<PAGE>
Quality Systems, Inc. Money Purchase Pension Plan
AUDITED FINANCIAL STATEMENTS AND
SUPPLEMENTAL SCHEDULES
December 31, 1997
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Quality Systems, Inc. Money Purchase Pension Plan
FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES
December 31, 1997
Financial Statements
Report of Independent Auditors 1
Statement of Assets Available for Benefits 2
Statement of Changes in Assets Available for Benefits 2
Notes to Financial Statements 3
Supplemental Schedules
Schedule of Assets Held for Investment Purposes 6
Schedule of Reportable Transactions 7
Nonexempt Party-in-Interest Transaction *
Obligations in Default *
Leases in Default *
* The Plan's activities for the year ended December 31, 1997, did not
include any such transactions under the definitions in the Department of
Labor regulations, and, accordingly, these schedules are not presented.
<PAGE> 1
Report of Independent Auditors
The Plan Administrator
Quality Systems, Inc. Money Purchase Pension Plan
We have audited the accompanying statement of assets available for benefits of
the Quality Systems, Inc. Money Purchase Pension Plan (the "Plan") as of
December 31, 1997 and the related statement of changes in assets available for
benefits for the year 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 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 assets available for benefits of the Plan at December
31, 1997, and the changes in its assets available for benefits for the year then
ended, in conformity with generally accepted accounting principles.
Our audit was performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedules of assets
held for investment purposes as of December 31, 1997, and reportable
transactions for the year then ended, are presented for purposes of complying
with the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974, and are
not a required part of the financial statements. The supplemental schedules
have been subjected to the auditing procedures applied in our audits of the
financial statements and, in our opinion, are fairly stated in all material
respects in relation to the financial statements taken as a whole.
/S/ Ernst & Young LLP
Austin, Texas
June 19, 1998
<PAGE> 2
STATEMENT OF ASSETS AVAILABLE FOR BENEFITS
ASSETS
Norwest mutual fund:
Stable Return Fund $1,476,434
Contributions receivable 533,315
----------
Total assets available for benefits $2,009,749
==========
STATEMENT OF CHANGES IN ASSETS AVAILABLE FOR BENEFITS
Year Ended December 31, 1997
ADDITIONS
Employer contributions $2,009,043
Net realized and unrealized gain on investments 706
----------
Net increase in fund 2,009,749
Net assets available for benefits at beginning of year --
----------
Net assets available for benefits at end of year $2,009,749
==========
See notes to financial statements.
<PAGE> 3
NOTES TO FINANCIAL STATEMENTS
Note A -- Description of the Plan
The following description of the Quality Systems, Inc. Money Purchase Pension
Plan (the Plan) provides only general information. Participants should refer to
the Plan agreement for a more complete description of the Plan's provisions.
The Plan is a defined contribution plan established by Quality Systems, Inc.
(QSI, the Company, or Plan Sponsor) on January 1, 1997. The Plan is subject to
the provisions of the Employee Retirement Income Security Act of 1974 (ERISA).
Participants
Substantially all employees of the Company are eligible to participate in the
Plan upon employment. Effective January 1, 1998, employees of the Company who
are assigned to the Software Center of Excellence on or after January 1, 1998,
are excluded from participation in the Plan.
Contributions
Participants must be employed by the Plan Sponsor on the last day of the Plan
year to receive a contribution. The Company contribution is equal to 5.24% of
covered compensation up to the Social Security wage base, and 10.48% of covered
compensation in excess of the Social Security wage base up to the covered
compensation limits. Participants are 100% vested in the Company's
contributions and earnings thereon after four years of credited service.
Participants who terminate employment due to retirement, death, or
disability become fully vested in employer contributions and earnings thereon.
Upon termination, nonvested amounts are forfeited to the Plan and allocated
among active plan participants on the last day of each plan year.
Distributions
Upon retirement, death, or disability, benefits are distributed in monthly,
quarterly, or annual installments, in a lump sum, or in a nontransferrable
annuity contract, as elected by the participant or his/her beneficiary.
Benefits are based upon the balance of the participant's account.
Termination
Although it has not expressed any intent to do so, the Company has the right
under the Plan to discontinue contributions at any time and to terminate the
Plan subject to the provisions of ERISA. In the event of Plan termination,
participants will become 100% vested in their accounts.
Investment Options
Contributions made by the Plan Sponsor may be directed by the participant to any
of the ten investment options:
Norwest Stable Return Fund -- Invests in fixed income securities.
Norwest Growth Equity Fund -- Invests in large company growth stocks,
small company stocks and international stocks.
Norwest Small Cap Opportunities Fund -- Invests all assets in the
Schroder U.S. Smaller Companies Portfolio, a series of Schroder
Capital Funds, itself a registered open-end management investment
company.
Vanguard Wellington Fund -- Invests 60-70% of assets in equity
securities and 30-40% in fixed income securities.
Vanguard Institutional Index Fund -- Invests in equity securities of
companies in the Standard & Poor's 500 Composite Stock Price Index.
The fund holds all of the 500 underlying securities in proportion to
their weighting in the Index.
Vanguard Windsor II Fund -- Invests in equity securities of companies
that are undervalued or out-of-favor.
Vanguard International Growth Fund -- Invests in stocks of companies
based outside the United States that have above-average growth
potential. 60-70% of the fund is invested in small- to medium-sized
companies, and the remainder is invested in liquid, large
capitalization stocks.
T. Rowe Price Spectrum Income Fund -- Invests primarily in domestic
bond funds and in a foreign bond fund. Up to 25% of fund assets may
be allocated to a stock fund.
Fidelity Contrafund -- Invests in equity securities of companies that
are undervalued or out-of-favor.
Tracor Stock Fund -- Invests in Tracor, Inc. common stock.
Note B -- Significant Accounting Policies
Investments
The Plan's investments are stated at fair value. Shares of publicly traded
mutual funds (registered investment companies) are valued at quoted market
prices which represent the net asset value (redemption value) of shares held by
the Plan at year-end.
Security transactions are accounted for on the date securities are purchased or
sold (trade date). Dividend income is recognized on the ex-dividend date.
Interest income is recognized when earned. Net gains or losses from security
transactions are computed using the average cost method based on the beginning
market value.
Distributions
Distributions to participants are recorded by the Plan when actual payment is
made.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires Plan management to make estimates and assumptions
that affect the reported amounts of assets and liabilities. Actual results could
differ from those estimates.
Note C -- Federal Income Taxes
The Plan has not yet obtained a tax determination letter from the Internal
Revenue Service, however, the Plan Sponsor believes the Plan is currently
designed and being operated in compliance with the requirements of the Internal
Revenue Code.
Note D -- Investments
Investments held in trust at December 31, 1997 by Norwest Bank, trustee of the
Plan, are as follows:
Investment Description
Norwest Stable Return Fund $1,476,434
Note E -- Year 2000 Issue (Unaudited)
The Plan Sponsor has developed a plan to modify its internal information
technology to be ready for the year 2000 and has begun converting critical data
processing systems. The project also includes determining whether third party
service providers have reasonable plans in place to become year 2000 compliant.
The Plan Sponsor currently expects the project to be substantially complete by
early 1999. The Plan Sponsor does not expect this project to have a significant
effect on plan operations.
Note F -- Subsequent Event
Subsequent to year end, the Plan Sponsor was acquired by General Electric
Corporation, p.l.c. of the United Kingdom. As of the report date, no decision
has been made to change, merge or terminate the Plan.
<PAGE> 6
SUPPLEMENTAL SCHEDULES
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
December 31, 1997
Current
Identity of Issue Description of Investment Cost Value
- ---------------------------- ------------------------- ---------- ----------
* Norwest Stable Return Fund 58,801 shares, mutual
fund, share value $25.11 $1,475,728 $1,476,434
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Total assets held for investment $1,475,728 $1,476,434
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* Indicates party-in-interest to the Plan
<PAGE> 7
SCHEDULE OF REPORTABLE TRANSACTIONS
Year Ended December 31, 1997
<TABLE>
<CAPTION>
Current
Value of
Asset on
Trans-
* Identity of Description Purchase Selling Cost of action Net
Party Involved of Asset Price Price Asset Date Gain
-------------- --------------- ---------- ---------- ---------- ---------- ------
<S><C> <C> <C> <C> <C> <C> <C>
Category (i)
------------
Norwest Bank
Stable
Return Fund $1,475,728 $1,475,728 $1,475,728
There were no category (ii), (iii), or (iv) reportable transactions during the year ended
December 31, 1997.
* All transactions on market.
</TABLE>
QUALITY SYSTEMS, INC.
MONEY PURCHASE PENSION PLAN
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the employee benefit plan) have duly
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
Quality Systems, Inc. Money
Purchase Pension Plan
Date: June 26, 1998 By: /s/ Peter Price
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Peter Price
Treasurer
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statements
(No. 33-55624 , No. 33-93186, No. 33-96474, No. 333-17409, No. 333-27061, and
No. 333-30363, all on Form S-8) pertaining to various benefit plans sponsored by
Tracor, Inc. of our report dated June 19, 1998, with respect to the financial
statements of the Quality Systems, Inc. Money Purchase Pension Plan included in
this Annual Report (Form 11-K) for the period ended December 31, 1997.
/S/ Ernst & Young LLP
Austin, Texas
June 26, 1998
