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EXHIBIT 99.10
RAYTHEON SAVINGS AND INVESTMENT PLAN (10014)
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 Savings and Investment Plan (10014) (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
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RAYTHEON SAVINGS AND INVESTMENT PLAN (10014)
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) $ 2,280
At fair value (Notes B, F and G) 59,325
-------
61,605
-------
Receivables:
Accrued investment income and
other receivables 155
Cash and cash equivalents 426
-------
Total assets 62,186
-------
Liabilities:
Payable for outstanding purchases 165
Accrued expenses and other payables 51
-------
Total liabilities 216
-------
Net assets available for plan benefits $61,970
=======
The accompanying notes are an integral part of the financial statements.
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RAYTHEON SAVINGS AND INVESTMENT PLAN (10014)
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 $ 1,301
Interest 26
Dividends 289
-------
1,616
Contributions and deferrals:
Employee deferrals 44,616
Employer contributions 15,738
-------
60,354
-------
Total additions 61,970
-------
Increase in net assets 61,970
Net assets available for plan
benefits, beginning of year --
-------
Net assets available for plan
benefits, end of year $61,970
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The accompanying notes are an integral part of the financial statements.
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A. Description of Plan:
General
The following description of the Raytheon Savings and Investment Plan
(10014)(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 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 ("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 plans based upon average monthly balances
invested by each plan.
Contributions and Deferrals
Eligible employees are allowed to defer to the Plan up to 10% of their
salaries. The Company contributes amounts equal to 50% of each participant's
deferral, up to a maximum of 3% of the participant's salary. The contributions
are invested in Raytheon Company Class B common stock for two full plan years
following the plan year for which the contributions are made, and are then
allocated to the 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.
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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.
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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 changes 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.
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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.
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 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.
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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 Stock
Fund Fund Stock Fund Fund Fund Fund Fund Fund Total
Assets:
Master trust investments:
At contract value:
Bankers Trust $ 852 $ 852
Prudential Insurance
Company of America 528 528
Metropolitan Life
Insurance Company 900 900
At fair value:
Fidelity Equity Income* $8,617 8,617
Raytheon Company Common Stock* $3,715 $15,666 19,381
BT Pyramid Equity Index Fund* $5,307 5,307
Fidelity Balanced Fund* $4,183 4,183
Fidelity Magellan Fund* $13,244 13,244
Fidelity Blue Chip Fund* $8,593 8,593
------ ------ ------ ------ ------ ------- ------ ------- -------
Total investments 2,280 8,617 3,715 5,307 4,183 13,244 8,593 15,666 61,605
------ ------ ------ ------ ------ ------- ------ ------- -------
Receivables:
Accrued investment income and
other receivables 27 12 116 155
Cash and cash equivalents 23 67 52 284 426
------ ------ ------ ------ ------ ------- ------ ------- -------
Total assets 2,303 8,617 3,809 5,371 4,183 13,244 8,593 16,066 62,186
------ ------ ------ ------ ------ ------- ------ ------- -------
Liabilities:
Payable for security purchases 32 133 165
Accrued expenses and other payables 7 13 31 51
------ ------ ------ ------ ------ ------- ------ ------- -------
Total liabilities 39 13 164 216
------ ------ ------ ------ ------ ------- ------ ------- -------
Net assets available for plan benefits $2,303 $8,617 $3,770 $5,358 $4,183 $13,244 $8,593 $15,902 $61,970
====== ====== ====== ====== ====== ======= ====== ======= =======
* Represents more than 5% of net assets available for plan benefits
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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 Stock
Fund Fund Stock Fund Fund Fund Fund Fund Fund Total
Additions to net assets
attributable to:
Investment income:
Net appreciation (depreciation)
of investments $ 285 $ (35) $ 185 $ 90 $ 522 $ 338 $ (84) $ 1,301
Interest $ 3 4 4 15 26
Dividends 56 233 289
------ ------ ------ ------ ------ ------- ------ ------- -------
3 285 25 189 90 522 338 164 1,616
------ ------ ------ ------ ------ ------- ------ ------- -------
Contributions and deferrals:
Employee deferrals 2,300 8,332 3,745 5,169 4,093 12,722 8,255 44,616
Employer contributions 15,738 15,738
------ ------ ------ ------ ------ ------- ------ ------- -------
2,300 8,332 3,745 5,169 4,093 12,722 8,255 15,738 60,354
------ ------ ------ ------ ------ ------- ------ ------- -------
Total additions 2,303 8,617 3,770 5,358 4,183 13,244 8,593 15,902 61,970
------ ------ ------ ------ ------ ------- ------ ------- -------
Increase in net assets 2,303 8,617 3,770 5,358 4,183 13,244 8,593 15,902 61,970
Net assets, beginning of year
------ ------ ------ ------ ------ ------- ------ ------- -------
Net assets, end of year $2,303 $8,617 $3,770 $5,358 $4,183 $13,244 $8,593 $15,902 $61,970
====== ====== ====== ====== ====== ======= ====== ======= =======
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H. Master Trust:
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 Stock
Income Equity Common Index Balanced Magellan Blue Chip
Fund Fund Stock 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 Balance Fund $117,556,481
Fidelity Magellan Fund $91,863,155
Fidelity Blue Chip Fund $136,586,123
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 91,863,155 136,586,123
------------ ------------ ------------ ------------ ------------ ----------- ------------
Receivables:
Employer contribution
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 91,863,155 136,586,123
------------ ------------ ------------ ------------ ------------ ----------- ------------
Liabilities:
Payables 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 $136,586,123
============ ============ ============ ============ ============ =========== ============
Percentage of Master Trust that ^ ^ ^ ^ ^ ^ ^
are plan assets of the Raytheon
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 Savings and Investment Plan (10014).
N/A: The Templeton Foreign I Fund, Investment Grade Bond Fund, and
Retirement Money Market Fund are not available for the Raytheon
Savings and Investment Plan (10014).
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Templeton Investment Retirement
Foreign I Grade Money Loan
Fund Bond Fund Market Fund 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 Balance Fund 117,556,481
Fidelity Magellan Fund 91,863,155
Fidelity Blue Chip Fund 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 5,471,176 1,548,125 12,186,085 166,395,767 3,485,057,475
---------- ---------- ----------- ------------ --------------
Receivables:
Employer contribution 4,015,100 4,015,100
Accrued Investment income
and other receivables 6,650,704
Cash and cash equivalents 27,491,419
---------- ---------- ----------- ------------ --------------
Total assets 5,471,176 1,548,125 16,201,185 166,395,767 3,523,214,698
---------- ---------- ----------- ------------ --------------
Liabilities:
Payables 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 $5,471,176 $1,548,125 $16,201,185 $166,395,767 $3,514,193,034
========== ========== =========== ============ ==============
N/A N/A N/A + ^
Percentage of Master Trust that are
plan assets of the Raytheon Savings
and Investment Plan (10014)
*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 Savings and Investment Plan (10014).
N/A: The Templeton Foreign I Fund, Investment Grade Bond Fund, and
Retirement Money Market Fund are not available for the Raytheon
Savings and Investment Plan (10014).
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I. 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
Income Common Stock Balanced Magellan Blue Chip
Fund Equity Fund Stock Fund Index Fund Fund Fund Fund
Net appreciation (depreciation)
of assets $ (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
=========== ============ =========== ============ =========== =========== ===========
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Templeton Investment Retirement
Foreign I Grade Money Loan
Fund Bond Fund Market Fund Fund Total
Investment income:
Net appreciation (depreciation)
of assets $(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
========= ======= ======== =========== ============