|
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)
|
10-11
|
||
|
Schedule
H, Line 4j; Schedule of Reportable Transactions
|
12
|
||
|
b)
|
EXHIBITS:
|
|
|
|
Exhibit
23.1
|
Consent
of Independent Registered Public Accounting Firm
|
13
|
|
|
Exhibit
99.1
|
Certification
of Chief Executive Officer and
|
14
|
|
|
Chief
Financial Officer
|
|
||
|
Exhibit
99.2
|
Certification
by a Trustee of the Plan
|
15
|
|
|
FREQUENCY
ELECTRONICS, INC.
|
|||
|
Registrant
|
|||
|
|
|||
|
By:
/s/ Alan L. Miller
|
|||
|
Alan
L. Miller
|
|||
|
Chief
Financial Officer and Treasurer
|
|||
|
Frequency
Electronics, Inc. 401(k) Savings Plan
|
|||
|
(Name
of Plan)
|
|||
|
|
|||
|
Date:
July 15, 2008
|
By:
|
||
|
|
|||
|
/s/Robert
Klomp
|
|||
|
Robert
Klomp, Trustee
|
|||
|
|
|||
|
/s/Markus
Hechler
|
|||
|
Markus
Hechler, Trustee
|
|||
|
|
|||
|
/s/Marvin
Meirs
|
|||
|
Marvin
Meirs, Trustee
|
|||
|
December
31,
|
|||||||
|
2007
|
2006
|
||||||
|
ASSETS:
|
|||||||
|
Cash
and Cash Equivalents
|
$
|
833
|
$
|
58,235
|
|||
|
Investments,
at Fair Value
|
14,782,104
|
13,715,479
|
|||||
|
Loans
Receivable from Participants
|
483,059
|
376,585
|
|||||
|
Contribution
Receivable - Employer
|
122,132
|
90,505
|
|||||
|
Contribution
Receivable – Participants
|
28,051
|
23,796
|
|||||
|
Other
Receivable
|
0
|
7,513
|
|||||
|
Total
Assets
|
15,416,179
|
14,272,113
|
|||||
|
LIABILITIES:
|
|||||||
|
Excess
Participant Contributions Payable
|
26,289
|
0
|
|||||
|
Total
Liabilities
|
|||||||
|
Net
Assets Available for Benefits at Fair Value
|
15,389,890
|
14,272,113
|
|||||
|
Adjustment
from Fair Value to Contract Value for
|
|||||||
|
Benefit
Responsive Investment Contract
|
66,644
|
45,225
|
|||||
|
Net
Assets Available for Benefits
|
$
|
15,456,534
|
$
|
14,317,338
|
|||
|
ADDITIONS:
|
||||
|
Additions
to net assets attributed to:
|
||||
|
Contributions:
|
||||
|
Participant
contributions
|
$
|
1,176,983
|
||
|
Rollover
contributions
|
143,159
|
|||
|
Employer
contributions
|
546,176
|
|||
|
Total
Contributions
|
1,866,318
|
|||
|
Investment
Income:
|
||||
|
Net
appreciation in fair value of investments
|
14,866
|
|||
|
Interest
|
27,527
|
|||
|
Dividends
|
236,485
|
|||
|
Net
Investment Gain
|
278,878
|
|||
|
Total
Additions
|
2,145,196
|
|||
|
DEDUCTIONS:
|
||||
|
Benefits
paid to participants
|
1,006,000
|
|||
|
NET
INCREASE
|
1,139,196
|
|||
|
NET
ASSETS AVAILABLE FOR BENEFITS, beginning of year
|
14,317,338
|
|||
|
NET
ASSETS AVAILABLE FOR BENEFITS, end of year
|
$
|
15,456,534
|
|
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”).
Plan
administration–
Effective December 1, 2006, the Plan changed its custodian and
recordkeeper from Metropolitan Life Insurance Company “Met Life” to
Principal Retirement Group “Principal”. The Plan also changed investment
options to accounts offered by Principal. Principal holds the Plan’s
investment in Frequency Electronics, Inc. common stock.
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,
2007,
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 9.5 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).
Forfeited
accounts - At
December 31, 2007 and 2006, forfeited non-vested accounts, in addition
to
the earnings and losses thereon, totaled $32,620 and $31,218,
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.
No amounts were relocated in the year due to the change in the Plan
custodian. During the year ended December 31, 2007, forfeitures of
non-vested accounts totaled $34,269.
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,
referred to as the Morley Financial Service, Inc. Principal Stable
Value
Fund, which is valued at contract 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 NASDAQ on the last business day of the year. Frequency
Electronics, Inc. common stock approximated $2,283,000 (15%) and
$2,545,000 (18%) of total assets at December 31, 2007 and 2006,
respectively.
Information
about the significant components of the change in net assets related
to
the nonparticipant-directed investment during the year ended December
31,
2007 is as follows:
|
|
Balance,
January 1, 2007
|
$
|
2,544,572
|
||
|
Employer
Contributions Received During 2007
|
514,549
|
|||
|
Net
Depreciation in Fair Value of Investments
|
(518,180
|
)
|
||
|
Investment
Income
|
23,953
|
|||
|
Distributions
|
(282,202
|
)
|
||
|
Balance,
December 31, 2007
|
$
|
2,282,692
|
|
Payment
of benefits -
Benefits are recorded when paid.
|
|
3.
|
Investments
|
|
The
following presents investments that represent 5 percent or more of
the
Plan's net assets at December 31,
2007:
|
|
Morley
Financial Services Principal Stable Value Fund; 188,977
shares
|
$
|
2,971,773
|
||
|
Principal
Global Investors Intl Emerging Mkts Adv Pref Fund; 31,861
shares
|
955,825
|
|||
|
Principal
Global Investors Diversified IntlAdv Pref Fund; 59,069
shares
|
816,924
|
|||
|
Principal
Global Investors S&P Idx AdvPr Fund; 217,052 shares
|
2,226,959
|
|||
|
Principal
Global Investors Principal Investors LifeTime 2030 Adv Pref Fund;
68,738
shares
|
940,348
|
|||
|
Capital
Research and Mgmt Co American Funds Growth Fund of America R3 Fund;
37,322
shares
|
1,251,018
|
|||
|
Frequency
Electronics, Inc. Common Stock; 236,551 shares
|
$
|
2,282,692
|
|
The
following presents investments that represent 5 percent or more of
the
Plan's net assets at December 31,
2006:
|
|
Morley
Financial Services Principal Stable Value Fund; 187,129 shares
|
$
|
2,849,274
|
||
|
Principal
Global Investors SmallCap Value AdvPr Fund; 38,816 shares
|
735,185
|
|||
|
Principal
Global Investors Diversified IntlAdv Pref Fund; 50,844 shares
|
703,683
|
|||
|
Principal
Global Investors S&P Idx AdvPr Fund; 223,400 shares
|
2,240,703
|
|||
|
Principal
Global Investors Principal Investors LifeTime 2030 Adv Pref Fund;
70,384
shares
|
956,516
|
|||
|
Capital
Research and Mgmt Co American Funds Growth Fund of America R3 Fund;
39,099
shares
|
1,268,751
|
|||
|
Frequency
Electronics, Inc. Common Stock; 212,934 shares
|
$
|
2,544,572
|
|
4.
|
Investment
Contract with Insurance Company
|
|
As
described in Financial Accounting Standards Board Staff Position,
FSP AAG
INV-1 and SOP 94-4-1, Reporting
of Fully Benefit-Responsive Investment Contracts Held by Certain
Investment Companies Subject to the AICPA Investment Company Guide
and
Defined-Contribution Health and Welfare and Pension Plans
(the
FSP),
investment
contracts held by a defined-contribution plan are required to be
reported
at fair value. However, contract value is the relevant measurement
attribute for that portion of the net assets available for benefits
of a
defined-contribution plan attributable to fully benefit-responsive
investment contracts because contract value is the amount participants
would receive if they were to initiate permitted transactions under
the
terms of the plan. As required by the FSP, the Statement of Net Assets
Available for Benefits presents the fair value of the investment
contracts
from fair value to contract value. Prior year balances have been
reclassified accordingly. The Statement of Changes in Net Assets
Available
for Benefits is prepared on a contract value basis.
Effective
November 30, 2006, the Plan obtained an investment position in the
Morley
Financial Services Principal Stable Value Fund (the “Stable Value Fund”).
The Stable Value Fund’s net assets include fully benefit-responsive
investment contracts that are accounted for on their contract value
basis.
Accordingly, the Plan accounts for its investment position in the
Stable
Value Fund using the contract value. The Plan’s investment in the Stable
Value Fund at contract value exceeded its fair value by approximately
$67,000 at December 31, 2007.
|
|
The
Plan was engaged in a benefit-responsive investment contract with
Metropolitan Life Insurance Company ("Met Life") referred to as the
Met
Life Stable Value Option in prior years. Met Life maintained the
contributions in a pooled account. This contract has been terminated
as of
November 30, 2006 as a result of the Plan’s change in
recordkeeper.
|
|
|
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.
|
|
|
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 NASDAQ on the last business day of the year. Investment
in
Frequency Electronics, Inc. common stock is permitted under the provisions
of the Plan.
|
|
|
Met
Life - The
Plan had entered into a benefit-responsive investment contract with
Metropolitan Life Insurance Company ("Met Life"). Met Life was the
custodian as defined by the Plan for January 1, 2006 through November
30,
2006 and, therefore, these transactions qualify as party-in-interest
transactions. Such transactions are permitted under the provisions
of the
Plan. This contract has been terminated as of November 30, 2006 as
a
result of the Company’s change in recordkeeper. No such contract exists
with the Plan’s new recordkeeper (Principal).
|
|
|
Principal
Financial Group -
Certain plan investments are shares of pooled separate accounts managed
by
Principal Financial Group. Principal is the custodian and record
keeper as
defined by the Plan, and, therefore, these transactions qualify as
party-in-interest transactions. Purchases and sales of these accounts
and
the underlying investments comprising these accounts are open market
transactions at fair market value. Such transactions are permitted
under
the provisions of the Plan and are exempt from the prohibition of
party-in-interest transactions under ERISA and applicable exemptions
promulgated thereunder. Fees paid by the Plan to Principal for
recordkeeping services totaled approximately $3,200 during the year
ended
December 31, 2007.
|
|
|
8.
|
Cash
Dividend
|
|
During
calendar year 2007, the Board of Directors of Frequency Electronics,
Inc.
declared semi-annual cash dividends of $0.10 (ten cents) per share
payable
June 1 and December 1. These dividends aggregated $46,171 in
2007.
|
|
|
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.
|
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
|||||||
|
Identity of issuer, borrower, lessor, or
|
Current
|
||||||||||
|
|
similar party
|
|
Description of investment
|
|
Cost
|
Value
|
|||||
|
*
|
Morley
Financial Services, Inc. Principal Stable Value Fund
|
Common
/ Collective Trust
|
$
|
2,971,773
|
|||||||
|
Principal
Global Investors Smallcap Value AdvPr Fund
|
Interest
in registered investment company.
|
|
492,118
|
||||||||
|
Principal
Global Investors Diversified IntlAdv Pref Fund
|
Interest
in registered investment company.
|
|
816,924
|
||||||||
|
Principal
Global Investors Intl Emerging Mkts AdvPr Fund
|
Interest
in registered investment company.
|
955,825
|
|||||||||
|
Principal
Global Investors S&P 500 Idx AdvPr Fund
|
Interest
in registered investment company.
|
2,226,959
|
|||||||||
|
Alliance
Bernstein LargeCap Value AdvPr Fund
|
Interest
in registered investment company.
|
171,712
|
|||||||||
|
Neuberger
Berman/Jacobs Levy MidCap Value AdvPr Fund
|
Interest
in registered investment company.
|
249,313
|
|||||||||
|
Principal
Global Investors Government & HQ BD AdvPr Fund
|
Interest
in registered investment company.
|
413,766
|
|||||||||
|
Principal
Global Investors Bond and Mtg Secs AdvPr Fund
|
Interest
in registered investment company.
|
612,053
|
|||||||||
|
Turner
Investment Partners MidCap Growth AdvPr Fund
|
Interest
in registered investment company.
|
395,038
|
|||||||||
|
Principal
Global Investors Prin Inv LifeTm 2010 AdvPr Fund
|
Interest
in registered investment company.
|
99,423
|
|||||||||
|
Principal
Global Investors Prin Inv LifeTm 2020 AdvPr Fund
|
Interest
in registered investment company.
|
245,684
|
|||||||||
|
Principal
Global Investors Prin Inv LifeTm 2030 AdvPr Fund
|
Interest
in registered investment company.
|
940,348
|
|||||||||
|
Principal
Global Investors Prin Inv LifeTm 2040 AdvPr Fund
|
Interest
in registered investment company.
|
36,397
|
|||||||||
|
Principal
Global Investors Prin Inv LifeTm 2050 AdvPr Fund
|
Interest
in registered investment company.
|
80,294
|
|||||||||
|
Capital
Research and Mgmt Co Am Fds Grth Fund of America R3 Fund
|
Interest
in registered investment companies.
|
1,251,018
|
|||||||||
|
Principal
Global Investor Prin Inv Life Tm Str Inc AdvPr Fund
|
Interest
in registered investment companies
|
84,941
|
|||||||||
|
Columbus
Circle Investors Large Cap Growth AdvPr Fund
|
Interest
in registered investment companies
|
195,962
|
|||||||||
|
Goldman
Sachs Asset Mgt Large Cap Blend I AdvPr Fund
|
Interest
in registered investment companies
|
15,557
|
|||||||||
|
Neuberger
Berman Mgmt Inc. Neub Berm Partners Adv Fund
|
Interest
in registered investment companies
|
96,803
|
|||||||||
|
Alliance
Bernstein LP Smallcap Growth I AdvPr Fund
|
Interest
in registered investment companies
|
54,940
|
|||||||||
|
Principal
Global Investors S&P 400 Idx AdvPr Fd
|
Interest
in registered investment companies
|
63,386
|
|||||||||
|
Principal
Global Investors S&P 600 Idx AdvPr Fund
|
Interest
in registered investment companies
|
29,178
|
|||||||||
|
*
|
Frequency
Electronics, Inc. Common Stock
|
Common
stock of Frequency Electronics, Inc Par value $1.00.
|
3,020,949
|
2,282,692
|
|||||||
|
$
|
14,782,104
|
||||||||||
|
*
|
Participant
loans
|
Loans
to plan participants. Various maturity dates through August 2014
with
interest at prevailing commercial rates (4.0% - 9.5%) and secured
by the
participants vested account balance.
|
$
|
-
|
$
|
483,059
|
|||||
|
*
Denotes party in interest.
|
|||||||||||
|
DESCRIPTION OF ASSET
|
Total Number
of Purchases
|
Total Number
of Sales
|
Total Value
of Purchases
|
Total Value
of Sales
|
Net Gain/(Loss)
|
|||||||||||
|
Stable
Value Fund
|
158
|
$
|
2,775,560
|
$
|
0
|
|||||||||||
|
Stable
Value Fund
|
155
|
$
|
2,747,672
|
42,285
|
||||||||||||
|
Prin
Inv Lifetm 2030 AdvPr Fund
|
123
|
418,116
|
0
|
|||||||||||||
|
Prin
Inv Lifetm 2030 AdvPr Fund
|
76
|
439,779
|
10,973
|
|||||||||||||
|
Am
Fds Grth Fd of Am R3 Fund
|
127
|
341,239
|
0
|
|||||||||||||
|
Am
Fds Grth Fd of Am R3 Fund
|
84
|
406,115
|
7,253
|
|||||||||||||
|
Midcap
Growth AdvPr Fund
|
124
|
532,249
|
0
|
|||||||||||||
|
Midcap
Growth AdvPr Fund
|
48
|
513,889
|
29,491
|
|||||||||||||
|
Diversified
Intl Adv Pref Fund
|
138
|
637,732
|
0
|
|||||||||||||
|
Diversified
Intl Adv Pref Fund
|
53
|
525,847
|
29,583
|
|||||||||||||
|
Intl
Em Mkts AdvPr Fund
|
157
|
1,632,869
|
0
|
|||||||||||||
|
Intl
Em Mkts AdvPr Fund
|
52
|
1,386,281
|
119,126
|
|||||||||||||
|
Frequency
Electronics, Inc.
|
87
|
650,429
|
0
|
|||||||||||||
|
Frequency
Electronics, Inc.
|
117
|
394,128
|
-97,428
|
|||||||||||||