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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 11-K
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[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ending 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 333-66626
A. Full title of the plan and the address of the plan, if different from that of
the issuer named below:
INTERDIGITAL COMMUNICATIONS CORPORATION SAVINGS AND PROTECTION PLAN
B. Name of issuer of the securities held pursuant to the plan and the address of
its principal executive office:
INTERDIGITAL COMMUNICATIONS CORPORATION
781 Third Avenue, King of Prussia, Pennsylvania 19406-1409
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INTERDIGITAL COMMUNICATIONS CORPORATION
SAVINGS AND PROTECTION PLAN
C O N T E N T S
---------------
PAGE
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 1
Financial Statements:
Statements of Net Assets Available for Benefits as of December 31, 2005 and 2004 2
Statements of Changes in Net Assets Available for Benefits for the 3
Years Ended December 31, 2005 and 2004
Notes to the Financial Statements 4 - 11
Supplemental Schedules*:
Schedule H, Part IV(I) - Schedule of Assets (Held at End of Year) 12
Schedule H, Part IV(j) - Schedule of Reportable Transactions 13
Signature 14
Exhibit Index 15
Exhibit 23.1 Consent of Morison Cogen LLP 16
------------------
* Other supplemental schedules required by Section 2520.103-10 of the Department
of Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974 have been omitted because they are not
applicable.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Participants and Plan Administrator
InterDigital Communications Corporation Savings and Protection Plan
King of Prussia, Pennsylvania
We have audited the accompanying statements of net assets available for benefits
of the InterDigital Communications Corporation Savings and Protection Plan (the
Plan) as of December 31, 2005 and 2004, and the related statements of changes in
net assets available for benefits for the years then ended. These financial
statements are the responsibility of the Plan's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits 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 changes in its net assets available for benefits
for the years then ended, in conformity with accounting principles generally
accepted in the United States.
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 held
for investment purposes and reportable transactions 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/ Morison Cogen LLP
Bala Cynwyd, Pennsylvania
May 18, 2006
-1-
INTERDIGITAL COMMUNICATIONS CORPORATION
SAVINGS AND PROTECTION PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2005 AND 2004
2005 2004
------------------ -----------------
Investments at fair value $ 24,840,220 $ 20,694,926
Cash 13,294 11,559
Employer Profit Sharing Receivable 442,062 567,808
Participant Loans 149,738 156,234
------------------ -----------------
NET ASSETS AVAILABLE FOR BENEFITS $ 25,445,314 $ 21,430,527
================== =================
The accompanying notes are an integral part of these financial statements.
-2-
INTERDIGITAL COMMUNICATIONS CORPORATION
SAVINGS AND PROTECTION PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
2005 2004
---------------- -----------------
ADDITIONS
Investment income
Interest and dividend income, investments $ 8,267 $ 8,157
Net appreciation in fair value of investments 1,057,223 2,348,174
---------------- -----------------
Total investment income 1,065,490 2,356,331
---------------- -----------------
Contributions
Employer 1,331,646 1,434,203
Participants 2,912,764 2,616,283
---------------- -----------------
Total contributions 4,244,410 4,050,486
---------------- -----------------
Asset transfers in 145,871 97,430
---------------- -----------------
TOTAL ADDITIONS 5,455,771 6,504,247
---------------- -----------------
DEDUCTIONS
Payment of benefits 1,440,610 885,316
Other deductions 374 676
---------------- -----------------
TOTAL DEDUCTIONS 1,440,984 885,992
---------------- -----------------
NET INCREASE 4,014,787 5,618,255
NET ASSETS AVAILABLE FOR BENEFITS - BEGINNING OF YEAR 21,430,527 15,812,272
---------------- -----------------
NET ASSETS AVAILABLE FOR BENEFITS - END OF YEAR $25,445,314 $21,430,527
================ =================
The accompanying notes are an integral part of these financial statements.
-3-
INTERDIGITAL COMMUNICATIONS CORPORATION
SAVINGS AND PROTECTION PLAN
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - DESCRIPTION OF THE PLAN
The following description of the InterDigital Communications Corporation Savings
and Protection Plan (the Plan) is provided for general information purposes.
Plan participants should refer to the Plan agreement for a more complete
description of the Plan's provisions.
General
-------
The Plan is a defined contribution 401(k) plan of InterDigital Communications
Corporation and its participating subsidiaries (the Company or InterDigital) for
eligible employees over the age of 18 and who have completed one month of
service with the Company. Beginning in 2004, individuals employed by the Company
as part of an academic course of study, such as a work-study program, co-op
program or similar arrangements, are not eligible. The Plan was established
effective February 1, 1985 and restated January 1, 1997. The Plan is subject to
the provisions of the Employee Retirement Income Security Act of 1974, as
amended (ERISA). Investors Bank & Trust Company is the trustee of the Plan.
Contributions
-------------
All participant contributions are made on a before-tax basis. Each participant
may invest from 1% to 100% of annual compensation as a basic contribution. The
total of the basic and supplemental contributions cannot exceed Internal Revenue
Service (IRS) limitations for each plan year. For the 2005 and 2004 plan years,
the total IRS limits were $14,000 and $13,000, respectively. In addition,
participants who have attained the age of 50 may make pre-tax contributions that
exceed the Internal Revenue Code limitations. The maximum additional annual
contribution beginning in 2002 was $1,000 and will increase in $1,000 increments
each year through 2006. If a participant's annual contributions exceed the
dollar limitation set by the IRS, thereby requiring a distribution of such
excess contributions, the participant will forfeit any employer matching
contributions related to the distribution amount. Amounts forfeited will be used
to reduce future employer contributions.
The Company may, at its sole discretion, contribute to the Plan through matching
contributions and/or discretionary contributions. Beginning July 2001, the
Company matches 50% of each participant's contribution, up to a maximum of 6% of
the participant's pretax annual basic compensation, as defined by the Plan. The
Company match is directed by the Company to the InterDigital Stock Fund and may
be immediately transferred to other investment alternatives by the participants.
Discretionary contributions are lump sum payments made to the Plan as determined
from time-to-time by the Board of Directors of the Company. In first quarter
2006 and 2005, the Company contributed 24,087 and 32,632 shares of InterDigital
stock, respectively, valued at $442,062 and $567,808, respectively. These
contributions were associated with the Company's performance in 2005 and 2004,
respectively. The Plan recorded a related receivable at December 31, 2005 and
2004.
The Internal Revenue Code limits the amount of pay that may be used to determine
contributions. The limit was $210,000 in 2005 and $205,000 in 2004. The Internal
Revenue Code also limits the amount of all contributions that can be made for or
by a participant to the Plan in a given year. The limit is the lesser of 100% of
pay or $42,000 for 2005, and the lesser of 100% of pay or $41,000 for 2004.
Employee rollover contributions from other qualified retirement plans are
permitted; such contributions are subject to the conditions and procedures set
forth in the Plan.
Participant Accounts
--------------------
Each participant's account is credited with that participant's contributions and
allocations of the Company's matching and discretionary contributions and Plan
earnings and losses. Allocations of discretionary contributions are based on a
participant's annual compensation relative to the total compensation of all
other participants. The benefit to which a participant is entitled is the
benefit that can be provided from the participant's vested account. Terminating
participants forfeit unvested Company contributions. Forfeitures are used to pay
Plan expenses or reduce employer contributions.
-4-
INTERDIGITAL COMMUNICATIONS CORPORATION
SAVINGS AND PROTECTION PLAN
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - DESCRIPTION OF THE PLAN (Continued)
Vesting
-------
Participants are immediately vested in their salary deferral and rollover
contributions. Vesting in Company contributions is based on length of service.
Participants vest 33 1/3 % on each of their first three anniversaries of
employment.
Participants Loans
------------------
Any participant who is an active employee may apply for a secured loan provided
the request does not exceed the lesser of 50% of their vested account balance or
$50,000. The minimum loan amount was $500 during 2005 and 2004. Only one loan
per participant may be made every 365 days and all loans are subject to approval
by the Company as Plan Administrator. Loan terms are limited to five years set
at the inception of each loan. Interest rates are set at an annual rate of prime
+ 1%. The rates of outstanding loans at December 31, 2005 and 2004 range between
4.0% and 8.0%. Interest paid by the participant is credited to the participant's
account. If a participant's balance remains unpaid for more than 90 days after
it is due, the loan will be in default on the outstanding loan amount and the
participant's vested account will be reduced by the amount of the unpaid
principal and interest. The unpaid amount is treated as a taxable withdrawal and
is subject to federal income taxes. Loans in default, in principle plus
interest, at December 31, 2005 and 2004 were $15,501 and $20,193, respectively.
Beginning in 2004, outstanding loans became due and payable in-full 60 days
after the related participant ceases to be an employee and a party-in-interest,
as defined by ERISA, or after complete termination of the Plan.
When a participant receives a distribution from the Plan, any outstanding
principal plus accrued interest will be deducted from the amount of the
distribution. A participant may then either default on the loan or make
arrangements to continue loan repayments beyond when they become entitled to a
distribution as long as their remaining interest in the Plan exceeds their
outstanding loan balance.
Payment of Benefits
-------------------
If a participant retires, dies, becomes permanently disabled, or otherwise
separates from the Company, the participant or participant's beneficiary is
entitled to the vested amount of their account as valued on the applicable
valuation date. In the event of a participant's death, distribution of their
account will be made as soon as administratively practicable upon the receipt of
appropriate documentation from their designated beneficiary. Distributions for
reasons of retirement, permanent disability, or termination will be made upon
written request. Distributions from a participant's account are typically made,
subject to certain limitations, using a single installment or deferred payment.
Plan Termination
----------------
The Company may amend or suspend the Plan and may terminate the Plan at any time
subject to the provisions of ERISA; although there is no present intent to do
so. However, no such action may cause the Plan's assets to be used for purposes
other than the exclusive benefit of the participants and their beneficiaries. If
the Plan is terminated, all such participant's accounts shall become fully
vested and all accounts of participants shall be distributed as soon as
administratively possible.
Investment Options
------------------
All investments are participant directed except for the Company's matching and
profit sharing contribution, which by the terms of the Plan is directed by the
Company to the InterDigital Stock Fund. Participants may reallocate their
holdings among available investment options at any time. However, prior to 2004,
participants could not reallocate that portion of their Plan account that was
attributable to the Company's matching contribution made after June 2001. Fund
descriptions below were obtained from fund brochures and other Plan documents:
-5-
INTERDIGITAL COMMUNICATIONS CORPORATION
SAVINGS AND PROTECTION PLAN
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - DESCRIPTION OF THE PLAN (Continued)
SHORT-TERM BONDS:
----------------
Money Market Fund
-----------------
This Fund seeks high current income while preserving capital and providing
liquidity by investing in high quality short-term cash equivalent securities,
such as commercial paper, bank acceptances, and repurchase agreements. The Fund
will typically invest in A1/P1- rated debt instruments, and in securities with
maturities of 30-120 days. All securities will have maturities less than one
year.
Stabled Pooled Collective Trust
-------------------------------
This Fund seeks to provide positive income with reduced return volatility
through investment in a diversified portfolio of high quality fixed income
securities. The Fund invests in stable value fixed income instruments, including
Guaranteed Investment Contracts (GIC's), Bank Investment Contracts (BIC's), as
well as GIC alternatives, such as synthetic GIC's.
High Quality Bond Fund
----------------------
This Fund seeks to generate consistent risk-adjusted returns while focusing on
preservation of capital through investment in US Government, Agency,
asset-backed, and corporate bonds, rated BBB or better at the time of purchase.
The Fund's dollar weighted average maturity generally does not exceed 3 years.
This Fund was first offered to participants beginning July 1, 2005.
INTERMEDIATE/LONG-TERM BONDS:
----------------------------
Core Bond Fund
--------------
This Fund seeks to maximize return through investment in US Government,
asset-backed and mortgage-backed securities, corporate securities, and to a
lesser extent, convertible, high yield and international fixed income
securities.
Intermediate Bond Fund
----------------------
This Fund seeks maximum current income over the intermediate-term consistent
with preservation of capital primarily, almost exclusively, through the
investment in US Government securities, its Agencies and money market
instruments. The Fund maintains a dollar weighted-average maturity of three to
ten years under normal conditions. A three-year duration is typical.
LARGE-CAP STOCKS:
----------------
Value & Income Fund
-------------------
This Fund seeks long-term capital appreciation primarily through investment in a
diversified portfolio of common stocks selling at reasonable valuations relative
to their future projected earnings. The Fund utilizes a combination of deep and
relative value sub styles.
Equity Growth Fund
------------------
This Fund seeks to provide a high level of capital appreciation through
investment in a diversified portfolio of common stocks with the potential for
above-average growth in earnings. The Fund utilizes two managers with
complementary large capitalization growth styles.
Transamerica PRM Core Equity Investment
---------------------------------------
This Fund seeks capital appreciation. The Fund primarily invests in common and
preferred stocks, warrants, convertibles, corporate and high-yield debt, and
other securities that management believes to be undervalued. It may invest any
proportion of assets in each type of security. The Fund may invest in securities
of any asset size, earnings level, or industry type. It may invest no more than
35% of assets in debt rated below-investment grade.
-6-
INTERDIGITAL COMMUNICATIONS CORPORATION
SAVINGS AND PROTECTION PLAN
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - DESCRIPTION OF THE PLAN (Continued)
Transamerica Premier Equity Index Fund, Class M
-----------------------------------------------
This Fund seeks to track the performance of the S&P 500 index. The Fund invests
in a combination of common stocks included in the index, S&P 500 stock index
futures and options, and short-term investments. It may not purchase
Transamerica Corporation common stock. Management seeks a correlation between
the performance of the Fund and the index of .95 or higher. To select
securities, management solely takes into consideration the proportions of
securities within the index. This Fund was no longer offered as of April 25,
2005.
Stock Index Fund
----------------
This Fund seeks to match the performance of the S&P 500 Index by investing
substantially all of its net assets in the stocks comprising the S&P 500 Index.
SMALL MID-CAP STOCKS:
--------------------
Mid-Cap Value Fund
------------------
This Fund seeks capital appreciation through investment in a diversified
portfolio of medium size value-oriented companies. The Fund invests in quality
companies undergoing beneficial strategic changes that are selling at below
market valuation standards due to limited analyst coverage and low expectations.
Mid-Cap Growth Fund
-------------------
This Fund seeks a high level of capital appreciation through investment in a
diversified portfolio of medium size, growth-oriented companies. The Fund
invests in high quality companies whose growth in earnings will provide returns
in excess of the market, while frequently exhibiting above-market standard
valuation measures.
Special Equity Fund
-------------------
This Fund seeks to provide long-term capital appreciation through investment in
a diversified portfolio of common stocks of small size companies. The Fund
utilizes two growth-style managers, two value-oriented managers and a structured
core manager. This provides an opportunity for higher returns relative to the
broad small-cap market over a full market cycle.
Baron Small Cap Fund
--------------------
This Fund seeks capital appreciation. The Fund normally invests at least 80% of
assets in securities of smaller companies. A small sized company is defined as
having a market value of under $2.5 billion.
INTERNATIONAL STOCKS:
--------------------
International Fund
------------------
This Fund seeks long-term capital appreciation by investing in both value and
growth oriented companies. The Fund invests primarily in the stock markets of
the United Kingdom, continental Europe, Japan, Canada, and Australia. Stock
selection is based on in-depth, local research.
MULTI-ASSET/OTHER:
-----------------
AIM Real Estate Funds, Class A
------------------------------
This Fund seeks high total return. The Fund normally invests at least 80% of its
assets in securities of real estate and real estate-related companies. The Fund
considers a company to be a real estate-related company if at least 50% of
assets, gross income or net profits are attributable to ownership, construction,
management or sale of residential, commercial or industry real estate. The Fund
may invest up to 25% of its total assets in foreign securities.
-7-
INTERDIGITAL COMMUNICATIONS CORPORATION
SAVINGS AND PROTECTION PLAN
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - DESCRIPTION OF THE PLAN (Continued)
Intermediate Horizon Strategic Allocation Fund
----------------------------------------------
This Fund seeks to provide greater potential for long-term return at moderate
risk levels by investing in an array of Diversified Investment Advisors
(Diversified) Funds. The portfolio will invest in a combination of both asset
income and equity funds, maintaining approximately equal exposure to both asset
classes. Fund allocations within asset classes are broadly designed to mirror
the market at large.
Long Horizon Strategic Allocation Fund
--------------------------------------
This Fund seeks to attain its objective by investing in an array of
Diversified's Funds with an emphasis on equity funds. The Fund will have limited
exposure to a variety of fixed income funds. Fund allocations within asset
classes are broadly designed to mirror the market at large.
Short Horizon Strategic Allocation Fund
---------------------------------------
This Fund seeks to attain its objective by investing in an array of
Diversified's Funds. The primary emphasis is on fixed income funds with limited
exposure to equity funds. Fund allocations within asset classes are broadly
designed to mirror the market at large.
InterDigital Stock Fund
-----------------------
This Fund invests in the Common Stock of InterDigital Communications
Corporation.
Plan Amendments
---------------
In June 2001, the Compensation Committee of the Board of Directors of the
Company authorized an amendment to the Plan to include increasing the Company's
matching contribution from 25% to 50% of the first 6% of a participant's annual
compensation that a participant contributes to the Plan, (paying the additional
25% matching contribution in the Company's Common Stock), adding the Company's
Common Stock to the selection of investments under the Plan, permitting an
additional discretionary year-end matching contribution and, effective for
employees hired on or after January 1, 2004, extending the vesting period of the
Company's matching contributions to 36 months from the commencement of
employment. The prior vesting policy permitted immediate vesting of 33% upon
commencement of employment and vesting of 67% and 100% on the first and second
anniversaries of commencement of employment, respectively. Under the current
vesting policy, participants vest 33 1/3% on each of their first three
anniversaries of employment.
In August 2001, 400,000 shares of the Company's authorized but unissued Common
Stock were reserved for issuance to the account of participants in the Plan as
matching contributions. An agreement was entered into between the Company, on
behalf of the Plan, and Web401(k).com and Fidelity Investments to serve as third
party administrator and custodian, respectively, of the InterDigital Stock Fund.
As more fully discussed in Note 3, Diversified replaced Principal, Web 401(k)
and Fidelity Investments in these capacities in 2004.
NOTE 2 - SUMMARY OF ACCOUNTING POLICIES
The following accounting policies, which conform with accounting principles
generally accepted in the United States of America, have been used consistently
in the preparation of the Plan's financial statements.
Basis of Accounting
-------------------
Accounting records are maintained by the custodian on the cash basis of
accounting. The financial statements of the Plan reflect all material
adjustments to place the financial statements on the accrual basis of
accounting.
Use of Estimates
----------------
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
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, as well as reported amounts of additions and
deductions during the reporting period. Actual results could differ from those
estimates.
-8-
INTERDIGITAL COMMUNICATIONS CORPORATION
SAVINGS AND PROTECTION PLAN
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF ACCOUNTING POLICIES (Continued)
Investment Valuation and Income Recognition
-------------------------------------------
Investments in pooled separate accounts are stated at fair value. Shares of
registered investment companies are valued at quoted market prices which
represent the net asset value of shares held by the Plan at year-end. The
InterDigital Stock Fund is valued at its year-end unit closing price (comprised
of common stock market price plus uninvested cash position). Participant loans
are valued at cost, which approximates fair value.
Purchases and sales of investments are recorded on a trade-date basis. Interest
income is accrued when earned. Dividend income is recorded on the ex-dividend
date. Capital gain distributions are included in dividend income.
Payment of Benefits
-------------------
Benefits are recorded when paid.
Forfeited Accounts
------------------
At December 31, 2005 and 2004, forfeited non-vested accounts totaled $43,183 and
$8,000, respectively. These forfeited accounts were fully utilized to reduce
employer matching contributions in 2005 and 2004.
NOTE 3 - CUSTODIAN AND THIRD PARTY ADMINISTRATOR
Effective January 1, 2004, the Plan appointed Diversified to replace Principal
as the custodian and third party administrator for the majority of Plan Assets.
Also effective January 1, 2004, Diversified replaced Web 401(k) and Fidelity
Investments as the third party administrator and custodian, respectively, of
Company common stock held by the Plan.
On December 31, 2003, Principal converted a portion of the Plan's holdings into
cash in preparation for the transfer of funds to Diversified. In January 2004,
Principal transferred approximately $13.9 million cash to Diversified.
Diversified invested these funds into investment options offered by Diversified,
in accordance with the instructions of each participant. In January 2004,
Principal and Fidelity (as custodians) also transferred Company common stock
with a total fair value of approximately $1.8 million, as of December 31, 2003,
to Diversified.
NOTE 4 - INVESTMENTS
The following presents investments that represent 5 percent or more of the
Plan's net assets.
2005 2004
------------------- ------------------
International Fund $ 1,755,356 $ 1,463,438
Special Equity Fund 1,486,372 1,549,106
Mid-Cap Value Fund 3,228,489 2,923,478
AIM Real Estate Funds, Class A 1,405,862 -
Transamerica PRM Core
Equity Investment 2,032,989 1,901,890
Stock Index Fund 3,700,480 -
InterDigital Stock Fund 3,204,048 2,447,075
Transamerica PRM Equity Index - 3,295,232
-9-
INTERDIGITAL COMMUNICATIONS CORPORATION
SAVINGS AND PROTECTION PLAN
NOTES TO FINANCIAL STATEMENTS
NOTE 4 - INVESTMENTS (Continued)
During 2005 and 2004, the Plan's investments, including gains and losses on
investments bought and sold, as well as held during the year, appreciated
(depreciated) in value as follows:
2005 2004
------------------- ------------------
Investment in Common Trusts $ 37,761 $ 26,124
Registered Investment Companies 1,109,670 1,352,383
Interest in Other Funds 252,133 699,109
InterDigital Stock Fund (342,341) 270,558
------------------ ------------------
$ 1,057,223 $ 2,348,174
================== ==================
The Plan invests in various 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 investment 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.
NOTE 5 - NONPARTICIPANT-DIRECTED INVESTMENTS
Information about the components of and significant changes in net assets
relating to the Plan's nonparticipant-directed investments are as follows:
2005 2004
------------------- -----------------
Net Assets
InterDigital Stock Fund $ 3,204,048 $ 2,447,075
------------------- -----------------
Changes in Net Assets
Contributions $ 1,535,310 $ 923,904
Net appreciation in fair value of investments (342,341) 270,558
Distributions (164,193) (49,934)
Transfers (241,154) (476,899)
Forfeitures and other (30,649) (7,748)
------------------- -----------------
$ 756,973 $ 659,881
=================== =================
NOTE 6 - RELATED PARTY TRANSACTIONS
The Plan invests in shares of the Company's common stock through the
InterDigital Stock Fund. In 2005 and 2004, the Plan also invested in funds with
Diversified. Transactions in such investments qualify as party-in-interest
transactions that are exempt from the prohibited transaction rules.
NOTE 7 - PLAN EXPENSES
All costs and expenses incurred in the administration of the Plan (i.e.,
trustee and recordkeeper fees) are currently paid by the Company.
-10-
INTERDIGITAL COMMUNICATIONS CORPORATION
SAVINGS AND PROTECTION PLAN
NOTES TO FINANCIAL STATEMENTS
NOTE 8 - TAX STATUS
The IRS has determined and informed the Company by letter dated June 13, 2005
that the Plan satisfies the qualification requirements under Internal Revenue
Code Section 401(a) and that the trust maintained in connection with the Plan
satisfies the requirements for exemption under Section 501(a) of the Internal
Revenue Code. The Company believes the Plan is designed and is currently being
operated in compliance with the applicable requirements of the Internal Revenue
Code.
NOTE 9 - RECENT ACCOUNTING PRONOUNCEMENTS
In December 2005, the Financial Accounting Standards Board (FASB) issued FASB
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 AICPA Investment Company Guide and Defined-Contribution Health and
Welfare and Pension Plans. This FSP amends the guidance in AICPA SOP 94-4,
Reporting of Investment Contracts Held by Health and Welfare Benefit Plans and
Defined-Contribution Pension Plans, with respect to the definition of the fully
benefit-responsive and the presentation and disclosure of fully
benefit-responsive investment contracts. The financial statement presentation
and disclosure guidance in FSP AG INV-1 and SOP 94-4-1 is effective for
financial statements for the Plan years ending after December 15, 2006. The Plan
intends to adopt the financial presentation and disclosure guidance in the FSP
in the financial statements for the Plan year ending December 31, 2006.
-11-
INTERDIGITAL COMMUNICATIONS CORPORATION
SAVINGS AND PROTECTION PLAN
EIN 23-1882087
SCHEDULE H, PART IV(i) - SCHEDULE OF ASSETS (HELD AT END OF YEAR)
DECEMBER 31, 2005
Current
Identity of Issue Investment Type Value
------------------------------ -------------------------------- ------------------
Investors Bank & Trust Company Cash $ 13,294
Money Market Fund* Registered investment companies $ 875,617
Short Horizon Strategic
Allocation Fund* Registered investment companies 323,783
Equity Growth Fund* Registered investment companies 505,051
Mid-Cap Growth Fund* Registered investment companies 485,408
International Fund* Registered investment companies 1,755,356
Long Horizon Strategic
Allocation Fund* Registered investment companies 497,968
Value and Income Fund* Registered investment companies 684,086
Special Equity Fund* Registered investment companies 1,486,372
Mid-Cap Value Fund* Registered investment companies 3,228,489
Intermediate Bond Fund* Registered investment companies 793,724
Core Bond Fund* Registered investment companies 1,254,537
Intermediate Horizon Strategic
Allocation Fund* Registered investment companies 130,409
AIM Real Estate Funds, Class A Registered investment companies 1,405,862
Baron Small Cap Fund Registered investment companies 1,156,934
Transamerica PRM Core
Equity Investment Registered investment companies 2,032,989
High Quality Bond Fund* Registered investment companies 82,258
Stock Index Fund* Registered investment companies 3,700,480
-------------------------------------------------------------
Mutual Fund Total $ 20,399,323
Stable Pooled Collective Trust* Investments in common trusts 1,236,849
-------------------------------------------------------------
Collective Trust Fund Total $ 1,236,849
InterDigital Stock Fund* Employer Stock Fund $ 3,204,048 **
Participant Loans* Notes Receivable with Interest $ 149,738
Rates of 4.33% to 8.00%
-------------------
TOTAL ASSETS HELD AT END OF YEAR $ 25,003,252
===================
*transaction with party in interest
**cost basis is $2,195,742
-12-
INTERDIGITAL COMMUNICATIONS CORPORATION
SAVINGS AND PROTECTION PLAN
SUPPLEMENTAL SCHEDULE H, PART IV(j)
REPORTABLE TRANSACTIONS
DECEMBER 31, 2005
Historical
Identity of Purchase Selling Cost of Historical
Party Involved Description of Asset Price Price Asset Gain (Loss)
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Diversified Investors Funds Group InterDigital Stock Fund $ 873,663 $ 4,239 $ 4,322 $ (83)
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SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees (or other persons who administer the employee benefit plan) have
duly caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
INTERDIGITAL COMMUNICATIONS CORPORATION
SAVINGS AND PROTECTION PLAN
By: InterDigital Communications Corporation, in
its capacity as Plan Sponsor and Plan
Administrator
Date: June 29, 2006 By: /s/ R.J. Fagan
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Richard J. Fagan
Chief Financial Officer
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EXHIBIT INDEX
The following is a list of Exhibits filed as part of this Annual Report
on Form 11-K:
Exhibit Exhibit
Number Description
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23.1 Consent of Morison Cogen LLP
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