<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-K/A
                                      NO. 5

                        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

                                       OR

[   ] 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

                         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)

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

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

                                                  Name of each exchange
           TITLE OF EACH CLASS                     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)

      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 ]
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      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.
<PAGE>

      The Registrant, PEC Israel Economic Corporation ("PEC" or the "Company"),
hereby amends Item 14(a)(2)(f) of Part IV of PEC's Annual Report on Form 10-K
for the year ended December 31, 1998, as previously amended, by (i) replacing
the report of certified public accountants with respect to the financial
statements of Ham-Let (Israel-Canada) Limited ("Ham-Let") for the year ended
December 31, 1998 with the report of certified public accountants set forth
on the next page with respect to the financial statements of Ham-Let for the
year ended December 31, 1998 filed pursuant to Rule 2-05 of Regulation S-X and
(ii) adding the reports of certified public accountants with respect to the
financial statements of the following entities filed pursuant to Rule 2-05 of
Regulation S-X:

            For the year ended December 31, 1998:

            Ham-Let (UK) Fittings and Valves Limited, a subsidiary of
              Ham-Let.

            For the year ended December 31, 1997:

            Retail Chains Hungary Kereskedelmi Kft., a subsidiary of Super-
              Sol Ltd.

<PAGE>

                    [LETTERHEAD OF JUNGERMAN, GILBOA, SILBER
                      CERTIFIED PUBLIC ACCOUNTANTS (ISR.)]


                      Auditors' Report to the Shareholders
                                       of
                         HAM-LET (ISRAEL-CANADA) Limited

We have audited the accompanying Balance Sheets of Ham-Let (ISRAEL - CANADA)
Limited (hereinafter - the Company) as of December 31, 1998 and 1997, and the
Consolidated Balance Sheets as of these dates, and the Statements of Operations,
the Statements of Changes in Shareholders' Equity and the Statements of Cash
Flows - of the Company and consolidated - for each of the three years in the
period ended December 31, 1998. These financial statements are the
responsibility of the board of directors and management of the Company. Our
responsibility is to express an opinion on these financial statements on the
basis of our examination.

We did not audit the financial statements of consolidated companies, whose
assets constitute approximately 17% and approximately 18% of total consolidated
assets as of December 31, 1998 and 1997, respectively, and whose revenues
constitute approximately 73%, 73%, and 42% of total consolidated revenues for
the years ended December 31, 1998, 1997, and 1996, respectively. The financial
statements of these companies were audited by other auditors, whose reports were
furnished to us, and our opinion, insofar as it relates to the amounts included
in respect of these companies, is based on the reports of the other auditors.

We performed our audit in accordance with generally accepted auditing standards,
including those prescribed in the Auditors Regulations, (Mode of Performance)
1973. These regulations require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement, whether it originates in an error in the financial statements or
originates in a misrepresentation included therein. An audit includes examining
on a test basis evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by the board of directors and management of the
Company, as well as evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.

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The aforementioned financial statements have been prepared on the basis of the
historical cost convention, adjusted to reflect the changes in the general
purchasing power of U.S. Dollar, in accordance with the opinions of the
Institute of Certified Public Accountants in Israel.

Condensed nominal financial statements of the Company, on the basis of which the
adjusted financial statements were prepared, are presented in Note 29.

In our opinion, based on our audit and on the reports of the other auditors, the
financial statements referred to above, present fairly in all material respects,
the financial position - of the Company and consolidated - as of December 31,
1998 and 1997, and the results of operations, changes in shareholders' equity,
and cash flows - of the Company and consolidated - for each of the three years
in the period ended December 31, 1998, in conformity with generally accepted
accounting principles.

In our opinion, the abovementioned financial statements have been prepared in
conformity with the Securities Regulations (Preparation of Annual Financial
Statements), 1993.

Accounting principles generally accepted in Israel differ in certain respects
from accounting principles generally accepted in the United States. The
application of the latter would have affected in the determination of net loss
and shareholder's equity to the extent summarized in Note 30 to the financial
Statement.

                                           /s/ Jungerman, Gilboa, Silber
                                           Jungerman, Gilboa, Silber
                                           Certified Public Accountants (Israel)

Tel Aviv, 22 March 1999



<PAGE>

                     [Letterhead of PricewaterhouseCoopers]


AUDITORS' REPORT TO THE MEMBERS OF
HAM-LET (UK) FITTINGS AND VALVES LIMITED

We have audited the financial statements on pages 5 to 12 which have been
prepared under the historical cost convention and the accounting policies set
out on page 7.

RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS

The directors are responsible for preparing the Annual Report, including as
described on page 3 the financial statements. Our responsibilities as
independent auditors, are established by statute, the Auditing Practices Board
and our profession's ethical guidance.

We report to you our opinion as to whether the financial statements give a true
and fair view and are properly prepared in accordance with the Companies Act. We
also report to you if, in our opinion, the directors' report is not consistent
with the financial statements, if the company has not kept proper accounting
records, if we have not received all the information and explanations we require
for our audit or if information specified by law regarding directors'
remuneration and transactions is not disclosed.

BASIS OF AUDIT OPINION

We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the financial statements. It
also includes an assessment of the significant estimates and judgements made by
the directors in the preparation of the financial statements and of whether the
accounting policies are appropriate to the company's circumstances, consistently
applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.

OPINION

In our opinion the financial statements give a true and fair view of the state
of the company's affairs at 29 December 1998 and of its loss for the period then
ended and have been properly prepared in accordance with the Companies Act 1985.


/s/PRICEWATERHOUSECOOPERS
PricewaterhouseCoopers

Chartered Accountants
and Registered Auditors                               17 April 1999


<PAGE>

                       [Letterhead of KPMG Hungaria Kft.]


                        Report of the Independent Auditor
                             to the Shareholders of
                     Retail Chains Hungary Kereskedelmi Kft.
                               (Under Liquidation)

We have audited the accompanying financial statements of the net assets in
liquidation of Retail Chains Kft. ("the Company") as of December 31, 1997, and
the related statements of the changes in net assets in liquidation, changes in
shareholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's managements. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing standards
in Israel, including those prescribed by the Israeli Auditors Regulations (Mode
of Performance) 1973. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement, either originating within the financial statements
themselves, or due to any misleading statement included therein. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by the managements, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.

As stated in Note 1 to the aforementioned financial statements, the company
ceased its operations and resolved to voluntarily liquidate. As a result of this
resolution, the company changed its accounting policy and commenced on reporting
based on the accepted accounting principles relating to a business in
liquidation.

In our opinion, the financial statements referred to above, present fairly, in
all material respects, the value of net assets in liquidation of the Company as
of December 31, 1997, and the changes in net assets in liquidation, changes in
shareholders' equity and cash flows for the year then ended, in conformity with
generally accepted accounting principles in Israel relating to a business in
liquidation.

February 16, 1998

KPMG Hungaria Kft.

/s/ MICHAEL KEVEHAZI

Michael Kevehazi
Partner
<PAGE>

      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
                                        ----------------------------
DATE: September 21, 1999                James I. Edelson
                                        EXECUTIVE VICE PRESIDENT AND
                                                 SECRETARY