-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BWxCVY1ve4WNPe98bu/sY7wj0umwOHaGtMKDIll59Lw6+I1U3jorT8YOM+dKFvoi NflCIZMFwvHw6255UZGB6Q== 0000950005-98-000549.txt : 19980619 0000950005-98-000549.hdr.sgml : 19980619 ACCESSION NUMBER: 0000950005-98-000549 CONFORMED SUBMISSION TYPE: 11-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980618 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: WATKINS JOHNSON CO CENTRAL INDEX KEY: 0000105006 STANDARD INDUSTRIAL CLASSIFICATION: SPECIAL INDUSTRY MACHINERY, NEC [3559] IRS NUMBER: 941402710 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 11-K SEC ACT: SEC FILE NUMBER: 001-05631 FILM NUMBER: 98650345 BUSINESS ADDRESS: STREET 1: 3333 HILLVIEW AVE CITY: PALO ALTO STATE: CA ZIP: 94304-1223 BUSINESS PHONE: 4154934141 MAIL ADDRESS: STREET 1: 3333 HILLVIEW AVENUE CITY: PALO ALTO STATE: CA ZIP: 94304-1223 11-K 1 FORM 11-K FORM 11-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON D.C. 20549 ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (X) Annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 1997 Commission file number 001-05631 A. Full title of the plan and the address of the plan, if different from that of the issuer named below: Watkins-Johnson Employees' Investment Plan B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office: Watkins-Johnson Company Stanford Research Park 3333 Hillview Avenue Palo Alto, CA 94304-1223 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the administrator has duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized. WATKINS-JOHNSON EMPLOYEES' INVESTMENT PLAN May 8, 1998 By /s/ Scott Buchanan ----------------------------- Scott Buchanan Chairman of Committee VP & CFO WATKINS-JOHNSON EMPLOYEES' INVESTMENT PLAN FINANCIAL STATEMENTS DECEMBER 31, 1997 AND 1996 -------------------------- WATKINS-JOHNSON EMPLOYEES' INVESTMENT PLAN Financial Statements and Supplemental Schedules Years ended December 31, 1997 and 1996 -------------------------------------- Table of Contents Independent Accountants' Report ............................................ 1-2 Financial Statements: Statements of Net Assets Available for Plan Benefits ......................... 3 Statements of Changes in Net Assets Available for Plan Benefits, With Fund Information ...................................................... 4 Notes to Financial Statements................................................. 5 Form 5500 Supplemental Schedules as of and for the year ended December 31, 1997 ......................................................... 13 27a, Part I - Schedule of Assets Held for Investment Purposes 27d, Part V - Schedule of Reportable Transactions To the Participants and Plan Administrator of the Watkins-Johnson Employees' Investment Plan INDEPENDENT ACCOUNTANTS' REPORT We have audited the financial statements and supplemental schedules of the Watkins-Johnson Employees' Investment Plan (the Plan) as of December 31, 1997 and 1996, and for the years then ended, as listed in the accompanying table of contents. 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 the Plan's 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 plan benefits of the Plan as of December 31, 1997 and 1996, and the changes in net assets available for plan benefits for the years then ended in conformity with generally accepted accounting principles. Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules are presented for the purpose of additional analysis and are not a required part of the basic financial statements but are supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. These supplemental schedules are the responsibility of the Plan's management. The fund information in the statement of changes in net assets available for 1 plan benefits is presented for purposes of additional analysis rather than to present the changes in net assets available for plan benefits for each fund. The supplemental schedules and fund information have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. MOHLER, NIXON & WILLIAMS Accountancy Corporation Campbell, California May 8, 1998 2 WATKINS-JOHNSON EMPLOYEES' INVESTMENT PLAN STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS December 31, --------------------------- 1997 1996 ------------ ------------ Investments, at fair value $106,995,683 $ 90,950,924 Investments, at contract value 40,664,264 41,903,240 Cash and cash equivalents 522,495 541,976 ------------ ------------ Assets held for investment purposes 148,182,442 133,396,140 Employer's contribution receivable 187,672 183,242 ------------ ------------ Net assets available for plan benefits $148,370,114 $133,579,382 ============ ============ See independent accountants' report and accompanying notes to financial statements. 3 WATKINS-JOHNSON EMPLOYEES' INVESTMENT PLAN STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS, WITH FUND INFORMATION For the years ended December 31, 1997 and 1996 Participant Directed - ------------------------------------------------------------------------------------------------------------------------------------ Fidelity Trust Company - ------------------------------------------------------------------------------------------------------------------------------------
Retirement Government Fixed Growth & Money Income Magellan OTC Balanced Income Market Fund Fund Portfolio Fund Fund ------------ ------------ ------------ ------------ ------------ ------------ Net assets available for plan benefits at December 31, 1995 $ 3,413,015 $ 43,309,197 $ 30,941,667 $ 10,744,928 $ 16,608,195 $ 3,426,812 ------------ ------------ ------------ ------------ ------------ ------------ Employer's contribution 113,397 465,617 783,116 350,056 422,709 201,169 Participants' contributions/rollovers 390,244 1,484,836 2,486,806 1,247,029 1,308,870 721,171 Withdrawals/distributions (313,685) (3,242,299) (3,185,012) (1,093,961) (1,278,917) (440,240) Dividends and interest 186,129 2,555,002 4,910,503 1,743,827 736,893 414,852 Net appreciation (depreciation) in fair value of investments (1,556,128) 879,825 589,620 838,636 Net loan activities (84,641) (891,180) (644,611) (302,173) (330,796) (42,883) Administrative fees (13,091) (5,511) (7,043) (3,444) (4,892) (1,946) Transfer in from another plan Transfers in (out) 103,063 (611,463) (2,973,239) 930,953 (2,643,741) 4,028,461 ------------ ------------ ------------ ------------ ------------ ------------ Increase (decrease) in net assets 381,416 (244,998) (185,608) 3,752,112 (1,200,254) 5,719,220 ------------ ------------ ------------ ------------ ------------ ------------ Net assets available for plan benefits at December 31, 1996 3,794,431 43,064,199 30,756,059 14,497,040 15,407,941 9,146,032 ------------ ------------ ------------ ------------ ------------ ------------ Employer's contribution 211,040 396,258 584,851 309,162 162,492 299,395 Participants' contributions/rollovers 608,709 1,165,558 1,758,532 987,672 473,637 1,379,431 Withdrawals/distributions (605,022) (4,937,181) (3,277,107) (1,859,466) (633,403) (1,714,630) Dividends and interest 226,431 2,556,632 2,294,728 1,060,125 324,770 630,662 Net appreciation (depreciation) in fair value of investments 5,443,251 330,051 1,689,322 2,409,144 Net loan activities (10,184) (120,856) (129,761) (17,053) (12,534) (21,854) Administrative fees (25,803) (6,093) (1,143) (1,284) (704) (1,748) Transfer out to another plan Transfers in (out) 115,957 (191,251) (2,473,544) (732,981) (17,411,521) 1,834,937 ------------ ------------ ------------ ------------ ------------ ------------ Increase (decrease) in net assets 521,128 (1,136,933) 4,199,807 76,226 (15,407,941) 4,815,337 ------------ ------------ ------------ ------------ ------------ ------------ Net assets available for plan benefits at December 31, 1997 $ 4,315,559 $ 41,927,266 $ 34,955,866 $ 14,573,266 $ -- $ 13,961,369 ============ ============ ============ ============ ============ ============ Warburg Picus Spartan Founders Emerging U.S. Equity Intermediate Overseas Balanced Growth Freedom Index Bond Fund Fund Fund Fund Funds Fund ------------ ------------ ------------ ------------ ------------ ------------- Net assets available for plan benefits at December 31, 1995 $ 1,135,900 $ 800,226 ------------ ------------ Employer's contribution 47,143 56,347 Participants' contributions/ rollovers 142,897 210,432 Withdrawals/distributions (80,232) (90,878) Dividends and interest 94,823 100,866 Net appreciation (depreciation) in fair value of investments (43,813) 69,769 Net loan activities (18,188) (21,642) Administrative fees (359) (335) Transfer in from another plan Transfers in (out) 31,299 631,325 ------------ ------------ Increase (decrease) in net assets 173,570 955,884 ------------ ------------ Net assets available for plan benefits at December 31, 1996 1,309,470 1,756,110 ------------ ------------ Employer's contribution 18,691 67,098 $ 164,768 $ 7,185 $ 6,541 $ 25,341 Participants' contributions/rollovers 69,731 255,984 494,488 37,196 36,051 237,595 Withdrawals/distributions (94,387) (200,786) (719,538) (23,180) (174,070) Dividends and interest 42,140 123,157 1,407,553 35,188 14,210 16,883 Net appreciation (depreciation) in fair value of investments 3,485 64,134 (526,891) (10,661) (4,805) 58,785 Net loan activities (4,940) (13,023) (14,279) 256 356 (4,013) Administrative fees (8) (37) (234) (9) (16) Transfer out to another plan Transfers in (out) (1,344,182) 320,819 16,537,451 544,847 391,132 1,595,674 ------------ ------------ ------------ ------------ ------------ ------------- Increase (decrease) in net assets (1,309,470) 617,346 17,343,318 590,822 443,485 1,756,179 ------------ ------------ ------------ ------------ ------------ ------------- Net assets available for plan benefits at December 31, 1997 $ -- $ 2,373,456 $ 17,343,318 $ 590,822 $ 443,485 $ 1,756,179 ============ ============ ============ ============ ============ ============= Fidelity Watkins- U.S. Bond Johnson Non-Participant Index Stock Directed Participant Contribution Fund Fund ESOP Loans Receivable Total ------------- ------------- ------------- ------------- ------------- -------------- Net assets available for plan benefits at December 31, 1995 $ 6,709,171 $ 117,089,111 ------------- -------------- Employer's contribution 291,715 $ 699,989 $ 183,242 3,614,500 Participants' contributions/ rollovers 827,000 8,819,285 Withdrawals/distributions (295,051) (329,920) $ (71,457) (10,421,652) Dividends and interest 83,101 47,525 96,277 10,969,798 Net appreciation (depreciation) in fair value of investments (2,227,474) (1,655,825) (3,105,390) Net loan activities (117,525) 2,453,639 -- Administrative fees (925) (1,095) (38,641) Transfer in from another plan 6,652,371 6,652,371 Transfers in (out) 503,342 -- ------------- ------------- ------------- ------------- -------------- Increase (decrease) in net assets (935,817) 5,413,045 2,478,459 183,242 16,490,271 ------------- ------------- ------------- ------------- -------------- Net assets available for plan benefits at December 31, 1996 5,773,354 5,413,045 2,478,459 183,242 133,579,382 ------------- ------------- ------------- ------------- -------------- Employer's contribution $ 20,693 246,769 828,387 4,430 3,353,101 Participants' contributions/rollovers 80,098 731,849 8,316,531 Withdrawals/distributions (63,197) (286,284) (617,750) (348,404) (15,554,405) Dividends and interest 72,830 62,772 51,516 214,266 9,133,863 Net appreciation (depreciation) in fair value of investments 46,215 771,135 273,489 10,546,654 Net loan activities (3,060) (44,985) 395,930 -- Administrative fees (28) (509) (17,328) (54,944) Transfer out to another plan (950,068) (950,068) Transfers in (out) 2,218,438 (1,405,776) -- ------------- ------------- ------------- ------------- ------------- -------------- Increase (decrease) in net assets 2,371,989 74,971 518,314 (688,276) 4,430 14,790,732 ------------- ------------- ------------- ------------- ------------- -------------- Net assets available for plan benefits at December 31, 1997 $ 2,371,989 $ 5,848,325 $ 5,931,359 $ 1,790,183 $ 187,672 $ 148,370,114 ============= ============= ============= ============= ============= ============== See independent accountants' report and accompanying notes to financial statements
4 WATKINS-JOHNSON EMPLOYEES' INVESTMENT PLAN NOTES TO FINANCIAL STATEMENTS December 31, 1997 and 1996 -------------------------- Note 1 - The Plan and its significant accounting policies: The following description of the Watkins-Johnson Employees' Investment Plan (the Plan) provides only general information. Participants should refer to the Plan document for a more complete description of the Plan's provisions. The Plan is a defined contribution plan that was established in 1967 by Watkins-Johnson Company (the Company) to provide benefits to eligible employees. The Plan covers all employees of the Company on U.S. payroll and not otherwise covered by a collective bargaining agreement or an independent contractor. Effective January 1, 1996, the Company eliminated the service requirement for eligibility and offered loans against 401(k) funds. During April 1996, the Company merged the Watkins-Johnson Company Employee Stock Ownership Plan (ESOP) into the Watkins-Johnson Employees' Investment Plan and the Plan document was amended and restated to combine the plans. The Plan administrator believes the Plan is currently designed and being operated in compliance with the applicable requirements of the Internal Revenue Code and the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). Administration - The Company has appointed an Administrative Committee (the Committee) to manage the operation and administration of the Plan. A third-party administrator processes and maintains the records of participant data. Effective August 1, 1997, the Company contracted with Fidelity Management Trust Company (Fidelity) to act as the trustee. Prior to August 1, 1997, Wells Fargo Bank was the trustee and Fidelity acted as the custodian. Substantially all expenses incurred for administering the Plan are paid by the Company except for certain trustee and loan fees which are paid by the Plan. 5 Investments - Investments of the Plan are trusteed by Fidelity and invested based solely upon instructions received from participants for participant directed accounts. The ESOP portion of the Plan is non-participant directed and consists of investments in the Watkins-Johnson Stock Fund and cash. During 1997, Freedom Funds, Fidelity Spartan U.S. Equity Index Fund, and Warburg Picus Emerging Growth Fund were added as investment options under the Plan and the Intermediate Bond Fund and Balanced Fund were replaced with the Fidelity U.S. Bond Index Fund and Founders Balanced Fund, respectively. The Plan's investments in mutual funds and Company stock are valued at fair value as of the last day of the Plan year, as measured by quoted market prices. The Plan's investment in the Fixed Income Fund is recorded at contract value (purchase price plus interest). Liquidation of Plan assets invested in guaranteed investment contracts would result in a market value adjustment as specified in the contract. The Fixed Income Fund principally consists of the following deposits for unsecured contracts with a fixed interest rate: 1997 1996 ----------- ----------- Continental Assurance Company, interest at 4.83%, matures in December 1998 $ 1,055,978 $ 1,007,313 Continental Assurance Company, interest at 7.28%, matures in December 1999 3,131,590 2,919,034 New York Life Insurance Company, interest at 7.00%, 50% matures in December 1998, remainder matures in June 1999 8,827,665 8,250,284 People's Security Life Insurance Company, interest at 5.04%, matures in March 2000 1,598,962 4,021,498 Provident Life an Accident Insurance Company, interest at 5.10%, 50% matured in July 1996, remainder matured in June 1997 1,145,177 Sun Life Insurance Company of America, interest at 7.07%, matures in June 1998 2,794,046 2,609,551 Fidelity Managed Income Portfolio II 20,502,241 19,370,486 6 1997 1996 ----------- ----------- Transamerica Occidental Life Insurance Co., interest at 6.74%, 50% matured in December 1996, remainder matures in June 1998 2,753,782 2,579,897 ----------- ----------- Total deposit contracts 40,664,264 41,903,240 Fidelity Fixed Income Fund 1,263,002 1,160,959 ----------- ----------- Total Fixed Income Fund $41,927,266 $43,064,199 =========== =========== Cash and cash equivalents - All highly liquid investments purchased with an original maturity of three months or less (generally money market funds) are considered to be cash equivalents. These investments are usually held for a short period of time, pending long-term investment. Vesting - Salary deferral, voluntary, rollover, and employer matching contributions - Participants are 100% vested in their accounts at all times. Profit sharing contributions - Participants are fully vested in their profit sharing contributions if they were employed by the Company on January 1, 1995. Participants who terminated prior to January 1, 1995 are subject to the vesting schedule as defined in the Plan document. ESOP contributions - Participants are fully vested in their ESOP contributions if they were employed by the Company on January 1, 1996. Participants who terminated prior to January 1, 1996 are subject to the vesting schedule as defined in the Plan document. Income taxes - The Plan has been amended since receiving its latest favorable determination letter dated August 1995. However, the Company intends that the Plan continue to qualify under the applicable requirements of the Internal Revenue Code and related state statutes, and is exempt from federal income and state franchise taxes. 7 Fund groupings - Funds have been grouped by common fund description for financial reporting purposes. Fund groups which do not represent 5% or more of the Plan's net assets at year end have been classified as "Freedom Funds" for financial reporting purposes. Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Risks and uncertainties - 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 fluctuations and credit risks. Due to the level of risk associated with certain 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. Financial instruments - Certain Fidelity investment options may enter into certain forward contracts to protect securities and related receivables and payables against fluctuations in future foreign currency rates. A forward contract is an agreement to buy or sell currencies of different countries on a specified futures date at a specified rate. Risks associated with such contracts include the movement in the value of the foreign currency relative to the U.S. dollar and the ability of the counterparty to perform. The market value of the contract will fluctuate with changes in currency exchange rates. Fidelity invests in futures contracts solely for the purpose of hedging its existing portfolio securities, or securities it intends to purchase, against fluctuations in value caused by changes in prevailing market interest rates. The use of futures transactions involves the risk of imperfect correlation in movements in the price of futures contracts, interest rates and the underlying hedged assets, and the possible inability of counterparties to meet the terms of their contracts. When the contract is closed, a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed is recorded. 8 Note 2 - Participation and benefits: Employee contributions - Participants may elect to have the Company contribute a percentage, from 1% to 15%, of their pre-tax compensation up to the amount allowable under current income tax regulations. Participants who elect to have the Company contribute a portion of their compensation to the Plan agree to accept an equivalent reduction in taxable compensation. Participants may also elect to make after-tax contributions up to 10% of their regular compensation as defined by the Plan. Contributions withheld are invested in accordance with the participant's direction and are allocated to funds in whole percentage increments. Participants are also allowed to make rollover contributions of amounts received from other qualified employer-sponsored retirement plans. Such contributions are deposited in the appropriate investment funds in accordance with the participant's direction and the Plan's provisions. Employer contributions - The Company is allowed to make matching contributions as defined in the Plan and as approved by the Board of Directors. The Company matches 100% of the first 2% of regular compensation contributed by each participant and 50% of the next 2% of regular compensation contributed, for a maximum contribution of 3% of regular compensation. The Plan also allows for an ESOP contribution that may be paid in the form of cash or Company stock. In 1997 and 1996, the Board of Directors approved an ESOP contribution equal to 1% of participants' regular compensation. Cash contributions were made to a holding account held by the trust on a quarterly basis to purchase shares of Watkins-Johnson Company stock which were allocated in the following year to eligible participants who were employed by the Company on the last day of the Plan year. 9 Participant accounts - Each participant's account is credited with the participant's contribution, Plan earnings or losses and an allocation of the Company's matching and ESOP contributions, if any. Allocation of the Company's contributions are based on participant contributions or regular compensation, as defined in the Plan. Payment of benefits - Upon termination, the participant or beneficiary will receive the benefits in a lump-sum amount equal to the value of the participant's vested interest in his or her account, or a series of payments comprising a complete distribution of the participant's account within one year. In addition, except for ESOP accounts, benefits may be paid in installments, payable at least annually, over a period not to exceed the life expectancy of the participant and his or her beneficiary. Loans to participants - The Plan allows participants to borrow not less than $1,000 and up to the lesser of $50,000 or 50% of their allowable account balance that excludes voluntary or ESOP money sources in participant accounts. The loans are secured by the participant's vested balance. Such loans bear interest at prime plus 1% and must be repaid to the Plan within a five year period, unless the loan is used for the purchase of a primary residence in which case the maximum repayment period is fifteen years. The specific terms and conditions of such loans are established by the Committee. Note 3 - Transfer of Plan assets: As a result of the merger of the ESOP into the Plan, assets of approximately $6,600,000 were transferred into the ESOP portion of the Plan during April 1996. 10 Note 4 - Investments: The following table includes the fair or contract values of investments and investment funds that represent 5% or more of the Plan's net assets at December 31: 1997 1996 ------------ ------------ Fidelity: Retirement Government Money Market Fund $ 4,315,563 $ 3,798,210 Fixed Income Fund 41,927,266 43,064,199 Magellan Fund 34,955,866 30,756,059 OTC Portfolio 14,573,266 14,497,040 Balanced Fund -- 15,407,941 Growth & Income Fund 13,961,369 9,146,032 Intermediate Bond Fund -- 1,309,470 Overseas Fund 2,373,456 1,756,110 Founders Balanced Fund 17,343,318 -- Warburg Pincus Emerging Growth Fund 590,822 -- Freedom Funds 443,485 -- Spartan U.S. Equity Index Fund 1,756,835 -- Fidelity U.S. Bond Index Fund 2,371,989 -- Cash and cash equivalents 522,495 541,976 Watkins-Johnson Stock Fund 11,256,529 10,640,644 Participant Loans 1,790,183 2,478,459 ------------ ------------ Assets held for investment purposes $148,182,442 $133,396,140 ============ ============ The ending balances reported in the statement of changes in net assets available for plan benefits as of December 31, 1997 and 1996 may differ from those reported above due to the allocation of cash and cash equivalents to the Watkins-Johnson Stock Fund for participant directed and non-participant directed accounts. 11 Note 5 - Party in interest transactions: ESOP contributions are invested in the common stock of the Company. In addition, as allowed in the Plan, participants may elect to invest a portion of their account in the common stock of the Company. Aggregate investment in Company common stock at December 31, 1997 and 1996 was as follows: Date Number of shares Fair value Cost ---- ---------------- ----------- ----------- 1997 645,780 $11,256,529 $10,820,963 1996 434,312 $10,640,644 $10,554,346 Note 6 - Plan termination and/or modification: The Company intends to continue the Plan indefinitely for the benefit of its employees; however, it reserves the right to terminate and/or modify the Plan at any time by resolution of its Board of Directors and subject to the provisions of ERISA. Note 7 - Subsequent events: In 1997, a division of the Company, Stellex Microwave Systems (Stellex), was sold. In conjunction with the sale, participant accounts for Stellex employees were transferred from the Plan to the Stellex Microwave Systems Employees' Investment Plan in February 1998. Participant loans of approximately $950,000 were transferred in December 1997. 12 WATKINS-JOHNSON EMPLOYEES' INVESTMENT PLAN SUPPLEMENTAL SCHEDULES DECEMBER 31, 1997 ----------------- 13 E.I.N.: 94-1402710 Plan #: 001 WATKINS-JOHNSON EMPLOYEES' INVESTMENT PLAN ITEM 27a, PART 1 - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES December 31, 1997 ----------------- ( a ) ( b ) ( c ) ( d ) ( e )
Description of investment including maturity date, rate of Identity of issue, borrower, interest, collateral, Current lessor, or similar party par or maturity value Cost Value - ----- ---------------------------------- ---------------------------- ---------- ---------- Fidelity Management Trust Company Ret. Gov't Money Market 4,315,563 4,315,563 Fidelity Managed Income Port. II Fixed Income Fund 20,502,241 20,502,241 Continental Assurance Company Fixed Income Fund 4,187,568 4,187,568 Peoples Security Life Fixed Income Fund 1,598,962 1,598,962 New York Life Insurance Company Fixed Income Fund 8,827,665 8,827,665 Sun Life Insurance Co. of America Fixed Income Fund 2,794,046 2,794,046 Transamerica Accidental Life Insur Fixed Income Fund 2,753,782 2,753,782 Fidelity Management Trust Company Fixed Income Fund 1,263,002 1,263,002 Fidelity Management Trust Company Founders Blanced 17,893,380 17,343,318 Fidelity Management Trust Company Warburg Pincus Emerging Growth 606,400 590,822 Fidelity Management Trust Company Magellan 27,757,388 34,955,866 Fidelity Management Trust Company Growth & Income 11,429,322 13,961,369 Fidelity Management Trust Company OTC Portfolio 12,949,912 14,573,266 Fidelity Management Trust Company Overseas Fund 2,328,018 2,373,456 Fidelity Management Trust Company Freedom Income Fund 29,246 29,029 Fidelity Management Trust Company Freedom 2000 Fund 269,654 263,527 Fidelity Management Trust Company Freedom 2010 Fund 45,522 44,734 Fidelity Management Trust Company Freedom 2020 Fund 36,055 35,455 Fidelity Management Trust Company Freedom 2030 Fund 71,808 70,740 Fidelity Management Trust Company Spartan U.S. Equity Index 1,711,703 1,756,835 Fidelity Management Trust Company Fidelity U.S. Bond Index 2,328,469 2,371,989 Fidelity Management Trust Company Cash 522,495 522,495 * Watkins-Johnson Company Common stock 10,820,963 11,256,529 * Participant loans Loan Fund (9.25% - 9.50%) 1,790,183 ----------- 148,182,442 =========== * Parties-in-interest
E.I.N.: 94-1402710 Plan #: 001 WATKINS-JOHNSON EMPLOYEES' INVESTMENT PLAN ITEM 27d, PART v - SCHEDULE OF REPORTABLE TRANSACTIONS FOR THE YEAR ENDED DECEMBER 31, 1997 ----------------- ( a ) ( b ) ( c ) ( d ) ( e ) ( f ) ( g ) Expense
Description of asset incurred (including interest rate and Purchase Selling Lease with Cost of maturity in case of a loan) Price Price rental transaction asset - ------ ----------------------------------- ------------- -------------- ------ ----------- ------------ Fidelity Management Trust Company: Ret. Gov't Money Mkt 8,408,199 8,408,199 Ret. Gov't Money Mkt 7,887,071 7,887,071 Comingled Pool 8,944,100 8,944,100 Comingled Pool 8,947,100 8,947,100 FMTC Inst. Money Mkt 19,744,630 19,744,630 FMTC Inst. Money Mkt 19,724,924 19,724,924 Founders Balanced 20,109,193 20,109,193 Founders Balanced 2,238,984 2,215,814 Magellan Fund 9,184,130 9,184,130 Magellan Fund 10,427,574 9,036,253 Growth & Income Fund 12,545,771 12,545,771 Growth & Income Fund 10,139,578 9,343,054 OTC Portfolio 7,970,553 7,970,553 OTC Portfolio 8,224,378 7,612,253 Balanced Fund 1,676,518 1,676,518 Balanced Fund 18,773,782 15,785,937 Watkins-Johnson Stock Fund 18,982,498 18,982,498 Watkins-Johnson Stock Fund 19,430,670 18,193,385
( a ) ( h ) ( I ) Current value of asset on transaction Net gain date or (loss) - ------ -------------- ------------ 8,408,199 - 7,887,071 - 8,944,100 - 8,947,100 - 19,744,630 - 19,724,924 - 20,109,193 - 2,238,984 23,170 9,184,130 - 10,427,574 1,391,321 12,545,771 - 10,139,578 796,524 7,970,553 - 8,224,378 612,125 1,676,518 - 18,773,782 2,987,845 18,982,498 - 19,430,670 1,237,285 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the use of our name on our report, dated May 8, 1998, with respect to the financial statements and schedules of the Watkins-Johnson Employees' Investment Plan for the years ended December 31, 1997 and 1996, included in the Annual Report on Form 11-K which is filed electronically with the Securities and Exchange Commission. MOHLER, NIXON & WILLIAMS Accountancy Corporation Campbell, California May 8, 1998 -----END PRIVACY-ENHANCED MESSAGE-----