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, 2009
OR
o 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
(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,
2009
CONTENTS
|
Page
|
||
|
a)
FINANCIAL STATEMENTS:
|
||
|
Report
of Independent Registered Public Accounting Firms
|
3
|
|
|
Statements
of Net Assets Available for Benefits
|
4
|
|
|
Statement
of Changes in Net Assets Available for Benefits
|
5
|
|
|
Notes
to Financial Statements
|
6 -
12
|
|
|
SUPPLEMENTAL
SCHEDULE:
|
||
|
Schedule
H, Line 4i: Schedule of Assets (Held at End of
Year)
|
13
– 14
|
|
|
Schedule
H, Line 4j; Schedule of Reportable Transactions
|
15
|
|
|
b) EXHIBITS:
|
||
|
Exhibit
23.1
|
Consent
of Independent Registered Public Accounting Firm
|
16
|
|
Exhibit
99.1
|
Certification
of Chief Executive Officer and
|
|
|
Chief
Financial Officer
|
17
|
|
|
Exhibit
99.2
|
Certification
by a Trustee of the Plan
|
18
|
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
|
|
Treasurer
and Chief Financial
Officer
|
Dated:
June 16, 2010
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:
June 16, 2010
|
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,
2009 and 2008, and the related statement of changes in net assets available for
benefits for the year ended December 31, 2009. 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. We were not
engaged to perform an audit of the Plan’s internal control over financial
reporting. Our audit includes consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Plan’s internal control over financial
reporting. Accordingly, we express no such opinion. 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, 2009 and 2008, and the changes in net assets available for benefits
for the year ended December 31, 2009 in conformity with accounting principles
generally accepted in the United States of America.
Our
audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of
assets as of December 31, 2009 and reportable transactions for
the year ended December 31, 2009 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 supplemental schedules
have been subjected to the auditing procedures applied in the audit 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.
|
/s/EISNER
LLP
|
|
EISNER
LLP
|
New York,
New York
June 16,
2010
- 4 -
FREQUENCY ELECTRONICS,
INC.
401(k) SAVINGS
PLAN
STATEMENTS OF NET ASSETS
AVAILABLE FOR BENEFITS
|
December 31,
|
||||||||
|
2009
|
2008
|
|||||||
|
ASSETS:
|
||||||||
|
Cash
|
$ | 833 | $ | 833 | ||||
|
Investments,
at Fair Value
|
13,100,601 | 9,952,358 | ||||||
|
Loans
Receivable from Participants
|
491,407 | 565,492 | ||||||
|
Contribution
Receivable – Participant
|
19,620 | 25,837 | ||||||
|
Total
Assets
|
13,612,461 | 10,544,520 | ||||||
|
LIABILITIES:
|
||||||||
|
Excess
Participant Contributions Payable
|
19,612 | 0 | ||||||
|
Net
Assets Available for Benefits at Fair Value
|
13,592,849 | 10,544,520 | ||||||
|
Adjustment
from Fair Value to Contract Value for Fully Benefit-Responsive Investment
Contracts
|
(26,495 | ) | 171,166 | |||||
|
Net
Assets Available for Benefits
|
$ | 13,566,354 | $ | 10,715,686 | ||||
|
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,
2009
|
ADDITIONS
(REDUCTIONS):
|
||||
|
Additions
(Reductions) to net assets attributed to:
|
||||
|
Contributions:
|
||||
|
Participant
contributions
|
$ | 1,028,696 | ||
|
Less
accrued excess contributions
|
(19,612 | ) | ||
|
Employer
contributions
|
303,833 | |||
|
Total
Contributions
|
1,312,917 | |||
|
Investment
Income (Loss):
|
||||
|
Net
appreciation in fair value of investments
|
2,397,789 | |||
|
Decrease
in Contract Value for Fully
|
||||
|
Benefit-Responsive
Investment Contract
|
(197,661 | ) | ||
|
Interest
|
35,894 | |||
|
Dividends
|
109,922 | |||
|
Net
Investment Income
|
2,345,944 | |||
|
Net
Additions
|
3,658,861 | |||
|
DEDUCTIONS:
|
||||
|
Benefits
paid to participants
|
806,377 | |||
|
Administrative
expenses
|
1,816 | |||
|
Total
Deductions
|
808,193 | |||
|
NET
INCREASE
|
2,850,668 | |||
|
NET
ASSETS AVAILABLE FOR BENEFITS, beginning of year
|
10,715,686 | |||
|
NET
ASSETS AVAILABLE FOR BENEFITS, end of year
|
$ | 13,566,354 | ||
|
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, 2009
|
|
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(a) 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 – The custodian and record keeper of the Plan is Principal
Retirement Group “Principal”. Investment options for participants in
the Plan are accounts offered by Principal. Principal holds the
Plan’s investment in Frequency Electronics, Inc. common stock.
Contributions
- - Each year, participants may contribute a portion of their pretax annual
compensation, as defined by the Plan, subject to certain limitations imposed by
the Internal Revenue Code (the “Code”). Participants who have
attained age 50 before the end of the Plan year are eligible to make catch-up
contributions up to $5,500 for 2009 and $5,000 for 2008. Participants
may also rollover 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, 2009, Company contributions were made in the form of Company
stock. Through June 2009, 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 $250 on behalf of each eligible participant, regardless of the
participant’s contribution, if any. The maximum Company contribution
was $2,750 per participant up to June 30, 2009. After that date, the
Company’s contribution was reduced whereby the $250 Company contribution was
eliminated and the maximum annual matching contribution became
$1,250.
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 10.25
percent. Principal and interest are paid ratably through payroll
deductions.
-7-
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 - During the year ended December 31, 2009, forfeitures of
non-vested accounts totaled $19,094 and forfeited non-vested accounts had
investment earnings of $17,204 including $9,750 related to the accumulated
forfeited balance at January 1, 2009. At December 31, 2009 and 2008,
forfeited non-vested accounts, including earnings and losses thereon, totaled
$26,548 and $37,380, 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 2009, the plan reallocated to
participants an aggregate of $47,130 from prior year forfeitures.
Plan expenses -
Expenses associated with administering the Plan are generally paid by the
Company. Certain participant-specific expenses may be paid by the
Plan or assessed against such Participant as provided in the service and expense
agreement.
|
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 the Plan administrator to make estimates
and assumptions that affect the reported amounts of net assets available for
benefits at the date of the financial statements and the changes in net assets
available for benefits during the reporting period and, when applicable,
disclosure of contingent assets and liabilities at the date of the financial
statements. 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 Union Bond &
Trust Company Principal Stable Value Fund (“Stable Value Fund”) which includes
fully benefit-responsive investment contracts valued at contract
value. Participant loans are valued at cost plus accrued interest,
which approximates 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 $1,905,000 (14%) and $935,000 (9%) of net assets available
for benefits at December 31, 2009 and 2008, respectively.
-8-
Information
about the significant components of the change in net assets related to the
shares of common stock of the Company (nonparticipant-directed investment)
during the year ended December 31, 2009 is as follows:
|
Balance,
January 1, 2009
|
$ | 934,534 | ||
|
Employer
Contributions Received During 2009
|
303,833 | |||
|
Net
Appreciation in Fair Value of Investments
|
741,642 | |||
|
Distributions,
net
|
(75,038 | ) | ||
|
Balance,
December 31, 2009
|
$ | 1,904,971 |
Payment of
benefits - Benefits are recorded when paid.
New
Accounting Pronouncements In June 2009, the Financial
Accounting Standards Board (“FASB”) issued guidance under Accounting Standards
Codification (“ASC”) 105 “Generally Accepted Accounting Principles which became
effective for financial statements issued for periods ending after September 15,
2009. ASC 105-10 establishes the Accounting Standards Codification as
the source of authoritative generally accepted accounting principles in the
United States of America (“GAAP”) recognized by the FASB to be applied by
non-governmental entities in the preparation of financial statements. Rules and
interpretive releases of the Securities and Exchange Commission (“SEC”) under
authority of federal securities laws are also sources of authoritative GAAP for
SEC registrants. The FASB will no longer issue standards in the form of
Statements, FASB Staff Positions, or Emerging Issues Task Force Abstracts;
instead the FASB will issue Accounting Standards Updates (“ASU”). The
Codification did not affect the accounting policies followed by the Plan or the
existing GAAP.
In May
2009, the FASB amended ASC 855, “Subsequent Events” (“ASC855”), effective for
reporting periods ending after June 15, 2009, to establish general standards of
accounting for and disclosures of events that occur after the balance sheet date
but before financial statements are issued or are available to be
issued. The Plan’s management evaluated subsequent events through
June 16, 2010, the date on
which the financial statements were issued and no additional disclosures were
required.
In
January 2010, the FASB issued new accounting guidance for Fair Value
Measurements and Disclosures and Improving Disclosures about Fair Value
Measurements. A reporting entity should disclose separately the
amounts of significant transfers in and out of Level 1 and Level 2 and describe
the reasons for the transfers, disclosure on a gross basis of purchases, sales,
issuances and settlements within Level 3, and disclosures by class of assets and
liabilities. The new disclosures and clarifications of existing
disclosures are effective for financial statements issued interim or annual
financial reporting periods ending after December 15, 2009 with an exception for
the reconciliation disclosures for Level 3, which are effective for fiscal years
interim or annual financial reporting periods ending after December 15,
2010. The adoption of the new accounting standards is not
expected to have a material impact on the Plan’s financial statements or
disclosures.
|
3.
|
Investments
|
The
following presents investments that represent 5 percent or more of the Plan's
net assets at December 31, 2009:
|
Union
Bond & Trust Company Principal Stable Value Fund; 231,252
share
|
$ | 3,947,575 | ||
|
Principal
Global Investors Large Cap S&P 500 Index R3 Fund; 247,560
shares
|
$ | 1,928,490 | ||
|
Capital
Research and Management Co Growth Fund of America R3 Fund; 30,049
shares
|
$ | 809,220 | ||
|
Principal
Global Investors Bond & Mortgage Securities R3 Fund, 77,597
shares
|
$ | 745,702 | ||
|
Principal
Management Lifetime 2030 R3 Fund, 72,721 shares
|
$ | 741,755 | ||
|
Frequency
Electronics, Inc. Common Stock; 370,617 shares
|
$ | 1,904,971 |
- 9
- -
The
following presents investments that represent 5 percent or more of the Plan's
net assets at December 31, 2008:
|
Union
Bond & Trust Company Principal Stable Value Fund; 220,144
shares
|
$ | 3,495,117 | ||
|
Principal
Global Investors Large Cap S&P 500 Index R3 Fund; 250,706
shares
|
$ | 1,576,940 | ||
|
Capital
Research and Management Co Growth Fund of America R3 Fund; 31,978
shares
|
$ | 645,957 | ||
|
Frequency
Electronics, Inc. Common Stock; 323,760 shares
|
$ | 934,534 |
|
4.
|
Fair
Value Measurements
|
Effective
January 1, 2008, the Plan adopted accounting guidance under ASC 820 which
establishes a framework for measuring fair value. That framework
provides a fair value hierarchy that prioritizes the inputs to valuation
techniques used to measure fair value. The hierarchy gives the
highest priority to unadjusted quoted prices in active markets for identical
assets or liabilities (level 1 measurements) and the lowest priority to
unobservable inputs (level 3 measurements). The three levels of the
fair value hierarchy under ASC 820 are described below:
|
Level
1
|
Inputs
to the valuation methodology are unadjusted quoted prices for identical
assets or liabilities in active markets that the Plan has the ability to
access.
|
|
Level
2
|
Inputs
to the valuation methodology
include:
|
|
|
-
|
Quoted
prices for similar assets or liabilities in active
markets;
|
|
|
-
|
Quoted
prices for identical or similar assets or liabilities in inactive
markets;
|
|
|
-
|
Inputs
other than quoted prices that are observable for the asset or
liability;
|
|
|
-
|
Inputs
that are derived principally from or corroborated by observable market
data by correlation or other means.
|
|
Level
3
|
Inputs
to the valuation methodology are unobservable and significant to the fair
value measurement.
|
The
asset’s or liability’s fair value measurement level within the fair value
hierarchy is based on the lowest level of any input that is significant to the
fair value measurement. Valuation techniques used need to maximize
the use of observable inputs and minimize the use of unobservable
inputs.
Following
is a description of the valuation methodologies used for assets measured at fair
value. There have been no changes in the methodologies used at
December 31, 2009 and 2008.
Frequency Electronics, Inc. Common
Stock: Valued at the closing price reported on the NASDAQ
Global Market on which the securities are traded.
Mutual
funds: Valued at quoted market prices as reported on the
active market on which the individual funds are traded.
Participant
loans: Valued at cost plus accrued interest which approximates
fair value.
Stable Value
Fund: Fair value is determined by measuring the market value
of its underlying investments. The fund contains synthetic investment
contracts comprised of both underlying investment and contractual components
which have observable level 1 and level 2 pricing inputs, including quoted
prices for similar assets in active or non-active markets.
The
methods described above may produce a fair value calculation that may not be
indicative of net realizable value or reflective of future fair
values. Furthermore, while the Plan believes its valuation methods
are appropriate and consistent with other market participants, the use of
different methodologies or assumptions to determine the fair value of certain
financial instruments could result in a different fair value measurement at the
reporting date.
- 10 -
The
following table sets forth by level, within the fair value hierarchy, the Plan’s
assets at fair value at December 31, 2009:
|
Assets at Fair Value as of December 31,
2009
|
||||||||||||||||
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
|
Mutual
Funds
|
$ | 7,248,055 | $ | 7,248,055 | ||||||||||||
|
Frequency
Electronics, Inc.
|
||||||||||||||||
|
Common
Stock
|
1,904,971 | 1,904,971 | ||||||||||||||
|
Stable
Value Fund
|
$ | 3,947,575 | 3,947,575 | |||||||||||||
|
Investments,
at Fair Value
|
9,153,026 | 3,947,575 | - | 13,100,601 | ||||||||||||
|
Participant
Loans
|
$ | 491,407 | 491,407 | |||||||||||||
|
Assets
at Fair Value
|
$ | 9,153,026 | $ | 3,947,575 | $ | 491,407 | $ | 13,592,008 | ||||||||
The
following table sets forth by level, within the fair value hierarchy, the Plan’s
assets at fair value at December 31, 2008:
|
Assets at Fair Value as of December 31,
2008
|
||||||||||||||||
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
|
Mutual
Funds
|
$ | 5,522,707 | $ | 5,522,707 | ||||||||||||
|
Frequency
Electronics, Inc.
|
||||||||||||||||
|
Common
Stock
|
934,534 | 934,534 | ||||||||||||||
|
Stable
Value Fund
|
$ | 3,495,117 | 3,495,117 | |||||||||||||
|
Investments,
at Fair Value
|
6,457,241 | 3,495,117 | - | 9,952,358 | ||||||||||||
|
Participant
Loans
|
$ | 565,492 | 565,492 | |||||||||||||
|
Assets
at Fair Value
|
$ | 6,457,241 | $ | 3,495,117 | $ | 565,492 | $ | 10,517,850 | ||||||||
Level 3
Changes
The
change in fair value of Participant Loans (level 3 assets) is due solely to
issuance of new loans, repayments less accrued interest and deemed distributions
to participants who were terminated during the year prior to repayment of their
loan. The Participant Loans did not record any gains or losses,
whether realized or unrealized. The components of changes in loan
balances for the years ended December 31, 2009 and 2008 are as
follows:
|
2009
|
2008
|
|||||||
|
Beginning
balance, January 1
|
$ | 565,492 | $ | 483,059 | ||||
|
New
loans
|
178,253 | 262,105 | ||||||
|
Repayment
of principal
|
(194,924 | ) | (167,767 | ) | ||||
|
Deemed
distributions
|
(57,414 | ) | (11,905 | ) | ||||
|
Ending
balance, December 31
|
$ | 491,407 | $ | 565,492 | ||||
5. Investment
Contract with Insurance Company
Accounting
guidance provided in ASC 962, formerly known as 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 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.
- 11 -
The
Stable Value Fund’s net assets include Guaranteed Investment Contracts (GIC)
which are fully benefit-responsive and are accounted for on their contract value
basis. These contracts include both conventional and synthetic
GICs. Conventional GICS are issued by insurance companies and are
primarily non-participating. Synthetic investment contracts or wrap
contracts, issued by insurance companies or banks, are primarily participating
and do not absorb any loss for credit defaults in an underlying
portfolio. Market value events may limit the ability of the Stable
Value Fund to transact at contract value with the issues. As required
by ASC 962, the Statement of Net Assets Available for Benefits presents the fair
value of the Stable Value Fund with an adjustment from fair value to contract
value. The Statement of Changes in Net Assets Available for Benefits
is prepared on a contract value basis. At December 31, 2009, the
Plan’s investment in the Stable Value Fund at fair value exceeded the contract
value by approximately $26,000. At December 31, 2008 the Stable Value
Fund contract value exceeded its fair value by approximately $171,000. The
average yield of the Stable Value Fund, based on actual earnings were 1.81% and
3.54%, respectively, for the years ended December 31, 2009 and
2008. For the same periods, the yield based on interest rates
credited to Participants were 1.80% and 3.58%, respectively.
6. Tax
Status
The Internal Revenue Service has
determined and informed the Company by a letter dated January 9, 2009, that the
Plan and related trust are designed in accordance with applicable sections of
the Code. This new determination letter was obtained as a result of
Plan amendments which were adopted in 2007 to conform the Plan to recent
legislative changes.
7. 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 employer contributions.
8. Parties
in Interest/Related Party Transactions
The Plan's investments include shares of
common stock issued by the Plan Sponsor, Frequency Electronics,
Inc. Investment in Frequency Electronics, Inc. common stock is
permitted under the provisions of the Plan.
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.
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.
- 12 -
The
value, liquidity and related income of the securities in which the Plan invests
are sensitive to changes in economic conditions, including delinquencies or
defaults, or both, and may be adversely affected by shifts in the market’s
perception of the issues and changes in interest rates.
10. Excess
Contribution Payable
For the
year ended December 31, 2009, the Plan did not meet the test for highly
compensated employees under IRC Sections 401(k) and 401(m). The
excess contribution in the amount of $19,612 for the year ended
December 31, 2009 was returned to the participants in February
2010.
11. Noncompliance
with Plan Terms
For the
year ended December 31, 2009, the Plan was not in compliance with certain
participant contribution requirements per the Plan document, which resulted in
incorrect withholding of contributions. The Plan Sponsor is in the
process of correcting this error.
12. Reconciliation
to Form 5500
The differences between the information
reported in the financial statements and the information reported in the Form
5500 arise primarily from the adjustment of investment contracts from fair value
to contract value in accordance with the FSP.
The
following is a reconciliation of the changes in net assets available for
benefits during the year ended December 31, 2009:
|
Changes
in Net Assets Available for Benefits per Form 5500
|
$ | 3,067,941 | ||
|
Excess
Participant Contribution, accrued
|
(19,612 | ) | ||
|
Decrease
in Contract Value Adjustment,
|
(197,661 | ) | ||
|
Changes
in Net Assets Available for Benefits per financial
statements
|
$ | 2,850,668 |
The
following is a reconciliation of net assets available for benefits at December
31, 2009 and 2008:
|
2009
|
2008
|
|||||||
|
Net
Assets per Form 5500
|
$ | 13,612,461 | $ | 10,544,520 | ||||
|
Contract
Value Adjustment, current year
|
(26,495 | ) | 171,166 | |||||
|
Excess
Participant Contribution, accrued
|
(19,612 | ) | - | |||||
|
Net
Assets Available for Benefits per financial statements
|
$ | 13,566,354 | $ | 10,715,686 | ||||
- 13 -
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,
2009
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
|||||||
|
Identity
of issuer, borrower, lessor, or
|
Current
|
||||||||||
|
similar party
|
Description of investment
|
Cost
|
Value
|
||||||||
|
*
|
Union
Bond & Trust Company Principal Stable Value Fund
|
Common
/ Collective Trust
|
$ | 3,947,575 | |||||||
|
*
|
Principal
Global Investors Smallcap Value R3 Fund
|
Interest
in registered investment company.
|
357,391 | ||||||||
|
*
|
Principal
Global Investors Diversified International R3 Fund
|
Interest
in registered investment company.
|
423,147 | ||||||||
|
*
|
Principal
Global Investors International Emerging Markets R3 Fund
|
Interest
in registered investment company.
|
438,888 | ||||||||
|
*
|
Principal
Global Investors LargeCap S&P 500 Index R3 Fund
|
Interest
in registered investment company.
|
1,928,490 | ||||||||
|
Allianz
NFJ Dividend Value Fund
|
Interest
in registered investment company.
|
139,186 | |||||||||
|
Columbia
Management Advisors MidCap Value A Fund
|
Interest
in registered investment company.
|
207,645 | |||||||||
|
*
|
Edge
Asset Management Government & HQ Bond R3 Fund
|
Interest
in registered investment company.
|
381,406 | ||||||||
|
*
|
Principal
Global Investors Bond and Mortgage Securities R3 Fund
|
Interest
in registered investment company.
|
745,702 | ||||||||
| , | |||||||||||
|
Turner
Investment Partners MidCap Growth III R3 Fund
|
Interest
in registered investment company.
|
221,413 | |||||||||
|
*
|
Principal
Global Investors LifeTime 2010 R3 Fund
|
Interest
in registered investment company.
|
74,419 | ||||||||
|
*
|
Principal
Global Investors LifeTime 2020 R3 Fund
|
Interest
in registered investment company.
|
310,939 | ||||||||
|
*
|
Principal
Global Investors LifeTime 2030 R3 Fund
|
Interest
in registered investment company.
|
741,755 | ||||||||
|
*
|
Principal
Global Investors LifeTime 2040 R3 Fund
|
Interest
in registered investment company.
|
55,291 | ||||||||
|
*
|
Principal
Global Investors LifeTime 2050 R3 Fund
|
Interest
in registered investment company.
|
104,049 | ||||||||
|
Capital
Research and Mgmt Growth Fund of America R3 Fund
|
Interest
in registered investment companies.
|
809,220 | |||||||||
- 14 -
|
*
|
Principal
Global Investor Life Time Strategic Income R3 Fund
|
Interest
in registered investment companies
|
51,724 | ||||||||
|
Columbus
Circle Investors Large Cap Growth AdvPr Fund
|
Interest
in registered investment companies
|
23,937 | |||||||||
|
T.
Rowe Price LargeCap Blend II R3 Fund
|
Interest
in registered investment companies
|
12,802 | |||||||||
|
Neuberger
Berman Mgmt Inc. Partners Advisory Fund
|
Interest
in registered investment companies
|
127,632 | |||||||||
|
Alliance
Bernstein LP Smallcap Growth I R3 Fund
|
Interest
in registered investment companies
|
31,804 | |||||||||
|
*
|
Principal
Global Investors MidCap S&P 400 Index R3 Fund
|
Interest
in registered investment companies
|
44,479 | ||||||||
|
*
|
Principal
Global Investors SmallCap S&P 600 Index R3 Fund
|
Interest
in registered investment companies
|
16,736 | ||||||||
|
*
|
Frequency
Electronics, Inc. Common Stock
|
Common
stock of Frequency Electronics, Inc Par value $1.00.
|
$ |
3,039,439
|
1,904,971 | ||||||
| $ | 13,100,601 | ||||||||||
|
*
|
Participant
loans
|
Loans
to plan participants. Various maturity dates through March 2019
with interest at prevailing commercial rates (4.0% -10.25%) and secured by
the participants vested account balance.
|
$ |
-
|
$ | 491,407 | |||||
| * Denotes party in interest. |
- 15 -
FREQUENCY ELECTRONICS,
INC.
401(k) SAVINGS
PLAN
SCHEDULE H, LINE 4j – PN
003: EIN 11-1986657; FORM 5500
SCHEDULE OF REPORTABLE
TRANSACTIONS
DECEMBER 31,
2009
|
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
|
164 | $ | 1,455,464 | $ | 0 | |||||||||||||||
|
Stable
Value Fund
|
143 | $ | 1,271,262 | 70,594 | ||||||||||||||||
|
Intl
Emerg Mkts AdvPr Fund
|
133 | 411,891 | 0 | |||||||||||||||||
|
Intl
Emerg Mkts AdvPr Fund
|
49 | 473,535 | (186,861 | ) | ||||||||||||||||
|
Frequency
Electronics, Inc.
|
84 | 414,517 | 0 | |||||||||||||||||
|
Frequency
Electronics, Inc.
|
95 | 226,416 | 40,693 | |||||||||||||||||
Exhibit
23.1a
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 of Frequency Electronics, Inc. of our report dated June
16, 2010 relating to our audit of the financial statements and supplemental
schedules of the Frequency Electronics, Inc. 401(k) Savings Plan included in
this Annual Report on Form 11-K for the year ended December 31,
2009.
|
/s/EISNER
LLP
|
||
|
EISNER
LLP
|
New York,
New York
June 16,
2010
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, 2009 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:
June 16, 2010
|
By:
/s/Martin Bloch
|
|
|
Martin
Bloch
|
|
|
Chief
Executive Officer
|
|
Date:
June 16, 2010
|
|
|
By:
/s/Alan Miller
|
|
|
Alan
Miller
|
|
|
Treasurer
and Chief Financial Officer
|
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, 2009 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:
June 16, 2010