WATKINS-JOHNSON
EMPLOYEES' INVESTMENT PLAN
Financial Statements and Supplemental Schedules
For the Years Ended December 31, 1995 and 1994 and
Independent Auditors' Report
<PAGE>
WATKINS-JOHNSON EMPLOYEES' INVESTMENT PLAN
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Page
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS AS OF DECEMBER 31, 1995 AND 1994 AND FOR THE
YEARS THEN ENDED:
Statements of Net Assets Available for Benefits with Fund Information 2-3
Statements of Changes in Net Assets Available for Benefits with
Fund Information 4-5
Notes to Financial Statements 6-8
SUPPLEMENTAL SCHEDULES AS OF DECEMBER 31, 1995 AND FOR THE
YEAR THEN ENDED:
Schedule 1--Assets Held For Investment Purposes 9
Schedule 2--Reportable Transactions 10-12
<PAGE>
Deloitte &
Touche LLP
- ------------ -----------------------------------------------------------------
50 Fremont Street Telephone: (415) 247-4000
San Francisco, California 94105-2230 Facsimile: (415) 247-4329
INDEPENDENT AUDITORS' REPORT
The Administrative Committee, Watkins-Johnson
Employees' Investment Plan:
We have audited the accompanying statements of net assets available for benefits
of Watkins-Johnson Employees' Investment Plan (the "Plan") as of December 31,
1995 and 1994, 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, such financial statements present fairly, in all material
respects, the net assets available for benefits of the Plan at December 31, 1995
and 1994, and the changes in net assets available for benefits for the years
then ended in conformity with generally accepted accounting principles.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information by fund is
presented for the purpose of additional analysis of the basic financial
statements rather than to present information regarding the net assets available
for benefits and changes in net assets available for benefits of the individual
funds, and is not a required part of the basic financial statements. The
accompanying supplemental schedules, listed in the foregoing table of contents,
are presented for the purpose of complying with the Department of Labor's Rules
and Regulations for Reporting and Disclosure under the Employee Retirement
Income Security Act of 1974. This supplemental information by fund and the
supplemental schedules are the responsibility of the Plan's management. Such
supplemental information by fund and supplemental schedules have been subjected
to the auditing procedures applied in our audit of the basic financial
statements and, in our opinion, are fairly stated in all material respects when
considered in relation to the basic financial statements taken as a whole.
/s/ Deloitte & Touche LLP
May 24, 1996
- ----------------
Deloitte Touche
Tohmatsu
International
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<PAGE>
<TABLE>
WATKINS-JOHNSON
EMPLOYEES' INVESTMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION, DECEMBER 31, 1995
<CAPTION>
Supplemental Information
-----------------------------------------------------------------------------
Retirement
Government Fixed
Total Money Market Income Fund Magellan Fund OTC Portfolio Balanced Fund
------------ ------------ ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Cash and cash equivalents $ 305,418 - - - - -
Deposit contracts 37,601,324 - $37,601,324 - - -
------------ ------------ ----------- ------------ ------------ ------------
Total 37,906,742 - 37,601,324 - - -
------------ ------------ ----------- ------------ ------------ ------------
Investments (at fair value):
Fidelity mutual funds 72,828,734 $ 3,413,260 5,752,804 $ 30,944,009 $ 10,745,759 $ 16,609,403
Common stock of Plan sponsor
(cost of $5,197,702) 6,385,269 - - - - -
------------ ------------ ----------- ------------ ------------ ------------
Total 79,214,003 3,413,260 5,752,804 30,944,009 10,745,759 16,609,403
------------ ------------ ----------- ------------ ------------ ------------
Total Investments 117,120,745 3,413,260 43,354,128 30,944,009 10,745,759 16,609,403
Receivables:
Employer contributions - - - - - -
Interest and dividends 18,948 - - - - -
------------ ------------ ----------- ------------ ------------ ------------
Total 18,948 - - - - -
------------ ------------ ----------- ------------ ------------ ------------
Total Assets 117,139,693 3,413,260 43,354,128 30,944,009 10,745,759 16,609,403
------------ ------------ ----------- ------------ ------------ ------------
Liabilities:
Expenses payable 14,388 245 8,737 2,342 831 1,208
Purchase of Securities &
Interest 36,194 - 36,194 - - -
------------ ------------ ----------- ------------ ------------ ------------
Total Liabilities 50,582 245 44,931 2,342 831 1,208
------------ ------------ ----------- ------------ ------------ ------------
Net Assets Available for Benefits $117,089,111 $ 3,413,015 $43,309,197 $ 30,941,667 $ 10,744,928 $ 16,608,195
============ ============ =========== ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Supplemental Information
------------------------------------------------------------------
Watkins-
Johnson Growth & Intermediate Overseas
Stock Fund Income Bond Fund
----------- ------------- ------------ ----------
<S> <C> <C> <C> <C>
Assets:
Cash and cash equivalents $ 305,418 - - -
Deposit contracts - - - -
----------- ------------- ------------ ----------
-
Total 305,418 - - -
----------- ------------- ------------ ----------
Investments (at fair value):
Fidelity mutual funds - $ 3,427,187 $ 1,136,000 $ 800,312
Common stock of Plan sponsor
(cost of $5,197,702) 6,385,269 - - -
----------- ------------- ------------ ----------
Total 6,385,269 3,427,187 1,136,000 800,312
----------- ------------- ------------ ----------
Total Investments 6,690,687 3,427,187 1,136,000 800,312
Receivables:
Employer contributions - - - -
Interest and dividends 18,948 - - -
----------- ------------- ------------ ----------
Total 18,948 - - -
----------- ------------- ------------ ----------
Total Assets 6,709,635 3,427,187 1,136,000 800,312
----------- ------------- ------------ ----------
Liabilities:
Expenses payable 464 375 100 86
Purchase of Securities &
Interest - - - -
----------- ------------- ------------ ----------
Total Liabilities 464 375 100 86
----------- ------------- ------------ ----------
Net Assets Available for Benefits $ 6,709,171 $ 3,426,812 $ 1,135,900 $ 800,226
=========== ============= ============ ==========
<FN>
See notes to financial statements.
</FN>
</TABLE>
-2-
<PAGE>
<TABLE>
WATKINS-JOHNSON
EMPLOYEES' INVESTMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION, DECEMBER 31, 1994
<CAPTION>
Supplemental Information
-----------------------------------------------------------------------------------
Retirement Watkins-
Government Fixed Income Magellan OTC Balanced Johnson
Total Money Market Fund Fund Portfolio Fund Stock Fund
------------ ------------ ----------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Cash and cash equivalents $ 190,313 - - - - - $ 190,313
Deposit contracts 48,771,667 - $48,771,667 - - - -
------------ ---------- ----------- ----------- ---------- ----------- ----------
Total 48,961,980 - 48,771,667 - - - 190,313
------------ ---------- ----------- ----------- ---------- ----------- ----------
Investments (at fair value):
Fidelity mutual funds 48,457,948 $2,908,248 1,196,343 $21,518,558 $6,421,503 $16,413,296 -
Corporate stocks 2,726,713 - - - - - 2,726,713
------------ ---------- ----------- ----------- ---------- ----------- ----------
Total 51,184,661 2,908,248 1,196,343 21,518,558 6,421,503 16,413,296 2,726,713
------------ ---------- ----------- ----------- ---------- ----------- ----------
Total Investments 100,146,641 2,908,248 49,968,010 21,518,558 6,421,503 16,413,296 2,917,026
Receivables:
Employer contributions 3,194,198 57,908 823,131 971,749 391,467 802,049 147,894
Interest and dividends 11,123 - - - - - 11,123
------------ ---------- ----------- ----------- ---------- ----------- ----------
Total 3,205,321 57,908 823,131 971,749 391,467 802,049 159,017
------------ ---------- ----------- ----------- ---------- ----------- ----------
Total Assets 103,351,962 2,966,156 50,791,141 22,490,307 6,812,970 17,215,345 3,076,043
------------ ---------- ----------- ----------- ---------- ----------- ----------
Liabilities:
Expenses payable 15,065 473 7,223 3,341 1,033 2,524 471
------------ ---------- ----------- ----------- ---------- ----------- ----------
Total Liabilities 15,065 473 7,223 3,341 1,033 2,524 471
------------ ---------- ----------- ----------- ---------- ----------- ----------
Net Assets Available for Benefits $103,336,897 $2,965,683 $50,783,918 $22,486,966 $6,811,937 $17,212,821 $3,075,572
============ ========== =========== =========== ========== =========== ==========
<FN>
See notes to financial statements.
</FN>
</TABLE>
-3-
<PAGE>
<TABLE>
WATKINS-JOHNSON
EMPLOYEES' INVESTMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION, YEAR ENDED DECEMBER 31, 1995
<CAPTION>
Supplemental Information
--------------------------------------------------------------------------
Retirement
Government
Money Fixed Income Magellan OTC
Total Market Fund Fund Portfolio
-------------- -------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
ADDITIONS:
Investment Earnings:
Interest $ 2,988,881 $ 2,987,110 - -
Dividends 3,585,772 $ 187,310 - $ 1,786,159 $ 613,324
-------------- -------------- -------------- ------------- --------------
Total 6,574,653 187,310 $ 2,987,110 1,786,159 613,324
-------------- -------------- -------------- ------------- --------------
Net appreciation (depreciation)
in fair value of investments 11,467,825 - - 6,437,175 2,099,375
Trustee fees (39,160) (991) (18,645) (8,700) (3,042)
-------------- -------------- -------------- ------------- --------------
Total 11,428,665 (991) (18,645) 6,428,475 2,096,333
-------------- -------------- -------------- ------------- --------------
Total investments earnings 18,003,318 186,319 2,968,465 8,214,634 2,709,657
-------------- -------------- -------------- ------------- --------------
Contributions:
Employer 2,404,451 76,550 514,244 743,620 309,630
Employee 7,268,512 200,175 1,479,579 2,240,400 988,113
-------------- -------------- -------------- ------------- --------------
Total 9,672,963 276,725 1,993,823 2,984,020 1,297,743
-------------- -------------- -------------- ------------- --------------
Total additions 27,676,281 463,044 4,962,288 11,198,654 4,007,400
-------------- -------------- -------------- ------------- --------------
DEDUCTIONS:
Distributions to participants (13,924,067) (413,815) (6,368,621) (3,254,828) (1,017,021)
-------------- -------------- -------------- ------------- --------------
Increase (decrease) in net assets
before interfund transfers 13,752,214 49,229 (1,406,333) 7,943,826 2,990,379
Interfund transfers - 398,103 (6,068,388) 510,875 942,612
-------------- -------------- -------------- ------------- --------------
Net Increase (decrease) 13,752,214 447,332 (7,474,721) 8,454,701 3,932,991
Net assets available for benefits,
January 1 103,336,897 2,965,683 50,783,918 22,486,966 6,811,937
-------------- -------------- -------------- ------------- --------------
Net assets available for benefits,
December 31 $ 117,089,111 $ 3,413,015 $ 43,309,197 $ 30,941,667 $ 10,744,928
============== ============== ============== ============= ==============
</TABLE>
<TABLE>
<CAPTION>
Supplemental Information
------------------------------------------------------------------------------------------
Watkins-
Balanced Johnson Growth & Intermediate Overseas
Fund Stock Fund Income Bond Fund
------------- -------------- ------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
ADDITIONS:
Investment Earnings:
Interest - 1,771
Dividends $ 728,129 $ 90,741 $ 132,600 $ 29,008 $ 18,501
------------- -------------- ------------- -------------- -------------
Total 728,129 92,512 132,600 $ 29,008 $ 18,501
------------- -------------- ------------- -------------- -------------
Net appreciation (depreciation)
in fair value of investments 1,614,572 1,063,345 240,541 17,298 (4,481)
Trustee fees (4,840) (1,734) (791) (236) (181)
------------- -------------- ------------- -------------- -------------
Total 1,609,732 1,061,611 239,750 17,062 (4,662)
------------- -------------- ------------- -------------- -------------
Total investments earnings 2,337,861 1,154,123 372,350 46,070 13,839
------------- -------------- ------------- -------------- -------------
Contributions:
Employer 522,109 197,555 26,186 5,822 8,735
Employee 1,540,877 604,889 119,100 22,352 73,027
------------- -------------- ------------- -------------- -------------
Total 2,062,986 802,444 145,286 28,174 81,762
------------- -------------- ------------- -------------- -------------
Total additions 4,400,847 1,956,567 517,636 74,244 95,601
------------- -------------- ------------- -------------- -------------
DEDUCTIONS:
Distributions to participants (2,248,929) (280,673) (302,810) (9,771) (27,599)
------------- -------------- ------------- -------------- -------------
Increase (decrease) in net assets
before interfund transfers 2,151,918 1,675,894 214,826 64,473 68,002
Interfund transfers (2,756,544) 1,957,705 3,211,986 1,071,427 732,224
------------- -------------- ------------- -------------- -------------
Net Increase (decrease) (604,626) 3,633,599 3,426,812 1,135,900 800,226
Net assets available for benefits,
January 1 17,212,821 3,075,572 - - -
------------- -------------- ------------- -------------- -------------
Net assets available for benefits,
December 31 $ 16,608,195 $ 6,709,171 3,426,812 $ 1,135,900 $ 800,226
============= ============== ============= ============== =============
<FN>
See notes to financial statements.
</FN>
</TABLE>
-4-
<PAGE>
<TABLE>
WATKINS-JOHNSON
EMPLOYEES' INVESTMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION, YEAR ENDED DECEMBER 31, 1994
<CAPTION>
Supplemental Information
---------------------------------------
Retirement
Government
Money Fixed Income
Total Market Fund
-------------- --------------- ---------------
<S> <C> <C> <C>
ADDITIONS:
Investment Earnings:
Interest $ 3,490,952 - $ 3,490,952
Dividends 1,645,258 $ 103,107 -
-------------- --------------- ---------------
Total 5,136,210 103,107 $ 3,490,952
-------------- --------------- ---------------
Net appreciation (depreciation) in fair value
of investments (2,516,210) - -
Trustee fees (30,074) (897) (14,822)
-------------- --------------- ---------------
Total (2,546,284) (897) (14,822)
-------------- --------------- ---------------
Total investments earnings 2,589,926 102,210 3,476,130
-------------- --------------- ---------------
Contributions:
Employer 3,194,198 57,908 823,131
Employee 6,077,422 168,832 1,351,122
-------------- --------------- ---------------
Total 9,271,620 226,740 2,174,253
-------------- --------------- ---------------
Total additions 11,861,546 328,950 5,650,383
-------------- --------------- ---------------
DEDUCTIONS:
Distributions to participants (8,751,601) (284,041) (3,444,886)
-------------- --------------- ---------------
Increase (decrease) in net assets before
interfund transfers 3,109,945 44,909 2,205,497
Transfers between funds - 512,345 (3,078,152)
-------------- --------------- ---------------
Net Increase (decrease) 3,109,945 557,254 (872,655)
Net assets available for benefits, January 1 100,226,952 2,408,429 51,656,573
-------------- --------------- ---------------
Net assets available for benefits, December 31 $ 103,336,897 $ 2,965,683 $ 50,783,918
============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
Supplemental Information
----------------------------------------------------------------------------------
Watkins-
Magellan OTC Balanced Johnson
Fund Portfolio Fund Stock Fund
--------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
ADDITIONS:
Investment Earnings:
Interest - - - -
Dividends $ 864,469 $ 56,515 $ 566,511 $ 54,656
--------------- -------------- -------------- --------------
Total 864,469 56,515 566,511 54,656
--------------- -------------- -------------- --------------
Net appreciation (depreciation) in fair value
of investments (1,334,633) (239,116) (1,624,707) 682,246
Trustee fees (6,552) (1,930) (5,118) (755)
--------------- -------------- -------------- --------------
Total (1,341,185) (241, 046) (1,629,825) 681,491
--------------- -------------- -------------- --------------
Total investments earnings (476,716) (184,531) (1,063,314) 736,147
--------------- -------------- -------------- --------------
Contributions:
Employer 971,749 391,467 802,049 147,894
Employee 1,933,889 774,002 1,649,823 199,754
--------------- -------------- -------------- --------------
Total 2,905,638 1,165,469 2,451,872 347,648
--------------- -------------- -------------- --------------
Total additions 2,428,922 980,938 1,388,558 1,083,795
--------------- -------------- -------------- --------------
DEDUCTIONS:
Distributions to participants (1,552,084) (493,516) (2,872,449) (104,625)
--------------- -------------- -------------- --------------
Increase (decrease) in net assets before
interfund transfers 876,838 487,422 (1,483,891) 979,170
Transfers between funds 1,230,233 278,796 504,704 552,074
--------------- -------------- -------------- --------------
Net Increase (decrease) 2,107,071 766,218 (979,187) 1,531,244
Net assets available for benefits, January 1 20,379,895 6,045,719 18,192,008 1,544,328
--------------- -------------- -------------- --------------
Net assets available for benefits, December 31 $ 22,486,966 $ 6,811,937 $ 17,212,821 $ 3,075,572
=============== ============== ============== ==============
<FN>
See notes to financial statements.
</FN>
</TABLE>
-5-
<PAGE>
WATKINS-JOHNSON
EMPLOYEES' INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. DESCRIPTION OF PLAN
The Watkins-Johnson Employees' Investment Plan (the Plan) was created by
Watkins-Johnson Company effective January 1, 1967. The Plan, amended as
of January 1, 1991, conforms to the requirements of the Employee
Retirement Income Security Act of 1974 (ERISA), and is in compliance with
the Tax Reform Act of 1986. The Plan added the Salary Deferral Plan,
known as a 401(k) Plan in reference to the Internal Revenue Code Section
401(k) on April 1, 1983. Watkins-Johnson Company terminated the Profit
Sharing portion of the Plan on January 1, 1995, and restated the Plan as
Watkins-Johnson Employees' Investment Plan. A Company match of up to a
maximum of 3% of regular compensation was added to the Plan to replace
the Profit Sharing portion. Participants should refer to the Plan
Agreement for a more complete description of the Plan's provisions.
Beginning January 1, 1995, employees of Watkins-Johnson Company on U.S.
payroll are generally eligible to participate after 90 days of service.
In prior periods, the eligibility requirement was one year.
Participant and Company contributions are fully vested.
The Fidelity Retirement Government Money Market Portfolio invests in
obligations issued or guaranteed as to principal and interest by the U.S.
Government, its agencies or instrumentalities, and in repurchase
agreements secured by these obligations.
<TABLE>
The Fixed Income Fund principally consists of the following deposits for
unsecured contracts with a fixed interest rate:
<CAPTION>
1995 1994
---------- -----------
<S> <C> <C>
Bankers Trust Company,
interest at 8.48%, matured in June 1995 $ - $13,415,630
Continental Assurance Company,
interest at 4.90%, matures in June 1997 960,881 4,071,426
Continental Assurance Company,
interest at 7.43%, matures in December 1999 2,720,767 3,944,043
New York Life Insurance Company,
interest at 7.00%, 50% matures in December 1998
50% matures in June 1999 7,710,425 7,752,411
Peoples' Security Life Insurance Company,
interest at 5.04%, matures in March 2000 4,051,209 -
</TABLE>
-6-
<PAGE>
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Protective Life Insurance Company,
interest at 8.46%, matured in June 1995 - 6,709,673
Provident Life and Accident Insurance Company,
interest at 5.10%, 50%, matures in July 1996
50% matures in June 1997 2,178,916 6,369,304
Sun Life Insurance Company of America,
interest at 7.07%, matures in June 1998 2,437,238 2,449,093
Fidelity Managed Income Portfolio II (MIPII) 15,124,963 -
Transamerica Occidental Life Insurance Company,
interest at 6.74%, 50% matures in December 1996
50% matures in December 1997 2,416,925 4,060,087
----------- -----------
Total deposit contracts 37,601,324 48,771,667
Fidelity Fixed Income Fund 5,752,804 1,196,343
----------- -----------
Total Fixed Income Fund $43,354,128 $49,968,010
=========== ===========
</TABLE>
The Fidelity Magellan Fund is a growth fund and invests in stock of both
well-known and lesser-known foreign and domestic companies with
above-average growth potential.
The Fidelity OTC Portfolio is a growth fund and invests primarily in
securities traded on the over-the-counter securities market including
common stocks, preferred stocks, securities convertible into common
stocks and debt securities.
The Fidelity Balanced Fund is a growth and income fund and invests in
investment grade or higher bonds and other high-yielding securities,
including common and preferred stocks.
The Watkins-Johnson Stock Fund invests primarily in Watkins-Johnson
Company's common stock. At December 31, 1995 and 1994, the Plan owned
145,949 and 91,266 shares, respectively, representing 1.8% and 1.2%,
respectively, of total Watkins-Johnson Company common stock shares.
The Fidelity Intermediate Bond Fund seeks a high level of current income.
This fund invests in bonds rated BBB or better with a dollar-weighted
average maturity of between 3 and 10 years.
The Fidelity Growth and Income Portfolio seeks long-term capital
appreciation, current income, and growth of income. The fund invests
primarily in stocks, and also in a broad range of convertibles and
fixed-income securities.
The Fidelity Overseas Fund seeks long-term capital appreciation,
primarily through investments in foreign securities.
The description of each Fidelity Mutual Fund's investment objective, as
provided above, is as stated in the individual fund's prospectus.
The Plan, as amended, allows all participants to direct contributions to
the funds of their choice.
-7-
<PAGE>
Although it has not expressed any intent to do so, the Company has the
right under the Plan to discontinue its contributions at any time and to
terminate the Plan subject to the provisions of ERISA.
The Plan obtained its latest determination letter in August 1995, in
which the Internal Revenue Service stated that the Plan, as then
designed, was in compliance with the applicable requirements of the
Internal Revenue Code. The Plan administrator and the Plan's tax counsel
believe that the Plan is currently designed and being operated in
compliance with the applicable requirements of the Internal Revenue Code.
Therefore, they believe that the Plan was qualified and was tax-exempt as
of December 31, 1995.
2. SIGNIFICANT ACCOUNTING POLICIES
Cash and cash equivalents are highly liquid investments with a maturity
of three months or less.
Deposit contracts are stated at contract value (cost plus accumulated
interest) and are benefit responsive.
Investments are stated at fair value based on quoted market prices; the
unrealized difference between cost and market is included in determining
Plan net assets.
Dividend and interest income are recorded on the accrual basis.
Administrative expenses incurred on behalf of the Plan are paid by
Watkins-Johnson Company except for trustee fees which are paid by the
Plan. Such fees are recorded on the accrual basis.
Contributions are matched bi-weekly at the rate of 100% of the first 2%
of regular compensation contributed by participants, and 50% of the next
2% contributed, up to a maximum Company matching of 3% of regular
compensation. A participant may contribute a maximum of 15% of the
participant's regular compensation.
Distributions for in-service withdrawals, voluntary withdrawals, age
59-1/2 withdrawals, hardship and rollover withdrawals may be taken at any
time by the participant. Upon termination, death, or permanent disability
the participant or participant's designated beneficiary may take a lump
sum distribution, periodic payments or leave funds in the Plan until age
70-1/2.
Forfeitures recorded in 1995 relate to activity originating prior to
January 1, 1995. Total forfeitures recorded in 1995 and 1994 were $21,846
and $57,668, respectively, and were allocated to individual active
participants in the ratio that each such participant's regular
compensation bore to the aggregate of such regular compensation for all
eligible Plan participants for the applicable Plan year.
3. SUBSEQUENT EVENTS
On January 1, 1996, the Company eliminated the 90 day service requirement
for participation in the Plan so that employees become eligible
immediately upon their date of hire.
In 1996, the Company dissolved the Watkins-Johnson Employee Stock
Ownership Plan and its assets were transferred as another source to the
Employees' Investment Plan.
-8-
<PAGE>
<TABLE>
Schedule 1
WATKINS-JOHNSON
EMPLOYEES' INVESTMENT PLAN
ITEM 27a--SUPPLEMENTAL SCHEDULE OF ASSETS
HELD FOR INVESTMENT PURPOSES
AS OF DECEMBER 31, 1995
<CAPTION>
Number of
Identity of Issue Description of Investment Shares Cost Fair Value
- --------------------------------------------- ------------------------------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Fidelity Management Trust Company Retirement Government Money Market $ 3,413,245 $ 3,413,260
Fidelity Managed Income Portfolio II Fixed Income Fund (Deposit Contracts) 15,124,963 15,124,963
Continental Assurance Company Fixed Income Fund (Deposit Contracts) 3,681,648 3,681,648
New York Life Insurance Company Fixed Income Fund (Deposit Contracts) 7,710,425 7,710,425
Peoples Security Life Fixed Income Fund (Deposit Contracts) 4,051,209 4,051,209
Provident Life and Accident Insurance Company Fixed Income Fund (Deposit Contracts) 2,178,916 2,178,916
Sun America Life Insurance Company Fixed Income Fund (Deposit Contracts) 2,437,238 2,437,238
Transamerica Occidental Life Insurance Company Fixed Income Fund (Deposit Contracts) 2,416,925 2,416,925
Fidelity Management Trust Company Fixed Income Fund (Cash Portfolio) 5,752,804 5,752,804
Fidelity Management Trust Company Magellan Fund 359,898 25,573,920 30,944,009
Fidelity Management Trust Company OTC Portfolio 354,295 9,375,712 10,745,759
Fidelity Management Trust Company Balanced Fund 1,228,506 15,745,829 16,609,403
Fidelity Management Trust Company Growth & Income 126,698 3,191,872 3,427,187
Fidelity Management Trust Company Intermediate Bond 109,126 1,118,933 1,136,000
Fidelity Management Trust Company Overseas Fund 27,531 805,420 800,312
Watkins-Johnson Company Common Stock 145,959 5,503,120 6,690,687
------------ ------------
Total Investments $108,082,179 $117,120,745
============ ============
</TABLE>
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<PAGE>
<TABLE>
Schedule 2
WATKINS-JOHNSON
EMPLOYEES' INVESTMENT PLAN
ITEM 27d--SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(One or a Series of Transactions Exceeding 5% of the Fair Value of the Plan Assets at the Beginning of the Year)
<CAPTION>
Fair Value
Identity of Party of Asset on Net Gain
Involved Description of Asset Purchase Price Selling Price Cost of Asset Transaction Date or (Loss)
- ------------------------ -------------------------- -------------- ------------- ------------- ---------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Single Transactions:(1)
Bankers Trust Fixed Income Fund (Deposit - $ 11,750,000 $ 11,750,000 $ 11,750,000 *
Contract)
Protective Life Fixed Income Fund(Deposit - 6,851,030 6,851,030 6,851,030 *
Contracts)
<FN>
(1) No expenses were incurred with any reportable transaction.
* For each transaction, fair value (contract value) was equal to cost and
accumulated interest.
</FN>
</TABLE>
-10-
<PAGE>
<TABLE>
Schedule 2 (continued)
WATKINS-JOHNSON
EMPLOYEES' INVESTMENT PLAN
ITEM 27d--SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(One or a Series of Transactions Exceeding 5% of the Fair Value of the Plan Assets at the Beginning of the Year)
<CAPTION>
Identity of Party
Involved Description of Asset Purchase Price Selling Price Cost of Asset
- --------------------------- --------------------------------- ----------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Series of Transactions:(1)
Bankers Trust Fixed Income Fund (Deposit - $ 13,935,322 $ 13,935,322
Contract)
(3 Transactions)
Fidelity Managed Income Fixed Income Fund (Deposit $ 16,607,211 - 16,607,211
Portfolio II (MIPII) Contracts)
(93 Transactions)
Protective Life Fixed Income Fund (Deposit - 7,160,494 7,160,494
Contract)
(3 Transactions)
Cash Portfolio Fixed Income Fund 36,372,879 - 36,372,879
(93 Transactions)
Cash Portfolio Fixed Income Fund - 31,973,443 31,973,443
(173 Transactions)
Fidelity Management Trust Watkins-Johnson Fund 11,838,225 - 11,838,225
Company (235 Transactions)
</TABLE>
<TABLE>
<CAPTION>
Fair Value
Identity of Party of Asset on Net Gain
Involved Description of Asset Transaction Date or (Loss)
- --------------------------- --------------------------------- ------------------- -----------
<S> <C> <C> <C>
Series of Transactions:(1)
Bankers Trust Fixed Income Fund (Deposit $ 13,935,322 *
Contract)
(3 Transactions)
Fidelity Managed Income Fixed Income Fund (Deposit 16,607,211 *
Portfolio II (MIPII) Contracts)
(93 Transactions)
Protective Life Fixed Income Fund (Deposit 7,160,494 *
Contract)
(3 Transactions)
Cash Portfolio Fixed Income Fund 36,372,879 *
(93 Transactions)
Cash Portfolio Fixed Income Fund 31,973,443 *
(173 Transactions)
Fidelity Management Trust Watkins-Johnson Fund 11,838,225 *
Company (235 Transactions)
<FN>
(1) No expenses were incurred with any reportable transaction.
* For each transaction, fair value (contract value) was equal to cost and
accumulated interest.
</FN>
</TABLE>
<PAGE>
<TABLE>
Schedule 2 (continued)
WATKINS-JOHNSON
EMPLOYEES' INVESTMENT PLAN
ITEM 27d--SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(One or a Series of Transactions Exceeding 5% of the Fair Value of the Plan Assets at the Beginning of the Year)
<CAPTION>
Purchase Selling Cost of
Identity of Party Involved Description of Asset Price Price Asset
- ---------------------------- -------------------------------------- --------------- ------------- -------------
<S> <C> <C> <C> <C>
Series of Transactions:(1)
Fidelity Management Trust Watkins-Johnson Fund - 9,212,225 8,517,259
Company (164 Transactions)
Fidelity Management Trust Magellan 12,362,013 - 12,362,013
Company (241 Transactions)
Fidelity Management Trust Magellan - 9,373,737 8,096,157
Company (206 Transactions)
Fidelity Management Trust OTC Portfolio 5,548,361 - 5,548,361
Company (209 Transactions)
Fidelity Management Trust Balanced Fund 6,799,489 - 6,799,489
Company (230 Transactions)
Fidelity Management Trust Balanced Fund - 8,217,953 8,185,781
Company (210 Transactions)
Fidelity Management Trust Retirement Government Money Market 7,795,613 - 7,795,613
Company Fund
(390 Transactions)
Fidelity Management Trust Retirement Government Money Market - 7,290,601 7,290,601
Company Fund
(352 Transactions)
</TABLE>
<TABLE>
<CAPTION>
Fair Value
of Asset on Net Gain
Identity of Party Involved Description of Asset Transaction Date or (Loss)
- ---------------------------- -------------------------------------- ------------------ ------------
<S> <C> <C> <C>
Series of Transactions:(1)
Fidelity Management Trust Watkins-Johnson Fund 9,212,225 694,966
Company (164 Transactions)
Fidelity Management Trust Magellan 12,362,012 *
Company (241 Transactions)
Fidelity Management Trust Magellan 8,096,157 1,277,580
Company (206 Transactions)
Fidelity Management Trust OTC Portfolio 5,548,361 *
Company (209 Transactions)
Fidelity Management Trust Balanced Fund 6,799,489 *
Company (230 Transactions)
Fidelity Management Trust Balanced Fund 8,217,853 32,072
Company (210 Transactions)
Fidelity Management Trust Retirement Government Money Market 7,795,613 *
Company Fund
(390 Transactions)
Fidelity Management Trust Retirement Government Money Market 7,290,601 *
Company Fund
(352 Transactions)
<FN>
(1) No expenses were incurred with any reportable transaction.
* For each transaction, fair value was equal to cost.
</FN>
</TABLE>
<PAGE>
Deloitte &
Touche LLP
- ------------ -----------------------------------------------------------------
50 Fremont Street Telephone: (415) 247-4000
San Francisco, California 94105-2230 Facsimile: (415) 247-4329
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
33-39962 of the Watkins-Johnson Employees' Investment Plan (the "Plan") on Form
S-8 of our report dated May 24, 1996, appearing in this Annual Report on Form
11-K of the Plan for the year ended December 31, 1995.
/s/ Deloitte & Touche LLP
June 26, 1996
- ----------------
Deloitte Touche
Tohmatsu
International
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