QUALCOMM DEF 14A 2007
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
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January 19, 2007
Dear Fellow Stockholder:
You are cordially invited to attend your Companys annual meeting on Tuesday, March 13, 2007. The meeting will begin promptly at 9:30 a.m. local time at Copley Symphony Hall, 750 B Street, San Diego, California 92101. The meeting will commence with a discussion and voting on matters set forth in the accompanying Notice of Annual Meeting of Stockholders followed by presentations and a report on your Companys 2006 performance.
Your vote is important, whether or not you plan to attend the meeting. PLEASE VOTE YOUR SHARES.
Instructions on how to vote can be found at the bottom of the Notice of Annual Meeting. You may vote over the Internet, by telephone or by mailing a proxy card as follows:
We encourage you to conserve natural resources, as well as reduce printing and mailing costs, by signing up for electronic delivery of our stockholder communications. For more information, see Electronic Delivery of QUALCOMM Stockholder Communications on page 2 of the enclosed Notice of Annual Meeting of Stockholders.
Please review the enclosed proxy materials carefully and send in your vote today. I look forward to seeing you in San Diego.
Your vote is very important to us. I urge you to vote FOR all proposals.
Please review the enclosed proxy materials carefully and vote today.
Paul E. Jacobs
Chief Executive Officer
5775 Morehouse Drive
San Diego, California 92121-1714
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of QUALCOMM Incorporated:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of QUALCOMM Incorporated, a Delaware corporation (QUALCOMM or the Company), will be held at Copley Symphony Hall, 750 B Street, San Diego, California 92101, on Tuesday, March 13, 2007 at 8:30 a.m. local time for previewing product displays, and 9:30 a.m. local time for the following purposes:
The Board of Directors has fixed the close of business on January 12, 2007 as the record date for the determination of stockholders entitled to notice of and to vote at this Annual Meeting and at any adjournment or postponement thereof.
By Order of the Board of Directors
Paul E. Jacobs
Chief Executive Officer
San Diego, California
January 19, 2007
If you are a stockholder whose shares are registered in your name, you may vote your shares by one of the three following methods:
If your shares are held in street name (through a broker, bank or other nominee), you may receive a separate voting instruction form with this Proxy Statement, or you may need to contact your broker, bank or other nominee to determine whether you will be able to vote electronically using the Internet or telephone.
PLEASE NOTE THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU WILL NOT BE PERMITTED TO VOTE IN PERSON AT THE MEETING UNLESS YOU FIRST OBTAIN A LEGAL PROXY ISSUED IN YOUR NAME FROM THE RECORD HOLDER.
The Company is pleased to offer to its stockholders the benefits and convenience of electronic delivery of annual meeting materials, including:
The Company encourages you to conserve natural resources, as well as to reduce printing and mailing costs, by signing up for electronic delivery of QUALCOMM stockholder communications.
If you are a registered stockholder, or a broker or other nominee holds your QUALCOMM shares, and you would like to sign-up for electronic delivery, please visit www.icsdelivery.com/qcom/index.html to enroll. Your electronic delivery enrollment will be effective until you cancel it. If you have questions about electronic delivery, please call QUALCOMM Investor Relations at 858-658-4813 or send email to firstname.lastname@example.org.
5775 Morehouse Drive
San Diego, California 92121-1714
FOR ANNUAL MEETING OF STOCKHOLDERS
March 13, 2007
The enclosed proxy is solicited on behalf of the Board of Directors or (the Board) of QUALCOMM Incorporated, a Delaware corporation (QUALCOMM or the Company), for use at the Annual Meeting of Stockholders to be held on Tuesday, March 13, 2007, at 9:30 a.m. local time (the Annual Meeting), or at any adjournment or postponement thereof, for the purposes set forth herein and in the accompanying Notice of Annual Meeting. The Annual Meeting will be held at Copley Symphony Hall, 750 B Street, San Diego, California 92101. The Company intends to mail this proxy statement and accompanying proxy card on or about January 19, 2007 to all stockholders entitled to vote at the Annual Meeting.
Only holders of record of common stock at the close of business on January 12, 2007 (the Record Date) will be entitled to notice of and to vote at the Annual Meeting. At the close of business on the Record Date, the Company had outstanding and entitled to vote 1,656,199,220 shares of common stock.
Each holder of record of common stock on the Record Date will be entitled to one vote for each share held on all matters to be voted upon. If no choice is indicated on the proxy, the shares will be voted in favor of Proposals 1 and 2.
All votes will be counted by an independent inspector of election appointed for the meeting, who will separately tabulate affirmative and negative votes, abstentions and broker non-votes.
A broker non-vote occurs when a broker submits a proxy card with respect to shares of common stock held in a fiduciary capacity (typically referred to as being held in street name), but declines to vote on a particular matter because the broker has not received voting instructions from the beneficial owner. Under the rules that govern brokers who are voting with respect to shares held in street name, brokers have the discretion to vote those shares on routine matters, but not on non-routine matters. Routine matters include the election of directors and ratification of independent accountants. Non-routine matters include actions on stock plans and most amendments to the Certification of Incorporation.
Any person giving a proxy pursuant to this solicitation has the power to revoke it at any time before it is voted. It may be revoked by filing with the Corporate Secretary of the Company at the Companys principal executive offices, 5775 Morehouse Drive, N-510F, San Diego, California 92121-1714, a written notice of revocation or a duly executed proxy bearing a later date, or it may be revoked by attending the meeting and voting in person. Attendance at the meeting will not, by itself, revoke a proxy.
The Company will bear the entire cost of solicitation of proxies including preparation, assembly, printing and mailing of this proxy statement, the proxy card and any additional information furnished to stockholders. Copies of solicitation materials will be furnished to banks, brokerage houses, fiduciaries and custodians holding in their names shares of common stock beneficially owned by others to forward to such beneficial owners. The Company may reimburse persons representing beneficial owners of common stock for their costs of forwarding solicitation
materials to such beneficial owners. In addition, the Company has retained Morrow & Company to act as a proxy solicitor in conjunction with the meeting. The Company has agreed to pay that firm $7,500, plus reasonable out of pocket expenses, for proxy solicitation services. Solicitation of proxies by mail may be supplemented by telephone, telegram or personal solicitation by directors, officers or other regular employees of the Company. No additional compensation will be paid to directors, officers or other regular employees for such services.
The deadline for submitting a stockholder proposal for inclusion in the Companys proxy statement and form of proxy for the Companys 2008 annual meeting of stockholders is September 21, 2007. The deadline for submitting a stockholder proposal or a nomination for director that is not to be included in such proxy statement and proxy is also September 21, 2007. Any such stockholder proposals must be submitted to the Companys Corporate Secretary in writing at 5775 Morehouse Drive, N-510F, San Diego, California 92121-1714. Stockholders are also advised to review the Companys bylaws, which contain additional advance notice requirements, including requirements with respect to advance notice of stockholder proposals and director nominations. For further information see page 7.
The Company has adopted a code of ethics that applies to all QUALCOMM employees, including employees of QUALCOMMs subsidiaries, as well as each member of the Board. The code of ethics is available at the Companys website at http://investor.qualcomm.com/documentdisplay.cfm?DocumentID=458. To date, there have not been any waivers by the Company of the code of ethics. Any amendments to, or waivers under, the code of ethics which are required to be disclosed by the rules of the Securities Exchange Commission (SEC) will be disclosed on the Companys website at http://investor.qualcomm.com/governance.cfm.
The Companys Restated Certificate of Incorporation and Bylaws provide that at the 2007 Annual Meeting, the successors of the directors whose terms expire at that meeting shall be elected for a term expiring at the 2008 annual meeting of stockholders. At the 2008 annual meeting of stockholders, all directors shall be elected for a term expiring at the 2009 annual meeting of stockholders. At each annual meeting of stockholders thereafter, the directors shall be elected for terms expiring at the next annual meeting of stockholders. Vacancies on the Board resulting from death, resignation, disqualification, removal or other causes may be filled by either the affirmative vote of the holders of a majority of the then-outstanding shares of common stock or by the affirmative vote of a majority of the remaining directors then in office, even if less than a quorum of the Board. Newly created directorships resulting from any increase in the number of directors may, unless the Board determines otherwise, be filled only by the affirmative vote of the directors then in office, even if less than a quorum of the Board. Any director elected in accordance with a vacancy shall hold office for a term expiring at the next annual meeting of stockholders and until such directors successor shall have been elected and qualified.
The Companys Restated Certificate of Incorporation provides that the number of directors shall be fixed exclusively by one or more resolutions adopted from time to time by the Board. As part of its annual evaluation of its size, the Board, upon the recommendation of its Governance Committee, has decided to reduce the number of its members by four and, as a result, has adopted a resolution reducing the size of the Board to 11 directors effective as of the time stockholders vote on the election of directors at the Annual Meeting. Six seats on the Board, currently held by Barbara T. Alexander, Raymond V. Dittamore, Irwin Mark Jacobs, Sherry Lansing, Peter M. Sacerdote and Marc I. Stern, have terms expiring as of the Annual Meeting and these directors will stand for re-election at the Annual Meeting as nominees proposed by the Board.
If a quorum is present, the directors will be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. Abstentions and broker non-votes have no effect on the vote. The six candidates receiving the highest number of affirmative votes of the shares
of common stock entitled to be voted for such directors will be elected directors of the Company. Shares of common stock represented by executed proxies will be voted, if authority to do so is not withheld, for the election of the six nominees named below. In the event that any nominee should be unavailable for election as a result of an unexpected occurrence, such shares of common stock will be voted for the election of such substitute nominee as the Board may propose. Each person nominated for election has agreed to serve if elected, and the Board has no reason to believe that any nominee will be unable to serve.
The following table sets forth, for the Companys directors continuing in office beyond this meeting and the nominees for election at this meeting, information with respect to their ages and background.
Set forth below is biographical information for each person nominated and each person whose term of office as a director will continue after the Annual Meeting.
Nominees for Election at this Meeting
Barbara T. Alexander, age 58, became a Director of the Company in July 2006. Ms. Alexander has been an independent consultant since February 2004. From October 1999 to January 2004 she was a Senior Advisor for UBS, and from January 1992 to September 1999 she was a Managing Director of Dillon Read & Co., Inc. In 1987, Salomon Brothers Inc. appointed Ms. Alexander the first female managing director in the companys history. She currently serves on the boards of Harrahs Entertainment, Centex Corporation and Freddie Mac. Ms. Alexander is a visiting fellow at the Joint Center for Housing Studies at Harvard University, has served on the boards of Habitat for Humanity International and Covenant House, and currently serves on the board of HomeAid America. She is a graduate of the University of Arkansas, Fayetteville, where she earned B.S and M.S. degrees in theoretical mathematics.
Raymond V. Dittamore, age 63, has served as a Director of the Company since December 2002. Mr. Dittamore is a retired audit partner of Ernst & Young LLP, an international accounting firm. Mr. Dittamore retired in 2001 after 35 years of service with that firm, including 14 years as the managing partner of the firms San Diego office. Mr. Dittamore is also a director of Invitrogen Corporation, Gen-Probe Incorporated, and Digirad Corporation. Mr. Dittamore received a B.S. degree from San Diego State University.
Irwin Mark Jacobs, age 73, one of the founders of the Company, has served as Chairman of the Board of Directors since it began operations in July 1985. He also served as Chief Executive Officer of the Company from
July 1985 to June 2005. Dr. Jacobs received a B.S. degree in Electrical Engineering from Cornell University and M.S. and Sc.D. degrees from the Massachusetts Institute of Technology. Dr. Irwin Jacobs is the father of Dr. Paul Jacobs, our Chief Executive Officer, and Jeffrey A. Jacobs, President of QUALCOMM Global Development.
Sherry Lansing, age 62, became a Director of the Company in September 2006. Ms. Lansing is the founder and chair of the Sherry Lansing Foundation, a philanthropic organization focusing on cancer research, health and education. From 1992 to 2005, she was the chair of the Motion Picture Group of Paramount Pictures where she oversaw the release of more than 200 films, including Academy Award® winners Forrest Gump, Braveheart and Titanic. From 1984 to 1990, she operated her own production company, Lansing Productions and co-founded Jaffe/Lansing Productions. In 1980, she became the film industrys first female to oversee all aspects of a studios motion picture production when she was appointed president of production at 20th Century Fox. She holds additional trustee, chair and advisory positions with the Friends of Cancer Research, the American Association of Cancer Research, the American Red Cross Board of Governors, the Carter Center and Stop Cancer, a non-profit philanthropic group she founded in partnership with Dr. Armand Hammer. Ms. Lansing also is a regent of the University of California and serves as chair of the University Health Services Committee. She has earned the Woodrow Wilson Award for Corporate Citizenship, the Distinguished Community Service Award from Brandeis University, the Alfred P. Sloan, Jr. Memorial Award, the Horatio Alger Humanitarian Award and an honorary doctorate in fine arts from the American Film Institute. She received her B.S. degree from Northwestern University.
Peter M. Sacerdote, age 69, became a Director of the Company in October 1989. Mr. Sacerdote has been the Chairman of Whale Rock Capital Management LLC, a hedge fund management company, since April 2006. From May 1999 until April 2006, he was an advisory director of Goldman, Sachs & Co. where he also served as chairman of the Investment Committee of its Principal Investment Area. In the five years prior to that time, he served as a limited partner of Goldman, Sachs Group, L.P. Mr. Sacerdote also serves as a director of Franklin Resources, Inc, a mutual fund management company and registered investment advisor and is a senior director of Goldman, Sachs & Co. Mr. Sacerdote received a B.E.E. degree from Cornell University and a M.B.A. degree from the Harvard Graduate School of Business Administration.
Marc I. Stern, age 62, became a Director of the Company in February 1994. Mr. Stern is the Chairman of Société Générales Global Investment Management and Services (GIMS) North America unit. Prior to his appointment as Chairman of GIMS North America in September 2005, Mr. Stern served as president and a director of The TCW Group Inc. (TCW), an asset management firm based in Los Angeles. Société Générale acquired majority control of TCW in 2001. In addition to his role at GIMS, Mr. Stern is Vice Chairman of TCW. From 1988 to 1990, Mr. Stern served as president and a director of SunAmerica, Inc., a financial services company. Prior to joining SunAmerica, Mr. Stern was managing director and chief administrative officer of The Henley Group, Inc., a diversified manufacturing company, and prior thereto was senior vice president of Allied-Signal Inc., a diversified manufacturing company. Mr. Stern is also a director of TCW Funds, Inc., a registered investment company. Mr. Stern received a B.A. degree from Dickinson College, a M.A. degree from the Columbia University Graduate School of Public Law and Government and a J.D. degree from the Columbia University School of Law.
Directors Whose Terms Continue Until the 2008 Annual Meeting
Sir Donald Gordon Cruickshank, age 64, has served as a Director of the Company since June 2005. He was Chairman of Clinovia Group Ltd. from 2004 to 2006 and Formscape Group Ltd. from 2003 to 2006 and has been a member of the Financial Reporting Council, the body responsible in the U.K. for oversight of the Accountancy and Actuarial professions and for corporate governance standards, since 2002. Sir Donald has extensive experience in a number of areas, including European regulation and telecommunications. His career has included assignments at
McKinsey & Co. Inc., Times Newspapers, Virgin Group plc., Wandsworth Health Authority and the National Health Service in Scotland. Sir Donald served as Chairman of the London Stock Exchange plc. from 2000 to 2003 and as Director General of the U.K.s Office of Telecommunications (Oftel) from 1993 to 1998. From 1997 to 2000 he served as Chairman of Action 2000, the U.K.s Millennium Bug campaign. In 1998, Chancellor Gordon Brown appointed him as Chairman of the Governments Review of the U.K. banking sector and from 1999 to 2004, he served as Chairman of SMG plc. one of Scotlands leading broadcasters. Sir Donald is a member of the Institute of Chartered Accountants of Scotland and has received M.A. and L.L.D. degrees from the University of Aberdeen, and a M.B.A. degree from Manchester Business School.
Paul E. Jacobs, age 44, has served as a Director since June 2005 and as the Companys Chief Executive Officer since July 2005. He served as Group President of the QUALCOMM Wireless & Internet Group from July 2001 to June 2005. In addition, he served as an Executive Vice President from February 2000 to June 2005. Dr. Jacobs holds a B.S. degree in Electrical Engineering and Computer Science, a M.S. degree in Electrical Engineering and a Ph.D. degree in Electrical Engineering and Computer Science from the University of California, Berkeley. Dr. Paul Jacobs is the son of Dr. Irwin Mark Jacobs, Chairman of QUALCOMMs Board, and the brother of Jeffrey A. Jacobs, President of QUALCOMM Global Development.
Robert E. Kahn, age 68, became a Director of the Company in February 1997. Dr. Kahn is chairman, chief executive officer and president of the Corporation for National Research Initiatives (CNRI), which he founded in 1986. From 1972 to 1985, Dr. Kahn was employed at the U.S. Defense Advanced Research Projects Agency, where his last position was director of the Information Processing Techniques Office. From 1966 to 1972, Dr. Kahn was a senior scientist with Bolt Beranek and Newman, where he was responsible for the system design of the Arpanet, the first packet switched network. Dr. Kahn received numerous awards for his pioneering work on the Internet for which he received the 1997 National Medal of Technology and the 2005 Presidential Medal of Freedom. Dr. Kahn received a B.E.E. degree from the City College of New York and M.A. and Ph.D. degrees from Princeton University. Dr. Kahn holds numerous honorary degrees and is a member of the National Academy of Engineering and an Inductee of the National Inventors Hall of Fame.
Duane A. Nelles, age 63, a certified public accountant, became a Director of the Company in August 1988. Mr. Nelles has been in the personal investment business since 1987. Prior to that time, Mr. Nelles was a partner in the international public accounting firm of Coopers & Lybrand, LLP, which he joined in 1968. He received a B.A. degree from Albion College and a M.B.A. degree from the University of Michigan.
Brent Scowcroft, age 81, became a Director of the Company in December 1994. General Scowcroft is the president of The Scowcroft Group, Inc., an international business consulting firm he founded in June 1994. General Scowcroft is also the president of The Forum for International Policy, a non-profit organization he founded in 1993 that promotes American leadership and foreign policy. General Scowcroft served as Assistant to the President for National Security Affairs for President George H.W. Bush from January 1989 until January 1993; he also held that position for President Ford during his term. A retired U.S. Air Force lieutenant general, General Scowcroft served in numerous national security posts in the Pentagon and the White House prior to his appointments as Assistant to the President for National Security Affairs. General Scowcroft received a B.S. degree from West Point and M.A. and Ph.D. degrees from Columbia University and holds numerous honorary degrees.
If a quorum is present and voting, the six nominees for director receiving the highest number of votes will be elected as directors. Abstentions and broker non-votes will each be counted as present for purposes of determining the presence of a quorum, but will not have any effect on the outcome of the vote.
THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF EACH NAMED NOMINEE.
During the fiscal year ended September 24, 2006, the Board held seven meetings. Raymond V. Dittamore has acted as the Companys presiding independent director since the Board meeting immediately following the 2006 stockholders meeting. The Board currently has an Audit Committee, a Compensation Committee, a Governance Committee, a Finance Committee and a Strategic Committee. Committee assignments are re-evaluated annually and approved by the Board at its annual meeting that follows the annual meeting of stockholders in February or March of each year.
The Audit Committee. The Audit Committee meets at least quarterly with the Companys management and independent accountants to, among other things, review the results of the annual audit and quarterly reviews and discuss the financial statements, select and engage the independent accountants, assess the adequacy of the Companys staff, management performance and procedures in connection with financial controls and receive and consider comments as to internal controls. The Audit Committee acts pursuant to a written charter adopted by the Board. The charter is available on the Companys website at http://investor.qualcomm.com/documentdisplay.cfm?DocumentID=463. At the beginning of fiscal 2006, the Audit Committee was composed of Messrs. Nelles (Committee Chair) and Dittamore, and Dr. Atkinson and met six times during the fiscal year. Ms. Alexander joined the Audit Committee in September 2006. The Board has determined that all four members are audit committee financial experts as defined by SEC rules. All of the members of the Audit Committee are independent directors within the meaning of Rule 4200 of the National Association of Securities Dealers, Inc. (NASD) and SEC Rule 10A-3(b)(1)(ii). With respect to the determination of independence of Mr. Nelles under NASD Rule 4200, the Board considered the employment by the Company of Mr. Nelles two sons in non-executive officer positions that did not involve key strategic roles, as described below under the heading Certain Transactions. The Board also considered Mr. Nelles track record of decision-making and determined that the employment of Mr. Nelles sons had not interfered and would not interfere with the exercise of Mr. Nelles independent judgment in carrying out his duties as a director.
The Compensation Committee. The Compensation Committee makes recommendations concerning salaries and incentive compensation, administers and approves stock offerings under the Companys 1996 Non-Qualified Employee Stock Purchase Plan and the 2001 Employee Stock Purchase Plan (collectively, the Employee Stock Purchase Plans), administers the Companys 1991 Stock Option Plan, 2001 Stock Option Plan and 2006 Long-Term Incentive Plan (collectively, the Stock Option Plans) and otherwise determines compensation levels for the Chief Executive Officer, the Named Executive Officers (as listed in the Summary Compensation Table), the directors and other key employees and performs such other functions regarding compensation as the Board may delegate. The Compensation Committee acts pursuant to a written charter adopted by the Board. The charter is available on the Companys website at http://investor.qualcomm.com/documentdisplay.cfm?DocumentID=462. At the beginning of fiscal 2006, the Compensation Committee was composed of Messrs. Dittamore (Committee Chair) and Stern and Dr. Atkinson. General Scowcroft joined the Compensation Committee during the fiscal year. The Compensation Committee met five times during the 2006 fiscal year. All of the members of the Compensation Committee are independent directors within the meaning of Rule 4200 of the NASD and outside directors within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended.
The Governance Committee. The Governance Committee reviews, approves and oversees various corporate governance related policies and procedures applicable to the Company. The Committee also reviews and evaluates the effectiveness of the Companys executive development and succession planning processes, as well as provides active leadership and oversight with respect to these processes. In addition, the Committee evaluates and recommends nominees for membership on the Companys Board and its committees. The Governance Committee acts pursuant to a written charter adopted by the Board. The charter is available on the Companys website at http://investor.qualcomm.com/documentdisplay.cfm?DocumentID=461. At the beginning of fiscal 2006, the Governance Committee was
composed of Messrs. Stern (Committee Chair), Nelles and Sacerdote, Sir Donald Cruickshank, General Scowcroft, and Dr. Kahn. General Scowcroft, Dr. Kahn and Mr. Nelles were reassigned to other committees during the fiscal year. The Governance Committee met seven times during the 2006 fiscal year. All of the members of the Governance Committee are independent directors within the meaning of Rule 4200 of the NASD.
The Finance Committee. The Finance Committee reviews the Companys financial position, cash management, dividend and stock repurchase programs, securities issuances, acquisitions and other major strategic investment decisions. The Finance Committee acts pursuant to a written charter adopted by the Board. The charter is available on the Companys website at http://investor.qualcomm.com/documentdisplay.cfm?DocumentID=464. At the beginning of fiscal 2006, the Finance Committee was composed of Messrs. Sacerdote (Committee Chair) and Sulpizio, and Ambassador Dougan. During the fiscal year, Ms. Coffman and Mr. Nelles joined the Finance Committee. The Finance Committee met seven times during the 2006 fiscal year.
The Strategic Committee. The Strategic Committee monitors the development and implementation of the Companys business and research and development strategies. It works with management in identifying and developing Board focus on issues and recommendations which will further the Companys long and short term strategic planning. The Strategic Committee acts pursuant to a written charter adopted by the Board. The charter is available on the Companys website at http://investor.qualcomm.com/documentdisplay.cfm?DocumentID=465. At the beginning of fiscal 2006, the Strategic Committee was composed of Ambassador Dougan (Committee Chair), Drs. Irwin Mark Jacobs and Kahn, Mr. Sulpizio and General Scowcroft. During the year, Dr. Irwin Mark Jacobs became Committee Chair and Dr. Paul E. Jacobs joined the Strategic Committee. The Strategic Committee met four times during the 2006 fiscal year.
During the fiscal year ended September 24, 2006, each Board member attended at least 75% of the aggregate of the meetings of the Board, and of the committees on which he or she served, held during the period for which he or she was a Board or Committee member, respectively.
The Companys Bylaws contain provisions which address the process by which a stockholder may nominate an individual to stand for election to the Board at the Companys annual meeting of stockholders. The Board has also adopted a formal policy concerning stockholder recommendations of Board candidates to the Governance Committee. This policy is set forth in the Companys Corporate Governance Principles and Practices, which is available on the Companys website at http://investor.qualcomm.com/documentdisplay.cfm?DocumentID=460. Under this policy the Governance Committee will review a reasonable number of candidates recommended by a single stockholder who has held over 1% of the Companys stock for over one year and who satisfies the notice, information and consent requirements set forth in the Companys Bylaws. To recommend a nominee for election to the Board, a stockholder must submit his or her recommendation to the Corporate Secretary at the Companys corporate offices at 5775 Morehouse Drive, N-510F, San Diego, California 92121-1714. A stockholders recommendation must be received by the Company prior to the date set forth above under Stockholder Proposals. A stockholders recommendation must be accompanied by the information with respect to stockholder nominees as specified in the bylaws, including among other things, the name, age, address and occupation of the recommended person, the proposing stockholders name and address and the number of shares beneficially owned by the stockholder. The proposing stockholder must also provide evidence of owning the requisite shares of Company stock for over one year. Candidates so recommended will be reviewed using the same process and standards for reviewing Governance Committee recommended candidates.
In evaluating director nominees, the Governance Committee considers the following factors:
The Governance Committees goal is to assemble a Board that brings to the Company a variety of perspectives and skills derived from high quality business and professional experience. In doing so, the Governance Committee also considers candidates with appropriate non-business backgrounds.
Other than the foregoing there are no stated minimum criteria for director nominees, although the Governance Committee may also consider such other factors as it may deem are in the best interests of the Company and its stockholders. The Governance Committee does, however, believe it appropriate for at least one, and preferably several, members of the Board to meet the criteria for an audit committee financial expert as defined by SEC rules, and that a majority of the members of the Board meet the definition of independent director under NASD rules. The Governance Committee also believes it is in the stockholders best interest for certain key members of the Companys current and former management to participate as members of the Board.
The Governance Committee identifies nominees by first evaluating the current members of the Board willing to continue in service. Current members of the Board with skills and experience that are relevant to the Companys business and who are willing to continue in service are considered for re-nomination, balancing the value of continuity of service by existing members of the Board with that of obtaining a new perspective. If any member of the Board does not wish to continue in service or if the Governance Committee or the Board decides not to re-nominate a member for re-election, the Governance Committee identifies the desired skills and experience of a new nominee based on the criteria above. Current members of the Governance Committee and Board are polled for suggestions as to individuals meeting the criteria of the Governance Committee. Research may also be performed to identify qualified individuals. The Company has, in the past, engaged a third party to identify and evaluate potential nominees.
The Company has also adopted a Majority Voting policy as a part of its Corporate Governance Principles and Practices. Under this policy, if a director receives in an uncontested election a greater number of withhold votes than votes cast for his or her election, the Governance Committee will undertake a prompt evaluation of the appropriateness of the directors continued service on the Board. In performing this evaluation, the Governance Committee will review all factors it deems relevant, including the stated reasons why votes were withheld, the directors length of service, his or her past contributions to the Company and the availability of other qualified candidates. The Governance Committee will then make its recommendation to the Board. The Board will review the Governance Committees recommendation and consider such further factors and information as it deems relevant. Under this policy, the Governance Committee will make its recommendation and the Board will act on the Governance Committees recommendation no later than 90 days following the date of the stockholders meeting. If the Board determines remedial action is appropriate, the director shall promptly take whatever action is requested by the Board. If the director does not promptly take the recommended remedial action or if the Board determines that immediate resignation is in the best interests of the Company and its stockholders, the director shall promptly tender his or her resignation upon request from the Board. The Company will publicly disclose the Boards decision within four business days by filing a Current Report on Form 8-K with the SEC, providing an explanation of the process by which the decision was reached, and, if applicable, the reason for not requesting the directors resignation. The director in question will not participate in the Governance Committees or the Boards analysis.
The Company has adopted stock ownership guidelines for its non-employee directors and executive officers to help ensure that they each maintain an equity stake in the Company, and by doing so, appropriately link their interests with those of the other stockholders. The guideline for executive officers is based on a multiple of the executives base salary, ranging from two to five times, with the size of the multiple based on the individuals
position. Only shares actually owned (as shares or as deferred units) count towards the requirement. Executives are required to achieve these stock ownership levels within five years of becoming an executive, or (in the case of persons who were executive officers at the time these guidelines were adopted) by September 2011. For non-employee directors, the guideline is three times the annual cash retainer for Board service. Non-employee directors are required to achieve this ownership level within five years of joining the Board, or (in the case of non-employee directors serving on the Board at the time the guidelines were adopted) by September 2011. In addition to the preceding ownership guidelines, all directors are expected to own shares of the Companys common stock within one year of joining the Board.
The Company has adopted a formal process for stockholder communications with the Board. This process is also set forth in the Companys Corporate Governance Principles and Practices. Stockholders who wish to communicate to the Board should do so in writing to the following address:
[Name of Director(s) or Board of Directors]
Attn: General Counsel
5775 Morehouse Drive, N-510F
San Diego, California 92121-1714
The Companys General Counsel logs all such communications and forwards those not deemed frivolous, threatening or otherwise inappropriate to the Chair of the Governance Committee for distribution.
The Companys Corporate Governance Principles and Practices sets forth a policy on director attendance at annual meetings. Directors are encouraged to attend absent unavoidable conflicts. All of the then-sitting directors attended the Companys last annual meeting.
The Board has determined that, except as noted below, all of the members of the Board are independent directors within the meaning of Rule 4200 of the NASD. Dr. Irwin Mark Jacobs and Dr. Paul E. Jacobs are not considered independent because both are employed by the Company as executive officers, and Dr. Irwin Mark Jacobs son and Dr. Paul E. Jacobs brother Jeffrey A. Jacobs is the President of QUALCOMM Global Development and an executive officer. Mr. Richard Sulpizio is not considered independent because of his recent employment relationships with the Company and its subsidiary, MediaFLO USA, Inc.
The Audit Committee of the Board has selected PricewaterhouseCoopers LLP as the Companys independent accountants for the fiscal year ending September 30, 2007, and the Board has directed that management submit the selection of independent accountants for ratification by the stockholders at the Annual Meeting. PricewaterhouseCoopers LLP has audited the Companys consolidated financial statements since the Company commenced operations in 1985. Representatives of PricewaterhouseCoopers LLP are expected to be present at the Annual Meeting, will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions.
Stockholder ratification of the selection of PricewaterhouseCoopers LLP as the Companys independent accountants is not required by the Companys Bylaws or otherwise. However, the Board is submitting the selection of PricewaterhouseCoopers LLP to the stockholders for ratification as a matter of good corporate practice. If the stockholders fail to ratify the selection, the Audit Committee will reconsider whether or not to retain that firm. Even if the selection is ratified, the Audit Committee in its discretion may direct the appointment of a different
independent accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and its stockholders.
The following table presents fees for professional services rendered by PricewaterhouseCoopers LLP for the audit of the Companys annual financial statements for the years ended September 24, 2006 and September 25, 2005 and fees for other services rendered by PricewaterhouseCoopers LLP during those periods. Certain prior year amounts have been reclassified to conform to the current year presentation.
Fees for accounting services rendered by other professional service firms during fiscal 2006 and 2005 were $6,391,000 and $5,337,000, respectively.
The Audit Committees policy is to pre-approve all audit and non-audit services provided by the independent accountants. These services may include audit services, audit-related services, tax fees, and other services. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is subject to a specific budget. The Audit Committee has delegated pre-approval authority to certain committee members when expedition of services is necessary. The independent accountants and management are required to periodically report to the full Audit Committee regarding the extent of services provided by the independent accountants in accordance with this pre-approval delegation, and the fees for the services performed to date. None of the fees paid to the independent accountants during fiscal 2006 and 2005, under the categories Audit-Related and All Other fees described above were approved by the Audit Committee after services were rendered pursuant to the de minimis exception established by the SEC.
The affirmative vote of a majority of the votes cast at the meeting, at which a quorum is present, either in person or by proxy, is required to approve this proposal. Abstentions and broker non-votes will each be counted as present for purposes of determining the presence of a quorum but will not have any effect on the outcome of the proposal.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANYS INDEPENDENT ACCOUNTANTS FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 2007.
STOCK OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership of the Companys common stock as of December 15, 2006 by: (i) each director and nominee for director; (ii) each of the executive officers of the Company named in the Summary Compensation Table under Compensation of Executive Officers (the Named Executive Officers); and (iii) all executive officers and directors of the Company as a group. Based on currently available Schedules 13D and 13G filed with the SEC, the Company does not know of any beneficial owners of more than 5% of its common stock.
Section 16(a) of the Securities Exchange Act requires the Companys directors, executive officers and persons who own more than 10% of a registered class of the Companys equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company. Officers, directors and greater-than-10-percent stockholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file.
To the Companys knowledge, based solely on a review of the copies of such reports furnished to the Company and written representations that no other reports were required, during the fiscal year ended September 24, 2006, all Section 16(a) filing requirements were complied with except for the following: a gift reported late by Adelia A. Coffman; a sale of stock reported late by Jeffrey A. Jacobs; an option exercise reported late by Louis Lupin; and the sale of fractional shares reported late by Raymond V. Dittamore.
EXECUTIVE COMPENSATION AND OTHER MATTERS
Compensation of Directors
Only non-employee directors receive director fees. During fiscal 2006, each non-employee director received the following compensation:
The following table presents the compensation earned or paid by the Company to the non-employee directors for the fiscal year ended September 24, 2006.
Non-Employee Director Compensation Table
Beginning in calendar 2006, a non-employee director may elect to defer his or her cash fees under the Companys Executive Retirement Contribution Plan. Mr. Stern elected to defer all his cash fees in 2006.
When traveling from out-of-town, the members of the Board are also eligible for reimbursement for their travel expenses incurred in connection with attendance at Board meetings and Board committee meetings. The Company has encouraged directors to invite their spouses to the annual meeting of stockholders and has reimbursed travel expenses for spouses to attend that meeting. These amounts are not included in the table above. Employee directors do not receive any compensation for their participation in Board meetings or Board committee meetings.
Each non-employee director of the Company is eligible to participate in a charitable gifts matching program in which the Company will match (up to $50,000 annually) a non-employee directors contribution to a qualified, eligible Internal Revenue Service (IRS) recognized nonprofit organization.
Each non-employee director of the Company is eligible to receive stock option grants under the Companys 2006 Long-Term Incentive Plan (the 2006 LTIP) which replaced the 2001 Non-Employee Directors Stock Option Plan.
As part of the non-employee directors compensation program in effect at the beginning of fiscal 2006, the Compensation Committee granted initial options to purchase 40,000 shares of the Companys common stock to non-employee directors upon first joining the Board (except that a director who was an employee of the Company or certain related entities or designated affiliates and who subsequently becomes a non-employee director as a result of the termination of such employment shall not be eligible to receive an initial option) and annual options to purchase 18,000 shares of the Companys common stock at the time of each annual meeting to non-employee directors who continue to serve on the Board. A non-employee director who received an initial option within 270 days prior to the annual meeting was not eligible to receive such annual option.
All options granted have exercise prices equal to the fair market value of the underlying common stock on the date of grant and generally vest over five years. The term of all options is 10 years, but such options generally terminate 30 days after the optionee ceases to be a non-employee director, employee or consultant. In the event that an optionee terminates service due to the optionees (i) retirement at age 70 or older and after nine years of service on the Board or (ii) due to permanent and total disability as defined in Section 22(e)(3) of the Internal Revenue Code, the option will terminate only upon expiration of the option term. In the event that an optionee terminates service due to the optionees death or due to the optionees termination due to permanent and total disability or retirement and such termination is followed by death, the vesting of all unvested shares will be accelerated in full as of the date of the optionees death and the option may be exercised in full at any time within one year of such termination or upon the original expiration date, whichever is earlier. In addition to the foregoing, the vesting of options granted accelerates in connection with specified change of control transactions.
During the fiscal year ended September 24, 2006, under the 2006 LTIP, annual options to purchase an aggregate of 198,000 shares of the Companys common stock were granted to non-employee directors serving on the Board on March 7, 2006 (the annual meeting date) and initial options to purchase 40,000 shares of the Companys common stock were granted to Barbara T. Alexander and Sherry Lansing on July 31, 2006 and September 18, 2006, respectively, in connection with their appointment to the Board.
Early in fiscal 2007 the Compensation Committee approved the following changes, effective April 1, 2007, to the non-employee directors compensation program. The Committee:
a. Replaced the combination of an initial stock option award granted upon election to the Board and subsequent annual awards with a single annual award prorated in the first year of a directors service. The committee agreed to apply the previous option program to candidates who were under consideration for Board service at the time of the committees September 6, 2006 meeting.
b. Changed the vesting schedule of the annual grant from five-year graded vesting to a one-year cliff vesting with a requirement to hold options, or net shares after-tax, for at least three years following the grant (or for at least six months after leaving the Board, if sooner). Vested options remain exercisable until the sooner of three years following separation from the Board or the expiration of the ten-year option term. The change to the vesting schedule aligns that term with the Directors annual Board service. The longer post-Board service exercise period enhances director independence by neutralizing the effect of market timing on continued Board service decisions. The holding requirement supports the objective of aligning directors interests with those who intend long-term ownership participation in QUALCOMM stock.
c. Made the directors subject to stock ownership guidelines (see the earlier section Majority Voting, Stock Ownership Guidelines and Other Matters).
d. Increased the annual retainer from $50,000 to $100,000. Directors may elect to receive all, or a portion of the annual retainer (paid in four equal quarterly installments) in cash and/or in tax-deferred stock units under
the Companys 2006 LTIP. The number of stock units received will be calculated based on the fair market value of the Companys common stock (as defined by the 2006 LTIP) on the last trading day of the last month of the quarter. Stock units will generally settle three years from grant, unless further deferred. Directors may also defer their retainer under the Companys Executive Retirement Contribution Plan.
e. Increased Board committee chair retainers by $2,500 annually.
A comparison of the fiscal year 2006 and 2007 non-employee director compensation program follows.
Compensation of Executive Officers
Summary Compensation Table
The following table shows, for each of the three fiscal years ended September 24, 2006, September 25, 2005 and September 26, 2004 compensation awarded or paid to, or earned by the Named Executive Officers:
The following table contains information concerning the stock option grants made to each of the Named Executive Officers for the fiscal year ended September 24, 2006.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Values
The following table sets forth information concerning option exercises and option holdings by each of the Named Executive Officers for the fiscal year ended September 24, 2006.
Information about employee and executive stock option grants from fiscal 2003 through fiscal 2006 is as follows (number of shares in millions):
The following table sets forth information regarding outstanding options and shares reserved for future issuance under the equity compensation plans as of September 24, 2006 (number of shares in thousands):
None of the members of the Companys Compensation Committee are, or have been, an employee or officer of the Company. During fiscal 2006, no member of the Compensation Committee had any relationship with the
Company requiring disclosure under Item 404 of Regulation S-K. During fiscal 2006, none of the Companys executive officers served on the compensation committee (or equivalent) or Board of another entity whose executive officer(s) served on the Companys Compensation Committee or Board.
During fiscal 2006, the Company employed the family members of certain directors and executive officers described below. All of the following family members under the Companys employ were adults who did not live with the related director or executive officer. Each family member below is compensated according to standard Company practices, including participation in the Companys employee benefit plans generally made available to employees of a similar responsibility level. The Company does not view any of the directors or executive officers listed below as having a beneficial interest in the described transactions that is material to them or the Company. Moreover, none of the following directors or executive officers believe that they have a direct or indirect material interest in the employment relationships of the listed family members. Options described below were granted under the Companys 2001 Stock Option Plan or the 2006 Long-Term Incentive Plan and have a grant price that is equal to the fair market value on the date of grant. Such options vest according to the following schedule: 10% of the shares subject to the option vest on the six-month anniversary of the date of grant, with ratable monthly vesting over the remaining five-year vesting period. Generally, vesting is contingent upon continued service with the Company. Options granted under any of the Companys stock option plans generally have a maximum term of 10 years.
Dr. Paul E. Jacobs and Jeffrey A. Jacobs are the sons of Dr. Irwin Mark Jacobs, Chairman of the Board. Dr. Paul E. Jacobs was compensated as described above under the heading Executive Compensation and Other Matters. Dr. Irwin Mark Jacobs serves as the Companys Chairman of the Board. Dr. Irwin Mark Jacobs earned $650,755 in salary and bonus during fiscal 2006 and received a stock option grant for 200,000 shares of the Companys stock at an exercise price of $44.02 per share.
Jeffrey A. Jacobs serves as the Companys President, QUALCOMM Global Development. Jeffrey A. Jacobs earned $693,471 in salary and bonus during fiscal 2006 and received a stock option grant for 225,000 shares of the Companys stock at an exercise price of $44.02 per share.
Duane A. Nelles son Duane A. Nelles, III serves as a Senior Director, Business Development for the Company. Duane A. Nelles III earned $191,562 in salary and bonus during fiscal 2006 and received a stock option grant for 4,000 shares of the Companys stock at an exercise price of $41.70 per share and a second grant for 3,800 shares at an exercise price of $51.48 per share.
Duane A. Nelles son Paul Nelles serves as a Project Manager for the Company. Paul Nelles earned $75,131 in salary and bonus during fiscal 2006 and received a stock option grant for 700 shares of the Companys stock at an exercise price of $41.70 per share and a second grant for 710 shares at an exercise price of $51.48 per share.
Steven R. Altmans brother Jeffrey S. Altman serves as Senior Director, Business Development for the Company. Jeffrey S. Altman earned $171,297 in salary and bonus during fiscal 2006 and received a stock option grant for 4,200 shares of the Companys common stock at an exercise price of $41.70 per share and a second grant for 4,000 shares at an exercise price of $51.48 per share.
Dr. Daniel L. Sullivans daughter, Megan J. Sullivan, serves as a Staff Marketing Communications Coordinator for the Company. Dr. Sullivan is the Companys Executive Vice President, Human Resources. Megan J. Sullivan earned $72,950 in salary and bonus during fiscal 2006 and received a stock option grant for 500 shares of the Companys common stock at an exercise price of $41.70 per share and a second grant for 530 shares at an exercise price of $51.48 per share.
II. Total Rewards Program Objectives and Philosophy
The Company approaches compensation from a Total Rewards Program framework that includes cash, equity and benefits.
Management, the Committee and the Committees compensation consultants reviewed an initial list of companies meeting all the criteria and then modified the list to include other labor market competitors. The peer group companies include:
Mix of Target Total Direct Compensation Elements
Determining annual salary. Increases to annual salary reflect a reward and recognition for successfully fulfilling the positions role and responsibilities, the incremental value of the experience, knowledge, expertise and skills the individual acquires and develops during employment with QUALCOMM, and
adjustments to achieve desired cash-to-equity proportions within the Target TDC. Prevailing competitive market practices guide the percentage increases to annual salary. The annual salary for the CEO and the other executive officers is determined in conjunction with setting the TDC. The Committee and management also consider the competitive market for salary alone. The sum of the annual salary and resulting target bonus is, for the executive officers in aggregate, below the competitive median so that the Company can emphasize equity-based compensation within its compensation framework and desired total competitive positioning.
Determining cash bonus target. The annual target bonus for the CEO and the other executive officers is determined in conjunction with setting the TDC. The sum of the annual salary and target bonus is set to provide the equity-based compensation leverage the Company desires and consistent with the Companys Total Rewards Program.
The Committee determines the value of equity compensation awarded to the CEO and the other executive officers at the time of grant. The objective is to award grants that represent competitive value while taking in to account the relative performance risk and leverage in QUALCOMMs options-only equity structure. The Committee and management agree that in a competitive environment that is moving to less-risky RSUs, granting stock options at above-median competitive values is appropriate because the program delivers compensation value only if there is corresponding stockholder value.
To avoid income taxation for participants prior to the time of distribution, the Plans treat all deferrals, earnings and the stock match as QUALCOMM-owned. Trusts (commonly known as a rabbi trust) protect the assets from use by QUALCOMM for business purposes, or in the event of a change of control in the ownership of the Company. However, in case of financial insolvency, all the assets are subject to the claims of QUALCOMMs general creditors.
The Companys 2006 LTIP provides that if a change-in-control (as defined in the 2006 LTIP) occurs and an outstanding equity award is not assumed or replaced, QUALCOMM may accelerate the vesting and exercisability of the award, effective 10 days prior to the change-in-control.
Target Total Direct Compensation for 2007
The Target TDC for the CEO, Dr. Paul Jacobs is below the 75th percentile. The Target TDCs for Steven Altman, William Keitel and Roberto Padovani are at or below the 75th percentile. As noted above, management and the Committee recognize the unique value and contributions Dr. Jha brings to QUALCOMM, and his significant responsibility for QUALCOMMs revenue and earnings. Dr. Jha leads the QUALCOMM CDMA Technology (QCT) division that generates approximately 60% of QUALCOMMs revenue and approximately 30% of the Companys earnings before tax. The QCT division is a global organization with roughly 50% of QUALCOMMs employees. QCT represents a very significant factor in how investors value QUALCOMM. The Committee and management (with the concurrence of the Committees compensation consultants) agree that the comparisons used to benchmark competitive practices underestimate Dr. Jhas role at QUALCOMM. Accordingly, the Committee and management agreed to position Dr. Jhas Target TDC at 65% relative of the CEOs Target TDC.
Raymond V. Dittamore, Chair
Richard C. Atkinson
Marc I. Stern
The following is the report of the Audit Committee with respect to QUALCOMMs audited financial statements for the fiscal year ended September 24, 2006.
The purpose of the Audit Committee is to assist the Board in its general oversight of QUALCOMMs financial reporting, internal controls and audit functions. The Audit Committee Charter describes in greater detail the full responsibilities of the Committee and is included in this proxy statement as Appendix 1. The Audit Committee is comprised solely of independent directors as defined by the listing standards of National Association of Securities Dealers, Inc.
The Audit Committee has reviewed and discussed the consolidated financial statements with management and PricewaterhouseCoopers LLP, the Companys independent accountants. Management is responsible for the preparation, presentation and integrity of QUALCOMMs financial statements; accounting and financial reporting principles; establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)); establishing and maintaining internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)); evaluating the effectiveness of disclosure controls and procedures; evaluating the effectiveness of internal control over financial reporting; and evaluating any change in internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting. PricewaterhouseCoopers LLP is responsible for performing an independent audit of the consolidated financial statements and expressing an opinion on the conformity of those financial statements with accounting principles generally accepted in the United States of America, as well as expressing an opinion on (i) managements assessment of the effectiveness of internal control over financial reporting and (ii) the effectiveness of internal control over financial reporting.
Beginning in fiscal 2004 and continuing through fiscal 2006 (the third year of certification), management has implemented a process of documenting, testing and evaluating the Companys system of internal controls over financial reporting in accordance with the requirements of the Sarbanes-Oxley Act of 2002. The Audit Committee is kept apprised of the progress of the evaluation and provides oversight and advice to management. In connection with this oversight, the Audit Committee receives periodic updates provided by management and PricewaterhouseCoopers LLP at each regularly scheduled Audit Committee meeting. At a minimum, these updates occur quarterly. The Audit Committee also holds regular private sessions with PricewaterhouseCoopers LLP to discuss their audit plan for the year, and the results of their quarterly reviews and the annual integrated audit. At the conclusion of the process, management provides the Audit Committee with and the Audit Committee reviews a report on the effectiveness of the Companys internal control over financial reporting. The Audit Committee also reviewed the report of management contained in the Companys Annual Report on Form 10-K for the fiscal year ended September 24, 2006 filed with the SEC, as well as PricewaterhouseCoopers LLPs Report of Independent Registered Public Accounting Firm included in the Companys Annual Report on Form 10-K related to its integrated audit of QUALCOMMs fiscal 2006 (i) consolidated financial statements and financial statement schedule, (ii) managements assessment of the effectiveness of internal control over financial reporting and (iii) the effectiveness of internal control over financial reporting. The Audit Committee continues to oversee the Companys efforts related to its internal control over financial reporting and managements preparations for the evaluation.
QUALCOMM has an Internal Audit Department that reports directly to the Audit Committee. The Audit Committee reviews and approves the internal audit plan once a year and receives periodic updates of internal audit activity in meetings held at least quarterly throughout the year. Updates include discussion of audit project results, quarterly assessment of internal controls and risks of fraud.
The Audit Committee has discussed with PricewaterhouseCoopers LLP the matters required to be discussed by Statement on Auditing Standards No. 61, as amended, Communication with Audit Committees and PCAOB Auditing Standard No. 2, An Audit of Internal Control Over Financial Reporting Performed in Conjunction with an Audit of Financial Statements. In addition, PricewaterhouseCoopers LLP has provided the Audit Committee with the written disclosures and the letter required by the Independence Standards Board Standard No. 1, as amended, Independence Discussions with Audit Committees, and the Audit Committee has discussed with PricewaterhouseCoopers LLP their firms independence.
Based on its review of the consolidated financial statements and discussions with management and PricewaterhouseCoopers LLP referred to above, the Audit Committee recommended to the Board that the audited financial statements be included in QUALCOMMs Annual Report on Form 10-K for fiscal year 2006, for filing with the Securities and Exchange Commission.
In accordance with Audit Committee policy and the requirements of law, the Audit Committee pre-approves all services to be provided by QUALCOMMs independent registered public accounting firm PricewaterhouseCoopers LLP. Pre-approval is required for audit services, audit-related services, tax services and other services. In some cases, the full Audit Committee provides pre-approval for up to a year, related to a particular defined task or scope of work and subject to a specific budget. In other cases, a designated member of the Audit Committee may have delegated authority from the Audit Committee to pre-approve additional services, and such pre-approval is later reported to the full Audit Committee. See Fees Paid to PricewaterhouseCoopers LLP for Professional Services for more information regarding fees paid to PricewaterhouseCoopers LLP for services in fiscal years 2006 and 2005.
Duane A. Nelles, Chair
Barbara T. Alexander
Richard C. Atkinson
Raymond V. Dittamore
The following graph compares total stockholder return on the Companys common stock since September 30, 2001 to two indices: the Standard & Poors 500 Stock Index (the S&P 500) and the Nasdaq Total Return Index for Communications Equipment Stocks, SIC 3660-3669 (the Nasdaq-Industry). The S&P 500 tracks the aggregate price performance of the equity securities of 500 U.S. companies selected by Standard & Poors Index Committee to include companies in leading industries and to reflect the U.S. stock market. The Nasdaq-Industry tracks the aggregate price performance of equity securities of communications equipment companies traded on the Nasdaq Stock Market. The total return for the Companys stock and for each index assumes the reinvestment of dividends, and is based on the returns of the component companies weighted according to their capitalizations as of the end of each annual period. The Company began paying dividends on the Company stock on March 31, 2003. The Companys common stock is traded on the Nasdaq Global Select Market and is a component of each of the S&P 500 and the Nasdaq-Industry.
The Companys closing stock price on September 24, 2006, the last trading day of the Companys 2006 fiscal year, was $37.86 per share.
The Board knows of no other matters that will be presented for consideration at the Annual Meeting. If any other matters are properly brought before the meeting, it is the intention of the persons named in the accompanying proxy to vote on such matters in accordance with their best judgment.
A copy of the Companys Annual Report on Form 10-K for the fiscal year ended September 24, 2006, as filed with the SEC, excluding exhibits, may be obtained by stockholders without charge by written request addressed to Investor Relations, 5775 Morehouse Drive, San Diego, California 92121-1714 or may be accessed on the Companys website at http://investor.qualcomm.com/sec.cfm?DocType=Annual&Year=.
In accordance with notices that the Company sent to certain stockholders, the Company is sending only one copy of its annual report and proxy statement to stockholders who share the same last name and address, unless they have notified the Company that they want to continue receiving multiple copies. This practice, known as householding, is designed to reduce duplicate mailings and save significant printing and postage costs as well as natural resources.
If you received a householded mailing this year and you would like to have additional copies of the Companys annual report and/or proxy statement mailed to you, or you would like to opt out of this practice for future mailings, please submit your request to Investor Relations via e-mail at email@example.com, by fax to (858) 651-9303 or by mail to Investor Relations, QUALCOMM Incorporated, 5775 Morehouse Drive, San Diego, California, 92121-1714 or call at (858) 658-4813. The Company will promptly send additional copies of the annual report and/or proxy statement upon receipt of such request. You may also contact the Company if you received multiple copies of the annual meeting materials and would prefer to receive a single copy in the future.
Unfortunately, householding for bank and brokerage accounts is limited to accounts within the same bank or brokerage firm. For example, if you and your spouse share the same last name and address, and you and your spouse each have two accounts containing QUALCOMM stock at two different brokerage firms, your household will receive two copies of the QUALCOMM annual meeting materials one from each brokerage firm. To reduce the number of duplicate sets of annual meeting materials your household receives, you may wish to enroll some or all of your accounts in the Companys electronic delivery program.
By Order of the Board of Directors
Paul E. Jacobs
Chief Executive Officer
January 19, 2007
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
The Audit Committee (the Committee) of the Board of Directors (the Board) of QUALCOMM Incorporated (the Company) was established to oversee the accounting and financial reporting processes of the Company and audits of the Companys financial statements. This charter specifies the scope of authority and responsibility of the Committee.
Committee Authority and Responsibilities
To fulfill its responsibilities and duties hereunder, the Committee shall:
General and Resources
The undersigned hereby appoints Paul E. Jacobs and Steven R. Altman, and each of them, as attorneys and proxies of the undersigned, with full power of substitution, to vote all of the shares of stock of QUALCOMM Incorporated (the Company) which the undersigned may be entitled to vote at the Annual Meeting of Stockholders of the Company to be held at Copley Symphony Hall, 750 B Street, San Diego, CA 92101, on Tuesday, March 13, 2007 at 9:30 a.m. local time and at any and all adjournments or postponements thereof, with all powers that the undersigned would possess if personally present, upon and in respect of the following matters and in accordance with the following instructions, with discretionary authority as to any and all other matters that may properly come before the meeting.
The shares represented by this proxy card will be voted as directed or, if this card contains no specific voting instructions, the shares will be voted in accordance with the recommendation of the Board of Directors.
YOUR VOTE IS IMPORTANT. If you will not be voting by telephone or the internet, you are urged to complete, sign, date and promptly return the accompanying proxy in the enclosed envelope, which is postage prepaid if mailed in the United States.
(Continued and to be signed on reverse side.)
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
QLCOM1 KEEP THIS PORTION FOR YOUR RECORDS
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1-2:
To withhold authority to vote for any individual nominee mark the Exceptions box and write the number(s) of the nominee(s) on the line below.
Please sign below, exactly as name or names appear on this proxy. If the stock is registered in the names of two or more persons, each should sign. When signing as attorney, executor, administrator, trustee, custodian, guardian or corporate officer, give full title. If more than one trustee, all should sign.
*** INVESTOR PROXY VOTING ALERT ***
As you may know, the rules for voting for the election of directors may be eliminated in the near future. Currently, your broker has discretion to vote on your behalf for the election of directors even if you fail to instruct your broker to vote your shares.
However, if discretionary voting on directors is abolished, your broker may no longer be allowed to vote on your behalf on the election of directors. It will be necessary for you to actually vote any proxies you receive in order for your vote to be counted.
We are reaching out to all of our stockholders to inform them of this important potential change to the broker voting rules. This change is significant and could cost your company additional time and money if you, our stockholders, do not take the time to vote your proxies as soon as they are received.
The quickest and easiest ways for you to vote your shares are by using the telephone or the Internet. We urge you to use these methods to vote your shares. Please check your voting form for instructions on how to vote using the telephone or Internet.
We urge you to vote the enclosed proxy even though this year your broker still has discretionary authority to vote your shares. As a reminder, please vote all management proxies you receive in the future to help save us time and money.
If you have any questions about this notice, please feel free to call our Proxy Solicitor, Morrow & Co., at 1-800-607-0088. Morrow will be able to answer any questions you may have about this important topic.
Your Board of Directors