<PAGE>
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
PEC ISRAEL ECONOMIC CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
PEC ISRAEL ECONOMIC CORPORATION
-----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JUNE 4, 1998
-----------------
To the Shareholders of PEC ISRAEL ECONOMIC CORPORATION:
The Annual Meeting of Shareholders of PEC Israel Economic Corporation will
be held at 511 Fifth Avenue, 17th Floor, New York, New York on June 4, 1998 at
2:00 P.M., for the following purposes:
1. To elect 11 directors for the ensuing year;
2. To transact such other business as may properly come before the
meeting.
The close of business on April 20, 1998 has been fixed as the record date
for the meeting. All holders of common stock at such date will be entitled to
vote at the meeting.
By Order of the Board of Directors,
JAMES I. EDELSON,
EXECUTIVE VICE PRESIDENT AND
SECRETARY
New York, New York
April 30, 1998
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING. PLEASE
SIGN, DATE AND MAIL YOUR PROXY PROMPTLY WHETHER OR NOT YOU EXPECT TO ATTEND THE
MEETING.
<PAGE>
PEC ISRAEL ECONOMIC CORPORATION
511 FIFTH AVENUE, NEW YORK, N.Y. 10017
PROXY STATEMENT
-----------------
The accompanying form of proxy is solicited on behalf of the Board of
Directors of PEC Israel Economic Corporation ("PEC" or the "Company") for use at
the annual meeting to be held June 4, 1998. Proxies in the accompanying form
which are properly executed and duly returned to PEC and not revoked will be
voted as directed. Proxies may be revoked at any time before they are voted by
delivery of a written notice of revocation or a subsequent proxy, or by
announcing such revocation at the meeting. Under Maine law and the Company's
Articles of Incorporation and By-Laws, if a quorum is present, directors are
elected by a plurality of the votes cast by the holders of the shares present in
person or represented by proxy at the meeting and entitled to vote on the
election of directors. A majority of the outstanding shares entitled to vote,
present in person or represented by proxy, constitutes a quorum. Shares
represented by proxies or ballots withholding votes from one or more directors
will not be counted in the election of that director but will be counted for
purposes of determining a quorum.
The only securities which are entitled to vote at the meeting are the shares
of common stock of PEC, each share of which has one vote. Only shareholders of
record at the close of business on April 20, 1998 are entitled to vote at the
meeting. As of April 20, 1998, there were outstanding and entitled to vote
18,362,188 shares of PEC common stock. This proxy statement is being distributed
to the shareholders commencing on or about April 30, 1998.
As of April 20, 1998, IDB Development Corporation Ltd. ("IDB Development")
owned 14,937,792 shares of PEC common stock, representing approximately 81.35%
of the outstanding shares. Approximately 71% of the voting securities of IDB
Development are owned by IDB Holding Corporation Ltd. ("IDB Holding"). For
information concerning these shareholdings and persons who, by reason of their
relationships to IDB Holding, may also be deemed to be beneficial owners of
these shares, see "Information as to Share Ownership."
ELECTION OF DIRECTORS
At the meeting, management will present a proposal to elect as directors the
11 nominees named below for the term of one year, and until their respective
successors have been elected and qualified. All of the nominees other than Mr.
Michael A. Recanati are currently serving as Directors of PEC for terms expiring
in June 1998. It is intended (unless such authority is withheld) that votes will
be cast pursuant to proxies hereby solicited for the nominees named below. If
for any presently unknown reason any of the nominees are unable to serve as a
director, another person or persons who may be nominated will be voted for at
the discretion of the proxy holders.
The following chart sets forth certain information with respect to each of
the nominees, including beneficial ownership of PEC common stock as of April 20,
1998.
1
<PAGE>
NOMINEES FOR ELECTION
<TABLE>
<CAPTION>
NUMBER AND PERCENTAGE OF
NAME, PRINCIPAL OCCUPATIONS YEAR FIRST SHARES OF PEC COMMON STOCK
DURING LAST 5 YEARS; BECAME A BENEFICIALLY OWNED AS OF
OTHER DIRECTORSHIPS* AGE DIRECTOR APRIL 20, 1998**
- ------------------------------------------------------------------ ------ ----------- -----------------------------------
<S> <C> <C> <C> <C>
OUDI RECANATI, Vice Chairman, PEC Israel Economic Corporation; 48 1996 -0-
Joint Managing Director of IDB Holding since November 1996;
Chairman, Y.L.R. Capital Markets Ltd., Investment Banking;
Chairman, Discount Investment Corporation Ltd.; Director, IDB
Development and Overseas Shipholding Group, Inc.(1)
FRANK J. KLEIN, President, PEC Israel Economic Corporation since 55 1994 1,200
January 1, 1995; Director, Elron Electronic Industries Ltd.,
Level 8 Systems, Inc., Scitex Corporation Ltd. and Super-Sol
Ltd. For more than 20 years prior to 1995, an officer of Israel
Discount Bank of New York (Executive Vice President from
December 1985 to December 1994)
ROBERT H. ARNOW, Chairman of the Board, Weiler Arnow Mgt. Co., 73 1988 3,900
Inc., Real Estate
ALAN R. BATKIN, Vice Chairman, Kissinger Associates, Inc., 53 1997 1,000
Geopolitical Consultants; Director, Hasbro, Inc.
JOSEPH CIECHANOVER, President, Atidim-Etgar Nihul Kranot B.M., 64 1980 2,000
General Partner, Investments; Chairman, El Al Israel Airlines
Ltd.; Director, IDB Holding and IDB Development; From 1980
through 1994, President, PEC Israel Economic Corporation
ELIAHU COHEN, Chairman of the Executive Committee of IDB Holding 65 1995 -0- (2)
since November 1996; Joint Managing Director of IDB Development;
Director, Discount Investment Corporation Ltd. and Super-Sol
Ltd. For more than 10 years prior to November 1996, Joint
Managing Director of IDB Holding
ALAN S. JAFFE, Partner, Proskauer Rose LLP, Attorneys, counsel to 58 1995 400 (3)
PEC Israel Economic Corporation
HERMANN MERKIN, Member, New York Stock Exchange, Inc. and American 90 1966 5,000
Stock Exchange, Inc.; Director, IDB Holding and Discount
Investment Corporation Ltd.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
NUMBER AND PERCENTAGE OF
NAME, PRINCIPAL OCCUPATIONS YEAR FIRST SHARES OF PEC COMMON STOCK
DURING LAST 5 YEARS; BECAME A BENEFICIALLY OWNED AS OF
OTHER DIRECTORSHIPS* AGE DIRECTOR APRIL 20, 1998**
- ------------------------------------------------------------------ ------ ----------- -----------------------------------
<S> <C> <C> <C> <C>
HARVEY M. MEYERHOFF, Chairman, Magna Holdings, Inc., Investments 71 1985 10,400
MICHAEL A. RECANATI, President, 511 Equities Corp., Investments, 40 -- -0-
since December 1997. From October 1995 until March 1997,
Chairman and Chief Executive Officer of IFusion Com Corp.,
developmental stage Internet technology corporation. For more
than five years prior to September 1995, Executive Vice
President and Treasurer of Overseas Shipholding Group, Inc.,
Shipping (1)(4)
ALAN S. ROSENBERG, Private Investor; From 1967 through 1994, 68 1992 5,000 (5)
Partner, Proskauer Rose LLP, Attorneys, counsel to PEC Israel
Economic Corporation
</TABLE>
- ------------------------
(1) Messrs. Oudi Recanati and Michael A. Recanati are brothers and the sons of
Mr. Raphael Recanati, the Chairman of the Board of PEC. See "Information as
to Share Ownership."
(2) Mr. Cohen owns 56,430 Ordinary "A" Shares of NIS 1.00 each of IDB
Development.
(3) Mr. Jaffe shares the power to vote and dispose of these shares with his
wife.
(4) On March 28, 1997, IFusion Com Corp. filed a voluntary petition under
Chapter 11 of the United States Bankruptcy Code.
(5) Includes 1,000 shares of PEC common stock owned by Mr. Rosenberg's wife. Mr.
Rosenberg disclaims beneficial ownership of these shares.
* IDB Development and IDB Holding are parent companies of PEC. Discount
Investment Corporation Ltd., Elron Electronic Industries Ltd., Level 8 Systems,
Inc., Scitex Corporation Ltd. and Super-Sol Ltd. are or may be deemed to be
affiliates of PEC.
** None of the nominees beneficially owns as much as 1% of the common stock of
PEC. Except as indicated for Messrs. Jaffe and Rosenberg, the amounts shown
represent shares of PEC common stock as to which the person has sole voting and
dispositive power. Four nominees for election to the Board of Directors are
presently members of the Board of Directors of IDB Holding. None of these four
nominees are considered by PEC to share voting and dispositive power with
respect to the shares of PEC beneficially owned by IDB Holding.
As of April 20, 1998, there were 37,666,364 Ordinary Shares of NIS 5.00 each
of IDB Holding issued and outstanding. One NIS (New Israel Shekel) was
equivalent to approximately $.27 on April 20, 1998. As of April 20, 1998, Mr.
Ciechanover beneficially owned 500 Ordinary Shares of IDB Holding, Mr. Cohen
beneficially owned 1,700 Ordinary Shares of IDB Holding and Mr. Merkin
beneficially owned 4,173 Ordinary Shares of IDB Holding.
3
<PAGE>
Following a lengthy trial in Israel of 22 defendants, including IDB Holding,
the four largest Israeli banks, and members of their senior managements, IDB
Holding, all the banks, including Israel Discount Bank Limited ("IDBL") of which
IDB Holding was the parent, and all the management-defendants were convicted by
a district court of contravening certain provisions of that country's laws in
connection with activities that arose out of a program related to the regulation
of bank shares prior to 1984. Messrs. Eliahu Cohen and Oudi Recanati, who were
among the management-defendants, and IDB Holding categorically denied any
wrongdoing and appealed to the Supreme Court of Israel, which found that the
share regulation had been authorized and encouraged by high officials of the
Israeli Government, overturned the principal count of the indictments of the
management-defendants, and acquitted IDB Holding of all charges. The Court left
standing the lower court's finding that Mr. Eliahu Cohen, who was a principal
executive officer of IDBL, and Mr. Oudi Recanati, who was a member of that
bank's senior management, caused improper advice to be given in connection with
the sale of securities and that Mr. Eliahu Cohen caused false entries in
corporate documents, in contravention of Israeli laws. None of the activities in
question, which occurred more than 14 years ago, relate to or involve PEC or its
business in any way.
Messrs. Oudi Recanati and Cohen are the present members of the Nominating
Committee which recommends persons to the Board of Directors for nomination as
members of the Board of Directors and election as officers of PEC. The
Nominating Committee had one meeting during 1997, at which time its members were
Messrs. Raphael Recanati, Cohen and Rosenberg. The Nominating Committee will
consider nominees recommended by shareholders. Recommendations should be
submitted in writing to the Secretary of PEC prior to December 31 in each year.
PEC has a Compensation Committee of the Board whose principal functions are to
determine the salaries, bonuses and other compensation, if any, to be paid to
the officers of PEC. The present members of the Compensation Committee, which
held one meeting in 1997, are Messrs. Raphael Recanati, Cohen and Meyerhoff. PEC
also has an Audit Committee of the Board. The principal functions of the Audit
Committee are to recommend the independent auditors for the Company, review the
planned scope and results of audits and other services performed by the
auditors, review the auditors' recommendations with regard to internal controls
of the Company and review and make recommendations to the Board of Directors
with respect to financial and accounting matters generally. The present members
of the Audit Committee are Messrs. Jaffe and Rosenberg. The Audit Committee held
two meetings in 1997. PEC also has a Pension Committee of the Board. The
principal functions of the Pension Committee are to administer the Employees'
Retirement Plan of PEC and the investment of its assets. The present members of
the Pension Committee are Messrs. Klein and Rosenberg. During 1997, the Pension
Committee held one meeting. Two meetings of the Board of Directors and six
meetings of the Executive Committee of the Board of Directors were held in 1997.
The present members of the Executive Committee are Messrs. Raphael Recanati,
Oudi Recanati and Klein. All members of the Board of Directors, except Messrs.
Ciechanover, Cohen and Raphael Recanati attended during 1997 at least 75% of the
meetings of the Board of Directors and the Committees on which they serve.
DIRECTOR COMPENSATION
Directors of the Company who are not officers or employees of the Company or
its parent companies, IDB Holding or IDB Development, receive a director's fee
of $10,000 per year, payable semi-annually.
4
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid to, or earned by, the
executive officers of the Company during each of the Company's last three fiscal
years:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) COMPENSATION ($)
- ---------------------------------------------------------------- --------- ----------- ----------- ----------------
<S> <C> <C> <C> <C>
Frank J. Klein.................................................. 1997 420,000 53,000 220,812(1)
President 1996 420,000 53,000 220,025(1)
1995 400,000 53,000 159,354(1)
James I. Edelson................................................ 1997 220,000 15,000 9,818(2)
Executive Vice President, Secretary and 1996 205,000 15,000 8,835(3)
General Counsel 1995 195,000 10,000 6,240(4)
William Gold.................................................... 1997 170,000 -- 9,206(2)
Treasurer 1996 165,000 5,000 8,691(3)
1995 160,000 10,000 6,240(4)
</TABLE>
- --------------
(1) Consists of $209,353, $209,353 and $150,361 that the Company expensed in
1997, 1996 and 1995, respectively, pursuant to the supplemental retirement
arrangement described below, $4,334, $3,922 and $4,373 of insurance premiums
paid by the Company in 1997, 1996 and 1995, respectively, for term life
insurance and $7,125, $6,750 and $4,620 of matching contributions by the
Company in 1997, 1996 and 1995, respectively, under its Savings and
Investment Plan.
(2) Consists of $7,125 of matching contributions by the Company under its
Savings and Investment Plan and $2,693 and $2,081 of insurance premiums paid
by the Company for term life insurance for Messrs. Edelson and Gold,
respectively.
(3) Consists of $6,750 of matching contributions by the Company under its
Savings and Investment Plan and $2,085 and $1,941 of insurance premiums paid
by the Company for term life insurance for Messrs. Edelson and Gold,
respectively.
(4) Consists of $4,620 of matching contributions by the Company under its
Savings and Investment Plan and $1,620 of insurance premiums paid by the
Company for term life insurance.
Messrs. Klein, Edelson and Gold are participants in the Employees'
Retirement Plan of PEC. Under the Employees' Retirement Plan, an employee is
entitled to annual benefits equal to 2% of (a) his average salary for the five
highest consecutive years of credited service preceding retirement or (b)
$160,000 for 1997, whichever is lower, multiplied by the number of years of
credited service and without reduction for Social Security benefits received.
Mr. Klein has 30 years of credited service, all but three years of which is
service with a former affiliated employer (for which he received benefits under
that employer's plan which offset and reduce the payments due under the PEC
Plan). Messrs. Edelson and Gold currently have 6 years and 30 years,
respectively, of credited service.
5
<PAGE>
The following table sets forth the estimated annual pension payable under
the Employees' Retirement Plan upon retirement at age 65, to employees at
various salary levels and in representative years-of-service classifications:
<TABLE>
<CAPTION>
AVERAGE ESTIMATED ANNUAL PENSION
PAST BASED ON YEARS OF CREDITED SERVICE AT AGE 65
ANNUAL ----------------------------------------------
SALARY 10 YEARS 20 YEARS 30 YEARS 40 YEARS
- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
$ 125,000 $ 25,000 $ 50,000 $ 75,000 $ 100,000
150,000 30,000 60,000 90,000 120,000
175,000 35,000 70,000 105,000 140,000
200,000 40,000 80,000 120,000 160,000
225,000 45,000 90,000 135,000 180,000
250,000 50,000 100,000 150,000 200,000
300,000 60,000 120,000 180,000 240,000
350,000 70,000 140,000 210,000 280,000
400,000 80,000 160,000 240,000 320,000
450,000 90,000 180,000 270,000 360,000
500,000 100,000 200,000 300,000 400,000
</TABLE>
The annual pension payable to any employee under the Employees' Retirement Plan
may not exceed the limitations imposed for qualified plans under Federal law
(currently $130,000). However, under a supplemental arrangement made with Mr.
Klein, he will be entitled to receive a lump sum equivalent of additional annual
benefits equal to 1 1/2% of his average salary and bonus for the five highest
consecutive years of credited service preceding retirement (without any
limitation as to amount) multiplied by the number of years of credited service
reduced by his annual pension under the Employees' Retirement Plan (and further
reduced by retirement benefits from his former employer). For purposes of these
calculations, Mr. Klein's prior service with his former employer is included in
credited service.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
GENERAL
The Compensation Committee of the Board of Directors (the "Committee") is
responsible for establishing the levels of compensation for the executive
officers of the Company. Its present members are Raphael Recanati, Chairman, and
Eliahu Cohen and Harvey M. Meyerhoff, none of whom is a current or former
employee of the Company. Each year the Committee evaluates PEC's compensation
paid to its executive officers.
COMPENSATION PHILOSOPHY
The executive compensation philosophy of the Company is to provide
competitive levels of compensation that reward corporate and individual
performance and assist the Company in attracting, retaining and motivating
highly qualified executives. There is no specific formula pursuant
6
<PAGE>
to which any executive officer's compensation is established or adjusted. In
setting executive officer salaries and bonuses, the Committee considered the
recommendations of Mr. Klein, the Committee's own subjective evaluations of the
performance of those officers, the respective officers' length of service to the
Company, and the many duties performed by the Company's executive officers
because of the Company's small staff. The Committee also considered the
Company's performance, emphasizing performance over a period of several years
rather than a single year because PEC's business philosophy is to acquire
interests in companies that have attractive long-term growth potential even
though such investments may not offer current cash returns. The Committee did
not give particular weight to or quantify any one or more particular performance
factors.
COMPONENTS OF COMPENSATION
Compensation paid to the named executive officers, as reflected in the
foregoing Summary Compensation Table, consists primarily of base salary and
bonus. The amount of the employee's salary and bonus is a function of the
employee's officer position as well as individual performance and length of
service to the Company. In evaluating the Company's executive compensation
levels, the Committee reviewed information drawn from a variety of sources,
including published survey data, information gleaned from the media, and the
Company's own experience in recruiting and retaining executives.
BENEFIT PLANS
At various times in the past, the Company has adopted certain broad-based
employee benefit plans in which executive officers are permitted to participate
on the same terms as non-executive employees who meet applicable eligibility
criteria. Such plans include savings and investment (Section 401(k)), retirement
and life and health insurance plans.
COMPENSATION OF THE PRESIDENT
Mr. Klein's 1997 compensation is based on the same factors as are described
above for all executive officers pursuant to the Company's executive
compensation philosophy. Mr. Klein's compensation in 1997 reflects his personal
involvement in most of the companies in which PEC has equity holdings, the
Committee's subjective evaluation of Mr. Klein's contribution to the business
and management of the Company, and his experience as the Executive Vice
President of the Company from 1977 through 1991 and as an executive officer for
more than 20 years of the 14th largest commercial bank in New York State in
terms of deposits.
Section 162(m) of the Internal Revenue Code makes certain
non-performance-based compensation to executives of public companies in excess
of $1,000,000 non-deductible to the Company. At this time, it is not anticipated
that any executive officer of the Company will receive any such compensation in
excess of the limit in 1998. Therefore, to date, the Board of Directors has not
taken any action with respect to this limit. The Board of Directors will
continue to monitor this situation and will take appropriate action if it is
warranted in the future.
7
<PAGE>
The report of the Committee shall not be deemed to be "soliciting material"
or incorporated by reference by any general statement incorporating by reference
this Proxy Statement into any filing under the Securities Act of 1933, as
amended (the "1933 Act"), or under the Securities Exchange Act of 1934, as
amended (the "1934 Act"), except to the extent that the Company specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under such Acts.
Compensation Committee:
Raphael Recanati, CHAIRMAN
Eliahu Cohen
Harvey M. Meyerhoff
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Raphael Recanati presently is Chairman of the Company and Chairman of the
Compensation Committee. Mr. Recanati is not an employee of the Company and does
not receive any compensation from the Company. Mr. Recanati is Chairman and
Managing Director of IDB Holding and IDB Development.
IDB Development and a subsidiary of PEC are parties to an agreement under
which IDB Development provides advisory and other services, including accounting
services and obtaining and compiling financial information and reports, for an
annual fee of $130,000. PEC has an agreement with a subsidiary of IDB
Development, under which each party provides administrative services to the
other party and offers the other party equal participation in business
opportunities for a fee of 2 1/2% of the equity and long-term debt, invested by
the paying party in business opportunities initiated or initially presented by
the other party. In 1997, PEC paid the subsidiary of IDB Development
approximately $501,000 under this agreement. PEC has made investments in and
loans to affiliates of IDB Holding.
8
<PAGE>
PERFORMANCE GRAPH
The following graph compares for the five fiscal years beginning January 1,
1993 the yearly change in the year end stock price of PEC with the cumulative
total return (change in year end stock price plus reinvested dividends) of the
Standard & Poor's 500 Stock Index and an index composed of American Israeli
Paper Mills Limited (an Israeli industrial company), Ampal American Israel
Corporation (an American holding company that acquires interests in companies
located in Israel or related to Israel), Elron Electronic Industries Ltd. (an
Israeli holding company which is an affiliate of PEC that acquires interests in
high technology companies located in Israel or related to Israel), Etz Lavud
Ltd. (an Israeli industrial company) and Israel Land Development Company Ltd.
(an Israeli company that engages in the development and rental of real estate,
hotel management, insurance and publishing and other commercial media business)
(the "Peer Group Index"), all of which are publicly traded in the United States.
FIVE YEAR CUMULATIVE RETURN*
PEC, S&P 500 STOCK INDEX AND PEER GROUP INDEX
($100 INVESTED ON 12/31/1992)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PEC Israel
Economic Peer Group
Corporation S&P 500 Index
----------- ---------- -----------
<S> <C> <C> <C>
12/31/92 $ 100.000 $ 100.000 $ 100.000
12/31/93 112.108 110.062 147.459
12/31/94 102.242 111.517 90.388
12/31/95 86.547 153.388 80.904
12/31/96 60.090 188.592 82.157
12/31/97 77.579 251.490 102.127
</TABLE>
- ------------------------
* Assumes that the value of the investment in the Company's common stock and
each index was $100 on December 31, 1992 and that all dividends were
reinvested. The Peer Group Index has been weighted based on market
capitalization. In accordance with rules of the Securities and Exchange
Commission ("SEC"), the Company's performance graph does not constitute
"soliciting material" and is not incorporated by reference in any filings
with the SEC made pursuant to the 1933 Act or the 1934 Act.
9
<PAGE>
INFORMATION AS TO SHARE OWNERSHIP
The following table shows, as of April 20, 1998, the number of shares of PEC
common stock owned by directors who are not nominees for reelection, the
executive officers named in the Summary Compensation Table (other than Frank J.
Klein whose holdings of PEC common stock are listed under "Election of
Directors") and by all directors and executive officers as a group.
<TABLE>
<CAPTION>
NUMBER AND PERCENTAGE
OF SHARES OF PEC COMMON
STOCK BENEFICIALLY
NAME OF BENEFICIAL OWNER(1) OWNED AS OF APRIL 20, 1998
- ------------------------------------------------- -----------------------------
<S> <C>
Raphael Recanati................................. 14,937,792--81.35%(2)
James I. Edelson................................. 2,000(3)
William Gold..................................... 1,000(3)
Directors and Executive Officers as a Group 14,969,692--81.52%(4)
</TABLE>
- ------------------------
(1) Mr. Raphael Recanati is Chairman of the Board of the Company and Messrs.
Edelson and Gold are executive officers of the Company.
(2) Represents shares of PEC common stock as to which Mr. Raphael Recanati may
be deemed to share voting and dispositive power. As of April 20, 1998, Mr.
Raphael Recanati may be deemed to have shared the power to vote and direct
the disposition of (and therefore to have beneficially owned) 19,817,850.4
Ordinary Shares of IDB Holding (52.6% of the outstanding Ordinary Shares).
(3) None of the executive officers beneficially owns as much as 1% of the
outstanding common stock of PEC. The amount shown for Mr. Gold includes 500
shares of PEC common stock owned by Mr. Gold's wife. Mr. Gold disclaims
beneficial ownership of these shares. Except as indicated for Mr. Gold, the
amounts shown represent shares of PEC common stock as to which the person
has sole voting and dispositive power.
(4) Persons who are directors or executive officers have sole power to vote and
direct the disposition of 30,000 shares (less than 1% of the outstanding
shares of the Company) and share with other persons the power to vote and
direct the disposition of 14,939,692 shares (81.4% of the outstanding
shares).
Set forth below are the names and addresses of those entities or persons
that are known by the Company to own beneficially more than 5% of the shares of
PEC common stock, as reported to the Company.
As of April 20, 1998, IDB Development Corporation Ltd., "The Tower", 3
Daniel Frisch Street, Tel Aviv, Israel, directly owned 14,937,792 shares of PEC
common stock, constituting 81.35% of the outstanding PEC common stock. IDB
Holding, which owns approximately 71% of the voting securities of IDB
Development and has the same address as IDB Development, may, by reason of such
holdings, be deemed the beneficial owner of the PEC common stock held by IDB
Development. Accordingly, IDB Holding may be deemed a beneficial owner of an
aggregate of 14,937,792 shares, or 81.35% of the outstanding PEC common stock.
By reason of their positions with and control of voting
10
<PAGE>
shares of IDB Holding, Raphael Recanati, of New York, New York, and Eliane
Recanati, of Haifa, Israel, who are brother-in-law and sister-in-law, and Leon
Recanati, of Tel Aviv, Israel, and Judith Yovel Recanati, of Herzliya, Israel,
who are brother and sister, may each be deemed to share the power to direct the
voting and disposition of the outstanding shares of PEC common stock owned by
IDB Development and may each, under existing regulations of the Securities and
Exchange Commission, therefore be deemed a beneficial owner of these shares.
Leon Recanati and Judith Yovel Recanati are the nephew and niece of Raphael
Recanati and Eliane Recanati. Companies the Recanatis control hold approximately
52.6% of the outstanding Ordinary Shares of IDB Holding.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company's directors and officers and all beneficial owners of more than
10 percent of the Company's common stock are required to file reports with the
SEC relating to changes in their ownership of the Company's common stock. Mr.
Jaffe inadvertently filed late one report on Form 4 covering a purchase in 1997
of 400 shares of PEC common stock.
OTHER MATTERS
Representatives of Price Waterhouse LLP and Haft & Gluckman LLP, who were
the Company's auditors for 1997 and have been recommended by the Audit Committee
to the Board of Directors to be the Company's auditors for 1998, are expected to
be present at the meeting with the opportunity to make a statement if they so
desire and to respond to appropriate questions. Arthur Andersen LLP and Haft &
Gluckman LLP were the Company's auditors for 1996 and 1995. On April 16, 1997,
the Executive Committee of the Board of Directors, upon the recommendation of
the Audit Committee of the Board of Directors, decided not to reengage Arthur
Andersen LLP. The report of the Company's auditors on the Company's financial
statements for 1996 did not contain an adverse opinion or a disclaimer of
opinion and was not qualified or modified as to uncertainty, audit scope or
accounting principles. During 1996 and from January 1, 1997 through April 16,
1997, the Company and Arthur Andersen LLP did not have any disagreement on any
matter of accounting principles or practices, financial statement disclosure or
auditing scope or procedure.
The Board of Directors of PEC does not know of any other matters to be
brought before the meeting except those set forth in the notice thereof. If
other business is properly presented for consideration at the meeting, it is
intended that the proxies will be voted by the persons named therein in
accordance with their judgment. The cost of preparing this Proxy Statement and
all other costs in connection with this solicitation of proxies for the Annual
Meeting of Shareholders are being borne by PEC.
11
<PAGE>
1999 SHAREHOLDERS MEETING
The Board of Directors of PEC will consider proposals intended for inclusion
in the proxy materials relating to the next annual meeting of shareholders.
These proposals must be submitted to and received at PEC's office no later than
December 31, 1998 and must otherwise comply with applicable laws and
regulations.
By Order of the Board of Directors,
JAMES I. EDELSON,
EXECUTIVE VICE PRESIDENT AND
SECRETARY
New York, New York
April 30, 1998
12
<PAGE>
PROXY PROXY
PEC Israel Economic Corporation
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Oudi Recanati, Frank J. Klein and
James I. Edelson, and each of them, as Proxies, each with full power of
substitution, and hereby authorizes them to represent and to vote, as
designated on the reverse side, all the shares of common stock of PEC Israel
Economic Corporation held of record by the undersigned on April 20, 1998 at
the annual meeting of shareholders to be held on June 4, 1998 or any
adjournment thereof.
(continued and to be signed and dated on the reverse side)
FOLD AND DETACH HERE
<PAGE>
Please mark
your votes as /X/
indicated in
this example
1. ELECTION OF DIRECTORS O. Recanati, F. Klein, R. Arnow, A. Batkin,
J. Ciechanover, E. Cohen, A. Jaffe, H. Merkin,
H. Meyerhoff, M. Recanati, A. Rosenberg
FOR ALL WITHHOLD (INSTRUCTION: To withhold authority
NOMINEES AUTHORITY to to vote for any individual nominee
LISTED(except vote for all write that nominee's name on the
as marked to nominees listed line provided below.)
the contrary)
/ / / / -----------------------------------
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
This proxy when properly executed will be voted in the manner directed herein
by the undersigned shareholder. If no direction is made, this proxy will be
voted for the election of the nominees named in Proposal 1. If more than one
of said proxies or their substitutes shall be present and vote at said
meeting, or any adjournment thereof, a majority of them so present and voting
(or if only one be present and vote, then that one) shall have and may
exercise all the powers hereby granted.
Please sign below exactly as your name
appears. When shares are held by joint
tenants, both should sign. When
signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in full
corporate name by president or other
authorized officer. If a partnership,
please sign in partnership name by
authorized person.
DATED , 1998
----------------------------
-----------------------------------------
Signature
-----------------------------------------
Signature if held jointly
Please mark, sign, date and return the
Proxy Card promptly using the enclosed
envelope which requires no postage
when mailed in the U.S.A.
FOLD AND DETACH HERE
Dear Shareholder:
Enclosed you will find proxy material relating to the Annual Meeting of
Shareholders of PEC Israel Economic Corporation ("PEC") to be held on
Thursday, June 4, 1998. The purposes of the meeting are to elect 11 directors
for the ensuing year and to transact such other business as may properly come
before the meeting. The Board of Directors of PEC recommends that you vote in
favor of the 11 nominees listed in the enclosed proxy statement.
Whether or not you plan to attend the Annual Meeting, we ask that you
complete and promptly return the attached proxy card in the accompanying
envelope, which requires no postage if you mail it in the United States.
Sincerely,
James I. Edelson
Executive Vice President
and Secretary
