,799,011 Raytheon Company Common Stock* 745,980,294 BT Pyramid Equity Index Fund* 484,781,406 Fidelity Balanced Fund 117,556,481 Fidelity Magellan Fund 91,863,155 Fidelity Blue Chip Fund $136,586,123 136,586,123 Templeton Foreign I Fund $5,471,176 5,471,176 Fidelity Investment Grade Bond Fund $1,548,125 1,548,125 Fidelity Retirement Money Market Fund $12,186,085 12,186,085 Loans receivable from participants $166,395,767 166,395,767 ------------ ---------- ---------- ----------- ------------ -------------- Total investments 136,586,123 5,471,176 1,548,125 12,186,085 166,395,767 3,485,057,475 ------------ ---------- ---------- ----------- ------------ -------------- Receivables: Employer contributions 4,015,100 4,015,100 Accrued investment income and other receivables 6,550,704 Cash and cash equivalents 27,491,419 ------------ ---------- ---------- ----------- ------------ -------------- Total assets 136,586,123 5,471,176 1,548,125 16,201,185 166,395,767 3,523,214,698 Liabilities: Payable for outstanding purchases 6,340,318 Accrued expenses and other payables 2,681,346 ------------ ---------- ---------- ----------- ------------ -------------- Total liabilities 9,021,664 ------------ ---------- ---------- ----------- ------------ -------------- Net assets available for plan benefits $136,586,123 $5,471,176 $1,548,125 $16,201,185 $166,395,767 $3,514,193,034 ============ ========== ========== =========== ============ ============== Percentage of Master Trust that are plan assets of the Raytheon Salaried Savings and Investment Plan ^ N/A N/A N/A + ^ *Represents more than 5% of net assets available for plan benefits ^Represents less than 1% of plan assets under the Master Trust + As of December 31, 1997, there were no loans outstanding in the Raytheon Salaried Savings and Investment Plan. N/A: The Templeton Foreign I Fund, Investment Grade Bond Fund, and Retirement Money Market Fund are not available to the Raytheon Salaried Savings and Investment Plan. 12 H. Master Trust, Continued: The following is a summary of investment income by fund under the Master Trust for the year ended December 31, 1997: Fixed Raytheon Stock Income Equity Common Index Balanced Magellan Blue Chip Fund Fund Stock Fund Fund Fund Fund Fund Investment income: Net appreciation (depreciation) of investments $ (191,924) $132,974,182 $30,715,963 $109,162,707 $ 6,388,316 $ 9,026,047 $15,474,118 Interest 62,319,073 673,934 312,511 Dividends 42,443,971 11,118,152 13,680,351 5,217,835 6,302,875 ----------- ------------ ----------- ------------ ----------- ----------- ----------- Total investment income/(loss) $62,127,149 $175,418,153 $42,508,049 $109,475,218 $20,068,667 $14,243,882 $21,776,993 =========== ============ =========== ============ =========== =========== =========== 13 Templeton Investment Retirement Foreign I Grade Money Market Loan Fund Bond Fund Fund Fund Total Investment income: Net appreciation (depreciation) of investments $(826,396) $22,581 $302,745,594 Interest $10,848,204 74,153,722 Dividends 549,717 36,337 $266,835 79,616,073 --------- ------- -------- ----------- ------------ Total investment income/(loss) $(276,679) $58,918 $266,835 $10,848,204 $456,515,389 ========= ======= ======== =========== ============