SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
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Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as
permitted by Rule 14a-6(e) (2))
/ x / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or
240.14a-12
Alcoa Inc.
(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 0-11.
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Rule 0-11 (Set forth the amount on which the
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provided by Exchange Act Rule 0-11(a)(2) and
identify the filing for which the offsetting fee was
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ALCOA LOGO
2000
Notice of Annual Meeting and Proxy Statement
TABLE OF CONTENTS
NOTICE OF 2000 ANNUAL MEETING 2
THE ANNUAL MEETING AND VOTING - QUESTIONS AND ANSWERS 3
BOARD OF DIRECTORS 5
ITEM 1 - ELECTION OF DIRECTORS 6
ALCOA STOCK OWNERSHIP AND PERFORMANCE 12
EXECUTIVE COMPENSATION 15
Report of the Compensation Committee
Summary Compensation Table
Option Grants in 1999
1999 Aggregate Option Exercises and Year-End
Option Values
Pension Plans
ITEM 2 - APPROVE AN AMENDMENT TO ALCOA'S 26
ARTICLES OF INCORPORATION TO INCREASE
COMMON STOCK
OTHER INFORMATION 28
ALCOA LOGO
TO ALCOA SHAREHOLDERS:
I cordially invite you to the 2000 annual meeting of Alcoa
shareholders.
The meeting this year is on Friday, May 12, 2000 at
9:30 a.m. in the Allegheny Ballroom of the DoubleTree Hotel
Pittsburgh in Pittsburgh, Pennsylvania. The location is
accessible to disabled persons, and we will have headsets
available for the hearing impaired.
I hope you will participate in this review of our company's
business and operations. This proxy statement describes the
items you will vote on at the meeting. In addition to
voting, we will review the major developments of 1999 and
answer your questions.
If you plan to attend, you will need an admission ticket.
For registered holders, we have included an admission ticket
with your proxy card. Other shareholders may obtain tickets
by contacting the corporate secretary.
Whether or not you plan to attend the meeting, your vote is
important. Please vote by returning your signed and dated
proxy card in the postage-paid envelope or by using the on-
line voting option.
I look forward to seeing you at the annual meeting.
Sincerely,
/s/Paul H. O'Neill
Paul H. O'Neill
Chairman of the Board
February 25, 2000
Alcoa
201 Isabella Street at 7th Street Bridge
Pittsburgh, Pennsylvania 15212-5858
ALCOA LOGO
NOTICE OF 2000 ANNUAL MEETING
February 25, 2000
Alcoa's annual meeting of shareholders will be on Friday,
May 12, 2000 at 9:30 a.m. We will meet in the Allegheny
Ballroom of the DoubleTree Hotel Pittsburgh, 1000 Penn
Avenue, Pittsburgh, Pennsylvania. If you owned common stock
at the close of business on February 14, 2000, you may vote
at this meeting.
At the meeting, we plan to:
- - elect three directors to serve for new terms;
- - vote to approve an amendment to Alcoa's Articles of
Incorporation increasing the number of authorized
shares of common stock; and
- - attend to other business properly presented at the
meeting.
The Board is not aware of any other proposals for the May 12,
2000 meeting. Should another arise, the proxy committee
will vote your proxy according to its best judgment.
On behalf of Alcoa's Board of Directors,
/s/Denis A. Demblowski
Denis A. Demblowski
Secretary
THE ANNUAL MEETING AND VOTING - QUESTIONS AND ANSWERS
This booklet and proxy card contain information about
the items you will vote on at the annual meeting.
Who is entitled to vote and how many votes do I have?
If you are a common stock holder of record at the close of
business on February 14, 2000, you can vote. For each matter
presented for vote, you have one vote for each share you
own.
How do I vote?
You may vote in person by attending the meeting or by
completing and returning a proxy by mail or electronically
using the Internet. To vote your proxy by mail, mark your
vote on the enclosed proxy card, then follow the directions
on the card. To vote your proxy using the Internet, see the
instructions on the proxy form, and have the proxy form
available when you access the Internet Web site. The homepage
will prompt you to enter your control number; then follow
the instructions to record your vote. The proxy committee
will vote your shares according to your directions. If you
do not mark any selections, your shares will be voted as
recommended by the Board of Directors. Whether you plan to
attend the meeting or not, we encourage you to vote by proxy
as soon as possible.
What does it mean if I receive more than one proxy card?
If you are a shareholder of record or participate in Alcoa's
Dividend Reinvestment and Stock Purchase Plan or employee
savings plans, you will receive one proxy card for all
shares of common stock held in or credited to your accounts
as of the record date, if the account registrations are the
same. If your shares are registered differently and are in
more than one account, you will receive more than one proxy
card. We encourage you to have all accounts registered in
the same name and address whenever possible. You can do this
by contacting our transfer agent, First Chicago Trust
Company of New York, at 1 800 317 4445 (in the U.S. and
Canada) or 1 201 324 0313 (all other calls) or by e-mail at
[email protected].
How do I vote if I participate in one of the employee
savings plans?
The plans' independent trustee will vote your Alcoa employee
savings plan shares according to your voting instructions or
as recommended by the Board of Directors if you give no
instructions on the proxy form. The trustee will vote plan
shares not voted by proxy in proportion to the way the other
plan participants voted their shares.
Can I change my vote?
You can revoke your proxy before the time of voting at the
meeting in several ways:
- - by mailing a revised proxy dated later than the
prior proxy
- - by voting again at the Internet Web site
- - by voting in person at the meeting or
- - by notifying Alcoa's corporate secretary in writing
that you are revoking your proxy.
Is my vote confidential?
Yes. Proxy cards, ballots and voting tabulations that
identify shareholders are kept confidential. There are
exceptions for contested proxy solicitations or where
necessary to meet legal requirements. Corporate Election
Services, Inc., the independent proxy tabulator used by
Alcoa, counts the votes and acts as the inspector of
election for the meeting.
-3-
Who can attend the annual meeting, and how do I obtain an
admission ticket?
You may attend the meeting if you were a shareholder on
February 14, 2000. If you plan to attend the meeting, you
will need an admission ticket, which is part of your proxy
form. If a broker holds your shares and you would like to
attend, please write to: Secretary, Alcoa, 201 Isabella
Street, Pittsburgh, PA 15212-5858. Please include a copy of
your brokerage account statement or an omnibus proxy (which
you can get from your broker), and we will send you an
admission ticket.
What constitutes a "quorum" for the meeting?
A majority of the outstanding shares, present or represented
by proxy, constitutes a quorum. A quorum is necessary to
conduct business at the annual meeting. You are part of the
quorum if you have voted by proxy. Abstentions, broker non-
votes and votes withheld from director nominees count as
"shares present" at the meeting for purposes of determining
a quorum. However, abstentions and broker non-votes do not
count in the voting results. A broker non-vote occurs when a
broker or other nominee who holds shares for another does
not vote on a particular item because the nominee does not
have discretionary voting authority for that item and has
not received instructions from the owner of the shares.
Director candidates who receive the highest number of votes
cast will be elected. Approval of each other item being
considered requires a majority of the votes cast.
At the close of business on February 14, 2000, the record
date for the meeting, Alcoa had outstanding 369,486,363
shares of common stock.
Who pays for the solicitation of proxies?
Alcoa pays the cost of soliciting proxies. We retain Morrow
& Company, Inc. to assist with the solicitation for a fee of
$13,000 plus reasonable out-of-pocket expenses. We will
reimburse brokerage firms and other custodians, nominees and
fiduciaries for their reasonable out-of-pocket expenses for
sending proxy materials to shareholders and obtaining their
votes.
How do I comment on company business?
There is space for your comments on the proxy card or you
may send your comments to us in care of the corporate
secretary. Although it is not possible to respond to each
shareholder, your comments help us to understand your
concerns and address your needs.
May I nominate someone to be a director of Alcoa?
If you are a shareholder entitled to vote at an annual
meeting, you may nominate one or more persons for election
as directors of Alcoa at that meeting. You may do this by
sending a written notice to: Secretary, Alcoa, 201 Isabella
Street, Pittsburgh, PA 15212-5858. The notice must include
certain information about the persons you nominate, and we
must receive it at least 90 days before the annual meeting
date. For complete details, contact the corporate secretary.
When are the 2001 shareholder proposals due?
The next Alcoa annual meeting is on April 20, 2001. You
must submit shareholder proposals in writing by November 1,
2000 for them to be considered for the 2001 proxy
statement. No proposals received after January 19, 2001 may
be raised at the annual meeting. Address all shareholder
proposals to the corporate secretary of Alcoa at the above
address.
-4-
BOARD OF DIRECTORS
COMMITTEES AND MEETINGS OF THE BOARD
The Board of Directors considers all major decisions of
Alcoa. The Board met nine times in 1999. Attendance by
directors at Board and committee meetings averaged over 90%.
All directors attended at least 75% of the meetings. The
Board has the following five standing committees:
The Audit Committee reviews Alcoa's auditing, financial
reporting and internal control functions and recommends the
firm that Alcoa should retain as its independent accountant.
It also reviews the company's environmental, health and
safety audits and monitors compliance with Alcoa business
conduct policies. The independent accountants, the vice
president-environment, health & safety, audit and compliance
and the general counsel have access to the committee without
management's presence. The committee met four times in 1999.
In addition, the chairman of this committee met with
management and the independent accountants prior to the
announcement of quarterly earnings in April, July and
October. The full committee reviewed quarterly and annual
results in January.
The Compensation Committee determines cash compensation
for Alcoa officers, approves posttermination contracts
and performs other functions specified by the company's
compensation plans. The committee also reviews the
participation of officers in other benefit programs for
salaried employees. A subcommittee of the Compensation
Committee administers the company's stock incentive plan. In
addition, this committee issues the Report of the
Compensation Committee on executive compensation (see
page 15 of this proxy statement). The committee met six times
in 1999.
The Executive Committee has authority to act on behalf of
the Board. It meets when specific action must be taken
between Board meetings. This committee met once in 1999.
The Nominating Committee considers and recommends nominees
for election as directors and reviews the performance of
incumbent directors. The committee reviews the names and
qualifications of nominees that shareholders submit in
writing to the corporate secretary. This committee met once
in 1999.
The Pension and Savings Plan Investment Committee reviews
and approves the investment management of Alcoa's
retirement plans and principal savings plans. This committee
met twice in 1999.
DIRECTORS' COMPENSATION
Alcoa pays each director who is not an Alcoa employee an
annual retainer fee of $100,000. Alcoa does not pay any
additional fees, such as meeting or committee fees.
Directors may elect to defer some or all of their
annual retainer under the company's deferred fee plan for
nonemployee directors. Alcoa encourages directors to defer
the maximum amount that their individual circumstances
allow. The company credits all fee deferrals to an Alcoa
stock investment account, except that directors may invest
deferrals exceeding 50% of the annual retainer fee in other
investment options under the plan. Alcoa credits deferred
accounts as if invested in the investment options under
Alcoa's principal savings plan for salaried employees.
Directors may change among investment options once each
month. Directors cannot, however, transfer from the Alcoa
stock investment option. Alcoa does not fund directors'
deferred accounts, but pays them out in cash from general
funds of the company after Board service ends.
TRANSACTIONS WITH DIRECTORS' COMPANIES
In the course of ordinary business, Alcoa and its
subsidiaries may have transactions with companies and
organizations whose executive officers are also Alcoa
directors. None of these transactions exceeded 5% of the
gross revenues of either Alcoa or the other organization.
-5-
ITEM 1 - ELECTION OF DIRECTORS
Alcoa's Board of Directors has 11 members, who are divided
into three classes. Directors are elected for three-year
terms. The terms for members of each class end in successive
years.
The Board of Directors has nominated the three members of
the class of directors whose terms of office are expiring
to serve for new terms. Paul H. O'Neill, Alcoa's chairman and
one of the nominees, has indicated that he intends to retire
as chairman and as a director on December 31, 2000 and, as a
consequence, his new term as a director will expire at that
time. The new terms of the other two director nominees will
expire in 2003.
The proxy committee will vote your proxy for the election
of these nominees unless you withhold authority to vote for
any one or more of them. If any director is unable to stand
for election, the Board may reduce its size or choose a
substitute.
NOMINEES TO SERVE FOR A THREE-YEAR TERM EXPIRING IN 2003
Kenneth W. Dam
Age: 67
Director since: 1987
Alcoa Board Audit Committee, Compensation
Committees: Committee and Executive Committee.
Principal occupation: Max Pam Professor of American and
Foreign Law, University of Chicago
Law School, since 1992.
Recent business Mr. Dam served as President and Chief
experience: Executive Officer for United Way of
America in 1992, Vice President for
Law and External Relations of IBM
Corporation from 1985 to 1992, Deputy
Secretary of State from 1982 to 1985
and Provost of the University of
Chicago from 1980 to 1982.
Other directorships: Council on Foreign Relations and
the Brookings Institution.
-6-
NOMINEES TO SERVE FOR A THREE-YEAR TERM EXPIRING IN 2003
(continued)
Judith M. Gueron
Age: 58
Director since: 1988
Alcoa Board Audit Committee and Pension and Savings
Committees: Plan Investment Committee.
Principal occupation: President, Manpower Demonstration
Research Corporation (MDRC), a
nonprofit research organization, since
1986.
Recent business Dr. Gueron was MDRC's Executive Vice
experience: President for research and evaluation
from 1978 to 1986. Before joining MDRC,
she was director of special projects
and studies and a consultant for the
New York City Human Resources Administration.
NOMINEE TO SERVE FOR A TERM EXPIRING DECEMBER 31, 2000
Paul H. O'Neill
Age: 64
Director since: 1986
Alcoa Board Executive Committee (chair).
Committee:
Principal occupation: Chairman of the Board of Alcoa.
Recent business Mr. O'Neill has served as Alcoa's Chairman
experience: of the Board since 1987 and was Chief
Executive Officer from 1987 to May 1999.
From 1985 to 1987, he was President and a
director of International Paper Company.
Other directorships: Eastman Kodak Company, Gerald R.
Ford Foundation, Lucent Technologies Inc.,
Manpower Demonstration Research
Corporation, National Association of
Securities Dealers, Inc. and The RAND
Corporation.
-7-
DIRECTORS WHOSE TERMS EXPIRE IN 2002
Joseph T. Gorman
Age: 62
Director since: 1991
Alcoa Board Compensation Committee, Nominating
Committees: Committee and Pension and Savings Plan
Investment Committee (chair).
Principal occupation: Chairman and Chief Executive Officer,
TRW Inc., a global company serving the
automotive, space and information
systems markets.
Recent business Mr. Gorman was TRW's President from 1985
experience: to 1991 and Chief Operating Officer
from 1985 to 1988. He has served as
Chairman and Chief Executive Officer of
TRW since 1988.
Other directorships: The Procter & Gamble Company and TRW.
Sir Ronald Hampel
Age: 67
Director since: 1995
Alcoa Board Nominating Committee and Pension and
Committees: Savings Plan Investment Committee.
Principal occupation: Since April 1999, Chairman of United
News & Media plc, a U.K.-based media
company with interests in broadcasting,
publishing and news dissemination
services.
Recent business Sir Ronald was Chairman, Imperial
experience: Chemical Industries PLC (ICI), a
diversified chemicals manufacturer,
from 1995 to 1999, Deputy Chairman
and Chief Executive of ICI from 1993
to 1995 and Chief Operating Officer
from 1991 to 1993. He was an ICI
director from 1985 to 1999. Sir Ronald
is Chairman of the UK Committee on
Corporate Governance.
Other directorships: BAE Systems PLC and the All England
Lawn Tennis Club (Wimbledon) Limited.
-8-
DIRECTORS WHOSE TERMS EXPIRE IN 2002 (continued)
John P. Mulroney
Age: 64
Director since: 1987
Alcoa Board Compensation Committee and Nominating
Committees: Committee (chair).
Principal occupation: Former President and Chief Operating
Officer, Rohm and Haas Company, a
specialty chemicals manufacturer.
Recent business Mr. Mulroney was President and Chief
experience: Operating Officer of Rohm and Haas
Company from 1986 until his retirement
in 1998. He served as a director of
Rohm and Haas from 1982 to 1998.
Other directorships: Teradyne, Inc.
Marina v.N. Whitman
Age: 64
Director since: 1994
Alcoa Board Audit Committee and Pension and Savings
Committee: Plan Investment Committee.
Principal occupation: Professor of Business Administration
and Public Policy, School of Business
Administration and the School of Public
Policy at the University of Michigan,
since 1992.
Recent business Dr. Whitman was Vice President and Group
experience: Executive, Public Affairs and Marketing
Staffs of General Motors Corporation,
from 1985 to 1992 and Vice President and
Chief Economist from 1979 to 1985. She
was a member of the President's Council
of Economic Advisers from 1972 to 1973.
Other directorships: The Chase Manhattan Corporation,
The Procter & Gamble Company and Unocal
Corporation.
-9-
DIRECTORS WHOSE TERMS EXPIRE IN 2001
Alain J. P. Belda
Age: 56
Director since: 1998
Principal occupation: President and Chief Executive Officer
of Alcoa since May 1999.
Recent business Mr. Belda was President and Chief
experience: Operating Officer of Alcoa from 1997 to
May 1999. He served as Alcoa's Vice
Chairman from 1995 to 1997 and Executive
Vice President from 1994 to 1995. From
1979 to March 1994, he was President of
Alcoa Aluminio S.A. in Brazil. In August
1991, he was named President-Latin America
for the company after he had been given
responsibility for all of Alcoa's
interests in Latin America (other than
Suriname) in 1989.
Other directorships: Citigroup Inc., Cooper Industries, Inc.,
E. I. du Pont de Nemours and Company and
The Ford Foundation.
Hugh M. Morgan
Age: 59
Director since: 1998
Alcoa Board Compensation Committee and Pension and
Committee: Savings Plan Investment Committee.
Principal occupation: Managing Director and Chief Executive
Officer, WMC Limited, an Australian mining
and minerals processing company.
Recent business Mr. Morgan has been Managing Director of
experience: WMC since 1986 and its Chief Executive
Officer since 1990. He was Executive
Director of WMC from 1976 to 1986 and
a director of Alcoa of Australia Limited
from 1977 to 1998.
Other directorships: Reserve Bank of Australia and a number
of industry, business, trade and
international associations and advisory
groups.
-10-
DIRECTORS WHOSE TERMS EXPIRE IN 2001 (continued)
Henry B. Schacht
Age: 65
Director since: 1994
Alcoa Board Audit Committee (chair).
Committee:
Principal occupation: Managing Director, E. M. Warburg,
Pincus & Co., LLC, a financial services
firm, since January 2000.
Recent business Mr. Schacht became Senior Advisor to
E. M. Warburg, Pincus in 1999. He was
Senior Advisor to Lucent Technologies
Inc. from February 1998 to February 1999.
He served as Chairman of Lucent
Technologies from 1996 to 1998 and was
its Chief Executive Officer from February
1996 to October 1997. Mr. Schacht was
Chairman of Cummins Engine Company, Inc.
from 1977 to 1995 and its Chief Executive
Officer from 1973 to 1994.
Other directorships: Cummins Engine Company, Inc., The Chase
Manhattan Bank, The Chase Manhattan
Corporation, Johnson & Johnson, Knoll,
Inc., Lucent Technologies Inc. and
The New York Times Company.
Franklin A. Thomas
Age: 65
Director since: 1977
Alcoa Board Audit Committee, Compensation Committee
Committees: (chair), Executive Committee, Nominating
Committee and Pension and Savings Plan
Investment Committee.
Principal occupation: Consultant, TFF Study Group, a nonprofit
institution assisting development in
South Africa, since 1996.
Recent business From 1979 until 1996, Mr. Thomas was
experience: President of the Ford Foundation. He was
President and Chief Executive Officer of
Bedford Stuyvesant Restoration
Corporation from its founding in 1967
until 1977.
Other directorships: Citigroup Inc., Conoco Inc., Cummins
Engine Company, Inc., Lucent Technologies
Inc. and PepsiCo, Inc.
-11-
ALCOA STOCK OWNERSHIP AND PERFORMANCE
The following shareholders reported to the Securities and
Exchange Commission that they owned more than 5% of Alcoa
common stock on December 31, 1999.
<TABLE>
<CAPTION>
Name and address Number of Percent of outstanding
of beneficial owner shares owned Alcoa common stock owned
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Capital Research and Management Company (1) 23,061,300 6.30%
333 South Hope Street
Los Angeles, CA 90071
Fidelity Management & Research Company, LLP (2) 37,799,385 10.316%
82 Devonshire Street
Boston, MA 02109
Wellington Management Company, LLP (3) 25,950,230 7.08%
75 State Street
Boston, MA 02109
<FN>
(1) Capital Research and Management is a registered investment adviser that
provides investment advisory services to various investment companies. Capital
Research and Management reported that it has sole power to dispose of all of
the shares shown, but no power to vote the shares. It disclaimed beneficial
ownership of the reported shares.
(2) FMR is a parent holding company and its report also covered interests owned
or controlled by its affiliates. FMR reported sole power to vote 2,460,417 shares
and sole power to dispose of all shares shown. It did not share power to vote or
dispose of any shares.
(3) Wellington reported these amounts as an investment adviser; the shares are
owned by its clients. Wellington reported that it had shared power to dispose of
25,942,230 shares and shared voting power over 6,420,116 of the shares shown; it
did not have sole power to vote or dispose of any shares.
</TABLE>
Stock Ownership of Directors and Executive Officers:
The following table shows beneficial ownership of Alcoa common
stock by directors, nominees for director and executive
officers as of December 31, 1999. The named executive officers
are Paul H. O'Neill, who served as chief executive officer until
May 6, 1999, Alain J.P. Belda, who became the chief executive
officer on May 6, and the four executive officers who were
the highest paid in 1999.
No individual director, nominee or executive officer owned
more than 1% of Alcoa's common stock. The total ownership
shown for directors and executive officers as a group
represents less than 2% of outstanding shares.
-12-
<TABLE>
<CAPTION>
STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
Name Exercisable stock Number of shares Number of deferred
options (1) owned (2) share equivalent units (3)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Alain J. P. Belda 661,659 273,213 6,192
Kenneth W. Dam 0 6,400 5,573
Joseph T. Gorman 0 4,647 5,885
Judith M. Gueron 0 6,045 4,869
Sir Ronald Hampel 0 5,264 0
Hugh M. Morgan 0 200 3,207
John P. Mulroney 0 6,321 4,842
Paul H. O'Neill 2,298,609 800,360 1,088
Henry B. Schacht 0 5,081 4,842
Franklin A. Thomas 0 6,467 13,881
Marina v.N. Whitman 0 3,800 4,869
George E. Bergeron 419,369 147,024 3,641
Richard L. Fischer 607,612 126,723 1,004
L. Patrick Hassey 288,501 46,265 1,826
Richard B. Kelson 378,196 95,061 2,378
Directors and executive officers 5,822,254 2,082,360 74,581
executive officers as a group
(23 individuals)
<FN>
(1) This column lists the number of shares of Alcoa common stock that the officers
had a right to acquire within 60 days through exercise of employee stock options.
Nonemployee directors are not eligible for stock option grants under any Alcoa plan.
(2) This column includes shares held of record and shares owned through a bank,
broker or other nominee. It also includes, for executive officers, shares owned
through the Alcoa Savings Plan for Salaried Employees.
(3) Reported in this column are share equivalent units credited to an individual's
account under deferred fee or deferred compensation plans.
</FN>
</TABLE>
Compliance With Section 16(a) Reporting: The rules of the
Securities and Exchange Commission require that we disclose
late filings of reports of stock ownership by Alcoa
directors and executive officers. Due to the complexity of
the reporting rules, the company has assumed certain
responsibilities for filing compliance and has instituted
procedures to assist officers and directors with these
obligations. Based on a review of the filings made for the
year, we believe that all required reports were filed on a
timely basis in 1999.
-13-
STOCK PERFORMANCE GRAPH
This graph compares the most recent five-year performance of
Alcoa common stock with the S&P 500 Index and a peer group
index. It shows an investment of $100 on December 31, 1994
and the reinvestment of all dividends. Over the five-year
period, your $100 investment in Alcoa stock would have grown
to $419.77 by the end of 1999. This compares with $351.12
for the S&P 500 Index and $179.00 for the peer group index.
The peer group index, which is weighted for market
capitalization, includes Alcan Aluminium Limited and
Reynolds Metals Company. Alcoa uses the peer group index
instead of the S&P Aluminum Industry Index, which includes
Alcoa as well as Alcan and Reynolds, because Alcoa's heavy
market capitalization weighting would distort a comparison
with the full index.
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
- ---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Alcoa $100.00 124.33 153.33 171.57 185.78 419.77
S&P 500 $100.00 137.58 169.17 225.60 290.08 351.12
Peer Group $100.00 122.46 131.29 121.37 116.58 179.00
</TABLE>
-14-
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE
Our committee, the Compensation Committee, is responsible
for determining compensation for Alcoa corporate officers
and executive officers. All committee members are
independent directors who have never been Alcoa employees.
We base our decisions on our understanding of Alcoa's
businesses and long-term strategy and our knowledge of the
capabilities and performance of the company and its
executives.
Compensation Philosophy - We believe that managing the
company with a long-term perspective, while striving to
deliver consistently good annual results, will best serve
Alcoa shareholders. The company, therefore, designs its
executive compensation program to hire, reward, motivate and
retain high-performing employees worldwide.
Alcoa's total compensation program includes:
- annual salary
- annual cash incentives
- long-term, stock-based incentives and
- employee benefits.
We determine compensation based on certain principles:
- pay for performance - both individual and team
performance
- competitive total compensation compared with leading
industrial companies and
- total compensation that is highly leveraged to
financial and nonfinancial business performance.
Our committee places less emphasis on high base salaries in
favor of at-risk, short-term and long-term incentives based
on performance. We believe that the company's executives will
more effectively represent Alcoa shareholders if they are
shareholders themselves and have a meaningful portion of their
personal assets invested in Alcoa stock.
Annual Cash Compensation - Each year we review comparative
market compensation information prepared by internal and
outside consultants. The outside consultants survey leading
manufacturing companies for both total cash compensation and
long-term incentive information. These companies are among
the largest and best performing in a broad range of
industries and serve as a sample of the larger market. We
also compare the level of responsibility for executive
positions surveyed within these companies.
Total annual cash compensation for Alcoa senior managers
includes base salary and cash incentive awards. We set the
annual cash compensation levels above the median of
high-performing industrial companies. In order to tie annual
cash compensation more closely to performance, we set base
salaries at or slightly below the median and annual cash
incentive levels above it.
Annual Cash Incentives - Alcoa establishes targets
for cash incentive awards, which vary by position as a
percentage of base salary. Our committee may make
adjustments in payout, however, to recognize and reward
individual performance. The maximum payout, before any
adjustment for individual performance, is 200% of the
target.
Alcoa revised its cash incentive programs in 1992 to provide
more consistent performance measures for both executives and,
under a performance-based pay plan, most U.S. employees.
Alcoa measures its business unit employees according to the
goals of their individual units. The company bases annual cash
incentive payouts for most executive officers on the
achievement of business plan goals by all of the company's
business units. Key financial measures for the business
units and the corporation include cost of goods sold (as a per-
-15-
centage of sales), administrative and sales expenses,
cash from operations, after-tax operating income, net funds
flow and return on capital. About 40% of the business unit
goals are nonfinancial. They may include measurements for
environmental, health and safety performance, customer
satisfaction, employee development and succession planning,
product innovation, on-time delivery, manufacturing
excellence, reduced cycle time, inventory reduction and
product quality improvements. The company believes that if
managers focus on the achievement of excellence in those
areas within their control, there will be long-term growth
in shareholder value.
Special Performance Enhancement Program - We have approved a
performance enhancement reward program, which is an integral
part of the company's $1.1 billion cost-reduction initiative.
Under the program, special cash incentives, in addition to
normal variable compensation, will be paid to eligible
participants if the company meets certain aggressive financial
goals for the year 2000. The goals relate to a target return
on capital and reductions in cost of goods sold as a percentage
of sales, capital as a percentage of sales and overhead
expenses. If these goals are met, a one-time payment will be
made in 2001 to eligible participants, including executive
officers. Individual award payments could range from 120% to
240% of target annual cash bonus award levels.
Long-Term Incentives - A goal of our committee is to closely
align management's interests with those of shareholders. The
company's long-term incentives are, therefore, principally
stock-based. We believe this encourages stock ownership
among Alcoa executives.
In 1999, the Alcoa Board adopted and shareholders approved a
new stock incentive plan under which long-term incentives are
awarded to employees. The new plan is called the Alcoa Stock
Incentive Plan. It became effective on June 1, 1999 and
replaced a prior plan. The new plan provides for a variety of
stock-based incentive award types, including stock options,
stock appreciation rights, contingent stock (forfeitable,
restricted stock) awards and performance awards. From June
through December 1999, we awarded only stock options
(principally reload options granted in connection with the
exercise of previously granted options) and a small number
of contingent stock awards under this plan.
Alcoa encourages all of its employees and directors to own an
increasing equity interest in the company. In January 1999 we
approved new stock ownership guidelines for Alcoa senior
executives. The guidelines became effective on January 1, 2000,
and individuals have five years to reach the minimum ownership
requirement for their positions. The guidelines range from
10,000 shares for most business unit presidents, to 20,000 or
40,000 shares for most executive officers. The ownership target
for the chief executive officer is 140,000 shares. Amounts
invested in the Alcoa stock fund of the Alcoa savings plan
(401(k) plan) as well as share equivalent units in the company's
deferred compensation plan are counted as ownership for purposes
of the guidelines since they represent an equity investment
position for the executive. Most executives, including all of
the named executive officers, currently own more than the
guideline number of shares for their positions.
To assist executives who are of relatively short tenure with
the company to achieve the guideline ownership requirement, we
approved a program that provides an incentive for those
eligible to invest all or a portion of their annual cash bonus
in Alcoa stock. Under the program, Alcoa matches 25% of the
portion of the participant's annual cash bonus that is used to
purchase Alcoa stock or that is deferred into the notional
Alcoa stock investment fund in the deferred compensation plan.
The match is in Alcoa shares or share credits that vest in
three years. If the executive voluntarily leaves the company
prior to the vesting date, other than due to
-16-
retirement, the company matching contribution is forfeited.
None of the named executive officers are eligible to
participate in this program.
0Annual Awards of Stock Options - A subcommittee of our
committee administers the Alcoa Stock Incentive Plan. In
January of each year we make new awards of long-term
incentives in the form of stock options to eligible key
employees. The stock option program allows us to provide
awards that are competitive with the sample of leading
industrial companies. The performance of Alcoa stock
determines the actual amount earned. The guidelines used to
establish the size of a stock option award include an
executive's level of responsibility, the size of prior
grants and comparative award information. Individual grants
typically follow the guideline amounts.
Stock Option Reload Feature - Alcoa added a reload feature
to its stock option program in 1989. This feature encourages
increased stock ownership and is available to all
participants who are active employees and whose awards were
granted under the current or predecessor plan (about 1,200
individuals). The reload feature promotes the early exercise
of options and the retention of Alcoa shares.
Share ownership by executive officers and other stock option
program participants has increased significantly in the last
several years due to the reload feature.
In 1997, we approved a dividend equivalent compensation plan.
Under this plan, Alcoa pays cash dividend equivalents, when
approved by the Board, on a portion of the exercisable options
held by active and retired participants.
For U.S. federal income tax purposes, Alcoa may deduct
compensation paid as the result of option exercises under
the shareholder-approved Alcoa Stock Incentive Plan. The
company may not, however, deduct portions of salary, bonus
and other cash and noncash compensation in excess of
$1 million paid to a named executive officer.
Compensation of Executive Officers in 1999 - Our committee
increased salary and annual cash incentive targets for
executive officers this year, reflecting similar increases
in the comparison group. Annual incentive payouts to
executive officers for 1999 averaged about 155% of target
based on attainment of business unit financial and
nonfinancial goals.
In January 1999, Alcoa granted stock options to executive
officers at or above the target levels for their positions.
Above-target grants reflected our judgment of the
significant contributions made by these individuals to the
overall growth and profitability of the company. The
majority of stock option exercises in 1999 by executive
officers also included the grant of reload options.
Compensation of the Chief Executive Officer - Alcoa bases
the chief executive officer's compensation on the same
philosophy and policies as for all executive officers. This
compensation includes base salary, annual cash incentives
and stock option awards.
Our committee meets annually without the chief executive
officer and evaluates his performance compared with
previously established financial and nonfinancial goals. We
reach a consensus as a committee and make the appropriate
compensation adjustments. Finally, we report in full to the
other members of the Board for their consideration and
agreement. This meeting is an executive session of
nonemployee directors only.
Paul H. O'Neill served as Alcoa chief executive officer until
May 6, 1999. In January 1999, we increased Mr. O'Neill's base
annual salary from $850,020 to $950,400. We also awarded him
a stock option covering 700,000 shares, which
-17-
was twice the guideline number of shares for his position.
This was Mr. O'Neill's final annual stock option award as an
Alcoa officer, even though he will remain an Alcoa employee
through December 31, 2000. Mr. O'Neill was not granted a new
annual stock option award in January 2000. In January 2000,
we awarded him a bonus of $2 million, which was 175% of his
target incentive award for 1999. We based this amount on the
superior performance of the company, as reflected in total
business unit results compared with plan goals. The award
also recognized Mr. O'Neill's leadership role in the
transition of the chief executive officer position during
1999.
Alain J. P. Belda was elected Alcoa's chief executive
officer on May 6, 1999. During the year, we increased his
annual salary from $650,000 to $900,000. Mr.Belda received
a new annual stock option award in January 1999 covering
210,000 shares, which was the guideline amount for his
then-current position as the company's chief operating
officer. We also awarded a special stock option grant
covering 350,000 shares in May 1999 at the time of his
election as chief executive officer. This award vests (and
becomes exercisable) in three installments: the option as to
100,000 shares vests on May 6, 2000, as to another
100,000 shares on May 6, 2001 and as to the final 150,000
shares on May 6, 2002. If Mr. Belda leaves the active
employment of Alcoa prior to an option installment vesting
date, he forfeits rights to exercise that portion of the
option. This special option award is intended as an
additional incentive for Mr. Belda to remain in the employ
of the company and to increase overall shareholder value
during his tenure as chief executive officer. All options
granted have reload rights.
In January 2000, we awarded Mr. Belda a bonus of $1.5 million,
which was 170% of his target incentive award for 1999. We
based this amount on total business unit results compared with
plan goals and in recognition, by our committee and all other
nonemployee directors, of Mr. Belda's leadership of Alcoa
during 1999.
We, as a committee, believe that Alcoa's compensation programs
help to maintain Alcoa's leadership position among global
industrial companies.
The Compensation Committee
Franklin A. Thomas, Chairman
Kenneth W. Dam
Joseph T. Gorman
Hugh M. Morgan
John P. Mulroney
-18-
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
This table summarizes the compensation for the CEOs and the
four highest paid executive officers in 1999.
Annual Compensation Long-term Compensation
Name and Principal Year Salary(1) Bonus Other Annual Number of Securities All Other
Position Compensation Underlying Compensation(4)
Option Grants(3)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Paul H. O'Neill 1999 $950,400 $2,000,000 $7,822 1,928,626 $150,114
Chairman of the Board; Chief 1998 850,020 1,600,000 12,612 816,220 153,236
Executive Officer through May 6 1997 850,020 1,250,000 10,411 649,168 171,206
Alain J. P. Belda 1999 770,837 1,500,000 105,771 1,310,820 290,311
President; Chief Executive 1998 640,707 1,100,000 16,020 523,518 185,211
Officer beginning May 6 1997 610,200 850,000 9,729 608,708 195,781
George E. Bergeron 1999 425,475 556,420 1,280 563,966 72,422
Executive Vice President 1998 397,038 700,000 2,487 180,448 73,358
Allied Products (5) 1997 368,577 381,300 3,362 288,628 77,754
Richard L. Fischer 1999 404,350 532,400 4,886 609,459 58,740
Executive Vice President- 1998 400,200 500,000 1,176 234,746 61,858
Chairman's Counsel (5) 1997 395,200 500,000 2,029 358,398 68,186
L. Patrick Hassey 1999 373,192 599,700 1,770 304,117 188,717
Vice President and President 1998 354,231 584,700 147 83,600 175,433
Alcoa Europe 1997 316,000 329,800 3,255 134,306 64,824
Richard B. Kelson 1999 452,396 620,000 2,514 444,668 130,613
Executive Vice President 1998 400,200 500,000 4,657 251,324 91,677
and Chief Financial Officer 1997 318,000 308,700 2,058 150,018 59,829
<FN>
(1) The most highly compensated executive officers are those with the highest
annual salary and bonus for 1999. In addition to base salary, the salary
column includes, when chosen by the employee, an extra week's pay instead
of vacation for employees with 25 or more years of service.
(2) Amounts represent the reimbursement of taxes on certain personal benefits,
the value of which benefits is less than the reporting threshold. For
Mr. Belda, in 1999, this includes taxes on the additional term insurance
referred to in note 4 below.
(3) New option grants made in 1999 totaled 700,000 for Mr. O'Neill; 560,000
for Mr. Belda (including the special option award described in note 1 to the
Options Grant in 1999 table on page 21); 125,600 for Mr. Bergeron; 83,600
for Mr. Hassey; and 150,000 each for Messrs. Fischer and Kelson. The
company granted all of these options at 100% of the fair market value of
Alcoa common stock on the grant date. The other option awards relate to
previous years' option grants and the use of the reload feature described
earlier in the Report of the Compensation Committee. See also the table,
Option Grants in 1999.
-19-
(4) Company matching contributions to 401(k) and excess savings plans for
1999 were: Mr. O'Neill, $57,024; Mr. Belda, $45,500; Mr. Bergeron, $24,653;
Mr. Fischer, $24,261; Mr. Hassey, $21,990; and Mr. Kelson, $26,682. The
present value costs of the company's portion of 1999 premiums for split-dollar
life insurance, above the term coverage level provided generally to salaried
employees, were: Mr.O'Neill, $93,090; Mr. Belda, $142,386; Mr. Bergeron,
$47,769; Mr. Fischer, $34,479; Mr. Hassey, $48,707; and Mr. Kelson, $66,431.
The 1999 amount for Mr. Belda also includes $900 of unused health care credits
received as cash and $101,525, which is the annual premium cost of additional
term life insurance acquired for Mr. Belda in 1999. This insurance is
designed to address certain estate planning complications related to
Mr. Belda's status as a non-U.S. citizen residing in the U.S.
The 1999 amount for Mr. Hassey includes $118,020 in additional compensation
relating to his assignment in Europe. This amount is paid under standard
company programs for U.S. employees on international assignments.
Also included for Mr. Kelson is an additional one month's salary paid to
employees in the year they attain 25 years of service with the company.
(5) Mr. Bergeron assumed the title of President - Reynolds Integration, and
Mr. Fischer was named Special Counsel to the CEO, in January 2000. Both
individuals have indicated an intent to retire in the near future, once they
have completed a number of important ongoing assignments. Although they
remain senior executives of the company, neither continues to be an executive
officer for ongoing reporting purposes.
</FN>
</TABLE>
-20-
OPTION GRANTS IN 1999
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
Name Number of Securities % of Total Options Exercise or Expiration Grant Date
Underlying Options Granted to Employees Base Price Date (5) Present Value (6)
Granted (1) (2) (3) in Fiscal Year ($/Sh) (4)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Paul H. O'Neill 700,000 3.21 $42.0937 2009/01/13 $7,455,000
299,544 1.37 44.5937 2008/01/13 2,983,458
309,663 1.42 44.5937 2007/01/13 3,084,243
28,927 0.13 64.125 2006/01/11 373,158
190,833 0.88 64.125 2005/01/13 2,461,746
135,464 0.62 64.125 2004/01/14 1,747,486
129,501 0.59 64.125 2003/01/15 1,670,563
64,267 0.29 64.125 2002/01/20 829,044
34,319 0.16 64.125 2001/01/23 442,715
36,108 0.17 64.125 2000/01/22 465,793
Alain J. P. Belda 210,000 0.96 42.0937 2009/01/13 2,236,500
350,000 1.61 61.50 2009/05/06 4,319,000
184,990 0.85 42.0937 2008/01/13 1,535,417
81,177 0.37 61.4377 2008/01/13* 1,025,266
7,007 0.03 55.0625 2007/01/13 69,790
181,398 0.83 61.5874 2007/01/13 2,247,521
128,041 0.59 61.4916 2006/01/11* 1,615,658
79,337 0.36 54.625 2005/01/13 790,197
32,798 0.15 54.625 2004/01/14 326,668
23,227 0.10 54.6515 2003/01/15* 231,341
4,005 0.02 61.9375 2003/01/15 49,622
15,477 0.07 54.625 2002/01/20 154,151
4,853 0.02 54.625 2001/01/23 48,336
8,510 0.04 61.6963 2001/01/23* 106,532
George E. Bergeron 125,600 0.58 42.0937 2009/01/13 1,337,640
75,385 0.35 61.3208 2008/01/13 934,020
92,336 0.42 42.0937 2008/01/13 766,389
81,918 0.38 43.625 2007/01/13 679,919
61,155 0.28 43.1875 2006/01/11 609,104
13,438 0.06 55.0625 2006/01/11 133,842
47,768 0.22 62.2187 2005/01/13 603,310
5,868 0.03 43.0312 2004/01/14 48,704
20,173 0.09 62.2187 2004/01/14 254,785
954 0.00 43.0312 2003/01/15 7,918
22,043 0.09 62.0659 2003/01/15* 273,853
11,231 0.05 62.3125 2002/01/20 139,152
-21-
George E. Bergeron 3,400 0.02 64.6562 2001/01/23 43,860
(Continued) 1,965 0.01 62.3125 2001/01/23 24,346
732 0.00 43.0312 2000/01/22 6,076
Richard L. Fischer 150,000 0.69 42.0937 2009/01/13 1,597,500
92,970 0.43 42.0937 2008/01/13 771,651
76,276 0.35 43.625 2007/01/13 633,091
7,928 0.04 55.0625 2007/01/13 78,963
89,626 0.41 61.875 2007/01/13 1,110,466
76,724 0.35 42.3125 2006/01/11 636,809
1,650 0.01 60.2187 2006/01/11 20,444
3,517 0.02 63.0312 2005/01/13 44,420
29,888 0.14 60.2187 2004/01/14 370,312
5,633 0.03 63.0312 2004/01/14 71,145
37,639 0.17 60.2187 2003/01/15 466,347
25,233 0.12 60.2187 2002/01/20 312,637
12,375 0.06 60.2187 2001/01/23 153,326
L. Patrick Hassey 83,600 0.38 42.0937 2009/01/13 890,340
73,100 0.34 42.0937 2008/01/13 606,730
70,076 0.32 43.625 2007/01/13 581,631
42,063 0.19 61.75 2006/01/11 521,161
15,616 0.07 42.0156 2004/01/14 129,613
19,662 0.09 60.8125 2004/01/14 243,612
Richard B. Kelson 150,000 0.69 42.0937 2009/01/13 1,597,500
93,076 0.43 42.0937 2008/01/13 772,531
77,141 0.35 60.75 2008/01/13 955,777
27,347 0.13 43.1875 2006/01/11 272,376
1,702 0.01 55.0625 2006/01/11 16,952
2,513 0.01 53.125 2006/01/11 25,029
35,980 0.17 62.2187 2005/01/13 454,427
5,000 0.02 43.1875 2004/01/14 49,800
11,439 0.05 62.2187 2004/01/14 144,475
1,339 0.01 43.1875 2003/01/15 13,336
13,938 0.06 62.1348 2003/01/15* 175,039
10,956 0.05 43.1875 2002/01/20 109,122
6,004 0.03 61.9375 2002/01/20 74,390
1,812 0.01 43.1875 2001/01/23 18,048
3,427 0.02 61.9375 2001/01/23 42,461
2,994 0.01 43.1875 2000/01/22 29,820
-22-
<FN>
(1) Alcoa grants annual options (the first grant listed for each officer) in January. These
options become exercisable one year after the grant date and have a term of ten years.
In addition to the January annual grant, Mr.Belda received a special option grant covering
350,000 shares on May 6, 1999 in connection with his election as chief executive officer.
This option becomes exercisable as to 100,000 shares on the first anniversary of the grant
date, as to another 100,000 shares on the second anniversary of the grant date and as to
the final 150,000 shares on the third anniversary of the grant date, provided that
Mr. Belda is an active employee of Alcoa on the related anniversary date of grant (this
condition is waived in the event of Mr. Belda's death while an active Alcoa employee). The
option has a term of 10 years from date of grant.
(2) All other option grants are reload option grants, which become exercisable after six months.
A reload option is available to active employees upon exercise of an outstanding option
(annual or reload) under the current or prior Alcoa option plan. The reload feature promotes
the early exercise of options and the retention of Alcoa shares, while continuing the
opportunity to gain from future appreciation on the stock. By exercising an outstanding
option, the participant realizes, in shares, the net profit or growth in value of that option
(the excess of the current fair market value over the option grant price), less applicable
withholding for taxes. Certain conditions apply: (i) the market value of Alcoa stock on the
exercise date of the underlying option must be at least $2.50 more than the grant price of
that option; and (ii) the participant must agree that one-half of the net profit shares
received on exercise of the underlying option will be held by the participant (directly or in
trust) for five years or until the participant's employment with Alcoa terminates, whichever
is earlier. A reload option has the same expiration date as the underlying option and is
granted at 100% of the market value of Alcoa stock on the grant date. The reload option
covers the number of shares exercised in the underlying option less the number of profit
shares delivered to the participant after withholding for taxes. Reload options may be granted
where the exercise price of the underlying option is paid using previously owned shares or,
subject to certain limitations, using cash.
(3) Options granted on or after June 1, 1999 provide for acceleration of vesting and become
immediately exercisable upon certain events constituting a change in control of Alcoa.
(4) The exercise price of all options is 100% of the fair market value of Alcoa stock on the
grant date. Option award participants may use shares they own for a minimum period to pay the
exercise price and may have shares withheld for payment of required withholding taxes.
Participants may transfer stock option awards to immediate family members or family trusts,
provided the transfer is made as a gift, for no consideration. The participant remains
responsible for payment of withholding taxes when the option is exercised by the family
member or trust. Otherwise, stock option awards are not transferable during the participant's
lifetime.
(5) We grouped together certain reload option grants for Messrs. Belda, Bergeron and Kelson
(the groupings are marked by an asterisk in the table). Each grouping reflects a consolidation
of two individual option grants (three grants for Mr. Bergeron) having the same expiration date
and a spread of grant prices not exceeding 3% of the lowest price in the grouping.
(6) The company uses the Black-Scholes option pricing model to estimate Grant Date Present Value
in this table. Our use of this model is not an endorsement of the model's accuracy in valuing
options. All stock option models require a prediction about future stock prices. We used the
following assumptions in calculating Grant Date Present Value: expected volatility - 37%;
average risk-free rate of return - 5%; dividend yield - 1.4%; expected life, special option
award for Mr. Belda - 3.5 years; expected life, annual grants - 2.5 years; expected life,
reload grants - 1.5 years. The real value of the options in this table depends on the actual
performance of Alcoa stock and the timing of exercises.
</FN>
</TABLE>
-23-
<TABLE>
<CAPTION>
1999 AGGREGATE OPTION EXERCISES AND YEAR-END OPTION VALUES
This chart shows the number and value of stock options, both
exercised and unexercised, for the named executive officers
during 1999.
Name Shares Value Number of Securities Value of Unexercised
Acquired Realized Underlying Unexercised In-the-Money Options
on Exercise Options at Fiscal Year-End at Fiscal Year-End (1)
-------------------------- ----------------------
Exercisable (2) Unexercisable Exercisable Unexercisable
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Paul H. O'Neill 1,587,205 $33,121,788 1,598,609 700,000 $57,671,146 $28,634,410
Alain J. P. Belda 829,516 15,914,127 256,049 963,131 8,980,727 24,769,583
George E. Bergeron 433,537 8,248,454 186,229 304,165 7,775,877 8,918,463
Richard L. Fischer 434,141 8,898,805 261,201 355,561 11,149,038 10,644,710
L. Patrick Hassey 170,595 3,540,006 143,176 145,325 5,749,493 4,749,856
Richard B. Kelson 312,672 5,844,732 137,465 297,929 5,861,093 9,327,220
<FN>
(1) We calculated the value of unexercised options using the difference between the option
exercise price and the year-end stock price of $83.00 per share, multiplied by the
number of shares underlying the option.
(2) Alcoa paid cash dividend equivalents in 1999 on a portion of the exercisable options
held by plan participants. Dividend equivalents are equal in amount to the company's
common stock dividend. The total amount of dividend equivalents paid in 1999 to all
plan participants was slightly less than $2 million.
</FN>
</TABLE>
-24-
PENSION PLANS
Alcoa's pension plans cover a majority of salaried
employees. Alcoa pays the full cost of these plans, which
include both tax-qualified and non tax-qualified excess
plans. This table shows the annual benefits payable at
executive compensation levels.
<TABLE>
<CAPTION>
PENSION PLAN TABLE
Average Annual Annual Benefits for Years of Service Indicated
Compensation
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
15 20 25 30 35 40
$ 100,000 $ 20,590 $ 27,450 $ 34,320 $ 41,180 $ 48,470 $ 56,620
250,000 53,340 71,120 88,900 106,680 124,460 142,240
500,000 108,650 144,870 181,080 217,300 253,520 289,740
750,000 163,960 218,620 273,270 327,930 382,580 437,240
1,000,000 219,280 292,370 365,460 438,550 511,640 584,740
1,250,000 274,590 366,120 457,650 549,180 640,710 732,240
1,500,000 329,900 439,870 549,830 659,800 769,770 879,740
2,000,000 440,530 587,370 734,210 881,050 1,027,890 1,174,740
2,500,000 551,150 734,870 918,580 1,102,300 1,286,020 1,469,740
3,000,000 661,780 882,370 1,102,960 1,323,550 1,544,120 1,764,740
</TABLE>
The company bases the employee's amount of pension upon the
average compensation for the highest five years in the last
ten years of service. For the executive level, covered
compensation includes base salary and annual cash bonus. We
calculate the amounts in the table using salary at target
and bonus at target. We also make payments as a straight
life annuity, reduced by 5% when an employee elects the
surviving spouse feature. The table shows benefits at age
65, before any reduction for surviving spouse coverage.
At March 1, 2000, pension service for the named officers
was: Mr. Belda, 31 years; Mr. Bergeron, 31 years;
Mr. Fischer, 34 years; Mr. Hassey, 32 years; Mr. Kelson,
25 years; and Mr. O'Neill, 28 years, reflecting an employment
contract that provides somewhat more than double credit for
his years with the company. The resulting pension for
Mr. O'Neill will be offset by pension payments from his
previous employer.
-25-
ITEM 2 - APPROVE AN AMENDMENT TO ALCOA'S ARTICLES OF
INCORPORATION TO INCREASE COMMON STOCK
Alcoa's Board of Directors has approved an amendment to
Article FIFTH of Alcoa's Articles of Incorporation to
increase the number of shares of authorized common stock
from 600 million shares to 1.8 billion shares. The amendment
is subject to approval by the shareholders, and the Board
recommends that shareholders vote to approve this amendment.
Approval of the amendment by shareholders is required to
permit a Board-approved two-for-one split of the common
stock. The Board of Directors, on January 10, 2000,
authorized and declared, subject to shareholder approval of
the foregoing amendment to Alcoa's Articles of Incorporation,
a two-for-one split of the common stock. The split will
provide one share of common stock for each authorized share
of common stock issued (including shares held in treasury)
or reserved for issuance at the close of business on May 26,
2000. The shares will be distributed on or about June 9, 2000.
The Board believes that the stock split will broaden the
potential market for Alcoa common stock and result in a
wider distribution of shares, which the Board believes to be
in the best interests of Alcoa and its shareholders.
The proposed amendment to Article FIFTH consists of revising
the first paragraph of that Article to read as follows:
"FIFTH. The authorized capital stock of the corporation
shall be 660,000 shares of Serial Preferred Stock of the par
value of $100 per share, 10,000,000 shares of Class B Serial
Preferred Stock of the par value of $1.00 per share and
1,800,000,000 shares of Common Stock of the par value of
$1.00 per share."
The proposed amendment would increase the number of shares
of common stock, $1.00 par value, that Alcoa is authorized
to issue from 600 million to 1.8 billion. The additional 1.2
billion shares would be part of the existing class of common
stock and, if and when issued, would have the same rights
and privileges as the shares of Alcoa common stock presently
issued and outstanding. No holder of common stock has any
preemptive rights to acquire additional shares of common
stock. No change in the $1.00 par value of the common stock
is being proposed. Holders of common stock do not have the
right to cumulate their shares in voting for directors.
At February 14, 2000, 369,486,363 shares of common stock
were outstanding, 25,209,563 shares were held in treasury,
73 million shares were reserved for issuance in connection
with the company's merger with Reynolds Metals Company and
an additional 38,819,977 million shares were reserved under
Alcoa benefit plans. The Board believes it is desirable to
increase the number of shares of common stock that Alcoa is
authorized to issue to accomplish the proposed stock split,
to reserve an amount of shares sufficient to satisfy the
requirements set forth above and to provide the company
with adequate flexibility in the future. Except for the
proposed stock split and in connection with current
reserves for the Reynolds transaction and existing benefit
plans, Alcoa has no present commitments, agreements or
intent to issue additional shares of common stock.
The proposed stock split cannot occur unless shareholders
approve the proposed amendment to Article FIFTH of the
company's Articles of Incorporation. The proposed
amendment to Article FIFTH would permit the issuance of
additional shares up to the new 1.8 billion maximum
authorization without further action or authorization by
shareholders, except as may be required in a specific
case by applicable law or stock exchange regulations. The
Board believes it is prudent for the company to have this
flexibility.
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The issuance of additional shares of common stock could
reduce existing shareholders' percentage ownership and
voting power in Alcoa and, depending on the transaction in
which the shares are issued, could affect the per share book
value or other per share financial measures. The
availability of additional shares of common stock could
discourage, or make more difficult, efforts to obtain
control of the company. For instance, the issuance of shares
in a public or private sale, merger or similar transaction
would increase the number of outstanding shares, thereby
possibly diluting the interest of a party attempting to
obtain control of the company. The proposed increase in the
number of authorized shares is not intended to inhibit a
change in control of Alcoa, and Alcoa is not aware of any
pending or threatened efforts to acquire control of the
company.
Alcoa has been advised by tax counsel that the proposed
stock split would result in no gain or loss or realization
of taxable income to holders of Alcoa common stock under
existing U.S. federal income tax laws. For tax purposes, the
cost basis of each new share and each retained share of
common stock would be equal to one-half the cost basis of
the corresponding share immediately preceding the stock
split. In addition, the holding period for the additional
share issued in the stock split would be deemed to be the
same as the holding period for the original share of common
stock. The laws of jurisdictions other than the United
States may impose income taxes on the issuance of the
additional shares, and shareholders are urged to consult
their tax advisers.
If shareholders sell or purchase shares of Alcoa common
stock following approval of the proposed amendment to
Article FIFTH of Alcoa's Articles of Incorporation and
the effectuation of the stock split, they may pay
higher brokerage commissions and stock transfer taxes
(if applicable) on the same relative interest in the
company because that interest is represented by a
greater number of shares. Consult your broker for
complete details.
If approved by shareholders, the amendment will become
effective upon filing of an appropriate certificate with the
Secretary of State of the Commonwealth of Pennsylvania.
For this amendment to be approved, a majority of the votes
cast by shareholders must be voted for approval.
Alcoa's Board of Directors recommends that shareholders vote
FOR adoption of the proposed amendment to Alcoa's Articles
of Incorporation.
-27-
OTHER INFORMATION
LEGAL PROCEEDING INVOLVING DIRECTORS AND EXECUTIVE OFFICERS
On October 15, 1999, Victoria Shaev, who represents that she
is an Alcoa shareholder, filed a lawsuit in the United
States District Court for the Southern District of New York,
naming as defendants Alcoa, each member of the company's
Board of Directors, certain Alcoa executive officers and
PricewaterhouseCoopers LLP, Alcoa's independent accountants.
The suit purports to be a derivative action brought on behalf
of the company against the other defendants. The shareholder
did not make a demand on the company prior to filing this
lawsuit. Under relevant law, this demand is required.
The lawsuit alleges, among other things, that Alcoa's proxy
statement for the 1999 annual meeting contained materially
false and misleading representations and omissions
concerning one of the items voted on by shareholders at the
1999 meeting, the proposal to approve the Alcoa Stock
Incentive Plan. The lawsuit further alleges that the
shareholder approval of the Plan, based upon those alleged
representations and omissions, was defective.
The lawsuit seeks, among other things, to invalidate the
shareholder approval of the Plan and enjoin its
implementation. The plaintiff also requests that Alcoa pay
the fees and expenses of her counsel and experts retained in
the lawsuit.
The defendants believe the suit is without merit.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP has been the independent
accounting firm that audits the financial statements of
Alcoa and most of its subsidiaries since 1950. In accordance
with standing policy, PricewaterhouseCoopers periodically
changes the personnel who work on the audit.
During 1999, PricewaterhouseCoopers reviewed Alcoa's filings
with the SEC, prepared or reviewed financial and audit
reports to lenders, including governmental agencies,
conducted audits and due diligence reviews for acquisitions
and evaluated the effects of various accounting issues,
information systems and business strategy opportunities.
They also helped in tax planning and the preparation of tax
returns for expatriate employees, executives and various
foreign locations of the company.
The Audit Committee of Alcoa's Board reviews summaries of
the audit and nonaudit services provided by
PricewaterhouseCoopers and the related fees.
On recommendation of the Audit Committee, the Board has
reappointed PricewaterhouseCoopers to audit the 2000
financial statements. Representatives from this firm will be
at the annual meeting to make a statement, if they choose,
and to answer any questions you may have.
-28-
ALCOA LOGO
Alcoa
201 Isabella Street at 7th Street Bridge
Pittsburgh, Pennsylvania 15212-5858
Printed in USA 0002 Form A07-12000
Graphics Appendix List
Page Where
Graphic Appears Description of Graphic or Cross-Reference
page 6 Photograph of Kenneth W. Dam, Nominee for
Director
page 7 Photograph of Judith M. Gueron, Nominee for
Director
page 7 Photograph of Paul H. O'Neill, Nominee for
Director
page 8 Photograph of Joseph T. Gorman, Continuing
Director
page 8 Photograph of Sir Ronald Hampel, Continuing
Director
page 9 Photograph of John P. Mulroney, Continuing
Director
page 9 Photograph of Marina v.N. Whitman, Continuing
Director
page 10 Photograph of Alain J.P. Belda, Continuing
Director
page 10 Photograph of Hugh M. Morgan, Continuing
Director
page 11 Photograph of Henry B. Schacht, Continuing
Director
page 11 Photograph of Franklin A. Thomas, Continuing
Director
Two Ways to Vote
VOTE BY MAIL
Return your proxy in the
postage-paid envelope provided.
VOTE BY INTERNET
Access this Web site to cast your vote.
http://www.votefast.com
Your Internet
Control Number is
------------------------
Vote By Mail--Please mark, sign and date your proxy card
and return it in the postage-paid envelope provided.
Vote By Internet--Have your proxy card available when you
access the Web site http://www.votefast.com. You will be prompted
to enter your control number, and then follow the directions given
to record your vote. If you vote through the Internet, do not mail
your proxy card.
Vote 24 hours a day, 7 days a week. Your Internet vote must
be received by 5:00 p.m. EDT on Thursday, May 11, 2000 to be
counted in the final tabulation.
Alcoa Annual Meeting of Shareholders
9:30 a.m. Friday, May 12, 2000
DoubleTree Hotel Pittsburgh
Allegheny Ballroom
Pittsburgh, Pennsylvania
Admission Ticket
This ticket is not transferable.
ALCOA LOGO
Please retain this ticket for admittance to the annual meeting.
Fold and detach here
(continued from the other side)
(RETURN IN THE ENCLOSED ENVELOPE)
PROXY
Please mark your choices clearly in the appropriate boxes. Unless
specified, the proxy committee will vote FOR both items.
DIRECTORS RECOMMEND A VOTE FOR THIS ITEM (#1)
---
1. Election of Directors
Nominees to serve a three-year term:
Kenneth W. Dam
Judith M. Gueron
Nominee to serve a term expiring December 31, 2000:
Paul H. O'Neill
/ / FOR all listed nominees
/ / WITHHOLD vote for all listed nominees
/ / WITHHOLD vote only from
----------------------------
DIRECTORS RECOMMEND A VOTE FOR THIS ITEM (#2)
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2. Amendment to Articles of Incorporation Increasing Authorized
Common Stock
/ / VOTE FOR / / VOTE AGAINST / / ABSTAIN
PLEASE VOTE, SIGN, DATE AND RETURN
Date 2000
- ----------------------------- --------
(Sign exactly as name appears above, indicating position or
representative capacity, where applicable)
Shareholder comments about any aspect of company business are welcome.
There is space on the bottom of this form for your comments. Although we
do not respond to these comments on an individual basis, they do assist
management in determining and responding to your needs as shareholders.
Please retain this ticket for admittance to the annual meeting.
Fold and detach here
ALCOA LOGO
Alcoa
201 Isabella St. at 7th St. Bridge
Pittsburgh, PA 15212-5858
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
I authorize Timothy S. Mock, Russell W. Porter, Jr. and Robert G.
Wennemer, together or separately, to represent me at the annual meeting
of shareholders of Alcoa Inc. scheduled for Friday, May 12, 2000, and
any adjournment of the meeting. I authorize them to vote the shares of
stock that I could vote if attending the meeting, in accordance with
the instructions on the reverse side of this card. The proxies are
authorized in their discretion to vote upon such other business as may
properly come before the meeting, and they may name others to take
their place.
As described more fully in the proxy statement, this card votes or
provides voting instructions for shares of common stock held under
the same registration in any one or more of the following manners:
as a shareholder of record, in the Alcoa Dividend Reinvestment and
Stock Purchase Plan and in Alcoa's employee savings plans.
If you plan to attend the annual meeting, please check the box below.
I will attend the annual meeting.
Comments:
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(continued on the other side)
