UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549-1004
FORM 11-K
(X) ANNUAL REPORT PURSUANT TO SECTION 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2005
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from-------------------to----------------------
Commission file number 1-8061
FREQUENCY ELECTRONICS, INC. 401(k) SAVINGS PLAN
(Full title of the plan)
Frequency Electronics, Inc.
55 Charles Lindbergh Blvd., Mitchel Field, NY 11553
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(Name of issuer of the securities held pursuant to
the plan and the address of its principal
executive offices)
Registrant's telephone number, including area code (516) 794-4500
Notices and communications from the Securities and Exchange Commission relative
to this report should be forwarded to:
Alan Miller
Chief Financial Officer
Frequency Electronics, Inc.
55 Charles Lindbergh Blvd.
Mitchel Field, NY 11553
FREQUENCY ELECTRONICS, INC.
401(k) SAVINGS PLAN
YEAR ENDED DECEMBER 31, 2005
CONTENTS
Page
a) FINANCIAL STATEMENTS:
Report of Independent Registered Public Accounting Firm 3
Statements of Net Assets Available for Benefits 4
Statement of Changes in Net Assets Available for Benefits 5
Notes to Financial Statements 6-9
SUPPLEMENTAL SCHEDULE:
Schedule H, Line 4i: Schedule of Assets (Held at End of Year) 10
b) EXHIBITS:
Exhibit 23.1 Consent of Independent Registered Public Accounting Firm 11
Exhibit 99.1 Certification of Chief Executive Officer and
Chief Financial Officer 12
Exhibit 99.2 Certification by a Trustee of the Plan 13
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
FREQUENCY ELECTRONICS, INC. Registrant
By: /s/ Alan L. Miller
----------------------
Alan L. Miller
Chief Financial Officer
and Controller
Dated: August 3, 2006
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees have duly caused this annual report to be signed on its behalf by
the undersigned hereunto duly authorized.
Frequency Electronics, Inc. 401(k) Savings Plan
(Name of Plan)
Date: August 3, 2006 By:
/s/Robert Klomp
---------------------
Robert Klomp, Trustee
/s/Markus Hechler
-----------------------
Markus Hechler, Trustee
/s/Marvin Meirs
---------------------
Marvin Meirs, Trustee
-3-
Report of Independent Registered Public Accounting Firm
To the Trustees of
Frequency Electronics, Inc.
401(k) Savings Plan
We have audited the accompanying statements of net assets available for benefits
of Frequency Electronics, Inc. 401(k) Savings Plan (the "Plan") as of December
31, 2005 and 2004, and the related statement of changes in net assets available
for benefits for the year ended December 31, 2005. 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 the standards of the Public Company
Accounting Oversight Board (United States). 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, the financial statements referred to above, present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 2005 and 2004, and the changes in net assets available for benefits
for the year ended December 31, 2005 in conformity with U.S. 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 schedule of assets (held
at end of year) at December 31, 2005 is presented for the purpose of additional
analysis and is not a required part of the basic financial statements but is
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. This supplemental schedule is the responsibility of the
Plan's management. The supplemental schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
/s/ Holtz Rubenstein Reminick LLP
---------------------------------
Holtz Rubenstein Reminick LLP
July 14, 2006
Melville, New York
-4-
FREQUENCY ELECTRONICS, INC.
401(k) SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
December 31,
2005 2004
---- ----
ASSETS:
Cash and Cash Equivalents $ 84,164 $ 77,211
Investments 11,544,869 10,709,641
Loans Receivable from Participants 391,081 356,810
Contribution Receivable - Employer 82,716 88,235
----------- -----------
Net Assets Available for Benefits $12,102,830 $11,231,897
=========== ===========
The accompanying notes are an integral part of
these financial statements.
-5-
FREQUENCY ELECTRONICS, INC.
401(k) SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEAR ENDED DECEMBER 31, 2005
ADDITIONS:
Additions to net assets attributed to:
Contributions:
Participant contributions $ 859,984
Rollover contributions 175,840
Employer contributions 406,312
-----------
Total Contributions 1,442,136
-----------
Investment Income (Loss):
Net depreciation in fair value of investments (457,980)
Interest 119,117
Dividends 299,378
-----------
Net Investment Loss (39,485)
------------
Total Additions 1,402,651
-----------
DEDUCTIONS:
Benefits paid to participants 531,718
-----------
NET INCREASE 870,933
NET ASSETS AVAILABLE FOR BENEFITS, beginning of year 11,231,897
-----------
NET ASSETS AVAILABLE FOR BENEFITS, end of year $12,102,830
===========
The accompanying notes are an integral part of
these financial statements.
-6-
FREQUENCY ELECTRONICS, INC.
401(k) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2005
1. Plan Description
The following description of the Frequency Electronics, Inc. (the "Company"
or the "Employer") 401(k) Savings Plan (the "Plan") provides only general
information. Participants should refer to the Plan agreement for a more
complete description of the Plan's provisions.
General - The Plan, adopted on January 1, 1985, is a defined contribution
savings plan qualified under Section 401(k) of the Internal Revenue Code
covering employees of the Company who have completed six months of service
and are age twenty-one or older. The Plan is subject to the provisions of
the Employee Retirement Income Security Act of 1974 ("ERISA").
Contributions - Each year, participants may contribute up to 25 percent of
pretax annual compensation, as defined by the Plan, subject to certain
limitations imposed by law. Participants who have attained age 50 before
the end of the Plan year are eligible to make catch-up contributions.
Participants may also contribute amounts representing distributions from
other qualified benefit plans. The Company may make matching contributions,
as defined by the Plan. Company contributions, if any, may consist of cash
or qualifying employer securities. During the year ended December 31, 2005,
Company contributions were made in the form of Company stock. The Company
contributed 100 percent of the first 3 percent of base compensation that a
participant contributed to the Plan, not to exceed a maximum of $2,500.
Additionally, the Company contributed $500 on behalf of each eligible
participant, regardless of the participant's contribution, if any. The
maximum Company contribution is $3,000 per participant.
Participant accounts - Each participant's account is credited with the
participant's contribution and allocations of the Company's contribution
and Plan earnings. Allocations of Plan earnings are made to each
participant's account based upon participant account balances, as defined.
The benefit to which a participant is entitled is the benefit that can be
provided from the participant's vested account.
Vesting - Participants are vested immediately in their contributions plus
actual earnings thereon. Vesting in the Company's contribution portion of
their accounts is based on years of continuous service. Participants vest
20 percent after two years of service and 20 percent each year thereafter.
A participant is 100 percent vested after six years of credited service.
Participant loans - Loans are permitted against a participant's
contributory account balance. Participants may borrow a minimum of $1,000
up to a maximum equal to the lesser of $50,000 or 50% of the participant's
contributory account balance. The loans are secured by the balance in the
participant's account and bear interest at rates that range from 4 percent
to 11 percent. Principal and interest are paid ratably through payroll
deductions.
Payment of benefits - A participant may elect to receive the value of the
vested interest in his or her account upon termination of service due to
death, disability or retirement. An employee who became a participant on or
after January 1, 1998, will generally receive their benefit as a lump-sum
distribution. An employee who became a participant prior to January 1,
1998, will generally receive their benefit, unless otherwise elected, as a
Qualified Joint and Survivor Annuity, if the participant is married, or as
a life annuity, if unmarried. Participants who elect not to receive the
annuity form of payment, may elect to receive a lump-sum distribution or a
distribution in substantially equal monthly, quarterly, semi-annual or
annual installments (over a term that does not extend beyond the
participant's or designated beneficiary's actuarial life expectancy).
-7-
Forfeited accounts - At December 31, 2005 and 2004, forfeited non-vested
accounts, and earnings thereon, totaled approximately $32,894 and $9,100,
respectively. These accounts may be used to pay administrative costs of the
Plan. Any such accounts not used to pay administrative costs will be
reallocated to participants in the same manner as employer contributions.
During the year ended December 31, 2005, forfeitures of non-vested accounts
totaled approximately $35,646 and accounts totaling approximately $8,795
were reallocated to participants.
Plan expenses - Expenses associated with administering the Plan are paid by
the Company.
2. Summary of Significant Accounting Polices
Basis of presentation - The accompanying financial statements have been
prepared on the accrual basis of accounting.
Use of 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 and changes therein, and disclosure of contingent assets and
liabilities. Actual results could differ from those estimates.
Investment valuation and income recognition - The Plan's investments are
stated at fair value based upon quoted market prices, except for the Plan's
benefit responsive investment contract with an insurance company, which is
valued at contract value, which approximates fair value. Participant loans
are valued at their outstanding balances, which approximate fair value.
Purchases and sales of investments are recorded on a trade-date basis.
Interest income is recognized in the period earned. Dividends are recorded
on the ex-dividend date. Gains and losses on the sales of investments are
recognized when realized, while unrealized gains and losses are recognized
daily based on fluctuations in market value. Realized and unrealized gains
and losses are netted in the financial statements.
Frequency Electronics, Inc. Common Stock Fund - The Frequency Electronics,
Inc. Common Stock Fund is a nonparticipant directed fund. All employer
matching contributions that were made prior to January 1, 1990 and
subsequent to January 1, 2001 are in the form of Frequency Electronics,
Inc. common stock. This stock is valued at the last sale price on the
American Stock Exchange on the last business day of the year. Frequency
Electronics, Inc. common stock approximated $1,825,000 (15%) and $2,150,000
(19%) of total assets at December 31, 2005 and 2004, respectively.
Information about the significant components of the change in net assets
related to the nonparticipant-directed investment during the year ended
December 31, 2005 is as follows:
Balance, January 1, 2005 $ 2,149,827
Employer Contributions Received During 2005 411,831
Net Depreciation in Fair Value of Investments (632,249)
Investment Income 35,197
Distributions (140,086)
-----------
Balance, December 31, 2005 $ 1,824,520
===========
Payment of benefits - Benefits are recorded when paid.
-8-
3. Investments
The following presents investments that represent 5 percent or more of the
Plan's net assets at December 31, 2005:
Met Life Stable Value Option - Premier Pooled
Guaranteed Investment Contract (GIC) NAV Product;
278,398 shares $ 3,075,776
Federated Capital Appreciation Fund; 78,366 shares 1,965,426
Calvert Income Fund; 41,241 shares 691,201
American Funds - Growth Fund of America; 37,201 shares 1,148,018
Met Life - American Funds Balanced; 34,569 shares 616,028
Frequency Electronics, Inc. Common Stock; 173,929 shares 1,824,520
The following presents investments that represent 5 percent or more of the
Plan's net assets at December 31, 2004:
Met Life Stable Value Option - Premier Pooled
Guaranteed Investment Contract (GIC) NAV Product;
263,081 shares $ 2,813,509
Federated Capital Appreciation Fund; 81,325 shares 2,061,594
Calvert Income Fund; 39,587 shares 672,981
American Funds - Growth Fund of America; 36,454 shares 998,100
Frequency Electronics, Inc. Common Stock; 144,769 shares 2,149,827
4. Investment Contract with Insurance Company
The Plan has entered into a benefit-responsive investment contract with
Metropolitan Life Insurance Company ("Met Life") referred to as the Met
Life Stable Value Option. Met Life maintains the contributions in a pooled
account. The account is credited with earnings on the underlying
investments and charged for participant withdrawals and administrative
expenses. The contract is included in the financial statements at contract
value as reported to the Plan by Met Life. Contract value represents
contributions made under the contract, plus earnings, less participant
withdrawals and administrative expenses. Participants may ordinarily direct
the withdrawal or transfer of all or a portion of their investment at
contract value.
There are no reserves against contract value for credit risk of the
contract issuer or otherwise. The average yield and crediting interest rate
was approximately 3.31%. The crediting interest rate is based on an
agreed-upon formula with the issuer, but cannot be less than zero. The
interest rate is reviewed on a quarterly basis for resetting. The crediting
interest rate at December 31, 2005 was 3.35%.
5. Tax Status
The Internal Revenue Service has determined and informed the Company by a
letter dated January 29, 2004, that the Plan and related trust are designed
in accordance with applicable sections of the Internal Revenue Code
("IRC").
6. Plan Termination
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 the ERISA. In the event of
Plan termination, participants will become 100 percent vested in their
accounts.
-9-
7. Parties in Interest/Related Party Transactions
The Plan's investments include shares of common stock issued by the Plan
Sponsor, Frequency Electronics, Inc. This stock is valued at the last sale
price on the American Stock Exchange on the last business day of the year.
Investment in Frequency Electronics, Inc. common stock is permitted under
the provisions of the Plan.
The Plan has entered into a benefit-responsive investment contract with
Metropolitan Life Insurance Company ("Met Life"). Met Life is the custodian
as defined by the Plan and, therefore, these transactions qualify as
party-in-interest transactions. Such transactions are permitted under the
provisions of the Plan.
During the year ended December 31, 2005, the three trustees were also
members of the Plan.
8. Cash Dividend
During calendar year 2005, the Board of Directors of Frequency Electronics,
Inc. declared semi-annual cash dividends of $.10 (ten cents) per share
payable June 1 and December 1. These dividends aggregated approximately
$35,200 in 2005.
9. Risks and Uncertainties
The Plan provides for various investment options in any combination of
stocks, bonds, mutual funds, and other investment securities. Investment
securities are exposed to various risks, such as interest rate, market and
credit risks. Due to the level of risk associated with certain investment
securities, it is at least reasonably possible that changes in the values
of investments securities will occur in the near term and that such changes
could materially affect participants' account balances and the amounts
reported in the statement of net assets available for benefits.
-10-
FREQUENCY ELECTRONICS, INC.
401(k) SAVINGS PLAN
SCHEDULE H, LINE 4i - PN 003; EIN 11-1986657; FORM 5500
SCHEDULE OF ASSETS (HELD AT END OF YEAR)
DECEMBER 31, 2005
(a) (b) (c) (d) (e)
Identity of issuer, borrower, Current
lessor or similar party Description of investment Cost Value
------- ------------------------------------- ------------------------------------------ ------------ ------------
* Met Life Stable Value Option - Guaranteed interest account with a
Premier Pooled GIC NAV Product crediting interest rate of 3.35% as of
December 31, 2005. $ 2,959,841 $ 3,075,776
Blackrock Index Equity Fund Interest in registered investment company. 178,735 193,701
American Funds - American Balanced Interest in registered investment company. 609,545 616,028
Fund
Federated Capital Appreciation Fund Interest in registered investment company. 1,860,320 1,965,426
Calvert Income Fund Interest in registered investment company. 710,149 691,201
Lord Abbett Small Cap Value Fund Interest in registered investment company. 492,188 516,265
JP Morgan Mid Cap Value Fund Interest in registered investment company. 108,419 118,995
Alger Mid Cap Growth Fund Interest in registered investment company. 238,155 254,374
American Funds - Growth Fund of Interest in registered investment company. 938,366 1,148,018
America Fund
Oppenheimer Global Fund Interest in registered investment company. 344,621 409,700
Oppenheimer Developing Markets Fund Interest in registered investment company. 425,027 481,472
Blackrock Government Income Fund Interest in registered investment company. 137,266 134,747
MFS Strategic Value Fund Interest in registered investment company. 103,286 94,959
Other Funds Interest in registered investment companies. 19,399 19,687
* Frequency Electronics, Inc. Common Common stock of Frequency Electronics, Inc.
Stock Par value $1.00. 2,041,048 1,824,520
----------- -----------
$11,166,365 $11,544,869
=========== ===========
* Participant loans Loans to plan participants. Various
maturity dates through July 2030 with
interest at prevailing commercial rates
(4.0% - 11.0%) and secured by the
participants vested account balance. - $ 391,081
========= =========
* Denotes party in interest.
-11-
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statement No.
333-40506 on Form S-8 pertaining to the Frequency Electronics, Inc. 401(k)
Savings Plan of our report dated July 14, 2006 with respect to the financial
statements and supplemental schedule of the Frequency Electronics, Inc. 401(k)
Savings Plan included in this Annual Report on Form 11-K for the year ended
December 31, 2005.
/s/HOLTZ RUBENSTEIN REMINICK, LLP
---------------------------------
HOLTZ RUBENSTEIN REMINICK, LLP
Melville, New York
August 2, 2006
-12-
Exhibit 99.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND
CHIEF FINANCIAL OFFICER OF FREQUENCY ELECTRONICS, INC.
Each of the undersigned hereby certifies, for the purposes of Section 1350 of
Chapter 63 of Title 18 of the United States Code, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, in his capacity as an officer of
Frequency Electronics, Inc. that, to his knowledge, the Annual Report for the
Frequency Electronics, Inc. 401(k) Savings Plan on Form 11-K for the year ended
December 31, 2005 fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934 and that the information contained in
such report fairly presents, in all material respects, the net assets available
for benefits and changes in net assets available for benefits of the Plan. This
written statement is being furnished to the Securities and Exchange Commission
as an exhibit to such Form 11-K.
Date: August 3, 2006
By: /s/Martin Bloch
---------------
Martin Bloch
Chief Executive Officer
Date: August 3, 2006
By: /s/Alan Miller
--------------
Alan Miller
Chief Financial Officer
-13-
Exhibit 99.2
Certification by a Trustee of the Frequency Electronics, Inc. 401(k) Savings
Plan Pursuant to Section 906 of the Sarbanes-Oxley Act
The Certification below is being submitted to the Securities and Exchange
Commission solely for the purpose of complying with Section 1350 of Chapter 63
of Title 18 of the United States Code.
In my capacity as a trustee of the Frequency Electronics, Inc. 401(k) Savings
Plan, I hereby certify that, to the best of my knowledge, Frequency Electronics,
Inc. 401(k) Savings Plan's annual report on Form 11-K for the fiscal year ended
December 31, 2005 as filed with the Securities and Exchange Commission on the
date hereof fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934 and the information contained in such annual
report fairly presents, in all material respects, the financial condition and
results of operations of the Frequency Electronics, Inc. 401(k) Savings Plan.
/s/ Robert Klomp
----------------
Robert Klomp
Trustee, Frequency Electronics, Inc.
401(k) Savings Plan
Dated: August 3, 2006