AMREP CORP. — Proxy Solicitation & Information Statement 2005

Aug 16, 2005

DEF 14A 1 sched14a05.htm UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 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 the 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 §240.14a-12 AMREP 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: -------------------------------------------------------------------------------- (2) Aggregate number of securities to which transaction applies: -------------------------------------------------------------------------------- (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: -------------------------------------------------------------------------------- [ ] 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: -------------------------------------------------------------------------------- (2) Form, Schedule or Registration Statement No.: -------------------------------------------------------------------------------- (3) Filing Party: -------------------------------------------------------------------------------- (4) Date Filed: -------------------------------------------------------------------------------- AMREP CORPORATION (An Oklahoma corporation) NOTICE OF ANNUAL MEETING OF SHAREHOLDERS September 21, 2005 NOTICE IS HEREBY GIVEN that the 2005 Annual Meeting of Shareholders of AMREP Corporation (the "Company") will be held at the Conference Center at Normandy Farm, Route 202 and Morris Road, Blue Bell, Pennsylvania on September 21, 2005, at 9:00 A.M. for the following purposes: (1) To elect three directors; and (2) To consider and act upon such other business as may properly come before the meeting. In accordance with the By-Laws, the Board of Directors has fixed the close of business on July 26, 2005, as the record date for the determination of shareholders of the Company entitled to notice of and to vote at the meeting and any adjournment thereof. The list of such shareholders will be available for inspection by shareholders during the ten days prior to the meeting at the offices of the Company, 641 Lexington Avenue, Sixth Floor, New York, New York. Whether or not you expect to be present at the meeting, please mark, date and sign the enclosed proxy and return it to the Company in the self-addressed envelope enclosed for that purpose. The proxy is revocable and will not affect your right to vote in person in the event you attend the meeting. By Order of the Board of Directors Joseph S. Moran, Secretary Dated: August 3, 2005 New York, New York -------------------------------------------------------------------------------- Upon the written request of any shareholder of the Company, the Company will provide to such shareholder a copy of the Company's annual report on Form 10-K for fiscal 2005, including the financial statements and the schedules thereto, filed with the Securities and Exchange Commission. Any request should be directed to Joseph S. Moran, Secretary, AMREP Corporation, 641 Lexington Avenue, New York, New York 10022. There will be no charge for such report unless one or more exhibits thereto are requested, in which case the Company's reasonable expenses of furnishing exhibits may be charged. -------------------------------------------------------------------------------- AMREP CORPORATION 641 Lexington Avenue New York, New York 10022 ___ PROXY STATEMENT ____ ANNUAL MEETING OF SHAREHOLDERS To be Held at 9:00 A.M. on September 21, 2005 This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors of AMREP Corporation (the "Company") for use at the Annual Meeting of Shareholders of the Company to be held on September 21, 2005, and at any continuation or adjournment thereof (the "Annual Meeting"). Anyone giving a proxy may revoke it at any time before it is exercised by giving the Secretary of the Company written notice of the revocation, by submitting a proxy bearing a later date or by attending the Annual Meeting and voting. This Proxy Statement and the accompanying Notice of Annual Meeting and proxy form are first being sent to shareholders on or about August 10, 2005. All properly executed, unrevoked proxies in the enclosed form which are received in time will be voted in accordance with the shareholders' directions and, unless contrary directions are given, will be voted for the election as directors of the nominees named below. The presence, in person or by proxy, of the holders of a majority of the outstanding shares of Common Stock of the Company authorized to vote will constitute a quorum for the transaction of business at the Annual Meeting. Abstentions will be counted in determining whether a quorum is present at the Annual Meeting. Directors are elected by a plurality of the votes of the shares present in person or represented by proxy at the Annual Meeting and entitled to vote on the election of directors, and abstentions have no effect. A copy of the 2005 Annual Report of the Company for the fiscal year ended April 30, 2005, including financial statements, accompanies this Proxy Statement. Such Annual Report does not constitute a part of the proxy solicitation material. Only shareholders of record at the close of business on July 26, 2005, the date fixed by the Board of Directors in accordance with the By-Laws, are entitled to vote at the Annual Meeting. As of July 26, 2005, the Company had issued and outstanding 6,626,112 shares of Common Stock, par value $.10 per share. Each share of Common Stock is entitled to one vote on matters to come before the Annual Meeting. COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Set forth in the following table is information concerning the ownership of the Common Stock of the Company by the persons who, to the knowledge of the Board of Directors, own beneficially more than 5% of the outstanding shares. The table also sets forth the same information concerning beneficial ownership for each current director, each nominee for election as a director, each current executive officer, and all current directors and executive officers as a group. Unless otherwise indicated, reported ownership is as of July 26, 2005, and the beneficial owners have sole voting and investment power with respect to the shares beneficially owned by them. In the case of nominees, directors and executive officers, the information below has been provided by such persons at the request of the Company. Shares Owned % of Beneficial Owner Beneficially(1) Class ---------------- ------------ ----- Nicholas G. Karabots (Director and Nominee) 3,635,453 (2) 54.9 P.O. Box 736 Fort Washington, PA 19034 Albert V. Russo (Director and Nominee) 1,264,970 (3) 19.1 Lena Russo, Clifton Russo, Lawrence Russo American Simlex Company 401 Broadway New York, NY 10012 Dimensional Fund Advisors Inc. 386,136 (4) 5.8 1299 Ocean Avenue Santa Monica, CA 90401 Elmer F. Hansen, Jr. (Nominee) - - Other Directors and Executive Officers Jerome Belson 10,250 * Edward B. Cloues II 12,250 * Lonnie A. Coombs 9,250 * Michael P. Duloc 5,000 (5) * Joseph S. Moran - - Peter M. Pizza - - Samuel N. Seidman 10,250 * James Wall 8,057 (6) * Directors and Executive Officers as a Group (10 persons) 4,955,480 (2),3),(5),(6) 74.7 ____ * Indicates less than 1%. -2- (1) The shareholdings include 1,000 shares for each of Messrs. Karabots, Belson, Cloues, Coombs and Seidman and 2,000 shares for Albert V. Russo which such persons have the right to acquire pursuant to options issued under the Company's Non-Employee Directors Option Plan that are now exercisable or will become so on September 27, 2005. (2) Includes 580,165 shares owned by The Karabots Foundation, a private non-profit corporation founded by Mr. Karabots and of which he is the President, Foundation Manager and one of two directors. Mr. Karabots disclaims beneficial ownership of the shares owned by The Karabots Foundation. (3) Albert V. Russo, Lena Russo, Clifton Russo and Lawrence Russo have reported that they share voting power as to these shares and that each of them has sole dispositive power as to the following numbers of such shares representing the indicated percentages of the outstanding Common Stock: Albert V. Russo - 680,491 (10.3%); Lena Russo - 58,740 (0.9%); Clifton Russo - 270,617 (4.1%); and Lawrence Russo - 255,122 (3.85%). (4) Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment advisor, is deemed to have beneficial ownership of these shares, all of which are held in portfolios of four registered investment companies or other investment vehicles, including commingled group trusts, for which Dimensional serves as investment manager or investment advisor. Dimensional disclaims beneficial ownership of all such shares. This ownership is reported in a Schedule 13G filed by Dimensional with the Securities and Exchange Commission on February 9, 2005. (5) Held jointly with Mr. Duloc's spouse. (6) Includes 287 shares held in the Company's Savings and Salary Deferral Plan allocated to the account of Mr. Wall. ELECTION OF DIRECTORS The Board of Directors of the Company is a classified board divided into three classes - Class I consisting of two directors, Class II consisting of two directors and Class III consisting of three directors. Each class of directors serves for a term of three years. At this Annual Meeting, three Class III directors will be elected to serve until the 2008 Annual Meeting and until their successors are elected and qualified. The Board of Directors is nominating Nicholas G. Karabots and Albert V. Russo, who are incumbent Class III directors, and Elmer F. Hansen, Jr., who has not previously served as a director of the Company, for election at the Annual Meeting. Jerome Belson, whose term as a Class III director will expire at the Annual Meeting, is not standing for re-election. Mr. Belson has been a director of the Company since 1967, and his valued service over that extended period has been greatly appreciated. Although the Board of Directors does not expect that any of the persons nominated will be unable to serve as a director, should any of them become unavailable for election it is intended that the shares represented by proxies in the accompanying form will be voted for the election of a substitute nominee or nominees selected by the Board. -3- The following table sets forth information regarding the nominees of the Board of Directors for election and the directors whose terms of office do not expire this year. Year First Elected As Principal Occupation For Past Name Age A Director Five Years and Current Directorships ---- --- ---------- ------------------------------------ Nominees to serve until the 2008 Annual Meeting (Class III) Elmer F. Hansen, Jr. 68 - President/Chief Executive Officer of Hansen Properties, Inc., a company engaged in the development and management of real estate investments. Nicholas G. Karabots 72 1993 Chairman of the Board and Chief Executive Officer of Kappa Media Group, Inc., Spartan Organization, Inc., Jericho National Golf Club, Inc. and other private companies, which companies are engaged primarily in the publishing, printing, recreational sports and real estate businesses. Albert V. Russo 51 1996 Managing Partner, Russo Associates, Pioneer Realty, 401 Broadway Realty Company and related real estate entities; Partner, American Simlex Company, textile exports. Directors continuing in office until the 2007 Annual Meeting (Class II) Samuel N. Seidman 71 1977 President of Seidman & Co., Inc., economic consultants and investment bankers; Director, Chairman of the Board and Chief Executive Officer of Productivity Technologies Corp., manufacture of metal forming and handling automation equipment and a wirer of control panels. Lonnie A. Coombs 57 2001 Certified Public Accountant, Lonnie A. Coombs, CPA, accounting, tax and business consulting services. -4- Year First Elected As Principal Occupation For Past Name Age A Director Five Years and Current Directorships ---- --- ---------- ------------------------------------ Directors continuing in office until the 2006 Annual Meeting (Class I) Edward B. Cloues II 57 1994 Chairman and Chief Executive Officer of K-Tron International, Inc., a material handling equipment manufacturer; Director of K-Tron International, Inc., Penn Virginia Corporation and Penn Virginia Resource GP, the general partner of Penn Virginia Resource Partners, L.P. James Wall 68 1991 Chairman of the Board, President and Chief Executive Officer of AMREP Southwest Inc., a wholly-owned subsidiary of the Company; Senior Vice President of the Company. Each current director has served continuously since the year in which he was first elected. THE BOARD OF DIRECTORS AND ITS COMMITTEES The Company's Common Stock is listed on the New York Stock Exchange and the Company is subject to the Exchange's Corporate Governance Standards (the "Governance Standards"). The Governance Standards, among other things, generally require a listed company to have independent directors within the meaning of the Governance Standards as a majority of its board of directors and for the board to have a nominating/corporate governance committee and a compensation committee composed entirely of independent directors. However, the Company is a "controlled company" within the meaning of the Governance Standards because Nicholas G. Karabots and entities related to him have the power to vote more than a majority of the outstanding Common Stock, and the Governance Standards permit a controlled company to choose not to comply with those requirements. The Board has chosen not to have a nominating/corporate governance committee. Also, the Board has chosen not to comply with the Governance Standards applicable to compensation committees. Although the Board has a Compensation and Human Resources Committee, not all of its members are independent directors as is required by the Governance Standards. Under the Governance Standards, a director of the Company will not be considered independent if such person has any material relationship with the Company, either directly, or as a partner, shareholder or officer of an -5- organization that has a relationship with the Company. The Governance Standards also provide that the presence of any of the following particular relationships will preclude a determination of independence: (1) the director is, or has been within the last three years, an employee of the Company, or an immediate family member is, or has been within the last three years, an executive officer of the Company; (2) the director has received, or has an immediate family member who has received, during any twelve-month period within the last three years, more than $100,000 in direct compensation from the Company, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service); (3) (A) the director or an immediate family member is a current partner of a firm that is the Company's internal or external auditor; (B) the director is a current employee of such a firm; (C) the director has an immediate family member who is a current employee of such a firm and who participates in the firm's audit, assurance or tax compliance (but not tax planning) practice; or (D) the director or an immediate family member was within the last three years (but is no longer) a partner or employee of such a firm and personally worked on the Company's audit within that time; (4) the director or an immediate family member is, or has been within the last three years, employed as an executive officer of another company where any of the Company's present executive officers at the same time serves or served on that company's compensation committee; or (5) the director is a current employee, or an immediate family member is a current executive officer, of a company that has made payments to, or received payments from, the Company for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million or 2% of such other company's consolidated gross revenues. Mr. Karabots does not qualify as an independent director under the Governance Standards because his son-in-law, Michael P. Duloc, is the chief operating officer of the Company's fulfillment and distribution services businesses. Additionally, those businesses provide distribution and fulfillment services to publishers owned by Mr. Karabots (see "Compensation Committee Interlocks and Insider Participation" at page 12 of this Proxy Statement). Based principally on their responses to questions to these persons regarding the relationships addressed by the Governance Standards and discussions with them, the Board has determined that, except for Messrs. Karabots and Wall, all of its members, as well as Mr. Hansen who is being proposed as a new member, meet the director independence requirements of the -6- Governance Standards. The Board was informed that Mr. Coombs, who is a certified public accountant, for many years has provided, and expects to continue to provide, business and tax consulting services to companies owned by Mr. Karabots, including companies which are customers for the Company's distribution and fulfillment services. The revenues from such business and tax consulting services for the Company's last three fiscal years have accounted for from 16.5% to 7.5% of Mr. Coombs' professional service revenues over those years. However, the Board concluded that Mr. Coombs' relationship with Mr. Karabots and his companies is as an independent contractor, and not as an employee, partner, shareholder or officer, and would not interfere with Mr. Coombs' independence from the Company's management. The nominees for election as directors are selected by the whole Board of Directors. The Board has no charter addressing the director nomination process nor any specific qualifications for nominees to meet. In selecting Mr. Hansen as a new nominee for director, the Board considered his extensive experience in the real estate business and financial sophistication as important factors. If the Board determines in the future to seek any new director, it will consider the qualifications for the position at that time. The Board will consider candidates for director recommended by shareholders on the same basis as any other proposed nominees. Any shareholder desiring to propose a candidate for selection as a nominee of the Board for election at the 2006 Annual Meeting may do so by sending a written communication no later than May 1, 2006 to AMREP Corporation, 641 Lexington Ave., New York, NY 10022, Attention: Corporate Secretary, identifying the proposing shareholder, specifying the number of shares of Common Stock held and stating the name and address of the proposed nominee and the information concerning such person which Securities and Exchange Commission regulations require be included in a proxy statement relating to such person's election as a director. Shareholders should recognize that so long as Mr. Karabots remains the Company's controlling shareholder, his concurrence is necessary for the election of any director. In July 2004 in response to the Governance Standards, the Board adopted Corporate Governance Guidelines (the "Guidelines") which address various matters involving the Board and the conduct of its business. The Board also adopted a new Code of Business Conduct and Ethics setting forth principles of business conduct applicable to the directors, officers and employees of the Company. The Guidelines and Code of Business Conduct and Ethics, as well as the charters of the Board's Audit Committee and Compensation and Human Resources Committee, may be viewed under "Corporate Governance" on the Company's website at www.amrepcorp.com, and written copies will be provided to any shareholder upon request to the Company at AMREP Corporation, 641 Lexington Ave., New York, NY 10022, Attention: Corporate Secretary. The Company intends to disclose on its website any amendment to or waiver of any provision of the Code of Business Conduct and Ethics that applies to any of its executive officers, including its principal financial and accounting officer. Directors are expected to attend Annual Meetings of Shareholders and all of them attended last year's Annual Meeting. The Board held four meetings during the last fiscal year, and all of the directors attended at least 75% of the total of those meetings and the meetings during such year of the Board -7- Committees of which they were members. Pursuant to the Guidelines, the Board has established a policy that the non-management directors meet in executive session at least two times per year and that the independent directors also meet in executive session at least twice per year. The Chairman of the Board (currently, Edward B. Cloues II), if in attendance, will be the presiding director at each such executive session; otherwise, those attending will select a presiding director. Any shareholder wishing to communicate with the Board or any of the directors may send a written communication to AMREP Corporation, 641 Lexington Ave., New York, NY 10022, Attention: Corporate Secretary for forwarding to the intended person or persons. The Board has an Executive Committee which generally has the power of the Board and acts, as needed, between meetings of the Board. Also, in the absence of a Chief Executive Officer (the Company has not had a CEO since January 1996), the Committee is charged with the oversight of the Company's business. The current members of the Committee are Messrs. Cloues, Karabots and Russo. Mr. Cloues is Chairman of the Board and of the Committee and is compensated for his services in those positions at the rate of $135,000 per year. Mr. Karabots is Vice-Chairman of the Board and of the Committee, having been elected to those positions in March 2005. At that time, the Company began paying a monthly fee of $10,000 to a company wholly-owned by Mr. Karabots for making him available to act in such positions. These payments to Messrs. Cloues and Karabots are in addition to the other fees paid to them as directors and members of the Compensation and Human Resources Committee. During the last fiscal year, the Executive Committee met frequently on an informal basis but held no formal meetings. The Board also has an Audit Committee and a Compensation and Human Resources Committee. For fiscal 2005, the fee payable to members of the Audit Committee for each Committee meeting attended was $1,000. For fiscal 2005, the fee payable to members of the Compensation and Human Resources Committee for each Committee meeting attended was $750. Each member of the Audit Committee is an independent director, as defined by the Governance Standards. The Committee operates under a written charter adopted by the Board of Directors, most recently on July 13, 2004. The duties of the Audit Committee include (i) appointing the Company's independent auditors, approving the services to be provided by the independent auditors and their compensation and reviewing the auditors' independence and performance of services, (ii) reviewing the scope and results of the yearly audit by the independent auditors, (iii) reviewing the Company's system of internal controls and procedures, (iv) reviewing with management and the independent auditors the Company's annual and quarterly financial statements, (v) reviewing the Company's financial reporting and accounting standards and principles, and (vi) overseeing the administration of the Guidelines. This Committee reports regularly to the -8- Board concerning its activities. The current members of this Committee are Messrs. Belson, Coombs and Seidman (Chairman), each of whom has been determined by the Board to be independent and financially literate within the meaning of the Governance Standards. The Board has also determined that Mr. Coombs, who is a certified public accountant, qualifies as an audit committee financial expert within the meaning of Securities and Exchange Commission regulations. The Audit Committee held five meetings during the last fiscal year. In past years, the Compensation and Human Resources Committee was responsible for making recommendations to the Board concerning compensation and other matters relating to employees. The members of this Committee are Messrs. Cloues, Karabots (Chairman) and Russo, and it held four meetings during the last fiscal year. Under its charter, adopted by the Board in July 2005, this Committee is now responsible for determining salaries and bonuses for the executives of the Company and its subsidiaries, establishing overall compensation and benefit levels and fixing bonus pools for other employees, and making recommendations to the Board concerning other matters relating to employees and regarding director compensation. For fiscal 2005 each non-employee director of the Company was paid a fee of $20,000 in addition to fees paid to such director as a member of one or more Board Committees. Additionally, under the 2002 Non-Employee Directors' Stock Plan, each non-employee director receives a grant from the Company of 1,250 shares of its Common Stock on each March 15 and September 15 as partial payment for services for the preceding six months. Regarding the fiscal 2005 grants, the last sales prices for the Common Stock on the New York Stock Exchange on September 14, 2004 (there having been no reported trades on September 15) and March 15, 2005 were $18.09 and $25.99. Also, under the Non-Employee Directors Option Plan, following the Company's Annual Meeting of Shareholders each non-employee director is granted an option covering 500 shares of Common Stock of the Company. The price per share payable upon exercise of such option is either (i) the mean between the highest and lowest reported sale price of the Common Stock on the date of grant on the New York Stock Exchange, or (ii) the price of the last sale of Common Stock on that date as quoted on the New York Stock Exchange, whichever is higher. For the options granted following the 2004 Annual Meeting, the exercise price is $17.55 per share. Each option becomes exercisable as to all or any portion of the shares covered thereby one year after the date of grant and expires five years after the date of grant. -9- EXECUTIVE COMPENSATION The Summary Compensation Table below sets forth certain information concerning the compensation of the persons who were the Company's executive officers at April 30, 2005. SUMMARY COMPENSATION TABLE Annual Compensation ---------------------------------- Other Annual Compensation($) Name and Principal Position Year Salary($) Bonus($) (a)(b) --------------------------- ---- --------- -------- ------------ James Wall 2005 281,831 - 10,732 Senior Vice President; 2004 277,572 35,000 4,552 Chairman of the Board, 2003 273,801 20,000 3,567 President and CEO of the Company's AMREP Southwest Inc. subsidiary Peter M. Pizza 2005 174,720 - 8,249 Vice President, Chief 2004 171,692 10,000 1,639 Financial Officer and 2003 165,538 10,000 -0- Treasurer Michael P. Duloc 2005 220,619 - 7,428 Chief Operating Officer 2004 217,042 12,500 4,298 of the Company's fulfillment 2003 206,153 7,500 3,227 and distribution services businesses ____ (a) Includes amounts contributed by the Company to the Company's Savings and Salary Deferral Plan. (b) Other compensation in the form of personal benefits to the named persons has been omitted because it does not exceed the lesser of $50,000 or 10% of the total annual salary and bonus as to each. Options No stock options were granted to or exercised by any of the officers named in the Summary Compensation Table during the fiscal year ended April 30, 2005. No stock options were held by any of such officers at April 30, 2005. Compensation and Human Resources Committee Report on Executive Compensation The current members of the Company's Compensation and Human Resources Committee are Messrs. Cloues, Karabots and Russo. ____ Since January 1996, the Company has not had a CEO. -10- Compensation Policy for Executive Officers ------------------------------------------ The Compensation and Human Resources Committee's compensation policy for executive officers is to pay competitively, while balancing pay versus performance and otherwise to be fair and equitable in the administration of compensation. In determining the salary to be paid to a particular individual, the Compensation and Human Resources Committee applies these and other criteria, while also using its best judgment of compensation applicable to other executives holding comparable positions both within the Company and at other companies. With respect to salaries, bonuses and other compensation and benefits, the decisions and recommendations of the Compensation and Human Resources Committee are subjective and are not based on any list of specific criteria. We believe that the compensation received by each of the executive officers for fiscal 2005 was reasonable. The Company has not had a Chief Executive Officer since January 1996, when the employment of the then CEO was terminated due to disability, and senior management now operates under the supervision of the Executive Committee of the Board and its Chairman, who is also the Chairman of the Board. Early in fiscal 2005, the Compensation and Human Resources Committee recommended and the Board of Directors approved the payment of bonuses to the executive officers based on the Committee's evaluation of their performance in fiscal 2004. The Committee has not acted on bonuses for executive officers in respect of fiscal 2005. There have been no stock options granted to executive officers since fiscal 1995. Payments during fiscal 2005 to the Company's executives as discussed above were made with regard to the provisions of Section 162(m) of the Internal Revenue Code. Section 162(m) limits the deduction that may be claimed by a "public company" for compensation paid to certain individuals to $1 million, except to the extent that any excess compensation is "performance-based compensation". It is the Compensation and Human Resources Committee's intention that compensation will not be awarded that exceeds the deductibility limits of Section 162(m). Bases for Chief Executive Officer's Compensation ------------------------------------------------ Since January 1996, the Company has not had a CEO. Nicholas G. Karabots, Chairman Edward B. Cloues II Albert V. Russo July 26, 2005 -11- Compensation Committee Interlocks and Insider Participation On August 4, 1993, pursuant to an agreement with Nicholas G. Karabots and two corporations he then owned, the Company, in exchange for 575,593 shares of its Common Stock, acquired various rights to distribute magazines for its distribution business. The distribution rights covered various magazines published by unaffiliated publishers, as well as magazines published by Mr. Karabots' companies. The distribution contracts with Mr. Karabots' companies, from time to time, have been amended and extended and are now scheduled to expire on December 31, 2005. The conduct of the Company's magazine distribution business involves the purchase of magazines from publishing companies, including those owned or controlled by Mr. Karabots, and their resale to wholesalers. During the fiscal year ended April 30, 2005, the purchases of magazines from Mr. Karabots' companies amounted to approximately $41.6 million. The Company reports as revenues only the spread between the prices paid to publishers and the prices received for copies sold to wholesaler customers. The $41.6 million paid to Mr. Karabots' companies represents 28.2% of the approximately $147.5 million which the Company paid to all publishers in fiscal 2005. Consistent with industry practice, advance payments for magazine purchases are made to publishers, including Mr. Karabots' companies, based upon estimates of the amounts that will be due to them from the sales of their publications to the buying public. If the actual sales are less than estimated, overadvances will result, which the publishers are obligated to repay promptly, without interest. The total overadvance to Mr. Karabots' companies at June 30, 2005 was approximately $30,000, and its highest amount between May 1, 2004 and June 30, 2005 was approximately $354,000. The Company also provides fulfillment services for publishing companies owned or controlled by Mr. Karabots under contracts that are effective through August 1, 2006, and continue from year to year thereafter, unless terminated at the election of either party. For fiscal 2005, the revenues for these services were $344,000. Mr. Karabots is a director, Vice-Chairman of the Board and of the Executive Committee, Chairman of the Compensation and Human Resources Committee and the father-in-law of Michael P. Duloc, one of the Company's executive officers. Performance Graph The following graph compares the cumulative total shareholder return on the Company's Common Stock with the cumulative total return of the Standard & Poor's 500 Index ("S&P 500 Index") and with an index comprised of the stock of 27 companies with market capitalizations similar to that of the Company ("Similar Cap Issuers"), for the five years ended April 30, 2005 (assuming the investment of $100 in the stock of the Company, the S&P 500 Index and the Similar Cap Issuers on April 30, 2000, and the reinvestment of all dividends). The Company cannot identify an index of issuers engaged in operations similar to those in which it is currently engaged and therefore has determined to use the Similar Cap Issuers for purposes of comparison. -12- 2000 2001 2002 2003 2004 2005 ---- ---- ---- ---- ---- ---- AMREP CORP 100 78.00 160.00 188.00 353.18 506.24 S&P 500 INDEX 100 87.03 76.04 65.92 81.00 86.14 SIMILAR CAP ISSUERS 100 111.80 164.68 134.59 214.55 197.04 The Similar Cap Issuers are: Bankrate, Inc., Cavalier Homes, Inc., D&K Healthcare Resources, Inc., Deckers Outdoor Corporation, DSG International Limited, First Federal Bankshares, Inc., First National Lincoln Corporation (Maine), Glowpoint, Inc., Golden Enterprises, Inc., Horizon Health Corporation, Hyperdynamics Corporation, I.D. Systems, Inc., Key Technology, Inc., Koss Corporation, Lipid Sciences, Inc., Mer Telemanagement Solutions Ltd., Mercury Air Group, Inc., Merit Medical Systems, Inc., NewMil Bancorp, Inc., Northway Financial, Inc., Oil-Dri Corporation of America, Perceptron, Inc., Security Capital Corporation (Delaware), SIFCO Industries, Inc., Sport Chalet, Inc., TeamStaff, Inc. and Zindart Limited. As a result of changes in market capitalizations from year to year, none of the companies comprising the Similar Cap Issuer index in the Company's 2004 Proxy Statement met the criteria for inclusion in the Similar Cap Issuer index in this Proxy Statement. The 2004 Similar Cap companies were: America First Apartment Investors, Inc., Codorus Valley Bancorp, Inc., Conrad Industries, Inc., DNB Financial Corporation, Eagle Supply Group, Inc., Edge Petroleum Corporation, Inc., Exponent, Inc., Featherlite, Inc., Genta Incorporated, -13- Harold's Stores, Inc., Intest Corporation, Irvine Sensors Corporation, JMAR Technologies, Inc., KCS Energy, Inc., KMG Chemicals, Inc., LSB Corporation, Mesabi Trust, The Middleton Doll Company, Nano-Proprietary, Inc., Nobility Homes, Inc., North America Scientific, Inc., Onspan Networking, Inc., PVF Capital Corp., Quality Dining, Inc., Startech Environmental Corporation, Thomas Group, Inc. and Westbank Corporation. Equity Compensation Plan Information The following table sets forth information as of April 30, 2005 concerning Common Stock of the Company which is issuable under its compensation plans. (C) (A) (B) Number of securities Number of securities Weighted average remaining available for to be issued upon exercise price of future issuance under equity exercise of outstanding compensation plans (excluding outstanding options, options, warrants securities reflected in Plan Category warrants and rights and rights column (A)) ------------- ------------------- ---------- ----------- Equity compensation plans approved by shareholders 7,000 $14.92 12,000 (a) Equity compensation plans not approved by shareholders - - 27,500 (b) ----- ------ Total 7,000 39,500 ===== ====== ____ (a) Consists of shares available for options to be issued under the Non-Employee Directors Option Plan. (b) Consists of shares available for issuance under the 2002 Non-Employee Directors' Stock Plan. On December 5, 2002, the Board of Directors adopted the AMREP Corporation 2002 Non-Employee Directors' Stock Plan and reserved 65,000 shares of Common Stock of the Company for issuance thereunder. Under this Plan, each non-employee director receives a grant from the Company of 1,250 shares on each March 15 and September 15 as partial payment for services for the preceding six months. Retirement Benefits The Company's executive officers participate in a Retirement Plan (the "Plan"), which was amended effective January 1, 1998, and subsequently frozen effective March 1, 2004, so that in the determination of the benefit payable, a participant's compensation from and after March 1, 2004 is not taken into account. Prior to the 1998 amendment, the Plan provided a monthly benefit payable at age 65 to employees with five or more years of service in an amount equal to 1.125% of the employee's highest consecutive 60-month average monthly earnings up to a specified amount related to the social security wage base, plus 1.5% of such earnings in excess of such specified amount, multiplied by years of service not to exceed 35. From and after January 1, 1998 through February 29, -14- 2004, each participant's benefit was the amount of the monthly benefit accrued for that participant as of December 31, 1997, under the terms of the Plan prior to the 1998 amendment, plus an additional benefit determined by establishing a cash balance account for the participant to which was allocated annually 2% of the participant's compensation plus an annual interest credit of 5% of the amount in such account. The cash balance account may be converted to a life annuity or may be taken in a lump sum. After February 29, 2004, a participant's benefit under the Plan is the sum of (i) the actuarial equivalent of the participant's cash balance account as of February 29, 2004, plus interest on the cash balance account at the rate of 5% per year, and (ii) the participant's monthly pension benefit under the Plan as at December 31, 1997. Mr. Wall has passed the normal retirement age of 65 under the Plan. His annual retirement benefit under the Plan had he elected to receive the life annuity pension at normal retirement age would have been $54,290. Mr. Pizza has nine years of credited service and Mr. Duloc has twelve years of credited service. Assuming that (i) they continue to be employed until age 65, and (ii) they elect the life annuity form of pension, their annual retirement benefits are estimated to be: Mr. Pizza - $5,679 and Mr. Duloc - $11,178. Certain Transactions See "Compensation Committee Interlocks and Insider Participation" for information concerning transactions involving Nicholas G. Karabots. SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company's directors, executive officers and holders of more than 10% of its Common Stock to file initial reports of ownership and reports of changes of ownership of the Common Stock with the Securities and Exchange Commission and the New York Stock Exchange. The related regulations require copies of the reports to be provided to the Company. Based upon a review of the copies of the reports received by the Company and certain written representations from the directors and executive officers, the Company believes that for the fiscal year ended April 30, 2005, all required Section 16(a) reports were filed on time. AUDIT-RELATED MATTERS The consolidated financial statements of the Company and its subsidiaries included in the Annual Report to Shareholders for the fiscal year ended April 30, 2005 have been audited by McGladrey & Pullen, LLP, an independent registered public accounting firm. No representative of McGladrey & Pullen, LLP is expected to attend the Annual Meeting. The Audit Committee has not yet acted with respect to the selection of auditors for fiscal 2006. -15- Audit Committee Report The Audit Committee has reviewed and discussed the Company's audited financial statements with management, which has primary responsibility for the financial statements. McGladrey & Pullen, LLP, as the Company's independent registered public accountants, are responsible for expressing an opinion on the conformity of the Company's audited financial statements with U.S. generally accepted accounting principles. The Committee has discussed with McGladrey & Pullen, LLP the matters that are required to be discussed by Statement on Auditing Standards No. 61 (Communication With Audit Committees). McGladrey & Pullen, LLP have provided to the Committee the written disclosures and the letter required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees), and the Committee has discussed with McGladrey & Pullen, LLP that firm's independence. Based on these considerations, the Audit Committee recommended to the Board of Directors that the consolidated financial statements audited by McGladrey & Pullen, LLP be included in the Company's annual report on Form 10-K for fiscal 2005. The foregoing report is provided by the following directors who constitute the Audit Committee: Samuel N. Seidman, Chairman Jerome Belson Lonnie A. Coombs July 13, 2005 Audit Fees The following table sets forth certain information concerning the fees of McGladrey & Pullen, LLP and its affiliate, RSM McGladrey Inc., for the Company's last two fiscal years. The reported fees, except the Audit Fees, are amounts billed to the Company in the indicated fiscal years. The Audit Fees are for services for those fiscal years. Fiscal Year Ended April 30, --------------------------- 2005 2004 ---- ---- Audit Fees (1).......................... $122,838 $112,368 Audit-Related Fees (2).................. 16,679 106,609 Tax Fees (3)............................ 41,656 46,276 All Other Fees.......................... - - __ (1) Includes fees for the audit of the Company's annual financial statements and for review of the unaudited financial statements included in the Company's quarterly reports to the Securities and Exchange Commission on Form 10-Q. (2) Includes fees in fiscal 2005 for consultation related to preparation for Sarbanes-Oxley Section 404 compliance, in fiscal 2004 for an acquisition audit and an information systems controls review, and in both periods for benefit plan audits. -16- (3) Includes fees for tax compliance, tax advice and tax planning services. Such services principally involved reviews of the Company's federal income tax returns and advice on the tax treatment of certain transactions. Pre-Approval Policies and Procedures The Audit Committee pre-approves all audit services to be provided by the independent registered public accountants and, separately, all permitted non-audit services to be performed by the independent registered public accountants. OTHER MATTERS The Board of Directors knows of no matters that will be presented for consideration at the Annual Meeting other than the matters referred to in this Proxy Statement. Should any other matters properly come before the Annual Meeting, it is the intention of the persons named in the accompanying proxy to vote such proxy in accordance with their best judgment. SOLICITATION OF PROXIES The Company will bear the cost of this solicitation of proxies. In addition to solicitation of proxies by mail, the Company may reimburse brokers and other nominees for the expense of forwarding proxy materials to the beneficial owners of stock held in their names. Directors, officers and employees of the Company may solicit proxies on behalf of the Board of Directors but will not receive any additional compensation therefor. SHAREHOLDER PROPOSALS From time to time, shareholders present proposals which may be proper subjects for inclusion in the Proxy Statement and for consideration at an annual meeting. Shareholders who intend to present proposals at the 2006 Annual Meeting and who wish to have such proposals included in the Company's Proxy Statement for the 2006 Annual Meeting must be certain that such proposals are received by the Company's Secretary at the Company's executive offices, 641 Lexington Avenue, New York, New York 10022, not later than April 6, 2006. Such proposals must meet the requirements set forth in the rules and regulations of the Securities and Exchange Commission in order to be eligible for inclusion in the Proxy Statement. For any proposal that is not submitted for inclusion in next year's Proxy Statement but is, instead, sought to be presented directly at the 2006 Annual Meeting, Securities and Exchange Commission rules permit management to vote proxies in its discretion if the Company does not receive notice of the proposal prior to the close of business on June 27, 2006. By Order of the Board of Directors Joseph S. Moran, Secretary Dated: August 3, 2005 -17- PROXY AMREP CORPORATION PROXY SOLICITED BY BOARD OF DIRECTORS FOR ANNUAL MEETING OF SHAREHOLDERS The Conference Center at Normandy Farm Route 202 and Morris Road, Blue Bell, Pennsylvania September 21, 2005, 9:00 A.M. Local Time The undersigned hereby appoints Edward B. Cloues II and Peter M. Pizza, and each of them acting alone, with full power of substitution, proxies to vote the Common Stock of the undersigned at the 2005 Annual Meeting of Shareholders of AMREP Corporation, and any adjournment thereof, for the election of directors as set forth in the Proxy Statement of the Board of Directors dated August 3, 2005, and upon all other matters which come before said meeting or any continuation or adjournment thereof. Receipt of the Notice of Annual Meeting of Shareholders and accompanying Proxy Statement of the Board of Directors is acknowledged. Unless otherwise specified, this proxy will be voted FOR the election of directors as set forth in the Proxy Statement. (Continued and to be dated and signed on reverse side.) PLEASE MARK, DATE SIGN AND MAIL YOUR PROXY [X] PROMPTLY IN THE ENVELOPE Votes MUST be indicated PROVIDED. (x) in Black or Blue ink. A vote FOR ITEM 1 is recommended by the Board of Directors. 1. FOR ELECTION OF THREE (3) DIRECTORS AS DESCRIBED IN THE PROXY STATEMENT OF THE BOARD OF DIRECTORS. FOR all nominees [ ] WITHHOLD AUTHORITY to vote for [ ] * Exceptions [ ] listed below all nominees listed below Nominees: Elmer F. Hansen, Jr., Nicholas G. Karabots, Albert V. Russo (INSTRUCTION: To withhold authority to vote for any individual nominee, mark the "Exceptions" box and write that nominee's name in the space provided below.) *Exceptions ____ To change your address, please mark this box. [ ] If stock is held in the name of more than one person, all holders should sign. Sign exactly as name or names appear at left. Persons signing in a fiduciary capacity should include their title as such. ____ _____ Date Share owner sign here Co-Owner sign here