<PAGE> 1
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 [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-2.
</TABLE>
Southern Peru Copper Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-12.
(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 LETTERHEAD]
March 19, 1999
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 29, 1999, 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,
Richard de J. Osborne Charles G. Preble
Chairman of the Board President
Chief Executive Officer
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 LETTERHEAD]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 29, 1999
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 29, 1999, 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 2000
annual meeting.
(2) To act upon a proposal to approve the selection by the Board of
Directors of PricewaterhouseCoopers L.L.P. as independent accountants
for the calendar year 1999.
(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 2000
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 1999.
Stockholders of record at the close of business on March 9, 1999 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 19, 1999
-----------------------------------------------------------
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 29, 1999 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 29, 1999, to holders
of Common Stock of record on March 9, 1999. 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 (now referred to
as "investment shares") of the Company's Peruvian Branch. Effective December 31,
1998, the Company's predecessor and wholly-owned operating subsidiary, Southern
Peru Limited, was merged into the Company. 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.
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 9, 1999, the record date for the annual meeting, the
Company had outstanding 13,962,062 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 9,
1999 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, 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
2
<PAGE> 5
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 2,
1999, 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, William Dowd,
Augustus B. Kinsolving, Francis R. McAllister, Kevin R. Morano, Richard de J.
Osborne, Robert A. Pritzker, Charles B. Smith, Gerald D. Van Voorhis, Michael O.
Varner, David B. Woodbury, J. Steven Whisler and Douglas C. Yearley. All of the
nominees, except for Messrs. Smith and Van Voorhis, are currently serving as
directors. Mr. Preble will cease to serve as a director when he retires as
President of the Company on April 29, 1999, when it is anticipated he will be
succeeded as President and a director by Mr. Smith, currently Executive Vice
President and Chief Operating Officer of the Company. Mr. Robert J. Muth will
retire as a director of the Company at the expiration of his term on April 29,
1999.
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.
3
<PAGE> 6
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 ........ Private consultant (Latin American political and 64 1996
business issues); President and Chief
Executive Officer of Americas Society and
Council of the Americas from October 1993
until December 1998. Ambassador Briggs
was U.S. Ambassador to Portugal from 1990
to 1993 and previously served as U.S.
Ambassador to Honduras and Panama.
John F. McGillicuddy .......... Director of UAL Corporation, USX Corporation, 68 1996
Empire Blue Cross and Blue Shield and
Young & Rubicam Inc. 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 .............. 65 Chairman of the Board and Director
Kevin R. Morano .................... 45 Vice President and Director
Augustus B. Kinsolving ............. 59 Secretary, General Counsel and Director
Jaime Claro ........................ 63 Director
William Dowd ....................... 49 Director
Francis R. McAllister .............. 56 Director
Robert A. Pritzker ................. 72 Director
Charles B. Smith ................... 60 Executive Vice President and Nominee
Gerald D. Van Voorhis .............. 60 Nominee
Michael O. Varner .................. 57 Director
J. Steven Whisler .................. 44 Director
David B. Woodbury .................. 58 Director
Douglas C. Yearley ................. 63 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, Birmingham Steel
Corporation, NACCO Industries, Inc. and The Tinker Foundation Incorporated.
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 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.
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,
5
<PAGE> 8
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.
William Dowd, Director. Mr. Dowd has been a director of the Company since
1998. He has been Controller of Asarco since 1995, and was previously its
Assistant Controller from 1993 to 1995.
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 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.
Charles B. Smith, Nominee. Mr. Smith has been Executive Vice President and
Chief Operating Officer of the Company since February 1996. From 1992 to
February 1996 he was Vice President and General Manager (Operations, Peru).
Gerald D. Van Voorhis, Nominee. Mr. Van Voorhis has been Vice President,
Exploration, of Asarco since 1992.
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 was President of Phelps Dodge Mining Company
from 1991 until September 1998. 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 1989, and previously its President
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.
6
<PAGE> 9
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, 1998, 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 PERCENT OF
STOCK OUTSTANDING COMMON STOCK CLASS A OUTSTANDING VOTING
BENEFICIALLY COMMON BENEFICIALLY COMMON CAPITAL PERCENTAGE
OWNED STOCK OWNED STOCK STOCK (a)
------------ ----------- ------------ ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
ASARCO Incorporated
180 Maiden Lane
New York, NY 10038 ...... -- -- 43,348,949 65.8% 54.3% 63.1%
CerroTrading 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 14.0 16.3
The Pritzker Family
Philanthropic Fund
200 West Madison Street
Chicago, IL 60606 ....... 2,850,000 20.4% -- -- 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.
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 a number
other 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
7
<PAGE> 10
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.
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, 1998.
<TABLE>
<CAPTION>
SOUTHERN PERU COPPER CORPORATION
----------------------------------------------------------------
SHARES OF THE ADDITIONAL
COMPANY'S SHARES
COMMON STOCK DEEMED PERCENT OF
BENEFICIALLY BENEFICIALLY OUTSTANDING
OWNED(a) OWNED(b) TOTALS COMMON STOCK
------------- ------------ ------- ------------
<S> <C> <C> <C> <C>
Everett E. Briggs(c)(d) ............ 1,197 -- 1,197 (e)
Jaime Claro(c) ..................... 600 -- 600 (e)
William Dowd(c) .................... 1,000 -- 1,000 (e)
Augustus B. Kinsolving(f) .......... 1,071 -- 1,071 (e)
Francis R. McAllister(c) ........... 3,075 -- 3,075 (e)
John F. McGillicuddy(c) ............ 800 -- 800 (e)
Kevin R. Morano(c) ................. 2,075 -- 2,075 (e)
Robert J. Muth(c) .................. 1,800 -- 1,800 (e)
Ronald J. O'Keefe(g) ............... 4,649 24,000 28,649 (e)
Richard de J. Osborne(h) ........... 3,254 -- 3,254 (e)
Charles G. Preble(g)(i) ............ 23,488 67,000 90,488 (e)
Robert A. Pritzker(j) .............. 600 -- 600 (e)
David J. Thomas(g) ................. 1,403 5,500 6,903 (e)
Eduardo Santistevan(g) ............. 2,248 12,800 15,048 (e)
Charles B. Smith(g)(k) ............. 7,228 37,800 45,028 (e)
Gerald D. Van Voorhis .............. -- -- -- (e)
Michael O. Varner(c)(l) ............ 1,338 -- 1,338 (e)
J. Steven Whisler(c) ............... 800 -- 800 (e)
David B. Woodbury(c) ............... 2,100 -- 2,100 (e)
Douglas C. Yearley(c) .............. 800 -- 800 (e)
All nominees, directors and officers
as a group (27 individuals)(g) ... 70,452 187,900 258,352 1.9%
</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 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, 1998, through the
exercise of options granted under the Company's Stock Incentive Plan.
8
<PAGE> 11
(c) See also the information below on Common Stock Equivalents.
(d) Includes 300 shares held in trust as to which Amb. Briggs and his wife
share voting and investment power.
(e) Less than 0.5%.
(f) Does not include 100 shares of the Company's Common Stock owned by Mr.
Kinsolving's son as to which Mr. Kinsolving disclaims beneficial ownership.
(g) 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: 14,690 such shares to Mr. Preble;
5,540 to Mr. Smith; 3,330 to Mr. O'Keefe; 1,065 to Mr. Santistevan; 1,000
to Mr. Thomas; and 4,055 to other executive officers.
(h) Includes 2,357 shares over which Mr. Osborne and his wife share voting and
investment power.
(i) Includes 8,133 shares held in a trust as to which Mr. Preble and his wife
share voting and investment power.
(j) 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.
(k) Includes 1,460 shares of the Company's Common stock held in the name of Mr.
Smith's wife.
(l) Mr. Varner and his wife share voting and investment power over these
shares.
COMMON STOCK EQUIVALENTS
The following table sets forth the per share number of Common Stock
Equivalents credited as of December 31, 1998, 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 ....................................... 5,399
Jaime Claro ............................................. 3,930
William Dowd ............................................ 379
Francis R. McAllister ................................... 4,310
Kevin R. Morano ......................................... 4,990
Robert J. Muth .......................................... 4,310
Michael O. Varner ....................................... 2,882
J. Steven Whisler ...................................... 1,625
David B. Woodbury ....................................... 3,597
Douglas C. Yearley ...................................... 2,324
------
Total .................................... 33,746
</TABLE>
9
<PAGE> 12
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,
1998.
<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 .......................... __ __ __ __
William Dowd(c) ...................... 5,704 24,300 30,004 (d)
Augustus B. Kinsolving(c) ............ 16,545 73,300 89,845 (d)
Francis R. McAllister(c) ............. 46,741 151,840 198,581 0.5%
John F. McGillicuddy ................. __ __ __ __
Kevin R. Morano(c) ................... 26,209 93,200 119,409 (d)
Robert J. Muth(c) .................... 14,752 52,614 67,366 (d)
Ronald J. O'Keefe(c) ................. 3,421 11,600 15,021 (d)
Richard de J. Osborne(c)(e) .......... 151,952 399,450 551,402 1.4%
Charles G. Preble .................... __ __ __ __
Robert A. Pritzker ................... __ __ __ __
Eduardo Santistevan .................. __ __ __ __
Charles B. Smith ..................... __ __ __ __
David J. Thomas ...................... __ __ __ __
Gerald D. Van Voorhis(c) ............. 6,175 21,500 27,675 (d)
Michael O. Varner(c)(f) .............. 9,012 30,100 39,112 (d)
J. Steven Whisler .................... __ __ __ __
David B. Woodbury(c) ................. 6,995 25,000 31,995 (d)
Douglas C. Yearley ................... __ __ __ __
All nominees, directors and officers
as a group (27 individuals)(c) ..... 293,159 902,554 1,195,713 3.0%
</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, 1998, through the
exercise of options granted under Asarco's stock incentive plans.
(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: 2,920 to Mr. Dowd; 7,600 to Mr.
Kinsolving; 16,520 to Mr. McAllister; 13,840 to Mr. Morano; 8,800 to Mr.
Muth; 440 to Mr. O'Keefe (relating to compensation by Asarco prior to his
employment by the Company); 61,500 to Mr. Osborne; 3,020 to Mr. Van
Voorhis; 3,930 to Mr. Varner; 3,690 to Mr. Woodbury and 2,260 to other
officers of the Company.
(d) Less than .5%.
10
<PAGE> 13
(e) Includes 5,027 shares of Asarco Common Stock over which Mr. Osborne and his
wife share voting and investment power.
(f) Includes 2,185 shares of Asarco common stock over which Mr. Varner 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 1998.
For fiscal year 1998, 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 three times in 1998.
During 1998, 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 1998 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 1998, for executive officers other than Mr.
Preble, base salaries were increased by an average of approximately 4.9%. In
1998, Mr. Preble was awarded a salary increase of 8.4% 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 1998
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 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 1998 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 and safety performance in 1998 and
programs to improve environmental and safety
11
<PAGE> 14
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 1998 corporate performance rating of 60% 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 40%.
At its meeting in February 1999 the Committee determined that it would be
in the best interests of the Company for Mr. Preble to be entitled to an office
and certain executive-level services following his retirement. The Committee
approved a one-year consulting agreement under which Mr. Preble will provide
consulting services to the Company for a daily consulting fee of $2,000 with an
annual minimum of 25 consulting days of service.
Under Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Internal Revenue Code"), 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 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
1998.
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 1998 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 1998 were to selected officers and employees, and were
made within long-term incentive targets based upon analyses by the Company's
compensation consultant and
12
<PAGE> 15
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
EXECUTIVE COMPENSATION
Set forth below is certain information concerning the compensation for
services in all capacities to the Company for fiscal years 1998, 1997 and 1996
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 ... 1998 $392,637 $147,100 $117,956 $40,681 25,000 $97,111
President and Chief 1997 362,940 232,200 115,854 97,500 23,000 138,276
Executive Officer 1996 336,933 196,812 131,029 89,950 19,000 151,877
Charles B. Smith .... 1998 311,050 85,300 139,339 15,049 14,500 75,333
Executive Vice 1997 298,700 122,700 100,078 37,375 13,000 110,991
President 1996 288,583 119,609 85,534 32,050 10,300 115,674
Ronald J. O'Keefe ... 1998 240,351 53,900 153,237 10,187 7,200 59,231
Executive Vice 1997 230,724 78,700 151,225 21,125 8,000 94,452
President 1996 220,004 77,682 114,562 26,503 8,800 88,856
Eduardo Santistevan.. 1998 191,950 38,200 117,301 3,037 4,500 50,126
Vice President 1997 184,967 47,200 102,881 7,313 4,500 75,587
1996 175,893 38,996 77,420 6,827 3,800 75,006
David J. Thomas(d)... 1998 179,667 41,800 87,071 510 5,500 24,073
Vice President 1997 34,514 __ 13,766 __ __ 4,319
1996 __ __ __ __ __ __
</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 1998, 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. Compensation amounts exceeding 25% of a named officer's total Other
Annual Compensation in 1998 were as follows: Charles G. Preble, a $92,474
foreign service premium; Charles B. Smith, a $71,090 foreign service
premium and a $49,000 housing allowance; Ronald J. O'Keefe, a $77,813
foreign service premium and a $40,800 housing allowance; Eduardo
Santistevan, a $43,625 foreign service premium and a $49,000 housing
allowance and David J. Thomas, a $71,721 foreign service premium. Mr.
Santistevan is the brother-in-law of Mr. Preble.
13
<PAGE> 16
(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, 1998, and still subject to restrictions are as follows: Mr. Preble,
14,960/$137,913; Mr. Smith, 5,540/$51,072; Mr. O'Keefe, 3,330/$30,699; Mr.
Santistevan, 1,065/$9,818; and Mr. Thomas, 1,000/$9,219. 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 1998 for all named officers include matching
contributions by the Company under the Company's Savings Plan and its
Compensation Deferral Plan. The Savings Plan is a 401(k) plan available
generally to United States and expatriate salaried employees. The
Compensation Deferral Plan is a non-qualified deferred compensation plan
that allows eligible employees to defer that portion of their salary that
could have been deferred under the Savings Plan but for limitations imposed
by the Internal Revenue Code, and to defer all or part of their eligible
incentive compensation, as provided in the Plan. Salary deferrals are
eligible for a Company matching contribution under the Plan. Compensation
deferred and amounts contributed by the Company may be withdrawn subject to
certain restrictions and penalties. Deferrals of incentive compensation are
not eligible for a Company matching contribution. 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 Thomas received $5,300, $4,643, $3,873, $3,169 and $2,579,
respectively, with respect to 1998.
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 and Santistevan in amounts of $50,763, $34,035,
$23,935 and $22,974, respectively, in 1998.
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 Thomas in amounts of $41,047,
$36,655, $31,424, $23,983 and $21,494, respectively, in 1998.
(d) Mr. Thomas commenced service with the Company in July 1997, after having
previously been employed by the Company from 1977 to 1987.
14
<PAGE> 17
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, 1998 to December 31,
1998.
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 25,000 30.8% $12.78 2/2/08 $78,925
Charles B. Smith 14,500 17.9% $12.78 2/2/08 45,777
Ronald J. O'Keefe 7,200 8.9% $12.78 2/2/08 22,730
Eduardo Santistevan 4,500 5.5% $12.78 2/2/08 14,207
David J. Thomas 5,500 6.8% $12.78 2/2/08 17,364
</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 following assumptions were used in determining the
value of the options using the model: expected volatility of 29.5% 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 3, 1998; an annual
dividend rate of $0.45 per share based upon the ten year average dividend
rate paid per share; a risk free rate of return of 5.4% 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.
All outstanding options were exercisable at December 31, 1998, and as of
that date, unexercised options were held as follows: Mr. Preble, 67,000; Mr.
Smith, 37,800; Mr. O'Keefe, 24,000; Mr. Santistevan, 12,800 and Mr. Thomas,
5,500. No options were exercised during 1998 and no outstanding options were "in
the money" at December 31, 1998.
15
<PAGE> 18
RETIREMENT PLANS
The following table shows the estimated amount of annual retirement income
payable to employees for life, commencing at normal retirement at age 65 in 1999
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 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, 1999.
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 ........ $ 25,150 $ 33,533 $ 41,916 $ 50,299 $ 58,682 $ 67,066 $ 75,449
150,000 ........ 30,775 41,033 51,291 61,549 71,807 82,066 92,324
175,000 ........ 36,400 48,533 60,666 72,799 84,932 97,066 109,199
200,000 ........ 42,025 56,033 70,041 84,049 98,057 112,066 126,074
225,000 ........ 47,650 63,533 79,416 95,299 111,182 127,066 142,949
250,000 ........ 53,275 71,033 88,791 106,549 124,307 142,066 159,824
275,000 ........ 58,900 78,533 98,166 117,799 137,432 157,066 176,699
300,000 ........ 64,525 86,033 107,541 129,049 150,557 172,066 193,574
325,000 ........ 70,150 93,533 116,916 140,299 163,682 187,066 210,449
350,000 ........ 75,775 101,033 126,291 151,549 176,807 202,066 227,324
375,000 ........ 81,400 108,533 135,666 162,799 189,932 217,066 244,199
400,000 ........ 87,025 116,033 145,041 174,049 203,057 232,066 261,074
425,000 ........ 92,650 123,533 154,416 185,299 216,182 247,066 277,949
450,000 ........ 98,275 131,033 163,791 196,549 229,307 262,066 294,824
475,000 ........ 103,900 138,533 173,166 207,799 242,432 277,066 311,699
500,000 ........ 109,525 146,033 182,541 219,049 255,557 292,066 328,574
525,000 ........ 115,150 153,533 191,916 230,299 268,682 307,066 345,449
550,000 ........ 120,775 161,033 201,291 241,549 281,807 322,066 362,324
575,000 ........ 126,400 168,533 210,666 252,799 294,932 337,066 379,199
600,000 ........ 132,025 176,033 220,041 264,049 308,057 352,066 396,074
700,000 ........ 154,525 206,033 257,541 309,049 360,557 412,066 463,574
800,000 ........ 177,025 236,033 295,041 354,049 413,057 472,066 531,074
</TABLE>
As of January 31, 1999, the following officers had completed the number of
years of service indicated: Charles G. Preble, 42 years; Charles B. Smith, 6
years; Ronald J. O'Keefe, 38 years; Eduardo
16
<PAGE> 19
Santistevan, 15 years and David J. Thomas, 11 years. The amounts of covered
compensation of such persons for calendar year 1998 were: Charles G. Preble,
$624,837; Charles B. Smith, $433,750; Ronald J. O'Keefe, $319,051; Eduardo
Santistevan, $239,150; David J. Thomas, $179,667, 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 13 years of accrued vested benefits of
$31,724 (reflecting a straight life annuity benefit assuming normal retirement
at age 65) payable to him under the Company's nonqualified noncontributory
defined benefit Retirement Plan and Trust for Selected Employees (the "Offshore
Pension Plan"). Under the Offshore Pension Plan, selected non-U.S.-citizen
expatriate salaried employees in Peru accrued benefits calculated as 1.5% of the
employee's final salary rate multiplied by the number of years of the employee's
credited service. The benefits are not subject to any offset for Peruvian
governmental benefits. Effective January 1, 1997, covered employees under the
Offshore Pension Plan ceased to accrue benefits under the Offshore Pension Plan
and began to participate in and accrue benefits under the Retirement Plan.
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 five 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.
Mr. R. J. O'Keefe resigned as Chief Financial Officer on February 2, 1999,
and will resign as Executive Vice President effective April 30, 1999. Under the
terms of his existing employment agreement, he will continue to serve as a
non-executive employee of the Company at his current base salary level for a
period of three years from April 30, 1999, and will receive pension and other
benefits applicable to U.S.-based employees.
17
<PAGE> 20
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 three-year period ending December 31, 1998.
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, 1998,
compared to the total return of the S&P 500 and the S&P Metals Miscellaneous
Group for the three-year period commencing December 31, 1995 and ending December
31, 1998. 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. In
1998, SPCC's stock provided a negative return of 26.5% compared to a positive
return of 28.6% for the S&P 500 and a negative return of 28.1% for the S&P
Metals Miscellaneous Group.
COMPARISON OF THREE YEAR CUMULATIVE TOTAL RETURN*
SPCC, S&P METALS MISC. GROUP INDEX & S&P 500 INDEX**
COMP OF THREE YEAR
"SPCC" "S&P 500" "S&P METAL"
1995 100 100 100
1996 99.06 122.96 102.03
1997 97.42 163.98 68.58
1998 82.56 173.82 53.49
* 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 1998, 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 1998 was $1.0 million.
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
18
<PAGE> 21
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 $18.7 million in 1998.
Asarco purchased copper products from the Company during 1998 in the amount
of $14.6 million. Richard de J. Osborne, Francis R. McAllister, Kevin R. Morano,
Augustus B. Kinsolving, William Dowd, Robert J. Muth, Gerald D. Van Voorhis,
Michael O. Varner and David B. Woodbury are executive officers of Asarco. Each
is a director or director-nominee 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
$4.1 million in 1998. 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 1998, the Company purchased steel castings at an aggregate price of
$23,041 from Cia. Electro Metalurgica S.A. ("Electro"). In addition, the Company
contracted an aggregate of approximately $11.5 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
The functions of the Compensation Committee, composed of Messrs. Kevin R.
Morano, Richard de J. Osborne, Robert A. Pritzker and Douglas C. Yearley,
include making recommendations to the Board with respect to election of and
title changes for all corporate executive officers.
The Nominating Committee, composed of Messrs. Richard de J. Osborne, Robert
A. Pritzker, Douglas C. Yearley, John F. McGillicuddy and Amb. Everett E.
Briggs, did not meet in 1998. 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
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person or by proxy to make the nomination. Nominations for the Company's 2000
annual meeting of stockholders must be received by January 31, 2000.
The Board of Directors met four times in 1998, 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 at least 75% of the aggregate number of meetings of the Board and of
the committees on which they served, with the exception of Mr. Pritzker, who
attended 14% of such meetings. There were no meetings of the Executive Committee
during 1998, which acted only by unanimous written consent during the year.
COMPENSATION OF DIRECTORS
During 1998 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. 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 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 normal retirement, or the
15th day of the 13th month following the date of any other termination of
service. The Plan permits early withdrawal or further deferral of participant
accounts, subject to financial hardship, prior notice or penalty requirements.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Richard de J. Osborne, Kevin R. Morano and Douglas C. Yearley
served on the Compensation Committee of the Board of Directors during 1998.
Messrs. Osborne and Morano were compensated by Asarco, and Mr. Yearly was
compensated by Phelps Dodge, and they received no compensation from the Company
during 1998 for services other than as directors. During 1998, Jaime Claro
attended meetings of the Compensation Committee as an alternate in the absence
of Robert A. Pritzker. Mr. Claro received no compensation from the Company
during 1998 for services other than as a director. See "Certain Transactions"
above for information regarding related transactions concerning these directors.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based on Company records and other information, the Company believes that
all filing requirements of the Securities and Exchange Commission applicable to
its executive officers and Directors were
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complied with for 1998 except that Mr. Frank R. Tweddle, Vice President, filed
one late report covering one transaction.
PROPOSAL TO APPROVE THE SELECTION OF ACCOUNTANTS
The Board of Directors has selected PricewaterhouseCoopers L.L.P. to serve
as independent accountants for the Company for the calendar year 1999, subject
to approval of the stockholders. The Board of Directors recommends that the
stockholders approve the selection of PricewaterhouseCoopers L.L.P. at the
annual meeting. PricewaterhouseCoopers L.L.P. and its predecessors have served
as the Company's accountants continuously since 1962. PricewaterhouseCoopers
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 1998. 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 PricewaterhouseCoopers 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 2000
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 30, 1999 in order to be considered for inclusion in the Company's
proxy statement and form of proxy.
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 are authorized to and 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 19, 1999
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SOUTHERN PERU COPPER CORPORATION
PROXY
PROXY SOLICITED BY BOARD OF DIRECTORS FOR ANNUAL MEETING OF STOCKHOLDERS TO BE
HELD APRIL 29, 1999
The undersigned hereby appoints CHARLES G. PREBLE, KEVIN R. MORANO and
AUGUSTUS B. KINSOLVING, 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 29, 1999, 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> 25
DIRECTORS OF SPCC RECOMMEND A VOTE "FOR" PROPOSALS 1 AND 2.
1. Election of Directors
FOR both nominees listed below / /
WITHHOLD AUTHORITY to vote for both nominees listed below / /
*EXCEPTION / /
Common Stock Director Nominees: Everett E. Briggs and 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:
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2. Selection of PricewaterhouseCoopers L.L.P. as independent accountants for
1999.
FOR AGAINST ABSTAIN
/ / / / / /
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, guardian or corporate officer, please give full title.
Dated: , 1999
--------------------------------------
- --------------------------------------------------
Signature
- --------------------------------------------------
Signature
PLEASE SIGN, DATE AND RETURN THIS PROXY IN THE ENCLOSED ENVELOPE.
VOTES MUST BE INDICATED (X) IN BLACK OR BLUE INK. /X/
