<PAGE> 1
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:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for the Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
</TABLE>
SOUTHERN PERU COPPER CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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:
<PAGE> 2
[SOUTHERN PERU COPPER CORPORATION LOGO]
March 23, 1998
Dear Common Stockholder:
You are cordially invited to attend the annual meeting of stockholders,
which will be held in the Ricker Auditorium, 180 Maiden Lane, New York, New York
on Thursday, April 30, 1998, at 2 P.M. We hope you can be with us.
At the meeting, you will be asked to elect two directors and to approve the
selection of independent accountants.
The meeting also provides an opportunity to give you a current report on
the activities of the Company and its plans and prospects for the future.
It is important that your shares be represented at the meeting whether or
not you are able to attend in person. Therefore, you are asked to vote, sign,
date and mail the enclosed proxy. Please do so today. In Peru, you may deliver
your signed proxy to our offices in Lima.
Sincerely,
<TABLE>
<S> <C>
/s/ Richard de J. Osborne /s/ Charles G. Preble
Richard de J. Osborne Charles G. Preble
Chairman of the Board President
Chief Executive Officer
</TABLE>
180 MAIDEN LANE, NEW YORK, N.Y. 10038 (212) 510-2000
AVENIDA CAMINOS DEL INCA NO. 171, CHACARILLA DEL ESTANQUE,
SANTIAGO DE SURCO, LIMA 33, PERU (511) 372-1414, EXTENSION 3301
<PAGE> 3
[SOUTHERN PERU COPPER CORPORATION LOGO]
<TABLE>
<S> <C>
180 MAIDEN LANE AVENIDA CAMINOS DEL INCA NO. 171
NEW YORK, N.Y. 10038 CHACARILLA DEL ESTANQUE, SANTIAGO DE SURCO,
LIMA 33, PERU
</TABLE>
------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 30, 1998
To the Common Stockholders:
The annual meeting of stockholders of Southern Peru Copper Corporation will
be held in the Ricker Auditorium, 180 Maiden Lane, New York, New York on
Thursday, April 30, 1998, at 2 P.M. for the following purposes:
(1) To elect two directors of the Company by the holders of Common Stock,
voting as a separate class, such directors to serve until the 1999
annual meeting.
(2) To act upon a proposal to approve the selection by the Board of
Directors of Coopers & Lybrand L.L.P. as independent accountants for
the calendar year 1998.
(3) To transact such other business as may properly come before the
meeting.
In addition, the holders of Class A Common Stock, voting as a separate
class, will elect thirteen directors, such directors to serve until the 1999
annual meeting. The holders of Class A Common Stock will vote together with the
holders of Common Stock, as a single class, upon the proposal to approve the
selection of independent accountants for the calendar year 1998.
Stockholders of record at the close of business on March 6, 1998 will be
entitled to vote at the annual meeting. Stockholders of record who attend the
annual meeting in person may withdraw their proxies and vote in person if they
wish.
By order of the Board of Directors,
A. B. Kinsolving
Secretary
New York, N.Y. March 23, 1998
----------------------------------------------------------
YOUR VOTE IS IMPORTANT
Please mark, sign, date and return your proxy.
----------------------------------------------------------
<PAGE> 4
PROXY STATEMENT
This proxy statement is furnished as part of the solicitation by the Board
of Directors of Southern Peru Copper Corporation, 180 Maiden Lane, New York,
N.Y. 10038 and Avenida Caminos del Inca No. 171, Chacarilla del Estanque,
Santiago de Surco, Lima 33, Peru, of the proxies of all holders of common stock,
par value $0.01 per share (the "Common Stock") entitled to vote at the annual
meeting to be held on April 30, 1998 and at any adjournment thereof. This proxy
statement is not soliciting proxies from holders of Class A Common Stock whose
proxies are being solicited separately. This proxy statement and the enclosed
form of proxy are being mailed commencing on or about March 27, 1998, to holders
of Common Stock of record on March 6, 1998. Additional copies will be available
at the Company's offices in Lima and other locations in Peru.
Southern Peru Copper Corporation was reorganized into a holding company
structure effective January 2, 1996, upon completion of a public offer to
exchange newly-issued Common Stock for outstanding labor shares of the Company's
Peruvian Branch ("Labor Shares"). Throughout this proxy statement, unless the
context otherwise requires, the terms "Southern Peru", "SPCC" and the "Company"
refer to the present corporation as well as its predecessor, now named Southern
Peru Limited ("SP Limited"), which previously was the parent company and is now
a wholly owned subsidiary of the Company.
Any proxy in the enclosed form given pursuant to this solicitation and
received in time for the annual meeting will be voted with respect to all shares
represented by it and in accordance with the instructions, if any, given in such
proxy. If the Company receives a signed proxy with no voting instructions given,
such shares will be voted for the election of directors and approval of
accountants proposals. Any proxy may be revoked at any time prior to the
exercise thereof by notice from the stockholder, received in writing by the
Secretary, or by written ballot voted at the meeting.
The outstanding shares of the Company consist of Common Stock and Class A
common stock, par value $0.01 per share (the "Class A Common Stock"). At the
close of business on March 6, 1998, the record date for the annual meeting, the
Company had outstanding 13,981,972 shares of Common Stock and 65,900,833 shares
of Class A Common Stock. Each such share of Common Stock is entitled to one vote
at the meeting, and each such share of Class A Common Stock is entitled to five
votes, except with respect to the election of directors, as described below
under "Voting Securities" or as required by law.
VOTING SECURITIES
The Company's Restated Certificate of Incorporation (the "Certificate")
provides for a Board of Directors composed of fifteen directors. Two directors
are elected by the holders of Common Stock (the "Common Stockholders") voting as
a separate class, with each share of Common Stock outstanding at the March 6,
1998 record date entitled to one vote at the annual meeting. Thirteen directors,
one of whom is the President, are nominated and elected by the holders of Class
A Common Stock, voting as a separate class and in accordance with the terms of
an agreement (the "Stockholders' Agreement") among ASARCO Incorporated
("Asarco"), Cerro Trading Company,
2
<PAGE> 5
Inc. ("Cerro") and Phelps Dodge Overseas Capital Corporation ("Phelps Dodge").
Asarco, Cerro and Phelps Dodge are hereinafter referred to collectively as the
"Class A Common Stockholders".
In accordance with the Company's Certificate, except with respect to the
election of directors or as required by law, the Common Stockholders and Class A
Common Stockholders vote together as a single class. Each share of Common Stock
is entitled to one vote per share and each share of Class A Common Stock is
entitled to five votes per share on matters submitted to the vote of
stockholders voting as one class.
The Company's By-Laws provide that the presence in person or by proxy of
the Common Stockholders of record of a majority of the shares of Common Stock
entitled to vote at the meeting shall constitute a quorum for the purpose of
electing two directors to represent the holders of Common Stock. Abstentions,
votes withheld and broker non-votes are counted for quorum purposes but are not
counted either as votes cast "For" or "Against". A plurality of the votes cast
by Common Stockholders is required for the election of the two Common Stock
directors. The presence in person or by proxy of the holders of record of a
majority of the combined outstanding shares of Common Stock and Class A Common
Stock entitled to vote at the meeting shall constitute a quorum for purposes of
voting on proposals other than the election of directors. The affirmative vote
of a majority of the votes cast at the meeting by the holders of shares of
Common Stock and holders of shares of Class A Common Stock entitled to vote
thereon, voting as a single class, is required to approve the independent
accountant proposal described in this proxy statement.
When a Common Stockholder participates in the Dividend Reinvestment Plan
applicable to the Company's Common Stock, his proxy to vote shares of Common
Stock will include the number of shares held for him by The Bank of New York,
the agent under the plan. If the Common Stockholder does not send any proxy, the
shares held for his account in the Dividend Reinvestment Plan will not be voted.
Shares of Common Stock owned under the Company's Savings Plan will be voted by
the trustee under the plan in accordance with the instructions contained in the
proxy submitted by the beneficial Common Stockholder. Any shares held by the
trustee as to which it receives no voting instructions will be voted by the
trustee in the same proportion as the shares for which it has received voting
instructions.
ELECTION OF DIRECTORS
Pursuant to a resolution of the Board of Directors adopted on February 3,
1998, two nominees are proposed for election by the Common Stockholders at the
annual meeting. Ambassador Everett E. Briggs and John F. McGillicuddy are the
nominees designated to be voted on by the Common Stockholders. The nominees to
be voted on by the Class A Common Stockholders are Jaime Claro, Augustus B.
Kinsolving, Francis R. McAllister, Kevin R. Morano, Robert J. Muth, Robert M.
Novotny, Richard de J. Osborne, Charles G. Preble, Robert A. Pritzker, Michael
O. Varner, David B. Woodbury, J. Steven Whisler and Douglas C. Yearley.
All of the nominees are currently serving as directors. Messrs. Morano and
Preble also serve as directors of the Company's operating subsidiary, SP
Limited.
3
<PAGE> 6
Proxies in the enclosed form will be voted, unless authority is withheld,
for the election of the two nominees named below. If any person should be
unavailable for election, proxies will be voted for another individual chosen by
the Board of Directors as a substitute for the unavailable nominee.
NOMINEES FOR ELECTION AS DIRECTORS REPRESENTING COMMON STOCK
As a Common Stockholder, you will be asked to elect two directors at the
annual meeting. The following two individuals have been nominated for election
to the Board of Directors to represent you until the next annual meeting of
stockholders.
<TABLE>
<CAPTION>
FOR COMMON STOCK DIRECTOR
DIRECTOR AGE SINCE
---------------- --- --------
<S> <C> <C> <C>
Amb. Everett E. Briggs........ President and Chief Executive Officer 63 January
of Americas Society and Council of 1996
the Americas since October 1993.
Ambassador Briggs was U.S. Ambassa-
dor to Portugal from 1990 to 1993
and previously served as U.S. Am-
bassador to Honduras and Panama.
John F. McGillicuddy.......... Director of UAL Corporation, USX Cor- 67 January
poration and Empire Blue Cross 1996
and Blue Shield. From December 1991
until December 1993, Mr.
McGillicuddy was Chairman of the
Board and Chief Executive Officer
of the Chemical Banking Corporation
and Chemical Bank. Mr. McGillicuddy
was Chairman of the Board and Chief
Executive Officer of Manufacturers
Hanover Trust Company from 1979 to
1991.
</TABLE>
4
<PAGE> 7
NOMINEES FOR ELECTION AS DIRECTORS REPRESENTING CLASS A COMMON STOCK
The following thirteen individuals have been nominated for election to the
Board of Directors by the Class A Common Stockholders voting in accordance with
the terms of a Stockholders' Agreement in effect among them. This information is
being provided to Common Stockholders for informational purposes only, as they
will not be asked to vote with respect to these individuals.
<TABLE>
<CAPTION>
CLASS A COMMON
STOCK DIRECTOR AGE POSITION
-------------- --- --------
<S> <C> <C>
Richard de J. Osborne...... 64 Chairman of the Board and Director
Charles G. Preble.......... 65 President, Chief Executive Officer and Director
Kevin R. Morano............ 44 Vice President and Director
Augustus B. Kinsolving..... 58 Secretary, General Counsel and Director
Jaime Claro................ 62 Director
Francis R. McAllister...... 55 Director
Robert J. Muth............. 64 Director
Robert M. Novotny.......... 49 Director
Robert A. Pritzker......... 71 Director
Michael O. Varner.......... 56 Director
J. Steven Whisler.......... 43 Director
David B. Woodbury.......... 57 Director
Douglas C. Yearley......... 62 Director
</TABLE>
Richard de J. Osborne, Chairman of the Board and Director. Mr. Osborne has
been Chairman of the Board of the Company since February 1996 and a director
since 1976. He has been Chairman of the Board and Chief Executive Officer of
Asarco since December 1985, also its President from 1982 until January 1998. Mr.
Osborne has been a director of Asarco since 1976. He is also a director of
Schering-Plough Corporation, The BFGoodrich Company and The Tinker Foundation
Incorporated.
Charles G. Preble, President, Chief Executive Officer and Director. Mr.
Preble has been President and Chief Executive Officer of the Company since 1985
and a director since 1984. He is also a director of InterBank, Lima.
Kevin R. Morano, Vice President and Director. Mr. Morano has been Vice
President and a director of the Company since 1993. Mr. Morano has been
Executive Vice President and Chief Financial Officer of Asarco since January
1998, and has served as Vice President, Finance and Chief Financial Officer of
Asarco from 1993 until January 1998. Prior to that he was general manager of
Asarco's Ray Complex from 1991 to 1993. From 1989 to 1991 he served as Asarco's
Treasurer. He has been a Director of Asarco since 1998.
Augustus B. Kinsolving, Secretary, General Counsel and Director. Mr.
Kinsolving has been Secretary of the Company and General Counsel since 1994 and
a director since 1989. He has been a Vice President of Asarco since 1983, has
served as Asarco's General Counsel since 1986 and its Secretary from 1987 to
1995.
5
<PAGE> 8
Jaime Claro, Director. Mr. Claro has been a director of the Company since
September 1996. Mr. Claro has been an advisor to The Marmon Group since October
1997, and he is also Vice Chairman of Cia. Electro Metalurgica S.A. and Quemchi
S.A., Chairman of Chilean Line Inc., and a director of Cia. Sud Americana de
Vapores, S.A., Cristalerias de Chile S.A. and Navarino S.A. He was director,
President and Chief Executive Officer of Cerro Sales Corporation from prior to
1991 until June 30, 1997, and President of the Cerro Sales Division of Cerro
Metal Products from June to September 1997.
Francis R. McAllister, Director. Mr. McAllister has been a director of the
Company since 1986 and was Vice President of the Company from 1992 to 1993. He
has been President and Chief Operating Officer of Asarco since January 1998, and
previously its Executive Vice President, Copper Operations from 1993 until
January 1998. Prior to that he was Asarco's Executive Vice President and Chief
Financial Officer from 1992 to 1993. From 1986 to 1992 he served as Vice
President, Finance and Administration and Chief Financial Officer. He has been a
director of Asarco since 1988. He is also a director of Cleveland-Cliffs Inc.
Robert J. Muth, Director. Mr. Muth has been a director of the Company since
1984. He has been Vice President, Government and Public Affairs of Asarco since
prior to 1991.
Robert M. Novotny, Director. Mr. Novotny has been a director of the Company
since 1995. He has been Vice President, Lead, Zinc, Silver and Mineral
Operations of Asarco since 1993. From 1990 to 1993, he was Vice President,
Operations.
Robert A. Pritzker, Director. Mr. Pritzker has been a director of the
Company since 1983. He is President and Chief Executive Officer of The Marmon
Corporation, and has served in that position for over five years. Mr. Pritzker
is also President and Chief Executive Officer of The Marmon Group, Inc. and
holds executive positions in its more than sixty autonomous member companies. He
is also a director of Acxiom Corporation.
Michael O. Varner, Director. Mr. Varner has been a director of the Company
since 1995. He has been Vice President, Environmental Operations of Asarco since
October 1993. Previously, he served as General Manager of Asarco's Western
Metals Division from April 1992 to September 1993 and was Director of Asarco's
Technical Services Center from 1986 to March 1992.
J. Steven Whisler, Director. Mr. Whisler has been a director of the Company
since June 1995. He has been President and Chief Operating Officer of Phelps
Dodge Corporation since December 1997, and previously its Senior Vice President
from 1988 until December 1997. He has also been President of Phelps Dodge Mining
Company since 1991. He is a director of Phelps Dodge Corporation and Burlington
Northern Santa Fe Corporation.
David B. Woodbury, Director. Mr. Woodbury has been a director of the
Company since April 1996. Mr. Woodbury has been Vice President, Human Resources
of Asarco since March 1993. From 1984 to March 1993, Mr. Woodbury was Vice
President, Human Resources of Ferro Corporation, a specialty materials producer.
Douglas C. Yearley, Director. Mr. Yearley has been a director of the
Company since 1991. He has been Chairman of the Board and Chief Executive
Officer of Phelps Dodge Corporation since
6
<PAGE> 9
December 1997, and previously its Chairman of the Board, President and Chief
Executive Officer from 1991 until December 1997. Mr. Yearley is a director of
Phelps Dodge Corporation, Lockheed Martin Corporation, USX Corporation, J.P.
Morgan & Co. Incorporated and Morgan Guaranty Trust Company of New York.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Set forth below is certain information with respect to those persons who
are known by the Company to have been, as of December 31, 1997, the beneficial
owners of more than five percent of the Company's outstanding Common Stock or
Class A Common Stock.
<TABLE>
<CAPTION>
COMMON STOCK CLASS A COMMON STOCK
--------------------------- --------------------------
SHARES OF SHARES OF PERCENT OF
COMMON PERCENT OF CLASS A OUTSTANDING
STOCK OUTSTANDING COMMON STOCK CLASS A PERCENT OF
BENEFICIALLY COMMON BENEFICIALLY COMMON OUTSTANDING VOTING
OWNED STOCK OWNED STOCK CAPITAL STOCK PERCENTAGE(A)
------------- ----------- ------------ ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
ASARCO Incorporated
180 Maiden Lane
New York, NY 10038............... -- -- 43,348,949 65.8% 54.1% 63.1%
Cerro Trading Company, Inc.(b)
225 West Washington Street
Suite 1900
Chicago, IL 60606................ -- -- 11,378,088 17.3 14.2 16.6
Phelps Dodge Overseas
Capital Corporation(c)
2600 North Central Avenue
Phoenix, AZ 85004................ -- -- 11,173,796 16.9 13.9 16.3
The Pritzker Family
Philanthropic Fund
200 West Madison Street
Chicago, IL 60606................ 2,850,000 20.1% -- -- 3.6 0.8
</TABLE>
- ---------------
(a) The Company's Certificate provides that, except with respect to the election
of directors or as required by law, the Common Stock and the Class A Common
Stock vote together as a single class, with each share of Common Stock
entitled to one vote and each share of Class A Common Stock entitled to
five votes.
(b) A subsidiary of The Marmon Corporation.
(c) A subsidiary of Phelps Dodge Corporation.
7
<PAGE> 10
The Class A Common Stockholders have entered into the Stockholders'
Agreement, which contemplates, among other things, a Board of Directors composed
of 15 members, one of whom is the President of the Company.
Under the terms of the Stockholders' Agreement, each Class A Common
Stockholder has the right to nominate that number of 12 directors which is in
proportion to the percentage of Class A Common Stock owned by it (or its
affiliates) out of the aggregate Class A Common Stock then owned by all holders
of Class A Common Stock (without any minimum required number of shares), rounded
to the nearest whole director, with 0.5 being rounded up. If this would result
in the Class A Common Stockholders, as a group, being entitled to elect more
than 12 directors, the Stockholders' Agreement contains a formula for rounding
up or rounding down as necessary to apportion the 12 directors among the Class A
Common Stockholders. The Class A Common Stockholders have also agreed to
nominate and vote for the President as a director.
The Stockholders' Agreement terminates, and each share of Class A Common
Stock automatically converts into one share of Common Stock (voting share for
share as a single class on all matters including election of directors), if at
any time the number of shares of Class A Common Stock owned by the Class A
Common Stockholders (or affiliates of the Class A Common Stockholders) is less
than 35% of the outstanding shares of Class A Common Stock and Common Stock of
the Company. In addition, the rights and obligations of each Class A Common
Stockholder under the Stockholders' Agreement terminate in the event such Class
A Common Stockholder (or its affiliates) ceases to own shares of Class A Common
Stock.
8
<PAGE> 11
BENEFICIAL OWNERSHIP OF MANAGEMENT
The information set forth below as to the shares of Common Stock of the
Company beneficially owned by the nominees, directors and executive officers
named in the Summary Compensation Table below and by all nominees, directors and
officers as a group is stated as of December 31, 1997.
<TABLE>
<CAPTION>
SOUTHERN PERU COPPER CORPORATION
----------------------------------------------------
SHARES OF THE ADDITIONAL
COMPANY'S SHARES PERCENT OF
COMMON STOCK DEEMED OUTSTANDING
BENEFICIALLY BENEFICIALLY COMMON
OWNED(A) OWNED(B) TOTALS STOCK
------------- ------------ ------- -----------
<S> <C> <C> <C> <C>
Everett E. Briggs(c)............................ 963 -- 963 (d)
Jaime Claro(c).................................. 400 -- 400 (d)
Hans A. Flury(e)................................ 2,825 8,700 11,525 (d)
Augustus B. Kinsolving.......................... 863 -- 863 (d)
Francis R. McAllister(c)........................ 1,793 -- 1,793 (d)
John F. McGillicuddy............................ 600 -- 600 (d)
Kevin R. Morano(c).............................. 1,793 -- 1,793 (d)
Robert J. Muth(c)............................... 1,600 -- 1,600 (d)
Robert M. Novotny............................... 1,228 -- 1,228 (d)
Ronald J. O'Keefe(e)............................ 2,950 16,800 19,750 (d)
Richard de J. Osborne(f)........................ 2,923 -- 2,923 (d)
Charles G. Preble(e)(g)......................... 15,998 42,000 57,998 (d)
Robert A. Pritzker(h)........................... 400 -- 400 (d)
Eduardo Santistevan(e).......................... 1,663 8,300 9,963 (d)
Charles B. Smith(e)............................. 4,500 23,300 27,800 (d)
Michael O. Varner(c)(i)......................... 1,085 -- 1,085 (d)
J. Steven Whisler............................... 600 -- 600 (d)
David B. Woodbury(c)............................ 1,900 -- 1,900 (d)
Douglas C. Yearley.............................. 600 -- 600 (d)
All nominees, directors and officers of the
Company as a group (25 individuals)(e)........ 50,225 109,800 160,025 1.13 %
</TABLE>
- ---------------
<TABLE>
<S> <C>
(a) Information with respect to beneficial ownership is based
upon information furnished by each nominee, director or
officer. Except as noted below, all nominees, directors and
officers have sole voting and investment power over the
shares beneficially owned by them.
(b) Consists of shares of Common Stock of the Company deemed
beneficially owned under regulations of the Securities and
Exchange Commission because such shares may be acquired
within 60 days after December 31, 1997, through the exercise
of options granted under the Company's Stock Incentive Plan.
(c) See also the information below on Common Stock Equivalents.
</TABLE>
9
<PAGE> 12
<TABLE>
<S> <C>
(d) Less than 0.5%.
(e) Includes restricted Common Stock awarded under the Company's Stock Incentive Plan to certain of the
Company's executive officers, and still subject to restrictions, as follows: 10,480 such shares to Mr.
Preble; 3,900 to Mr. Smith; 2,620 to Mr. O'Keefe; 790 to Mr. Santistevan; 830 to Mr. Flury; and 1,830 to
other executive officers.
(f) Includes 2,259 shares over which Mr. Osborne and his wife share voting and investment power.
(g) Includes 2,635 shares over which Mr. Preble and his wife share voting and investment power. Does not include
12 shares of the Company's Common Stock owned by Mr. Preble's wife as to which Mr. Preble disclaims
beneficial ownership.
(h) Does not include 200 shares of the Company's Common Stock owned by Mr. Pritzker's wife as to which Mr.
Pritzker disclaims beneficial ownership. In addition, trusts created for the benefit of certain lineal
descendants of Nicholas J. Pritzker, deceased, may be deemed to indirectly control Cerro, the record and
beneficial owner of certain shares of the Company. Mr. Robert A. Pritzker disclaims beneficial ownership of
shares of the Company beneficially owned by Cerro.
(i) Mr. Varner and his wife share voting and investment power over these shares.
</TABLE>
COMMON STOCK EQUIVALENTS
The following table sets forth the per share number of Common Stock
Equivalents credited as of December 31, 1997, to the accounts of the Company's
directors under the Company's Deferred Fee Plan for Directors. Under the Plan,
payments are made in cash following retirement depending on the market value of
the Common Stock at that time. Amounts shown reflect the number of share
equivalents credited under the Plan plus dividends credited. For additional
information regarding the Plan, see "Compensation of Directors" below.
<TABLE>
<CAPTION>
DEFERRED FEE PLAN
DIRECTOR COMMON STOCK EQUIVALENTS
-------- ------------------------
<S> <C>
Everett E. Briggs...................................... 3,089
Jaime Claro............................................ 1,964
Francis R. McAllister.................................. 2,571
Kevin R. Morano........................................ 2,980
Robert J. Muth......................................... 2,571
Michael O. Varner...................................... 1,982
David B. Woodbury...................................... 1,888
Douglas C. Yearley..................................... 1,368
------
Total........................................ 18,413
</TABLE>
10
<PAGE> 13
In addition, in satisfaction of applicable rules of the Securities and
Exchange Commission, information is set forth below as to the shares of Asarco
common stock beneficially owned by the nominees, directors and executive
officers named in the Summary Compensation Table below and by all nominees,
directors and officers as a group. This information is stated as of December 31,
1997.
<TABLE>
<CAPTION>
ASARCO INCORPORATED
-------------------------------------------------
SHARES OF ADDITIONAL
ASARCO'S SHARES
COMMON STOCK DEEMED PERCENT
BENEFICIALLY BENEFICIALLY OF
OWNED(A) OWNED(B) TOTALS CLASS
------------ ------------ --------- -------
<S> <C> <C> <C> <C>
Everett E. Briggs................................ -- -- -- --
Jaime Claro...................................... -- -- -- --
Hans A. Flury.................................... -- -- -- --
Augustus B. Kinsolving(c)........................ 14,409 62,744 77,153 (d)
Francis R. McAllister(c)......................... 40,215 133,340 173,555 (d)
John F. McGillicuddy............................. -- -- -- --
Kevin R. Morano(c)............................... 21,462 70,700 92,162 (d)
Robert J. Muth(c)................................ 14,591 37,414 52,005 (d)
Robert M. Novotny(c)............................. 16,171 43,200 59,371 (d)
Ronald J. O'Keefe(c)(e).......................... 3,751 11,600 15,351 (d)
Richard de J. Osborne(c)(f)...................... 134,376 325,500 459,876 1.2%
Charles G. Preble................................ -- -- -- --
Robert A. Pritzker............................... -- -- -- --
Eduardo Santistevan.............................. -- -- -- --
Charles B. Smith................................. -- -- -- --
Michael O. Varner(c)............................. 7,418 21,600 29,018 (d)
J. Steven Whisler................................ -- -- -- --
David B. Woodbury(c)............................. 5,489 17,500 22,989 (d)
Douglas C. Yearley............................... -- -- -- --
All nominees, directors and officers of the
Company as a group (25 individuals)............ 264,599 745,998 1,010,597 2.5%
</TABLE>
- ---------------
(a) Information with respect to beneficial ownership is based upon information
furnished by each nominee, director or officer. Except as noted below, all
nominees, directors and officers have sole voting and investment power over
the shares beneficially owned by them.
(b) Consists of shares of Asarco common stock deemed beneficially owned under
regulations of the Securities and Exchange Commission because such shares
may be acquired within 60 days after December 31, 1997, through the exercise
of options granted under Asarco's Stock Incentive Plan or the previous
Asarco Stock Option Plan.
(c) Includes restricted Asarco common stock awarded under Asarco's Stock
Incentive Plan to certain of the Company's officers and directors, and still
subject to restrictions, as follows: 6,680 to Mr. Kinsolving; 14,520 to Mr.
McAllister; 11,980 to Mr. Morano; 7,620 to Mr. Muth;
11
<PAGE> 14
9,140 to Mr. Novotny; 850 to Mr. O'Keefe (relating to compensation by Asarco
prior to his employment by the Company); 53,400 to Mr. Osborne; 3,490 to Mr.
Varner and 3,310 to Mr. Woodbury.
(d) Less than .5%.
(e) Does not include 631 shares of Asarco common stock owned by Mr. O'Keefe's
adult children as to which Mr. O'Keefe disclaims beneficial ownership.
(f) Includes 4,983 shares of Asarco common stock over which Mr. Osborne and his
wife share voting and investment power.
COMMITTEE REPORTS ON EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors of the Company
furnished the following report on compensation of executive officers in 1997.
For fiscal year 1997, the members of the Compensation Committee were Messrs.
Kevin R. Morano, Richard de J. Osborne, Robert A. Pritzker and Douglas C.
Yearley. The Committee met two times in 1997.
During 1997, the Compensation Committee considered and made recommendations
to the Board of Directors with respect to the base salaries of the Company's
executive officers, other than those executive officers who are also officers
of, and compensated by, Asarco.
The 1997 target levels for the base salaries of the executive officers were
determined with the assistance of an independent compensation consulting
organization which established target compensation levels for each position
based on competitive data and the responsibilities and value of each executive
position. The Compensation Committee considered compensation information from
other companies in the mining and metals industry and comparably sized and both
larger and smaller companies in other industries. The Compensation Committee
then considered individual and corporate performance in establishing salary
levels within a competitive range.
The Compensation Committee set base salaries at levels intended to be
competitive with the Company's industry peers. The Committee also considered the
Company's performance relative to its industry peers. In this regard, the
Company's success in meeting transactional, operational and financial objectives
was taken into consideration. In 1997, for executive officers other than Mr.
Preble, base salaries were increased by an average of approximately 4.4%. In
1997, Mr. Preble was awarded a salary increase of 7.8% in recognition of his
performance, which exceeded expectations.
The Compensation Committee also considered the cash incentive compensation
to be paid to each of the Company's executive officers with respect to 1997
performance. Annual cash incentive payments to key salaried employees of the
Company are determined by the Compensation Committee under the Southern Peru
Copper Corporation Incentive Compensation Plan. A target level of annual
incentive compensation is established for each eligible employee based on the
level
12
<PAGE> 15
of responsibility attached to such employee's position. For executive officers
these targets are set at competitive median levels. The officers' levels of
responsibility are determined by the Compensation Committee after review of
substantially equivalent positions among the Company's peers.
Under the Incentive Compensation Plan, awards to employees are increased or
decreased from a predetermined target level, based upon performance measured at
two levels: individual and Company-wide. The Company's performance in 1997 was
evaluated against certain objectives previously established by the Board of
Directors. Among such objectives were: the completion of certain transactions;
the achievement of certain production, expense and profit goals and the
completion of certain financial transactions. The Compensation Committee also
took note of the Company's environmental performance in 1997 and programs to
improve environmental performance. The degree to which the Company met its
objectives was expressed as a corporate performance rating determined by the
Company's Board of Directors with the recommendation of its Compensation
Committee.
The Compensation Committee and the Board of Directors determined that the
Company had achieved a 1997 corporate performance rating of 120% and concluded
that annual cash incentive payments should be made to each of the Company's
executive officers, other than those executive officers who are compensated by
Asarco, adjusted to reflect the Committee's assessment of each officer's
individual performance. Awards were reduced by the Peruvian government-mandated
workers' profit sharing payments. The Committee and the Board considered that
Mr. Preble's performance continued to exceed expectations and merited an
increased individual award adjustment of 30%.
During 1996 the Executive Committee (which, prior to February 4, 1997,
performed the functions of the Compensation Committee) considered and adopted
recommendations to establish a structure to provide for the on-going
administration and control of base pay and replace certain elements of cash
compensation to expatriate employees, including programs that awarded a month's
salary upon return from vacation and, after five years of service, five percent
of salary for every five years worked, with a foreign service premium consisting
of an annual payment equal to 20% (for individuals located in Lima, Peru) or 30%
(for individuals located elsewhere in Peru) of the mid-point of the individual's
salary grade. (By contract, Mr. Ronald J. O'Keefe is paid a foreign service
premium of 35% of his salary mid-point.) These changes in cash compensation were
made to make cash compensation and practices more comparable with compensation
in the competitive market. Accordingly, during 1997 the Compensation Committee
decided to retain the cash compensation policies previously established by the
Executive Committee.
Under Section 162 of the Internal Revenue Code of 1986, as amended, the
Company may not deduct, with certain exceptions, compensation in excess of $1
million to the Chief Executive Officer and the four other highest paid executive
officers as required to be reported in the Company's proxy statement. The
Compensation Committee does not believe that Section 162(m) will have any
immediate material impact on the Company because, among other things, the
principal taxing jurisdiction is Peru. The Compensation Committee will, however,
continue to monitor the Company's
13
<PAGE> 16
executive compensation programs to ensure their effectiveness and efficiency in
light of the Company's needs, including Section 162(m).
Kevin R. Morano
Richard de J. Osborne
Robert A. Pritzker
Douglas C. Yearley
STOCK INCENTIVE PLAN COMMITTEE
The Stock Incentive Plan Committee of the Board of Directors of the Company
administers the Company's Stock Incentive Plan. The members of the Committee are
Amb. Everett E. Briggs and Mr. John F. McGillicuddy. The Committee met once in
1997.
The Committee selects officers and other employees for participation and
decides upon the timing, pricing and amount of awards and benefits granted under
the Stock Incentive Plan. The members of the Stock Incentive Plan Committee are
non-employee directors who satisfy the requirements of Rule 16b-3 under the
Securities Exchange Act of 1934, as amended.
Long-term incentive compensation awarded in 1997 consisted of awards of
restricted stock and/or stock options and was designed to link the interests of
executive officers and selected employees with those of stockholders by
providing an incentive to manage the business of the Company as an owner with an
equity stake. Awards in 1997 were to selected officers and employees, and were
made within long-term incentive targets based upon analyses by the Company's
compensation consultant and consideration of each executive's and employee's
performance. In the case of the Chief Executive Officer, the Committee also
considered his performance and responsibility in directing the Company's
performance.
Everett E. Briggs
John F. McGillicuddy
14
<PAGE> 17
EXECUTIVE COMPENSATION
Set forth below is certain information concerning the compensation for
services in all capacities to the Company for fiscal years 1997, 1996 and 1995
of the Company's Chief Executive Officer and the other four most highly
compensated executive officers of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-----------------------
ANNUAL COMPENSATION SECURITIES
------------------------------------------- RESTRICTED UNDERLYING
NAME AND OTHER ANNUAL STOCK OPTIONS ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(A) AWARDS(B) (SHARES) Compensation(c)
------------------ ---- -------- -------- --------------- ---------- ---------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Charles G. Preble........ 1997 $362,940 $232,200 $115,854 $97,500 23,000 $138,276
President and Chief 1996 336,933 196,812 131,029 89,950 19,000 151,877
Executive Officer 1995 317,333 144,720 121,517 -- -- 195,219
Charles B. Smith......... 1997 298,700 122,700 100,078 37,375 13,000 110,991
Executive Vice 1996 288,583 119,609 85,534 32,050 10,300 115,674
President 1995 271,500 76,000 9,357 -- -- 149,789
Ronald J. O'Keefe........ 1997 230,724 78,700 151,225 21,125 8,000 94,452
Executive Vice 1996 220,004 77,682 114,562 26,503 8,800 88,856
President 1995 159,000(d) 99,600(d) 18,000(d) -- -- 111,491(d)(e)
Eduardo Santistevan...... 1997 184,967 47,200 102,881 7,313 4,500 75,587
Vice President 1996 175,893 38,996 77,420 6,827 3,800 75,006
1995 168,329 47,100 63,249 -- -- 98,747
Hans A. Flury............ 1997 139,147 51,000 89,346 7,313 4,500 90,225
Vice President 1996 129,574 45,654 33,815 7,630 4,200 86,326
1995 167,093(f) 37,200 48,390 -- -- 98,936
</TABLE>
- ---------------
(a) Other Annual Compensation consists mainly of Company-sponsored programs that
relate to the geographic distance of the Company's operations from countries
from which employees are recruited, and address the Company's need to
recruit and retain certain qualified employees in those employment positions
in Peru in which their services are needed by the Company. The Company also
sponsors programs to recruit and retain qualified Peruvian employees. During
1997, the expatriates' programs included: a foreign service premium, a
program reimbursing travel costs for the employee and his family to travel
back to their home country, an education assistance program and a program
awarding a housing allowance to employees residing in Lima. Peruvian
employees participate in programs that include an award of five percent of
base salary for every five years worked, a vacation bonus, a travel award
and educational assistance. Compensation amounts exceeding 25% of a named
officer's total Other Annual Compensation in 1997 were as follows: Charles
G. Preble, a $89,126 foreign service premium; Charles B. Smith, a $100,078
foreign service premium; Ronald J. O'Keefe, a $89,867 foreign service
premium and a $42,559 housing allowance; and Eduardo Santistevan, a $42,045
foreign service premium and a $43,564 housing allowance. Mr. Flury is a
Peruvian employee, and compensation amounts exceeding 25% of his total Other
Annual Compensation in 1997 were a $25,844 vacation bonus and a $27,829
service award. Mr. Santistevan is the brother-in-law of Mr. Preble.
15
<PAGE> 18
(b) Dollar values of restricted stock awards are shown as of the date of grant.
The number and dollar value of restricted stock holdings owned at December
31, 1997, and still subject to restrictions are as follows: Mr. Preble,
10,480/$140,170; Mr. Smith, 3,900/$52,163; Mr. O'Keefe, 2,620 /$35,043; Mr.
Santistevan, 790/$10,566; and Mr. Flury, 830/$11,101. Restrictions on such
shares lapse in equal installments over five years beginning on the first
grant-date anniversary. Cash dividends paid on shares of restricted stock
are not subject to restrictions.
(c) Amounts shown for 1997 for all named officers, except for Mr. Flury, include
matching contributions by the Company under the Company's Savings Plan and a
tax equalization subsidy for Mr. Santistevan. The Savings Plan is a 401(k)
plan available generally to United States and expatriate salaried employees.
Additional components of All Other Compensation are as follows. Each of
these programs is mandated by Peruvian law.
Workers' Participation. Under applicable Peruvian law, each worker in
Peru, including the named executive officers working in Peru, receives a
workers' participation in pre-tax earnings of the Peruvian Branch of the
Company. Under this program, Messrs. Preble, Smith, O'Keefe, Santistevan
and Flury received $44,472, $38,487, $34,580, $26,593 and $22,100,
respectively, with respect to 1997.
Private Pension System (AFP). Pursuant to the requirements of the
Peruvian private pension fund system (AFP), funds were paid to Messrs.
Preble, Smith, O'Keefe, Santistevan and Flury in amounts of $50,763,
$34,035, $23,935, $22,974 and $17,059, respectively, in 1997.
Severance Benefit. Peruvian law requires one month of regular income
each year to be accrued for severance benefits for each employee (whether
Peruvian or expatriate) working in Peru. Peruvian law requires a deposit of
one-twelfth of an employee's annual salary, vacation return and service
award bonus, as applicable, in a bank account of the employee's choosing
each year. The money accrues interest until the employee terminates
employment, at which time the employee is eligible to receive the funds.
Under this program, severance benefits were deposited on behalf of Messrs.
Preble, Smith, O'Keefe, Santistevan and Flury in amounts of $38,295,
$33,723, $31,187, $24,067 and $19,936, respectively, in 1997.
Other. Pursuant to Peruvian law, Peruvian employees receive payments
in July and December of each year consisting of one month's salary in
respect of national holidays and Christmas. Pursuant to this program, Mr.
Flury received $31,130 in 1997.
(d) For the period April 1, 1995 (date of hire) to December 31, 1995.
(e) Includes a foreign service premium of $74,200 paid in 1995.
(f) Includes a salary increase retroactive to 1992.
16
<PAGE> 19
OPTION GRANTS, EXERCISES, AND FISCAL YEAR-END VALUES
Set forth below is further information on grants of stock options under the
Company's Stock Incentive Plan for the period January 1, 1997 to December 31,
1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
GRANT
INDIVIDUAL GRANTS VALUE
--------------------------------------------------------- ----------
% OF TOTAL
NUMBER OF OPTIONS
SHARES GRANTED TO
UNDERLYING EMPLOYEES EXERCISE GRANT-DATE
OPTIONS IN OR BASE EXPIRATION PRESENT
NAME GRANTED(1) FISCAL YEAR PRICE $/SH. DATE VALUE(2)
---- ---------- -------------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Charles G. Preble 23,000 30.7% $16.25 2/3/07 $136,390
Charles B. Smith 13,000 17.4% $16.25 2/3/07 77,090
Ronald J. O'Keefe 8,000 10.7% $16.25 2/3/07 47,440
Eduardo Santistevan 4,500 6.0% $16.25 2/3/07 26,685
Hans A. Flury 4,500 6.0% $16.25 2/3/07 26,685
</TABLE>
- ---------------
(1) The options were awarded under the Company's Stock Incentive Plan. The
option price per share equals the fair market value of the Company's Common
Stock on the date of grant. The options provide for limited rights
exercisable upon the occurrence of specified events that may materially
affect the value of the Company's Common Stock and are designated as such by
the Committee that administers the Plan, including a tender or exchange
offer for shares of the Company's Common Stock, the replacement of a
majority of the Board as a result of a proxy contest, a merger or
reorganization of the Company, or a liquidation or dissolution of the
Company. If an exercise event occurs, the holder is entitled to receive the
cash value of the options at the highest market value that the shares traded
over a period of sixty days preceding the event or, in the event of the
consummation of a tender offer, the tender offer price, in each case, less
the exercise price.
(2) Based on the Black-Scholes option pricing model, a widely recognized method
of valuing options, the value per option on the grant date was $5.93. The
following assumptions were used in determining the value of the options
using the model: expected volatility of 29.39% based on the volatility of
the Common Stock as traded on the New York Stock Exchange from the start of
trading on January 5, 1996 to February 4, 1997; an annual dividend rate of
$0.08 per share based upon the ten year average dividend rate paid per
share; a risk free rate of return of 6.18% based on the yield of the five
year U.S. treasury notes as of the grant date; and exercise of the option
five years after the grant date. The actual value, if any, an executive may
realize will depend on the excess of the stock price over the exercise price
on the date the option is exercised, so that there is no assurance the value
realized by an executive will be at or near the value estimated by the
Black-Scholes model. The model is used for valuing market traded options and
is not directly applicable to valuing stock options granted under the
Company's Stock Incentive Plan which cannot be sold.
17
<PAGE> 20
All outstanding options were exercisable at December 31, 1997, and as of
that date, unexercised options were held as follows: Mr. Preble, 42,200; Mr.
Smith, 23,300; Mr. O'Keefe, 16,800; and Mr. Santistevan, 8,300 and Mr. Flury,
8,700. No options were exercised during 1997 and no outstanding options were "in
the money" at December 31, 1997.
RETIREMENT PLANS
Retirement Benefits Plan. The following table shows the estimated amount of
annual retirement income payable to employees for life, commencing at normal
retirement at age 65 in 1998 under the Company's qualified noncontributory
defined benefit Retirement Benefits Plan (the "Retirement Plan"), covering
substantially all salaried employees in the United States and all expatriate
employees in Peru, together with certain employees of subsidiaries, and a
supplemental retirement plan (the "Supplemental Plan"). Benefits are calculated
using an average of the highest consecutive 60 months of the last 120 months of
compensation received, minus a Social Security offset. The Company's funding
policy is to contribute amounts to the Retirement Plan sufficient to meet the
minimum funding requirements set forth in the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), plus such additional amounts as may
be determined to be appropriate from time to time. The Supplemental Plan is a
non-qualified supplemental retirement plan under which any benefits not payable
from Retirement Plan assets by reason of the limitations imposed by the Internal
Revenue Code of 1986, as amended, are paid from the Company's general corporate
funds. The figures below reflect a straight life annuity benefit assuming normal
retirement at age 65 and are subject to Social Security offsets assuming Social
Security benefit levels as in effect on January 1, 1998.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
--------------------------------------------------------------------------------
REMUNERATION 15 20 25 30 35 40 45
------------ -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$125,000............. $ 25,324 $ 33,766 $ 42,207 $ 50,648 $ 59,090 $ 67,531 $ 75,973
150,000............. 30,949 41,266 51,582 61,898 72,215 82,531 92,848
175,000............. 36,574 48,766 60,957 73,148 85,340 97,531 109,723
200,000............. 42,199 56,266 70,332 84,398 98,465 112,531 126,598
225,000............. 47,824 63,766 79,707 95,648 111,590 127,531 143,473
250,000............. 53,449 71,266 89,082 106,898 124,715 142,531 160,348
275,000............. 59,074 78,766 98,457 118,148 137,840 157,531 177,223
300,000............. 64,699 86,266 107,832 129,398 150,965 172,531 194,098
325,000............. 70,324 93,766 117,207 140,648 164,090 187,531 210,973
350,000............. 75,949 101,266 126,582 151,898 177,215 202,531 227,848
375,000............. 81,574 108,766 135,957 163,148 190,340 217,531 244,723
400,000............. 87,199 116,266 145,332 174,398 203,465 232,531 261,598
425,000............. 92,824 123,766 154,707 185,648 216,590 247,531 278,473
450,000............. 98,449 131,266 164,082 196,898 229,715 262,531 295,348
475,000............. 104,074 138,766 173,457 208,148 242,840 277,531 312,223
500,000............. 109,699 146,266 182,832 219,398 255,965 292,531 329,098
525,000............. 115,324 153,766 192,207 230,648 269,090 307,531 345,973
550,000............. 120,949 161,266 201,582 241,898 282,215 322,531 362,848
575,000............. 126,574 168,766 210,957 253,148 295,340 337,531 379,723
600,000............. 132,199 176,266 220,332 264,398 308,465 352,531 396,598
700,000............. 154,699 206,266 257,832 309,398 360,965 412,531 464,098
</TABLE>
18
<PAGE> 21
As of January 31, 1998, the following officers had completed the number of
years of service indicated: Charles G. Preble, 41 years; Charles B. Smith, 5
years; Ronald J. O'Keefe, 37 years; and Eduardo Santistevan, 14 years. The
amounts of covered compensation of such persons for calendar year 1997 were:
Charles G. Preble, $559,752; Charles B. Smith, $418,309; Ronald J. O'Keefe,
$308,406; and Eduardo Santistevan, $223,963, and consisted of basic salary and
bonuses in the year received. Mr. Preble's and Mr. O'Keefe's benefits are offset
by the accrued vested benefits payable to them under the Retirement Benefit Plan
for Salaried Employees of Asarco for the periods of June 11, 1956 through June
30, 1979, and January 27, 1960 through March 31, 1995, respectively, for which
Asarco will pay the accrued benefits up to the time of initiation of coverage by
SPCC, without duplication of benefits. Mr. Santistevan's benefits are offset by
the accrued vested benefits payable to him under the "Offshore Pension Plan"
described below.
Offshore Pension Plan. The following table shows the estimated amount of
annual retirement income payable to employees for life, commencing at normal
retirement at age 65 and under the Company's nonqualified noncontributory
defined benefit Retirement Plan and Trust for Selected Employees (the "Offshore
Pension Plan"). The Offshore Pension Plan covers selected non-U.S.-citizen
expatriate salaried employees in Peru. Benefits are calculated using 1.5% of the
employee's final salary rate multiplied by the number of years of the employee's
credited service. The figures below reflect a straight life annuity benefit
assuming normal retirement at age 65. The benefits are not subject to any offset
for Peruvian governmental benefits. Effective January 1, 1997, covered employees
under the Offshore Pension Plan cease to accrue benefits under the Offshore
Pension Plan and began to participate in and accrue benefits under the
Retirement Plan.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
--------------------------------------------------------------------
REMUNERATION 15 20 25 30 35 40
------------ -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$125,000..................... $ 28,125 $ 37,500 $ 48,875 $ 56,250 $ 65,625 $ 75,000
150,000..................... 33,750 45,000 56,260 87,500 78,750 90,000
175,000..................... 39,375 52,500 65,625 78,750 91,875 105,000
200,000..................... 45,000 60,000 75,000 90,000 105,000 120,000
225,000..................... 50,625 67,500 84,375 101,250 118,125 135,000
250,000..................... 56,250 75,000 93,750 112,550 131,250 150,000
275,000..................... 61,875 82,500 103,125 123,750 144,376 165,000
300,000..................... 67,500 90,000 112,500 135,000 157,500 180,000
325,000..................... 73,125 97,500 121,875 146,250 170,625 195,000
350,000..................... 78,750 105,000 131,250 157,500 183,750 210,000
375,000..................... 84,375 112,500 140,625 168,750 196,875 225,000
400,000..................... 90,000 120,000 150,000 180,000 210,000 240,000
425,000..................... 95,625 127,500 159,375 191,250 223,125 255,000
450,000..................... 101,250 135,000 168,750 202,500 236,250 270,000
475,000..................... 106,875 142,500 178,125 213,750 249,375 285,000
500,000..................... 112,500 150,000 187,500 225,000 262,500 300,000
</TABLE>
As of January 31, 1998, Mr. Flury had completed 24 years of service. As a
Peruvian national he is not covered by the retirement benefit plans of the
Company.
19
<PAGE> 22
SEVERANCE BENEFIT
As described in Note (c) to the Summary Compensation Table above, the
Company provides severance benefits as required by Peruvian law.
EMPLOYMENT AGREEMENTS
Pursuant to Peruvian laws concerning expatriate employees, the four such
named executive officers have entered into employment agreements. These
contracts generally are for terms of three years and may be extended for
additional periods. Pursuant to Peruvian law, those expatriate employees whose
spouses and/or children are Peruvian citizens have agreements for unlimited
terms. Of the four such named executive officers, Messrs. Preble and Santistevan
have agreements with unlimited terms. In accordance with the terms of the
contracts, the Company agrees to provide expatriate employees with benefits as
required by Peruvian law. The contracts provide that the Company may dismiss
expatriate employees for certain serious offenses. In other instances of
termination, the Company is required to provide 90 days' notice of termination.
Terminated employees are also entitled to receive severance benefits as required
by Peruvian law. Under the contracts, employees may resign at any time by
providing the Company with 30 days' notice.
20
<PAGE> 23
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total return on the Company's Common Stock against the cumulative
total return on the S&P Composite 500 Stock Index and the S&P Metals
Miscellaneous Group Index for the two-year period ending December 31, 1997. The
Company's Common Stock commenced trading on the New York Stock Exchange on
January 5, 1996. The chart below analyzes the total return on SPCC's Common
Stock for the period commencing January 5, 1996 and ending December 31, 1997,
compared to the total return of the S&P 500 and the S&P Metals Miscellaneous
Group for the two-year period commencing December 31, 1995 and ending December
31, 1997. In 1996, SPCC's stock declined 0.9% compared to positive returns of
23.0% for the S&P 500 and 2.0% for the S&P Metals Miscellaneous Group. In 1997,
SPCC's stock declined 1.7% compared to a positive return of 33.4% for the S&P
500 and a negative return of 32.8% for the S&P Metals Miscellaneous Group.
COMPARISON OF TWO YEAR CUMULATIVE TOTAL RETURN*
SPCC, S&P METALS MISC. GROUP INDEX & S&P 500 INDEX**
<TABLE>
<CAPTION>
MEASUREMENT PERIOD S&P METALS
(FISCAL YEAR COVERED) SPCC GROUP S&P 500
<S> <C> <C> <C>
1995 100 100 100
1996 99.06 102.03 122.96
1997 97.42 68.58 163.98
</TABLE>
* TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS
** ASSUMES $100 INVESTED ON 01/05/96 IN SPCC COMMON STOCK, AND ON 12/31/95 IN
THE S&P METALS GROUP INDEX & S&P 500 INDEX
CERTAIN TRANSACTIONS
Asarco provides various support services to the Company. In 1997, these
activities were principally related to accounting, legal, tax, treasury, price
risk assessment and hedging and administrative support services. Asarco is
reimbursed for these support services. The total amount paid by the Company to
Asarco for such services in 1997 was $1.1 million. Additionally, the Company
paid Asarco a fee of $500,000 for services of Asarco's senior management in
connection with the successful arrangement of financings for the Company's
expansion and modernization program.
21
<PAGE> 24
The Class A Common Stockholders and/or their affiliates purchase copper
products from the Company from time to time at prices determined on an
arm's-length basis by reference to the LME market price for copper at such time.
Management believes these transactions to be on terms as favorable as could be
obtained from unaffiliated parties. The Company expects that its policy of
determining prices for related party transactions on an arm's-length basis by
reference to the LME market price for copper at the time of any such transaction
will be continued. Sales of copper to the Class A Common Stockholders amounted
to $59.9 million in 1997.
Asarco purchased copper products from the Company during 1997 in the amount
of $39.5 million. In addition, in 1997 the Company paid Asarco approximately
$1.03 million in connection with the transfer to the Company of Asarco's
interest in the Boti exploration project in Peru, including certain mining
rights. Additional royalty payments may become payable to Asarco in future years
pursuant to the terms of the transfer. Richard de J. Osborne, Francis R.
McAllister, Kevin R. Morano, Augustus B. Kinsolving, Robert J. Muth, Robert M.
Novotny, Michael O. Varner and David B. Woodbury are executive officers of
Asarco. Each is a director of the Company.
During 1997, Cerro Sales Corporation, an entity formerly related to Cerro,
purchased copper products from the Company pursuant to certain sales contracts
in the amount of $9.5 million. Effective June 2, 1997, Cerro Sales Corporation
was reorganized and the contracts were assigned to an unrelated third party.
Until June 30, 1997, Robert A. Pritzker was Chairman of the Board and a director
of Cerro Sales Corporation and Jaime Claro was a director of Cerro Sales
Corporation and its President and Chief Executive Officer. Messrs. Pritzker and
Claro are directors of the Company.
Phelps Dodge Refining Corporation, an affiliate of Phelps Dodge and Phelps
Dodge Corporation, purchased copper products from the Company in the amount of
$10.9 million in 1997. Douglas C. Yearley is Chairman of the Board and Chief
Executive Officer of Phelps Dodge Corporation. J. Steven Whisler is President
and Chief Operating Officer of Phelps Dodge Corporation. Messrs. Yearley and
Whisler are directors of the Company.
During 1997, the Company purchased steel castings at an aggregate price of
$271,922 from Cia. Electro Metalurgica S.A. ("Electro"). In addition, the
Company contracted an aggregate of approximately $13.3 million for shipping
services to and from Peru by Cia. Sud Americana de Vapores, S.A. ("CSAV"), and a
subsidiary company. CSAV is a company indirectly controlled by Quemchi, S.A. Mr.
Jaime Claro is Vice Chairman of Electro and Quemchi, S.A., and his direct and
indirect family interests in both companies exceed 10%. Mr. Claro is also
Chairman of Chilean Line Inc., which is the agent for and is owned by CSAV.
The Company believes that the foregoing transactions were entered into on
arm's-length bases on terms as favorable as could be obtained from other third
parties. It is anticipated that in the future the Company will enter into
similar transactions with the same parties.
ADDITIONAL INFORMATION
Effective February 4, 1997, the Board of Directors established a
Compensation Committee, composed of Messrs. Kevin R. Morano, Richard de J.
Osborne, Robert A. Pritzker and Douglas C. Yearley, to establish policies for
total compensation and benefits, and to administer the Company's salary and cash
incentive programs. The functions of the Compensation Committee also include
making recommendations to the Board with respect to election of and title
changes for all corporate executive officers. Previously, these functions were
performed by the Executive Committee, which is
22
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composed of Messrs. Morano, Osborne, Preble, Pritzker and Yearley; however, Mr.
Preble did not act on the Executive Committee with respect to his own
compensation.
Effective February 3, 1998, the Board of Directors established a Nominating
Committee, composed of Messrs. Richard de J. Osborne, Robert A. Pritzker,
Douglas C. Yearley, John F. McGillicuddy and Amb. Everett E. Briggs. The
Nominating Committee considers and makes recommendations to the Board of
Directors with respect to the nominations, tenure policy and committee
assignments for directors representing the Common Stockholders. The Committee
considers recommendations for nominees to the Board of Directors from all
sources. Recommendations for nominees to represent the Common Stockholders
should be sent in writing to the Secretary of the Company. Common Stockholders
are entitled to elect two directors, voting as a separate class. The Company's
By-Laws define notice procedures to be followed by Common Stockholders seeking
to nominate directors for election. Under the By-Laws, a Common Stockholder
seeking to nominate a director for election by Common Stockholders must give
written notice to the Secretary of the Company at least 90 days in advance of
the anniversary date of the immediately preceding annual meeting, or within 10
days of the giving of notice of a special meeting. The notice must provide
specific biographical data with respect to each nominee, including such
information as is required to be included in the Company's proxy statement, and
a representation by the Common Stockholder that he or she is a holder of record
entitled to vote at the meeting and that he or she intends to appear in person
or by proxy to make the nomination. Nominations for the Company's 1999 annual
meeting of stockholders must be received by February 1, 1999.
The Board of Directors met four times in 1997, with 100% attendance by
Messrs. Briggs and McGillicuddy, the two directors representing holders of
Common Stock. Of the 13 directors representing Class A Common Stock, all of the
directors standing for reelection by the holders of Class A Common Stock
attended 100% of the meetings, with the exception of Mr. Pritzker, who did not
attend any of the meetings. The Executive Committee met once during 1997, with
100% attendance including the presence of alternates.
COMPENSATION OF DIRECTORS
During 1997 directors who were not compensated as employees of the Company
were paid a basic fee of $15,000 plus $1,000 for attendance at each meeting of
the Company's Board or of any Committee of the Board on which they serve. The
Company has a Directors' Stock Award Plan pursuant to which directors who are
not compensated as employees of the Company are entitled to an award of 200
shares of Common Stock upon election to the Board and 200 additional shares of
Common Stock following each annual meeting of stockholders thereafter.
Under the Deferred Fee Plan for Directors, a director may elect to defer
payment of 50% or 100% of the compensation payable to such director for Board
and Committee service for the calendar year for which deferral is elected.
Deferred amounts will be credited to a cash subaccount, a company common stock
subaccount or a combination thereof. Compensation deferred to the cash
subaccount will earn interest based on U.S. Treasury debt obligations with a
10-year maturity. Compensation deferred to the stock subaccount will be credited
as whole shares of Common Stock based on the stock's fair market value on the
date of such credit. Dividends and fractional share amounts will be aggregated
until at least one share of Common Stock may be credited at the then
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<PAGE> 26
fair market value. Payments will be made in cash in a lump sum upon retirement
or other termination of services as a director or in up to ten annual
installments commencing January 15 of the calendar year following retirement or
other termination of services, at the election of the Director.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Richard de J. Osborne, Charles G. Preble and Kevin R. Morano served
on the Executive Committee of the Board of Directors during 1997. Mr. Preble
took no action regarding his own compensation. Following February 4, 1997, the
compensation functions of the Executive Committee were assumed by the
Compensation Committee. Messrs. Osborne and Morano were compensated by Asarco
and received no compensation from the Company during 1997 for services other
than as directors.
PROPOSAL TO APPROVE THE SELECTION OF ACCOUNTANTS
The Board of Directors has selected Coopers & Lybrand L.L.P. to serve as
independent accountants for the Company for the calendar year 1998, subject to
approval of the stockholders. The Board of Directors recommends that the
stockholders approve the selection of Coopers & Lybrand L.L.P. at the annual
meeting. Coopers & Lybrand L.L.P. and its predecessors have served as the
Company's accountants continuously since 1962. Coopers & Lybrand L.L.P. has
advised the Company that neither the firm nor any of its members has any direct
or material indirect financial interest in the Company or its subsidiaries.
The Audit Committee consists of Amb. Everett E. Briggs and Mr. John F.
McGillicuddy. Three meetings were held in 1997. The functions of the Committee
include recommending the engagement of independent accountants, reviewing the
fees, scope and timing of their other services, and reviewing the audit plan and
results of the audit. The Committee also reviews the Company's policies and
procedures on internal auditing, accounting and financial controls. The
implementation and maintenance of internal controls are understood to be
primarily the responsibility of management.
A representative of Coopers & Lybrand L.L.P. will be present at the
stockholders' meeting. The representative will have an opportunity to make a
statement and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL.
PROPOSALS OF STOCKHOLDERS
Proposals of stockholders intended to be presented at the Company's 1999
annual meeting of stockholders must be received by the Company at either of its
principal executive offices (180 Maiden Lane, New York, N.Y. 10038 or Avenida
Caminos del Inca No. 171, Chacarilla del Estanque, Santiago de Surco, Lima 33)
by November 27, 1998 in order to be considered for inclusion in the Company's
proxy statement and form of proxy.
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<PAGE> 27
OTHER INFORMATION
The Company is not aware of any other matters to be considered at the
meeting. If any other matters properly come before the meeting, the persons
named in the enclosed form of proxy will vote said proxy in accordance with
their judgment on such matters.
The cost of soliciting proxies in the accompanying form will be borne by
the Company. Georgeson & Company Inc. has been employed to solicit proxies by
mail, telephone or personal solicitation for fees to be paid by the Company of
$12,000, plus reasonable out-of-pocket expenses. A number of regular employees
of the Company, without additional compensation, may solicit proxies personally
or by mail or telephone.
SOUTHERN PERU COPPER CORPORATION
A.B. Kinsolving, Secretary
New York, N.Y. March 23, 1998
25
<PAGE> 28
SOUTHERN PERU COPPER CORPORATION
P R O X Y
PROXY SOLICITED BY BOARD OF DIRECTORS FOR ANNUAL MEETING OF STOCKHOLDERS TO BE
HELD APRIL 30, 1998
The undersigned hereby appoints CHARLES G. PREBLE, KEVIN R. MORANO and
RONALD J. O'KEEFE, and each of them, with power of substitution, the
proxies of the undersigned to vote all the shares the undersigned may be
entitled to vote at the annual meeting of stockholders of Southern Peru Copper
Corporation, to be held in the Ricker Auditorium, 180 Maiden Lane, New York,
New York at 2 P.M., on Thursday, April 30, 1998, and at any adjournment thereof
upon all matters specified in the notice of said meeting as set forth on the
reverse hereof, and upon such other business as may lawfully come before the
meeting.
Holders of Common Stock, voting as a separate class, are entitled to
elect two directors at the meeting. Please refer to the Proxy Statement for
details.
PLEASE VOTE ON ALL PROPOSALS, SIGN DATE AND RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
STOCKHOLDER. IF A SIGNED PROXY IS RETURNED TO THE COMPANY WITH NO VOTING
INSTRUCTIONS GIVEN, SUCH SHARES WILL BE VOTED FOR BOTH NOMINEES FOR ELECTION AS
DIRECTORS AND FOR PROPOSAL NO. 2.
(Continued on the other side) SOUTHERN PERU COPPER CORPORATION
P.O. BOX 11179
NEW YORK, N.Y. 10203-0179
<PAGE> 29
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| |
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DIRECTORS OF SPCC RECOMMEND A VOTE "FOR" PROPOSALS 1 AND 2.
1. Election of Directors FOR both WITHHOLD AUTHORITY *EXCEPTION
nominees to vote for both
listed below nominees listed below
/ / / / / /
Common Stock Director Nominees: Everett E. Briggs, John F. McGillicuddy.
(INSTRUCTIONS: To withhold authority to vote for either individual nominee,
mark the "Exception" box and write that nominee's name in the space provided
below.)
*Exception
---------------------------------------------------------------------
2. Selection of Coopers & FOR AGAINST ABSTAIN
Lybrand L.L.P. as
independent accountants / / / / / /
for 1998.
3. In their discretion, the proxies are authorized to vote upon
such other matters as may properly come before the meeting.
ADDRESS CHANGE/COMMENTS
If you have noted either an Address Change or made
Comments on the Reverse side of this card, mark here. / /
Please sign exactly as name or names appear on this proxy.
If stock is held jointly, each holder should sign. If
signing as attorney, trustee, executor, administrator,
custodian, guardians, or corporate officer, please give
full title.
Dated , 1998
---------------------------------------------
-----------------------------------------------------------
Signature
-----------------------------------------------------------
Signature
VOTES MUST BE INDICATED
(X) IN BLACK OR BLUE INK. / /
PLEASE SIGN, DATE AND RETURN THIS PROXY IN THE ENCLOSED POSTAGE PAID ENVELOPE.
<PAGE> 30
SOUTHERN PERU COPPER CORPORATION
180 Maiden Lane, New York, NY 10038 (212) 510-2000
Avenida Caminos del Inca No. 171, Chacarilla del Estanque,
Santiago de Surco, Lima 33 (511) 372-1414, extension 3301
BECAUSE OF DELAYS IN MAIL
PLEASE SIGN AND RETURN THE
ENCLOSED PROXY EVEN IF YOU
RETURNED THE ORIGINAL
April 20, 1998
To the Common Stockholders of
Southern Peru Copper Corporation
A REMINDER
We have previously sent to you proxy soliciting material relating to the
annual meeting of stockholders to be held on April 30, 1998.
According to our latest records, we have not as yet received your Proxy.
The time before the meeting is short and many of our shares are held in small
amounts. Your signed Proxy will be helpful, whether your holding is large or
small, and will aid us in avoiding further expense and delay.
A Proxy and return envelope are enclosed for your use. You may also return
your Proxy to the Company's Lima office.
Thank you for your cooperation.
Very truly yours,
A.B. Kinsolving
Secretary
PLEASE ACT PROMPTLY
