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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K/A
NO. 1

FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

(MARK ONE)

/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM ______________ TO ______________

COMMISSION FILE NUMBER 1-8707
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PEC ISRAEL ECONOMIC CORPORATION

(Exact name of registrant as specified in its charter)

MAINE 13-1143528
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification no.)

511 FIFTH AVENUE, NEW YORK, NEW YORK 10017
(Address of principal executive offices) (Zip code)

(212) 687-2400
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED

Common Stock (par value $1.00 per share) New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

NONE
(Title of class)
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES /X/ NO / /

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/

The aggregate market value of the outstanding Common Stock of the registrant
held by non-affiliates on March 26, 1999 was approximately $101,041,000. Such
aggregate market value was computed on the basis of the closing price of the
Common Stock of the registrant on the New York Stock Exchange on that date. See
Part II, Item 5, "Market for the Registrant's Common Stock and Related
Stockholder Matters."

As of March 26, 1999, 18,362,188 shares of Common Stock were outstanding.

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The Registrant, PEC Israel Economic Corporation ("PEC" or the "Company"),
hereby amends Items 10, 11, 12 and 13 of Part III of PEC's Annual Report on Form
10-K for the year ended December 31, 1998 to read in its entirety as set forth
below. Unless otherwise defined in this Amendment No. 1 to Form 10-K,
capitalized terms used in this Amendment No. 1 have the meanings assigned to
them in the Form 10-K.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The following chart sets forth certain information with respect to each of
the ten directors of PEC, including beneficial ownership of PEC common stock as
of April 15, 1999. All of the directors of PEC are currently serving as
directors for terms expiring at the next annual meeting of shareholders of PEC.

DIRECTORS

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 15, 1999**
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OUDI RECANATI, Chairman, PEC Israel Economic Corporation since 49 1996 -0-
June 1998, and Vice Chairman, PEC Israel Economic Corporation
from June 1997 to June 1998; Vice Chairman of IDB Holding since
August 1998 and Co-Chief Executive Officer of IDB Holding since
November 1996; Vice Chairman, IDB Development since August 1998;
Chairman, Discount Investment; For more than five years prior to
October 7, 1998, Chairman, Y.L.R. Capital Markets Ltd.,
Investment Banking; Director, Overseas Shipholding Group,
Inc.(1)
FRANK J. KLEIN, President, PEC Israel Economic Corporation since 56 1994 1,200
January 1, 1995; Director, Elron Electronic Industries Ltd.,
Level 8 Systems, Inc., Scitex Corporation Ltd., Super-Sol Ltd.
and Tefron 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., 74 1988 3,900
Inc., Real Estate
ALAN R. BATKIN, Vice Chairman, Kissinger Associates, Inc., 54 1997 1,000
Geopolitical Consultants; Director, Hasbro, Inc.
JOSEPH CIECHANOVER, President, Atidim-Etgar Nihul Kranot B.M., 65 1980 1,100
General Partner, Investments; Chairman, El Al Israel Airlines
Ltd.; From 1980 through 1994, President, PEC Israel Economic
Corporation
ELIAHU COHEN, Chairman of the Executive Committee of IDB Holding 66 1995 -0- (2)
since November 1996, and Deputy Chairman of the Executive
Committee of IDB Holding until November 1996; Director and
Co-Chief Executive Officer of IDB Development; Director,
Discount Investment 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 59 1995 400 (3)
PEC Israel Economic Corporation
HARVEY M. MEYERHOFF, Chairman, Magna Holdings, Inc., Investments 72 1985 10,400
MICHAEL A. RECANATI, Vice Chairman of the Company since June 1998; 41 1998 -0-
President, 511 Equities Corp., Investments, 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, 69 1992 -0-
Partner, Proskauer Rose LLP, Attorneys, counsel to PEC Israel
Economic Corporation

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(1) Messrs. Oudi Recanati and Michael A. Recanati are brothers and the sons of
Mr. Raphael Recanati, the Chairman of the Board of IDB Holding and IDB
Development. See "Information as to Share Ownership."

(2) Mr. Cohen owns 10,000 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.

* Discount Investment, IDB Development and IDB Holding are parent companies of
PEC. Elron Electronic Industries Ltd., Level 8 Systems, Inc., Scitex Corporation
Ltd., Super-Sol Ltd. and Tefron 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 Mr. Jaffe, the amounts shown represent shares of
PEC common stock as to which the person has sole voting and dispositive power.
Two directors are presently members of the Board of Directors of IDB Holding.
Neither of these directors 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 15, 1999, 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 $.25 on April 15, 1999. As of April 15, 1999, Mr.
Ciechanover beneficially owned 500 Ordinary Shares of IDB Holding and Mr. Cohen
beneficially owned 1,700 Ordinary Shares of IDB Holding.

Information with respect to executive officers of PEC is included at the end
of Item 4 of Part I of this report on Form 10-K.

ITEM 11. EXECUTIVE COMPENSATION.

DIRECTOR COMPENSATION

Directors of the Company who are not officers or employees of the Company or
its parent companies, IDB Holding, IDB Development or Discount Investment,
receive a director's fee of $10,000 per year, payable semi-annually.

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

ANNUAL COMPENSATION
------------------------ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) COMPENSATION ($)
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Frank J. Klein.................................................. 1998 450,000 53,000 245,135(1)
President 1997 420,000 53,000 220,812(1)
1996 420,000 53,000 220,025(1)
James I. Edelson................................................ 1998 235,000 15,000 9,907(2)
Executive Vice President, Secretary and 1997 220,000 15,000 9,818(3)
General Counsel 1996 205,000 15,000 8,835(4)
William Gold.................................................... 1998 175,000 -- 9,216(2)
Treasurer 1997 170,000 -- 9,206(3)
1996 165,000 5,000 8,691(4)

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(1) Consists of $230,933, $209,353 and $209,353 that the Company expensed in
1998, 1997 and 1996, respectively, pursuant to the supplemental retirement
arrangement described below, $7,002, $4,334, and $3,922 of insurance
premiums paid by the Company in 1998, 1997 and 1996, respectively, for term
life insurance and $7,200, $7,125 and $6,750 of matching contributions by
the Company in 1998, 1997 and 1996, respectively, under its Savings and
Investment Plan.

(2) Consists of $7,200 of matching contributions by the Company under its
Savings and Investment Plan and $2,707 and $2,016 of insurance premiums paid
by the Company for term life insurance for Messrs. Edelson and Gold,
respectively.

(3) 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.

(4) 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.

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 1998, whichever is lower, multiplied by the number of years of
credited service and without reduction for Social Security benefits received.
Mr. Klein has 31 years of credited service, all but four 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 7 years and 31 years,
respectively, of credited service.

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:

AVERAGE ESTIMATED ANNUAL PENSION
PAST BASED ON YEARS OF CREDITED SERVICE AT AGE 65
ANNUAL ----------------------------------------------
SALARY 10 YEARS 20 YEARS 30 YEARS 40 YEARS
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$ 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

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 INTERLOCKS AND INSIDER PARTICIPATION

Oudi 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 Vice Chairman and
Co-Chief Executive Officer of IDB Holding, Vice Chairman of IDB Development and
Chairman of Discount Investment.

During 1998, IDB Development and a subsidiary of PEC were parties to an
agreement under which IDB Development provided advisory and other services,
including accounting services and obtaining and compiling financial information
and reports, for an annual fee of $130,000. On January 7, 1999, IDB Development
transferred all of its shares of PEC common stock to Discount Investment and, in
connection with such transfer, IDB Development assigned to Discount Investment
all of IDB Development's rights and obligations under this agreement. PEC has an
agreement with Discount Investment, 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 1998, PEC paid Discount Investment
approximately $258,000 under this agreement and Discount Investment paid PEC
approximately $123,000 under this agreement. PEC has made investments in and
loans to affiliates of IDB Holding.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

INFORMATION AS TO SHARE OWNERSHIP

The following table shows, as of April 15, 1999, the number of shares of PEC
common stock owned by the executive officers named in the Summary Compensation
Table in Item 11 (other than Frank J. Klein whose holdings of PEC common stock
are listed in the table in Item 10) and by all directors and executive officers
as a group.

NUMBER AND PERCENTAGE
OF SHARES OF PEC COMMON
STOCK BENEFICIALLY
NAME OF BENEFICIAL OWNER(1) OWNED AS OF APRIL 15, 1999
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James I. Edelson................................. 2,000(2)

William Gold..................................... 1,000(2)

Directors and Executive Officers as a Group 21,000(3)

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(1) Messrs. Edelson and Gold are executive officers of the Company.

(2) 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.

(3) Persons who are directors or executive officers have sole power to vote and
direct the disposition of 20,100 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 900 shares (less than 1% of the outstanding
shares).

The table in Item 10 sets forth the number of shares of PEC common stock
owned by each director of PEC.

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 15, 1999, Discount Investment Corporation Ltd., 14 Beth Hashoeva
Lane, Tel Aviv, Israel, directly owned 14,937,792 shares of PEC common stock,
constituting 81.35% of the outstanding PEC common stock. IDB Development, which
owns approximately 72% of the voting securities of Discount Investment and whose
address is "The Tower", 3 Daniel Frisch Street, Tel Aviv, Israel, and IDB
Holding, which owns approximately 71% of the voting securities of IDB
Development and has the same address as IDB Development, may each, by reason of
such holdings, be deemed the beneficial owner of the PEC common stock held by
Discount Investment. Accordingly, IDB Development and IDB Holding may each 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 shares of IDB Holding, Raphael Recanati, of New York, New York, and
Eliane Recanati, of Herzliya, 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 Discount Investment 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 51.6% of the outstanding Ordinary Shares of IDB Holding.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Information required to be disclosed under this Item 13 is disclosed under
the caption "Compensation Committee Interlocks and Insider Participation" in
Item 11 of this report on Form 10-K.

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

PEC ISRAEL ECONOMIC CORPORATION

BY: /S/ JAMES I. EDELSON
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James I. Edelson
DATE: APRIL 30, 1999 EXECUTIVE VICE PRESIDENT AND SECRETARY