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, 2001
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. CASH OR DEFERRAL PROFIT SHARING PLAN AND TRUST
(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
FINANCIAL STATEMENTS AND EXHIBIT
(a) FINANCIAL STATEMENTS: Page No.
Independent accountants' report 4
Statements of net assets available for benefits 5
Statement of changes in net assets available for plan benefits 6
Notes to financial statements 7-12
SUPPLEMENTAL SCHEDULE:
Schedule of assets held (at year end) 13-14
(b) EXHIBIT
Exhibit 23.1 - Independent Auditors' Consent 15
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: July 15, 2002
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. Cash or Deferral Profit Sharing Plan
(Name of Plan)
Date: July 15, 2002 By:
/s/Robert Klomp
---------------------
Robert Klomp, Trustee
/s/Markus Hechler
-----------------------
Markus Hechler, Trustee
/s/Marvin Meirs
---------------------
Marvin Meirs, Trustee
Independent Accountants Report
To the Trustees of
Frequency Electronics, Inc.
Cash or Deferral Profit Sharing
Plan and Trust:
We have audited the accompanying statements of net assets available for benefits
of Frequency Electronics, Inc. Cash or Deferral Profit Sharing Plan and Trust
(the "Plan") as of December 31, 2001 and 2000, and the related statement of
changes in net assets available for plan benefits for the year ended December
31, 2001. 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 auditing standards generally accepted
in the United States of America. 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, 2001 and 2000 and the changes in net assets available for benefits
for the year ended December 31, 2001, 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 schedule of Assets Held
(at year end) is presented for purposes 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.
HOLTZ RUBENSTEIN & CO., LLP
Melville, New York
June 25, 2002
FREQUENCY ELECTRONICS, INC.
CASH OR DEFERRAL PROFIT SHARING PLAN AND TRUST
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
December 31,
----------------------
2001 2000
--------------- ----------
ASSETS:
Cash and cash equivalents $ 47,572 $ 1,643
Investments, at fair value 6,967,001 6,769,427
Loans receivable from participants 225,565 225,482
Contribution receivable - employer 94,256 75,630
Contribution receivable - participants 25,739 -
--------------- ---------------
Net assets available for benefits $ 7,360,133 $ 7,072,182
=============== ===============
The accompanying notes are an integral part of the financial statements
FREQUENCY ELECTRONICS, INC.
CASH OR DEFERRAL PROFIT SHARING PLAN AND TRUST
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
YEAR ENDED DECEMBER 31, 2001
ADDITIONS TO NET ASSETS ATTRIBUTED TO:
Participant contributions $ 726,352
Net losses from investment activity (816,830)
Cash dividend on FEI stock 4,679
Interest on participant loans 20,388
Employer contributions 396,315
---------------
Total additions 330,904
---------------
DEDUCTIONS:
Distributions to participants 42,953
---------------
NET INCREASE 287,951
NET ASSETS AVAILABLE FOR PLAN BENEFITS, beginning of year 7,072,182
---------------
NET ASSETS AVAILABLE FOR PLAN BENEFITS, end of year $ 7,360,133
===============
The accompanying notes are an integral part of the financial statements
FREQUENCY ELECTRONICS, INC.
CASH OR DEFERRAL PROFIT SHARING PLAN AND TRUST
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001 AND 2000
1. Plan Description:
The following brief description of The Frequency Electronics, Inc. Cash or
Deferral Profit Sharing Plan and Trust (the "Plan") is provided for general
information purposes only. Participants should refer to the Plan agreement for
more complete information. The Plan, adopted on January 1, 1985, is a defined
contribution savings plan qualified under Section 401(k) of the Internal Revenue
Code. Employees are eligible for membership in the Plan after completing six
months of service.
All expenses of administering the Plan are paid by Frequency Electronics, Inc.
(the "Company").
Contributions:
-------------
Employee
Plan participants may contribute a maximum of 25% and 10% of compensation, as
defined in the plan agreement, as employee salary savings contributions and
voluntary deductible contributions, respectively, (collectively, "Savings
Contributions"). Total employee salary reduction contributions are limited to
the maximum deductible of $11,000 and $10,500 in 2001 and 2000, respectively,
under the Internal Revenue Code. Savings contributions are immediately fully
vested.
Each participant's account is credited with the participant's contribution
allocated as requested. 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 amount that can be provided
solely from the participant's account.
Employee contributions are to be transmitted to the Plan within fifteen business
days after the end of the month in which the contributions are received by the
employer.
Employer
During the period January 1, 1990 through December 31, 1999, the Company
suspended its matching contribution. In 2000 the Company's Board of Directors
approved a benefit policy under the Plan, effective January 1, 2000, wherein the
Company will make a matching contribution in Company stock. This matching
contribution is limited to 3% of the employee's earnings, to a maximum of
$2,500. In addition, every employee will receive an annual contribution of $500,
regardless of their own contribution.
The maximum Company contribution is $3,000 per employee. Employees are eligible
for both contributions after six months of employment. All contributions by the
Company will be subject to the current vesting schedule.
1. Plan Description: (Cont'd)
----------------
Participant loans
Loans are permitted against the total vested accrued benefit of a participant.
The amount of the loan cannot be less than $500 or exceed 50% of the
participant's contributory account balance.
An outstanding loan is repayable, with interest at prevailing commercial rates,
in full at any time or in monthly installments by means of a payroll deduction
over a term not to exceed five years.
2. Summary of Significant Accounting Polices:
Basis of presentation
The accompanying financial statements have been prepared on the accrual basis of
accounting and are presented in conformity with generally accepted accounting
principles, which require management to make significant estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
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. Due to the
level of risk associated with certain investment securities and the level of
uncertainty related to changes in the value of investment securities, it is at
least reasonably possible that changes in risk in the near term would materially
affect participant's account balances and the amounts reported in the statements
of net assets available for plan benefits and the statement of changes in net
assets available for plan benefits.
Investments
Contributions to the Plan are directed by the participants in any one or more of
the investment funds available to them as of December 31, 2001. The available
investment funds are as follows:
MFS High Income Fund
The fund's investment objective is to provide high current income by investing
primarily in a professionally managed, diversified portfolio of fixed income
securities, some of which may involve equity features.
MFS Total Return Fund
The primary investment objective of the fund is to obtain above-average income
consistent with prudent employment of capital. The fund's secondary objective is
to take advantage of opportunities for growth of capital and income.
2. Summary of Significant Accounting Polices: (Cont'd)
-----------------------------------------
MFS Capital Opportunities Fund
The fund's investment objective is capital appreciation. The fund invests, under
normal market conditions, at least 65% of its total assets in common stocks and
related securities, such as preferred stocks, convertible securities and
depositary receipts.
MFS Massachusetts Investors Trust
The fund's investment objective is reasonable current income and long-term
growth of capital and income. The fund invests, under normal market conditions,
at least 65% of its total assets in common stocks and related securities, such
as preferred stocks, convertible securities and depositary receipts.
MFS Emerging Growth Fund
The fund's investment objective is long-term growth of capital. The fund
invests, under normal market conditions, at least 65% of its total assets in
common stocks and related securities, such as preferred stocks, convertible
securities and depositary receipts for those securities, of emerging growth
companies.
MFS New Discovery Fund
The fund's investment objective is capital appreciation. The fund invests, under
normal market conditions, at least 65% of its total assets in companies that MFS
believes to offer superior prospects for growth.
MFS Global Equity Fund
The fund's investment objective is to seek capital appreciation. The fund
invests, under normal market conditions, at least 65% of its total assets in
common stocks and equity-related securities, such as preferred stock,
convertible securities and depositary receipts, of U.S. and foreign (including
emerging market) issuers.
MFS Massachusetts Investors Growth Stock Fund
The fund's investment objective is to provide long-term growth of capital and
future income rather than current income. The fund invests its assets, except
for working cash balances, in the common stocks of securities convertible into
common stocks of companies which MFS believes offer better than average
prospects for long-term growth.
MFS Research Fund
The fund's investment objective is to provide long-term growth of capital and
future income. The fund's policy is to invest a substantial proportion of its
assets in the common stocks or securities convertible into common stocks of
companies believed to possess better than average prospects for long-term
growth. A smaller portion of the assets may be invested in bonds, short-term
obligations, preferred stocks or common stocks whose principal characteristic is
income production rather than growth. Such securities may also offer
opportunities for growth of capital as well as income.
2. Summary of Significant Accounting Polices: (Cont'd)
-----------------------------------------
MFS Mid Cap Growth Fund
The fund's investment objective is long-term growth of capital. The fund, under
normal market conditions, invests at least 65% of its total assets in equity
securities of companies with medium market capitalization that are believed to
have above average growth potential.
MFS Bond Fund
The fund's investment objective is to seek as high a level of current income as
is believed to be consistent with prudent investment risk. As a secondary
objective, the fund strives to protect shareholders' capital. The fund invests,
under normal market conditions, at least 65% of its assets in investment-grade
bonds, including U.S. government securities and high-grade corporate debt. The
fund may invest up to 35% of its total assets in foreign securities including up
to 10% in non-dollar denominated securities. The fund may invest up to 20% of
its assets in high-yield securities.
MFS Utilities Fund
The fund's investment objective is to seek capital growth and current income.
The fund will invest a minimum of 65% but up to 100% of its assets in utility
securities, both stocks and bonds. The fund may also invest up to 35% of its
total assets in foreign securities.
MFS Fixed Fund
The fund's investment objective is to seek current income and preservation of
principal. The fund is an open-end collective investment trust that invests in a
diversified pool of high quality stable value contracts, including guaranteed
investment contracts, bank investment contracts, fixed-income investment
contracts, and other fixed-income securities, including U.S. government
securities.
In addition to the investments identified above, the Plan also maintains a
participant loan account in the amounts of $225,565 and $225,482 as of December
31, 2001 and 2000, respectively. Interest rates on the loans range from 6.75% to
10.5%.
Frequency Electronics, Inc. Common Stock Fund
All employer matching contributions that were made prior to January 1, 1990 and
subsequent to January 1, 2000 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. Common stock approximated
$836,000 (11%) and $575,000 (8%) of investments at December 31, 2001 and 2000,
respectively. Net investment (loss) earnings from investing activities and
participant distributions from the Frequency Electronics, Inc. Common Stock Fund
in 2001 and 2000 approximated ($89,802) and $109,300, respectively.
Net earnings (losses) from investment activity includes dividend and interest
income, as well as realized and unrealized gains and losses from security
transactions.
Revenue recognition
Contribution revenue is recognized when committed for payment.
Benefit payments
Benefits are recorded when paid.
3. Vesting Provisions and Benefit Payments:
Participants become fully vested in Company contributions upon attainment of age
65, early retirement at age 59-1/2, death or according to the number of years of
service with the Company as follows:
Years of Service Vested Amount
Less than 2 0%
2 years 20%
3 years 40%
4 years 60%
5 years 80%
6 years and above 100%
On termination of active service, as defined in the Plan agreement, a
participant may elect to receive vested benefits in either a lump sum
distribution, in equal installments (over a term not to exceed the lesser of
fifteen years or the participant's actuarial life expectancy, for fully vested
participants only) or various forms of annuity contracts purchased from an
insurance company. Lump sum distributions will be made in cash. The portion of
the Company contribution not vested will be forfeited and allocated to the
remaining plan participants.
Hardship withdrawals by plan participants may be made upon written request to,
and approval of, the Plan administrator. If approved, the distribution is
limited to the participant's contribution. Earnings on the participant's
contribution and the employer contributions can not be withdrawn.
4. Tax Status:
The Plan is qualified under Section 401 (a) of the Internal Revenue code, and
therefore, exempt from federal income taxes under Section 501 (a) of the Code.
5. Plan Amendment or Termination:
The Company reserves the right to amend or terminate the Plan at any time by
delivering written notice of such termination or amendment to the trustee. While
the Company has not expressed any intent to discontinue the Plan, it is free to
do so at any time, subject to penalties set forth in the Employee Retirement
Income Security Act of 1974. In the event of termination of the Plan, the Plan
provides for the net assets of the Plan, reduced by any payment of expenses
properly chargeable against the trust, to be distributed to the participants and
beneficiaries of the Plan.
6. Credit Risk:
The Company manages the Plan's credit risk by offering participants diversified
investment options.
7. Parties in Interest/Related Party Transactions:
For the year ended December 31, 2001, the three trustees were also members of
the Plan.
8. Contribution Receivable - Participants:
Contributions by participants for December 2001 were not received by the
respective funds until January 2002. Pursuant to accrual accounting a receivable
of $25,739 was recorded for the December 2001 contributions.
9. Investment:
The Plan's investments are stated at fair value, measured at quoted market
prices in an active market. The following presents investments that represent 5%
or more of the Plan's net assets.
December 31,
-----------------------
2001 2000
--------------- ----------
MFS Emerging Growth Fund, 18,726 and
15,897 shares, respectively $ 622,083 $ 711,859
MFS Massachusetts Investors Trust,
82,819 and 76,875 shares, respectively 1,373,142 1,539,045
MFS High Income Fund, 115,854
and 97,573 shares, respectively 442,562 408,829
MFS Capital Opportunities Fund,
63,615 and 64,235 shares, respectively 854,355 1,149,167
MFS Fixed Fund, 1,914,843 and 1,542,322
shares, respectively 1,914,843 1,542,322
MFS New Discovery Fund, 20,352 and
19,853 shares, respectively 349,856 359,743
Frequency Electronics, Inc.
Common Stock Fund, 59,480 and
33,614 shares, respectively 836,416 574,962
10. Cash Dividend:
During calendar 2001, the Board of Directors of Frequency Electronics, Inc.
declared a cash dividend of $0.10 (ten cents) per share payable June 1 and
December 1. This dividend aggregated $4,679 in 2001.
FREQUENCY ELECTRONICS, INC.
CASH OR DEFERRAL PROFIT SHARING PLAN AND TRUST
SCHEDULE H, LINE 4i - SCHEDULE OF ASSETS HELD (AT END OF YEAR)
--------------------------------------------------------------
DECEMBER 31, 2001
(a) (b) (c) (d) (e)
Identify of issue, Description of investment including maturity date, rate Cost Current Value
borrower, lessor, or of interest, collateral, par or maturity value
similar party
----- --------------------------- ---------------------------------------------------------- -------------- --------------
MFS Capital Opportunities Capital appreciation fund of common stocks and related $ 1,211,375 $ 854,355
Fund securities, such as preferred stock, convertible
securities, and depositary receipts. No maturity date
or interest rates. No collateral. Par value varies.
MFS Emerging Growth Fund Long-term growth of capital fund of common stocks and 915,066 622,083
related securities, such as preferred stocks,
convertible securities, and depositary receipts for
those securities, of emerging growth companies. No
maturity date or interest rates. No collateral. Par
value varies.
MFS Fixed Fund Current income and preservation of principal fund of 1,914,843 1,914,843
stable-value investment contracts issued by major
insurance companies and major banks. No maturity date
or interest rates. No collateral. Par value varies.
MFS Global Equity Fund Capital appreciation fund of common stocks and 93,671 84,338
equity-related securities, such as preferred stock,
convertible securities, and depositary receipts, of U.S.
and foreign (including emerging market) issuers. No
maturity date or interest rates. No collateral. Par
value varies.
MFS High Income Fund High current income fund with a diversified portfolio of 556,191 442,562
fixed income securities. No maturity date or interest
rates. No collateral. Par value varies.
MFS Massachusetts Reasonable current income and long-term growth of 1,694,784 1,373,142
Investors Trust capital and income fund of common stocks and related
securities, such as preferred stock, convertible securities
, and depositary receipts. Invests in companies of any size,
but generally focuses on companies with larger market
capitalizations. No maturity date or interest rates. No
collateral. Par value varies.
MFS New Discovery Fund Capital appreciation fund of investments in companies 356,510 349,856
believed to offer superior prospects for growth. No
maturity date or interest rates. No collateral. Par
value varies.
MFS Total Return Fund Above-average income fund of fixed income securities and 172,056 167,350
equity securities. No maturity date or interest rates.
No collateral. Par value varies.
MFS Massachusetts Long-term growth of capital and future income by 264,969 196,407
Investors Growth investing its assets in the common stocks, or securities
Stock Fund convertible into common stocks, of companies that offer
better than average prospects for long-term growth. No
maturity date or interest rates. No collateral. Par
value varies.
MFS Research Fund Long-term growth of capital and future income by 133,525 104,856
investing a substantial proportion of its assets in the
common stocks or securities convertible into common
stocks of companies that possess better than average
prospects for long-term growth. A smaller portion of
the assets may be invested in bonds, short-term
obligations, preferred stocks or common stocks whose
principal characteristic is income production rather
than growth. No maturity date or interest rates. No
collateral. Par value varies.
* Frequency Electronics, Common stock of Frequency Electronics, Inc. No maturity 707,863 836,416
Inc. Common Stock dates or interest rates. Par value $1.00.
MFS Utilities Fund Capital growth and current income fund of utility 239 239
securities, both stocks and bonds. The fund may also
invest in foreign securities.
FREQUENCY ELECTRONICS, INC.
CASH OR DEFERRAL PROFIT SHARING PLAN AND TRUST
SCHEDULE H, LINE 4i - SCHEDULE OF ASSETS HELD (AT END OF YEAR)
--------------------------------------------------------------
DECEMBER 31, 2001
(a) (b) (c) (d) (e)
Identify of issue, Description of investment including maturity date, rate Cost Current Value
borrower, lessor, or of interest, collateral, par or maturity value
similar party
----- --------------------------- ---------------------------------------------------------- ------------ --------------
MFS Bond Fund High level of current income as is believed to be $ 13,514 $ 13,471
consistent with prudent investment risk as well as to
protect shareholders risk capital. The fund invests in
investment-grade bonds including U.S. government
securities and high-grade corporate debt.
MFS Mid Cap Growth Fund Long-term growth capital fund of equity securities of 6,371 7,083
companies with medium market capitalization that are
believed to have above-average growth potential.
* Participant Loans Loans to plan participants. Maturity between one and - 225,565
five years with interest at prevailing commercial rates
(6.75%-10.50%) and secured by participant's vested
account balance.
* Denotes party in interest
Exhibit 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement
No. 333-40506 on Form S-8 pertaining to the Frequency Electronics Cash or
Deferral Profit Sharing Plan and Trust of our report dated June 25, 2002 with
respect to the financial statements and supplemental schedule of the Frequency
Electronics Cash or Deferral Profit Sharing Plan and Trust included in this
Annual Report on Form 11-K for the year ended December 31, 2001.
HOLTZ RUBENSTEIN & CO., LLP
Melville, New York
July 15, 2002