def14a
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO.___)
Filed by the Registrant
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Filed by a Party other than the Registrant o
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Preliminary Proxy Statement |
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Definitive Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Additional Materials |
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Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12 |
WESCO FINANCIAL 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):
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. |
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Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
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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. |
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Date Filed:
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TABLE OF CONTENTS
WESCO FINANCIAL CORPORATION
301 EAST COLORADO BOULEVARD, SUITE 300, PASADENA, CALIFORNIA
91101-1901
(626) 585-6700
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 11, 2006
The annual meeting of shareholders of Wesco Financial
Corporation (Wesco) will be held at the Hilton
Pasadena, 168 South Los Robles Avenue, Pasadena, California
91101, on Thursday, May 11, 2006 at 2:00 p.m. for the
following purposes:
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To elect six directors to hold office until the next annual
meeting of shareholders or until their respective successors
shall have been duly elected and qualified. |
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To transact such other business as may properly come before the
meeting or any adjournment thereof. |
The Board of Directors has fixed March 15, 2006, as of the
close of business, as the record date for the determination of
shareholders entitled to this notice and to vote at such annual
meeting or any adjournment or adjournments thereof. A list of
the shareholders as of such record date will be open to
examination by any shareholder for any purpose germane to the
meeting during ordinary business hours at Wescos principal
office at 301 East Colorado Boulevard, Suite 300, Pasadena,
California for a period of at least ten days prior to
May 11, 2006.
All shareholders are requested to complete, sign and date the
enclosed form of proxy promptly and return it in the
accompanying postage-prepaid, self-addressed envelope, whether
or not they expect to attend the meeting, to assure that their
shares will be represented. Any shareholder giving a proxy has
the right to revoke it at any time before it is voted at the
meeting.
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By Order of the Board of Directors |
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Margery A. Patrick |
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Secretary |
Pasadena, California
March 30, 2006
IMPORTANT
Whether or not you expect to attend the annual meeting,
please complete, sign and date the enclosed form of proxy and
return it promptly in the enclosed envelope.
Requests for additional copies of this combined Notice and Proxy
Statement should be mailed to Margery A. Patrick, Secretary,
Wesco Financial Corporation, at the above address, or faxed to
her at (626) 449-1455.
As stated above, Wescos annual shareholders meeting
will be held at the Hilton Pasadena, 168 South Los Robles Avenue
(corner of Cordova Street), in Pasadena, California, at
2:00 p.m., on Thursday, May 11, 2006. The
Hiltons adjoining parking structure may be accessed from
Cordova Street, which runs east-west to the south of the hotel.
WESCO FINANCIAL CORPORATION
301 EAST COLORADO BOULEVARD, SUITE 300, PASADENA, CALIFORNIA
91101-1901
(626) 585-6700
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
MAY 11, 2006
This proxy statement (Proxy Statement) is furnished
in connection with the solicitation by the board of directors of
Wesco Financial Corporation (Wesco) of proxies to be
voted at the May 11, 2006 annual meeting of the
shareholders of Wesco (Annual Meeting). This Proxy
Statement is expected to be mailed to shareholders on or about
March 22, 2006, together with Wescos combined annual
report to shareholders and annual report to the Securities and
Exchange Commission (SEC) on
Form 10-K for the
calendar year ended December 31, 2005.
PROXIES AND REVOCATION
The shares represented by each properly executed, unrevoked form
of proxy received in time for the meeting will be voted in
accordance with the instructions contained therein. Any
shareholder giving a proxy has the power to revoke it at any
time before it is voted at the meeting by filing with the
Secretary of Wesco at 301 East Colorado Boulevard,
Suite 300, Pasadena, California 91101-1901, a written
revocation or a properly executed proxy bearing a later date, or
by voting in person at the meeting.
Wesco intends to solicit proxies principally by the use of the
mail. It will also request banks, brokerage firms and other
custodians, nominees and fiduciaries to forward copies of the
form of proxy and Proxy Statement to persons for whom they hold
stock of Wesco and request authority for the execution of
proxies. Wesco will reimburse such banks, brokerage firms and
other custodians, nominees and fiduciaries for their actual
expenditures incurred in connection therewith at not higher than
usual and customary rates; facsimile transmissions are not
considered necessary, and expenditures related thereto will not
be reimbursed. Officers of Wesco may solicit proxies to a very
limited extent by telephone, but without incremental cost to
Wesco, except for actual
out-of-pocket
communication charges, which are expected to be insignificant.
Thus, the cost of soliciting proxies will be paid by Wesco.
1
ELECTION OF DIRECTORS
At the Annual Meeting, the six nominees for Director receiving
the highest number of affirmative votes will be elected Wesco
directors (Directors). Each elected Director shall
serve until the election and qualification of his or her
respective successor (expected to be at the annual meeting to be
held in May 2007) or upon earlier resignation (not currently
anticipated). Each nominee currently serves as a Director and
has been nominated by Wescos Board of Directors (the
Board). Set forth below for each nominee is his or
her principal occupation, business experience during at least
the past five years, age, and certain other information.
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CHARLES T. MUNGER, age 82, has been a Director since 1973,
and Chairman of the Board and Chief Executive Officer of Wesco
since 1984. He has also served Wesco as President since May
2005. He has been Chairman of the Board of Blue Chip Stamps
(Blue Chip) since 1976, having joined its board in
1969; Blue Chip, the parent of Wesco, is engaged in the trading
stamp business. Since 1978, Mr. Munger has been Vice
Chairman of Berkshire Hathaway Inc. (Berkshire), the
parent of Blue Chip; Berkshire is engaged in the property and
casualty insurance business and many other diverse businesses.
Mr. Munger is Chairman of the Board of Daily Journal
Corporation, a publisher of specialty newspapers primarily in
California. He is also a director and chairman of the audit
committee of Costco Wholesale Corporation, which operates a
large chain of membership warehouses. |
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CAROLYN H. CARLBURG, age 59, has been a Director since
1991. Since April 2005, she has been Chief Executive Officer of
AIDS Research Alliance of America, Inc., a non-profit, national
research organization which collaborates with scientists,
universities and researchers worldwide. From July 2001,
Ms. Carlburg was engaged in the practice of law under her
own name and specialized in land use matters and business
litigation. From 1997 through July 2001, she was Executive
Director of the Center for Community & Family Services,
Inc. Prior thereto, she practiced law under the name Carolyn H.
Carlburg & Associates. She has been a director of MS
Property Company, a wholly owned Wesco subsidiary, since 1999. |
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ROBERT E. DENHAM, age 60, has been a Director since 2000.
He is a partner of Munger, Tolles & Olson LLP, a law
firm which renders legal services for Wesco, Berkshire, and
certain of their affiliates. In 1998, he rejoined that firm,
with which he had been associated for twenty years, after
serving Salomon Inc, a former investee of Berkshire, Wesco and
several of their subsidiaries, in the following capacities: 1992
to 1997, Chairman and Chief Executive Officer of Salomon Inc;
1991 and 1992, general counsel of Salomon Inc and its investment
banking subsidiary, Salomon Brothers. Mr. Denham is also a
director of Chevron Corporation, an international energy
company; Lucent Technologies, Inc., a telecommunications
equipment manufacturer; and Fomento Economico Mexicano, S.A. de
C.V., a Mexico-based beverage and convenience store company
whose ADRs trade on the New York Stock Exchange. Since January
2004, he has been Chairman of the Financial Accounting
Foundation, which has oversight, funding and appointment
responsibilities for the Financial Accounting Standards Board,
the Governmental Accounting Standards Board, and their advisory
councils. |
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ROBERT T. FLAHERTY, age 68, has been a Director since May
2003. He is a Chartered Financial Analyst and is engaged in
personal investments. From 1983 through 1996, he served as
President of Flaherty & Crumrine Incorporated, a
registered investment and commodities trading advisor. In
addition, he served as a director of Flaherty &
Crumrine Incorporated until 2002; he retired from that company
in January 2003. During his affiliation with Flaherty &
Crumrine Incorporated, Mr. Flaherty also served as
Chairman, President and Chief Executive Officer of three
publicly traded closed-end investment companies managed by that
firm. |
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PETER D. KAUFMAN, age 51, has been a Director since May
2003. He is Chairman and Chief Executive Officer of Glenair,
Inc., a privately held manufacturer of electrical and fiber
optic components and assemblies for the aerospace industry. He
has served in various capacities at that company since 1977. |
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ELIZABETH CASPERS PETERS, age 80, has been a Director since
1959 except for the period 1961 to 1967. She is engaged in
personal investments. She has been a director of MS Property
Company since 1993. |
2
EXECUTIVE OFFICERS
In addition to Mr. Munger, Wesco has three executive
officers, who are listed below. All officers are elected by the
newly elected Board to serve for the next twelve months or until
their successors have been elected and qualified. Set forth
below for each executive officer other than Mr. Munger is
his principal occupation, business experience during at least
the past five years, age, and certain other information.
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JEFFREY L. JACOBSON, age 58, has served as Vice President
and Chief Financial Officer of Wesco since 1984. He has served
MS Property Company, a wholly owned Wesco subsidiary, as Vice
President and Chief Financial Officer since 1993, and as a
director since May 2005. He has served in various financial and
other offices of Blue Chip since joining it in 1977
currently he is Vice President and Chief Financial
Officer and has served as a Blue Chip director since
1987. |
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ROBERT E. SAHM, age 78, has, since 1971, served Wesco as
Vice President in charge of building management and, ultimately,
all real estate operations; prior thereto, he served as Building
Manager from 1967. Since May 2005, he has served MS Property
Company as President, and, prior thereto, as Senior Vice
President in charge of property management, development and
sales, and as a director, since 1993. |
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CHRISTOPHER M. GRECO, age 28, has served Wesco as Treasurer
since January 2005. He has also served MS Property and Blue Chip
as Treasurer since that time. Prior thereto, from November 2002,
he was employed by PriceWaterhouseCoopers, and from January 2000
by Windes & McClaughry Accountancy Corporation,
providing audit, tax-related and business consulting services to
publicly traded and privately owned companies, and other clients
of those accounting firms. |
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
On March 15, 2006, the record date for determination of
shareholders entitled to notice of and to vote at the Annual
Meeting, a total of 7,119,807 shares of capital stock were
outstanding. Such shares are the only voting securities of
Wesco. All information regarding stock ownership is given as of
the close of business on March 15, 2006.
Shareholders have the right to elect Directors by cumulative
voting in accordance with Wescos bylaws: Each share has
votes equal to the number of Directors to be elected (six), and
the votes may be cast for one candidate or distributed among two
or more candidates. On all other matters, each share has one
vote. Votes withheld as to specific Directors on forms of proxy
are treated as votes cast in determining if a quorum is present
to transact business but are excluded from the votes cast in
favor of such Directors. Any portion of the shares held by a
broker or other party that is not voted on an omnibus proxy is
neither counted in determining if a quorum is present nor
treated as votes cast for any purpose. A majority of
Wescos outstanding capital shares as of March 15,
2006 must be represented in person or by proxy to constitute a
quorum for the Annual Meeting.
The persons appointed by the Board as proxies on the
accompanying form of proxy have informed the Board of their
intent to distribute, in such proportion as they see fit, the
authorized votes represented by proxies (i) in favor of the
election of the six nominees named above, or (ii), in the event
one or more of said nominees is or are unable to serve, for the
remainder of the nominees named above supplemented by any
substitute nominee or nominees selected by the Board.
Blue Chip, a wholly owned subsidiary of Berkshire, owns
5,703,087 shares (80.1%) of Wesco capital stock. Warren E.
Buffett, Chairman of the Board and Chief Executive Officer of
Berkshire, has sole voting power with respect to 39.5% of
Berkshires common stock. Mr. Buffett may be deemed to
be in control of Berkshire; and Mr. Buffett, as well as
Berkshire, may be deemed to be in control of Blue Chip and
Wesco. Charles T. Munger, Chairman of the Board and President of
Wesco, is also Vice Chairman of the Board of Berkshire; he has
sole voting power with respect to 1.3% of Berkshires
common stock. Mr. Munger consults with Mr. Buffett
with respect to Wescos investment decisions and major
capital allocations. No other Director or executive officer of
Wesco owns more than one percent of any class of Berkshire
common stock,
3
and the amount of Berkshire common stock owned in the aggregate
by all Wesco Directors and executive officers (other than
Mr. Munger) is less than one percent of each class of
Berkshire common stock.
Wesco-Financial Insurance Company
(Wes-FIC),
a wholly owned subsidiary of Wesco, is headquartered in Omaha,
Nebraska, where its business is administered by employees of
wholly owned insurance subsidiaries of Berkshire. From time to
time, Berkshire has offered to
Wes-FIC, and
Wes-FIC (with
Wescos concurrence) has accepted, retrocessions of
portions of reinsurance contracts under arrangements described
on page 11 of Wescos 2005 Annual Report on
Form 10-K.
Wescos and
Wes-FICs boards
believe all such retrocessions have been entered into at terms
more favorable than
Wes-FIC could have
obtained elsewhere. Kansas Bankers Surety Company
(KBS), wholly owned by
Wes-FIC, is supervised
by Berkshire subsidiaries. In 2005 KBS ceded 50% of a layer of
loss exposure to an unaffiliated reinsurer and the other 50% to
a Berkshire subsidiary, on identical terms. A layer of losses
above such layer was 30%-retained by KBS; the other 70% was
reinsured by another Berkshire insurance subsidiary. In 2005,
premiums of $2,147,000 were ceded to Berkshire subsidiaries;
incurred reinsured losses aggregating $125,000 were allocated to
them. In addition, Berkshire subsidiaries in 2005 received
$92,000 in administrative fees and expense reimbursements
relative to Wes-FIC and
KBS.
Robert T. Flaherty, a Wesco Director, owns a significant portion
of the stock of Flaherty & Crumrine Incorporated, which
leases office space in the commercial office building owned by
Wescos MS Property Company subsidiary. Terms of the lease
are believed by Wescos management to be within the general
market range for such third-party leases. Wescos
subsidiary received $86,728 under the lease during 2005.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Wescos capital stock is the only class of outstanding
capital stock. Blue Chip is the only organization or individual
known to Wescos management to own beneficially 5% or more
of its outstanding capital stock. Beneficial ownership of
Wescos capital stock by Blue Chip and by all Directors and
executive officers who own shares is set forth below.
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Amount and Nature | |
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Ownership(1) | |
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Blue Chip Stamps
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5,703,087 |
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80.1 |
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Robert E. Denham
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1,270 |
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Peter D. Kaufman
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1,000 |
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Elizabeth Caspers Peters
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73,503 |
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1.0 |
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Robert E. Sahm
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3,150 |
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All directors and executive officers as a group
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78,923 |
(3,4,5) |
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1.1 |
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(1) |
Beneficial owner has sole voting and investment power, and
economic interest, except as indicated. |
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Voting and investment power may be deemed to be controlled by
Berkshire and Warren E. Buffett by virtue of the relationships
described on page 3. Blue Chips principal executive
offices are located at 301 East Colorado Boulevard,
Suite 300, Pasadena, California 91101-1901.
Berkshires principal executive offices are located at
1440 Kiewit Plaza, Omaha, Nebraska 68131, which is also
Mr. Buffetts principal address. |
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(3) |
Includes 270 shares held by Mr. Denhams spouse,
as to which Mr. Denham disclaims beneficial ownership. |
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(4) |
Includes 16,843 shares held by a trust of which
Mrs. Peters is co-trustee with her children and income
beneficiary. |
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(5) |
Does not include the 5,703,087 shares (80.1%) held by Blue
Chip, of which Charles T. Munger and Jeffrey L.
Jacobson are directors and executive officers and
Christopher M. Greco is an executive officer. |
4
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 ( the
Exchange Act) requires Wescos executive
officers and Directors, and persons who own more than ten
percent of Wescos outstanding capital stock, to file
reports of ownership and changes in ownership with the SEC.
Copies of all such Section 16(a) reports must be furnished
to Wesco.
Based solely on its review of the copies of such
Section 16(a) reports received by it, and representations
from certain persons subject to Section 16(a) reporting
that no such reports were required to be filed, Wesco believes
that its executive officers, Directors, and beneficial owners of
more than ten percent filed all such required reports on a
timely basis during 2005.
BOARD OF DIRECTORS INTERLOCKS AND INSIDER PARTICIPATION
Charles T. Munger, Chairman of the Board, President and Chief
Executive Officer of Wesco, is also Chairman of the Board of
Blue Chip and Vice Chairman of the Board of Berkshire. Robert H.
Bird, who was a Director and President of Wesco through the date
of his retirement in May 2005, is also a director of and
President of Blue Chip. Jeffrey L. Jacobson, Vice President and
Chief Financial Officer of Wesco, is also a director of and Vice
President and Chief Financial Officer of Blue Chip.
DIRECTOR INDEPENDENCE, COMMITTEES AND MEETINGS
Because 80.1% of Wescos capital stock is owned by Blue
Chip, the Board has determined that Wesco is a controlled
company within the meaning of Section 801 of the
listing standards of the American Stock Exchange
(AMEX), on which Wescos shares are traded.
Controlled companies are exempted from a number of AMEX listing
standards, including the requirement to have a majority of
independent directors and the requirement to have director
nominees selected by a nominating committee comprised entirely
of independent directors or by a majority of the independent
directors. Controlled companies are also exempt from the
requirement to have the compensation of the issuers
officers determined by a compensation committee comprised solely
of independent directors or by a majority of the boards
independent directors.
Nonetheless, the Board has affirmatively determined that
Carolyn H. Carlburg, Robert T. Flaherty, Peter D.
Kaufman and Elizabeth Caspers Peters are independent
as defined in Section 121(A) of the AMEX listing standards.
Wesco has a standing audit committee (Audit
Committee) established in accordance with
Section 3(a)(58)(A) of the Exchange Act that is responsible
for assisting the Board in fulfilling its responsibilities as
they relate to Wescos accounting policies, internal
controls and financial reporting practices. The members of the
Audit Committee are Carolyn H. Carlburg (Chair), Robert T.
Flaherty and Peter D. Kaufman. The Board has determined that
each of these Directors is independent in accordance with AMEX
listing standards, and with Rule 10A-3 promulgated under
the Exchange Act. The Board has determined that
Messrs. Flaherty and Kaufman are each audit committee
financial experts as that term is used in Item 401 of
Regulation S-K
promulgated under the Exchange Act.
The Audit Committee is the only standing committee of the Board.
Wesco does not have a nominating committee or a compensation
committee. Wescos nominating process is described below
under Nominations, and its compensation program is
described in the Board of Directors Report on
Executive Compensation on page 8.
During 2005, the Directors held four regularly scheduled Board
meetings and the Audit Committee held five meetings. No Director
attended fewer than 75 percent of the combined total number
of meetings of the Board and Audit Committee (if a member
thereof) held during the year. Wesco does not require its
Directors to attend annual meetings of shareholders, but all
current Directors attended the 2005 annual meeting.
5
NOMINATIONS
There is no standing nominating committee, and the entire Board
is responsible for selecting nominees for election as Directors.
Wesco believes that the Board is able to fully consider and
select appropriate nominees for election to the Board without
delegating that responsibility to a committee of independent
Directors or adopting formal procedures. Candidates have
traditionally been recommended to the Board by Mr. Munger
or one of the other Directors, and there is not a formal process
for identifying or evaluating new Director nominees. Candidates
recommended by shareholders will be evaluated in the same manner
as candidates recommended by others, although the Board may
prefer candidates of good repute who are personally known to
Directors. The Board will consider all relevant qualifications
as well as the needs of Wesco in terms of compliance with AMEX
listing standards and SEC rules.
A shareholder wishing to recommend a candidate for Director
should send a letter to Wesco Financial Corporation, attention
of the Secretary, at 301 East Colorado Boulevard,
Suite 300, Pasadena, California 91101-1901. The mailing
envelope must contain a clear notation indicating that the
enclosed letter is a Director Nominee
Recommendation. The letter must identify the author as a
shareholder and provide a brief summary of the candidates
qualifications, as well as contact information for both the
candidate and the shareholder. At a minimum, candidates for
election to the Board should meet the independence requirements
of Section 121(A) of the AMEX listing standards and
Rule 10A-3 under the Exchange Act. Candidates should also
have relevant business and financial experience, and they must
be able to read and understand fundamental financial statements.
SHAREHOLDER COMMUNICATION WITH THE BOARD
Shareholders who wish to communicate with the Board or with a
particular Director may send a letter to the attention of the
Secretary, Wesco Financial Corporation, at 301 East Colorado
Boulevard, Suite 300, Pasadena, California 91101-1901. The
mailing envelope must contain a clear notation indicating that
the enclosed letter is a Shareholder-Board
Communication or Shareholder-Director
Communication. All such letters must identify the author
as a shareholder and clearly state whether the intended
recipients are all of the members of the Board or just certain
specified individual Directors. The Secretary will make copies
of all such letters and forward them to the appropriate Director
or Directors.
CODE OF BUSINESS CONDUCT AND ETHICS
Wesco has adopted a Code of Business Conduct and Ethics (the
Code) applicable to its Directors, officers and
employees and those of its subsidiaries. A copy of the Code may
be accessed through Wescos website, www.wescofinancial.com.
6
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Directors who are not officers currently receive fees totaling
$9,000 per year, plus $750 for each special meeting which
they attend. The Chair of the Audit Committee currently receives
additional fees totaling $9,000 per year, and other Audit
Committee members receive $750 for each committee meeting
attended.
The following table shows compensation paid by Wesco and its
subsidiaries to its executive officers for the three years ended
December 31, 2005.
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Annual Compensation | |
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Name and Capacity in Which Served |
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Salary(1) | |
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Bonus(2) | |
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Charles T. Munger Chairman of the Board, President,
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2005 |
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$ |
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$ |
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and Chief Executive Officer of
Wesco(3) |
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2004 |
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2003 |
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Jeffrey L. Jacobson Vice President and Chief
Financial
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2005 |
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210,000 |
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Officer of Wesco and MS Property Company |
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2004 |
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204,000 |
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2003 |
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186,000 |
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Robert E. Sahm Vice President of Wesco and
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2005 |
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207,900 |
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17,750 |
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President of MS Property Company |
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2004 |
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198,000 |
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16,900 |
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2003 |
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188,400 |
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16,100 |
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Christopher M. Greco, Treasurer of Wesco and
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2005 |
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90,000 |
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MS Property Company |
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Robert H. Bird President of Wesco and MS Property
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2005 |
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46,000 |
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Company(3) |
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2004 |
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132,000 |
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2003 |
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108,000 |
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(1) |
Messrs. Munger, Bird, Jacobson and Greco have been
employees of, and compensated by, Blue Chip but have spent a
portion of their time on the activities of Wesco and its
subsidiaries. Figures shown for Messrs. Bird, Jacobson and
Greco represent amounts paid to Blue Chip by Wesco or its
subsidiaries for their services. Blue Chip has not been
compensated by Wesco or its subsidiaries for
Mr. Mungers services. Mr. Munger was paid a
total of $100,000 by Blue Chip for each of the three years.
Mr. Sahm is compensated by MS Property Company. |
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(2) |
Mr. Sahms bonus is based on a
length-of-service
formula applicable to all employees of MS Property Company and
is equal to one months salary. |
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(3) |
On May 5, 2005, the Board elected Mr. Munger President
of Wesco, coincident with Mr. Birds retirement as
President of Wesco and MS Property Company. |
7
BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION*
Wescos program of executive compensation is believed
different from most public corporations programs.
Messrs. Munger, Jacobson and Greco are not employees of
Wesco or a Wesco subsidiary, nor was Mr. Bird; nor are they
or have they been remunerated directly by Wesco or a Wesco
subsidiary for their services. All four have been employed by
Blue Chip. Messrs. Munger, Bird and Jacobson are directors,
and Mr. Munger is chairman of the board, of Blue Chip.
Wesco and its subsidiaries reimburse Blue Chip for the services
of Messrs. Jacobson, Greco, and, prior to his retirement,
Mr. Bird, based on Blue Chips cost of their
compensation, including related taxes and benefits, and an
estimate of the relative time each individual has devoted to the
business of each company. Wesco and its subsidiaries do not
reimburse Blue Chip for Mr. Mungers services.
Mr. Sahm, who does not work for Blue Chip, is compensated
based on factors such as his individual performance, changes in
responsibilities and inflation.
The Board, at least annually, reviews and approves the
compensation of, or any reimbursement to Blue Chip for,
Wescos executive officers based on the recommendation of
Mr. Munger. Factors considered by Mr. Munger are
typically subjective and include individual performance, changes
in responsibility and inflation. Neither the profitability of
Wesco nor the market price of Wescos stock is considered
in setting executive compensation.
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* |
Submitted by Wescos Board of Directors: Charles T. Munger,
Carolyn H. Carlburg, Robert E. Denham, Robert T. Flaherty, Peter
D. Kaufman and Elizabeth Caspers Peters. |
8
STOCK PERFORMANCE GRAPH
The following graph compares the value at each subsequent
yearend of $100 invested in Wesco capital stock on
December 31, 2000 with identical investments in the
Standard and Poors (S&P) 500 Stock
Index and the S&P Property-Casualty Insurance Index,
assuming reinvestment of dividends.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Wescos consolidated financial statements are required to
be included in the consolidated financial statements of its
80.1% parent, Berkshire. Accordingly, to facilitate the
efficient examination of the statements of both companies,
Wescos Audit Committee, effective with the year 2004,
delegated to Berkshires audit committee authority to
engage a public accounting firm to audit Wescos
consolidated financial statements, as well as the authority to
pre-approve other audit and non-audit services for Wesco.
Deloitte & Touche LLP (Deloitte) was
selected by Berkshires audit committee for 2005 and the
appointment was ratified by Wescos Audit Committee.
Berkshires audit committee has not yet selected
Wescos independent auditors for the year 2006.
Representatives of Deloitte are expected to be present at the
Annual Meeting. They will be given an opportunity to make a
statement if they so desire and to respond to any appropriate
questions.
Audit Fees. In 2005, Berkshire allocated to Wesco
$650,000 representing Wescos share of billings by Deloitte
for the audits of the 2005 consolidated financial statements of
Berkshire and all of its subsidiaries including Wesco and its
subsidiaries. Such services included testing required by the
Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley) as well
as reviews of the financial statements included in Wescos
Quarterly Reports to the SEC on
Form 10-Q for
2005. In 2004, Berkshire allocated to Wesco $565,000 for
Deloittes audit services.
Audit-Related Fees. In 2005, Deloitte was paid $24,500 by
Wesco in connection with its assistance with communications
received by Wesco from the Securities and Exchange Commission in
connection with its review of Wescos 2004 Annual Report on
Form 10-K. In
2004, a Wesco subsidiary retained Deloitte to assist with
Sarbanes-Oxley readiness, for which Deloitte was paid $250,000.
There were no other audit-related fees billed by Deloitte or
allocated by Berkshire in 2005 or 2004.
Tax Fees. There were no fees billed by Deloitte or
allocated by Berkshire in either 2005 or 2004 for tax
compliance, tax advice or tax planning for Wesco or its
subsidiaries.
All Other Fees. There were no fees billed by Deloitte or
allocated by Berkshire in either 2005 or 2004 other than those
set forth above.
9
Audit Fees Pre-approval Policy. Beginning in 2004,
Wescos Audit Committee delegated to Berkshires audit
committee authority to engage an independent registered public
accounting firm to audit Wescos consolidated financial
statements, as well as the authority to pre-approve other audit
and non-audit services for Wesco. Berkshires audit
committee adopted a pre-approval policy on May 5, 2003. The
policy requires that Berkshires audit committee
pre-approve all services the independent registered public
accounting firm provides, including audit services,
audit-related services, tax and other services. Some services
have a general pre-approval. The term of any general
pre-approval is 12 months from the date of pre-approval,
unless the audit committee considers a different period and
states otherwise. Berkshires audit committee will annually
review and pre-approve the services that may be provided by the
independent registered public accounting firm without obtaining
specific pre-approval. Berkshires audit committee will
revise the list of general pre-approved services from time to
time, based on subsequent determinations. Any proposed services
exceeding pre-approved cost levels or budgeted amounts will also
require specific pre-approval by Berkshires audit
committee. Wesco has been informed that all services performed
by Deloitte in 2005 were pre-approved in accordance with the
pre-approval policy adopted by Berkshires audit committee.
AUDIT COMMITTEE REPORT*
Wescos Audit Committee (the Committee)
operates pursuant to a written charter (Charter)
providing for the Committee to assist the Board in fulfilling
its oversight responsibilities by performing, among other
things, the following functions: monitoring the integrity of the
financial reporting process and internal controls; monitoring
the independence and performance of the independent registered
public accounting firm; and facilitating communication between
the Board, management and the independent registered public
accounting firm. The Charter was attached as an appendix to the
proxy statement for the 2004 annual meeting of Wesco
shareholders, which can be accessed through Wescos website
(www.wescofinancial.com).
In performing its functions for the year ended December 31,
2005, the Committee completed a number of procedures, including
those specified in the Charter. In particular, the Committee:
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Reviewed and discussed Wescos unaudited consolidated
financial statements for the quarters ended March 31,
June 30 and September 30, 2005, and audited
consolidated financial statements for the year ended
December 31, 2005 with Wescos management and Deloitte. |
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Discussed with Deloitte the matters required to be discussed by
Statement on Auditing Standards No. 61, Communications
with Audit Committees, as amended, promulgated by the
Auditing Standards Board of the American Institute of Certified
Public Accountants (AICPA). |
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Received the written disclosures and letter from Deloitte
required by Standard No. 1, Independence Discussions
with Audit Committees, as supplemented, promulgated by the
AICPAs Independence Standards Board, and discussed with
Deloitte their independence, including whether the provision of
their services is compatible with maintaining their independence. |
Based upon the reviews and discussions referred to above, and
the report of Deloitte, the Committee recommended to the Board
that Wescos audited consolidated financial statements for
2005 be included in its annual report to shareholders and its
annual report to the SEC on
Form 10-K, and the
Board concurred.
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* |
Submitted by Wescos Audit Committee: Carolyn H. Carlburg
(Chair), Robert T. Flaherty and Peter D. Kaufman. |
10
OTHER MATTERS
As far as Wesco is aware, there are no matters to be brought
before the May 11, 2006 annual meeting other than the
election of Directors. Should any other matters come before the
meeting, action will be taken thereon by the persons appointed
as proxies on the accompanying form of proxy, or their
substitutes, according to their discretion.
PROPOSALS OF SHAREHOLDERS FOR 2007 ANNUAL MEETING
Any shareholder proposal intended to be considered for inclusion
in the proxy statement for presentation at the annual meeting of
shareholders expected to be held in May 2007 (the 2007
annual meeting) must be received by Wesco by
December 4, 2006. The proposal must be in accordance with
the provisions of
Rule 14a-8
promulgated by the SEC under the Securities Exchange Act. It is
suggested the proposal be submitted by certified mail, return
receipt requested. Shareholders intending to present proposals
at the 2007 annual meeting without having the proposals included
in the proxy statement must notify Wesco of such intentions
before February 13, 2007. After such date, Wescos
proxy in connection with the 2007 annual meeting of shareholders
may confer discretionary authority on the Board to vote on any
such proposals. In addition, Wesco reserves the right, through
its directors, officers or proxies, to reject, rule out of
order, or take other appropriate action with respect to any
proposal that does not comply with the applicable deadline and
other requirements.
AVAILABLE INFORMATION
Wesco has mailed its combined printed annual report and
Form 10-K for the
year 2005 to shareholders of record as of March 15, 2006.
The exhibits to that report will be provided upon request and
payment of copying charges. Requests for the exhibits or
additional copies of the combined report should be directed to
Margery A. Patrick, Secretary, Wesco Financial Corporation, 301
East Colorado Boulevard, Suite 300, Pasadena, California
91101-1901. Wescos combined printed annual report and
Form 10-K may be
accessed through Wescos website, www.wescofinancial.com,
and portions that have been electronically filed with the SEC
are available through the SECs website at www.sec.gov.
* * * * *
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By Order of the Board of Directors |
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Margery A. Patrick |
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Secretary |
Pasadena, California
March 30, 2006
Directions to Annual Meeting
Meeting The annual shareholders meeting
of Wesco Financial Corporation will be held at the Hilton
Pasadena, 168 South Los Robles Avenue (corner of Cordova
Street), in Pasadena, California, at 2:00 p.m., on
Thursday, May 11, 2006.
Parking The Hiltons adjoining parking
structure may be accessed from Cordova Street, which runs
east-west to the south of the hotel.
11
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PROXY |
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WESCO FINANCIAL CORPORATION |
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Proxy for Annual Meeting of Shareholders |
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May 11, 2006 |
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This Proxy is Solicited on Behalf of the Board of Directors |
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The undersigned hereby appoints CHARLES T. MUNGER and MARGERY A. PATRICK, or either of them,
as Proxies, each with the power to appoint his or her substitute, and hereby authorizes them to
represent and to vote, as directed on the other side hereof, all shares of capital stock of WESCO
FINANCIAL CORPORATION held of record by the undersigned on
March 15, 2006 at the annual meeting of
shareholders to be held at the Hilton Pasadena, 168 South Los Robles Avenue, Pasadena, California,
on Thursday, May 11, 2006 at 2:00 p.m., or at any adjournment or adjournments thereof. |
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(Continued and to be signed on the other side) |
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Address Change (Mark the corresponding box on the reverse side) |
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5 FOLD AND DETACH HERE 5
WESCO FINANCIAL CORPORATION
Directions to Annual Meeting
Meeting The annual shareholders meeting of Wesco Financial Corporation will be held at the
Hilton Pasadena, 168 South Los Robles Avenue, Pasadena, California,
at 2:00 p.m., on Thursday, May
11, 2006.
Parking The Hiltons adjoining parking structure may be accessed from Cordova Street, which runs
east-west to the south of the hotel.
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WESCO FINANCIAL CORPORATION
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Mark Here
for Address
Change
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PLEASE SEE REVERSE SIDE |
(Continued from the other side)
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FOR
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WITHHOLD
AUTHORITY |
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1.
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ELECTION OF DIRECTORS to serve until the next annual meeting
of shareholders or until
their respective successors shall have been duly elected and
qualified. The Proxies are
directed to vote for all nominees listed below (except as
marked to the contrary):
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2. |
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OTHER MATTERS. In their discretion, the
Proxies are authorized to vote upon such
other business as may properly come
before the meeting. |
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01. Charles T. Munger, 02. Carolyn H. Carlburg, |
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03. Robert E. Denham, 04. Robert T. Flaherty, |
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05. Peter D. Kaufman, 06. Elizabeth Caspers Peters |
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INSTRUCTION: To withhold authority to vote for any individual
nominee, draw a line through his or her name above. |
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PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
CARD PROMPTLY USING THE ENCLOSED ENVELOPE. |
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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 as directors of all nominees
listed in Proposal 1 or, in the event one or
more of such nominees is unable to serve, any
substitute nominees selected by the present
Board of Directors. |
Please sign exactly as name appears herein. If shares are held by joint tenants, both should
sign. If signing as attorney, executor, administrator, trustee or guardian, please give full title
as such. If signing on behalf of a corporation, an authorized officer such as the president should
sign in full corporate name together with signature and title. If signing on behalf of a
partnership, an authorized person should sign in full partnership name together with signature and
position.
5 FOLD AND DETACH HERE 5