ASARCO INCORPORATED
180 MAIDEN LANE
NEW YORK, NEW YORK 10038
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES EXCHANGE ACT
OF 1934 AND RULE 14F-1 THEREUNDER
GENERAL
This Information Statement is being mailed on or about October 29,
1999. You are receiving this Information Statement in connection with the
possible appointment of persons designated by Grupo Mexico, S.A. de C.V.
("Grupo Mexico") to a majority of the seats on the Board of Directors of
ASARCO Incorporated ("ASARCO"). On October 25, 1999, ASARCO entered into an
Agreement and Plan of Merger (the "Merger Agreement") with Grupo Mexico and
ASMEX Corporation, a wholly owned subsidiary of Grupo Mexico ("ASMEX"),
pursuant to which, among other things, each share of common stock, no par
value per share, of ASARCO ("ASARCO Common Stock"), other than shares which
are cancelled in accordance with the Merger Agreement, will be converted
into the right to receive $29.75 in cash, as more fully set forth in the
Merger Agreement, upon the terms and subject to the conditions set forth in
the Offer to Purchase dated September 27, 1999, and in the related Letter
of Transmittal (which, together with any amendments or supplements thereto,
collectively constitute the "Offer"), copies of which have been previously
mailed to shareholders of ASARCO and are filed as Exhibits (a)(1) and
(a)(2), respectively, to the Schedule 14D-1 (as amended from time to time,
the "Schedule 14D-1") filed by Grupo Mexico and ASMEX with the Securities
and Exchange Commission (the "Commission") on September 27, 1999. The
Merger Agreement further provides that following the consummation of the
Offer, ASMEX will be merged (the "Merger") with and into ASARCO with ASARCO
continuing as the surviving corporation. As of the effective time of the
Merger (the "Effective Time"), each issued and outstanding share of ASARCO
Common Stock (other than shares of ASARCO Common Stock owned by ASARCO,
Grupo Mexico, ASMEX or their respective subsidiaries, which shares of
ASARCO Common Stock will be cancelled), will, by virtue of the Merger and
without any action by the holder thereof, be converted into the right to
receive cash, as more fully set forth in the Merger Agreement.
The Merger Agreement is more fully described in the
Solicitation/Recommendation Statement on Schedule 14D-9 related to the
Offer (as amended from time to time, the "Schedule 14D-9"), which was filed
by ASARCO with the Commission on October 5, 1999 and which was mailed to
shareholders of ASARCO with materials related to the Offer.
This Information Statement is being mailed to you in accordance
with Section 14(f) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and Rule 14f-l promulgated thereunder. The information set
forth herein supplements certain information set forth in the Schedule
14D-9. Information set forth herein related to Grupo Mexico, ASMEX or the
Grupo Mexico's designees has been provided by Grupo Mexico. You are urged
to read this Information Statement carefully. You are not, however,
required to take any action.
The Offer is currently scheduled to expire at 12:00 midnight, New
York City time, on Tuesday, November 9, 1999, unless Grupo Mexico extends
it.
ASARCO Common Stock is the only class of equity securities of
ASARCO outstanding. Only shares of ASARCO Common Stock are generally
entitled to vote, including in the election of ASARCO's directors, and each
share of ASARCO Common Stock is entitled to one vote. As of the close of
business on September 30, 1999, there were outstanding 39,921,427 shares of
ASARCO Common Stock.
The Board of Directors currently consists of 12 directors with a
maximum of 15 directors provided under ASARCO's By-laws, and is classified
into three classes, with four directors in each class, with each director
serving a three-year term and until his successor is duly elected and
qualified.
RIGHTS TO DESIGNATE DIRECTORS AND GRUPO MEXICO DESIGNEES
The Merger Agreement provides that, promptly upon the purchase of
and payment for shares of ASARCO Common Stock by Grupo Mexico or any of its
subsidiaries which, when taken together with shares owned by Grupo Mexico
and ASMEX, represent at least 80% of the then outstanding shares of ASARCO
Common Stock pursuant to the Offer, Grupo Mexico shall be entitled to
designate such number of directors, rounded up to the next whole number, on
the ASARCO Board of Directors as is equal to the product of the total
number of directors on such Board (giving effect to the directors
designated by Grupo Mexico pursuant to this sentence) multiplied by the
percentage that the aggregate number of shares beneficially owned by ASMEX,
Grupo Mexico and any other wholly-owned subsidiary of Grupo Mexico bears to
the total number of shares of ASARCO Common Stock then outstanding.
From and after the time, if any, that Grupo Mexico's designees
constitute a majority of the ASARCO Board of Directors, any amendment of
the Merger Agreement, any termination of the Merger Agreement by ASARCO,
any extension of time for performance of any of the obligations of Grupo
Mexico or ASMEX under the Merger Agreement, any waiver of any condition or
any of ASARCO's rights under the Merger Agreement or other action by ASARCO
under the Merger Agreement may be effected only by the action of a majority
of the directors of ASARCO then in office who were directors of ASARCO on
the date of the Merger Agreement, which action shall be deemed to
constitute the action of the full Board of Directors; provided, that if
there shall be no such directors, such actions may be effected by majority
vote of the entire ASARCO Board of Directors.
ASARCO shall, upon request of ASMEX, use all reasonable efforts
promptly either to increase the size of its Board of Directors or, at
ASARCO's election, secure the resignations of such number of its incumbent
directors as is necessary to enable Grupo Mexico's designees to be so
elected to the ASARCO Board of Directors, and shall cause Grupo Mexico's
designees to be so elected. Notwithstanding the foregoing, until the
Effective Time, ASARCO shall retain as members of its Board of Directors at
least two directors who are directors of ASARCO as of the date of the
Merger Agreement; provided, that subsequent to the purchase of and payment
for shares pursuant to the Offer, Grupo Mexico shall always have its
designees represent at least a majority of the entire Board of Directors.
Grupo Mexico's designees will be selected by Grupo Mexico from
among the individuals listed below. Each of the following individuals has
consented to serve as a director of ASARCO if appointed or elected. None of
Grupo Mexico's designees currently is a director of, or holds any positions
with, ASARCO. To the best of Grupo Mexico's knowledge, except as set forth
under "Beneficial Ownership of Certain Shareholders," none of Grupo
Mexico's designees or any of their affiliates beneficially owns any equity
securities or rights to acquire any such securities of ASARCO, nor has any
such person been involved in any transaction with ASARCO or any of its
directors, executive officers or affiliates that is required to be
disclosed pursuant to the rules and regulations of the Commission other
than with respect to transactions between Grupo Mexico and ASARCO that have
been described in the Schedule 14D-1 or the Schedule 14D-9.
The name, age, present principal occupation or employment and
five-year employment history of each of the following individuals are set
forth below. Unless otherwise indicated, each such individual has held his
present position as set forth below for the past five years and each
occupation refers to employment with Grupo Mexico, unless otherwise noted.
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATION AND EMPLOYMENT HISTORY AGE
- ---------------------------------- ---------------------------------------------- ----------
<S> <C> <C>
German Larrea Mota-Velasco(1) Chief Executive Officer of Grupo Mexico 46
since 1994. Chief Executive Officer of
EIM since 1994. Director of Grupo Mexico
since 1994.
Genaro Larrea Mota-Velasco(1) Commercial Managing Director of Grupo Mexico 39
since 1994. Director of Grupo Mexico
since 1994.
Hector Calva Ruiz Managing Director for Exploration and 62
Projects of Grupo Mexico since 1997.
Alternate Director of Grupo Mexico
since 1998. Managing Director of Industrial
Minera Mexico, S.A. de C.V. from 1984 to 1997.
Daniel Tellechea Salido Managing Director for Administration and 53
Finance of Grupo Mexico since 1994.
Alternate Director of Grupo Mexico since
1998. Managing Director of Mexicana de
Cobre, S.A. de C.V. from 1986 to 1993.
Oscar Gonzalez Rocha Managing Director for Mexicana de Cobre, S.A. 61
de C.V. since 1986. Managing Director of
Mexicana de Cananea, S.A. de C.V. since 1990.
Alternate Director of Grupo Mexico since 1988.
Xavier Garcia de Quevedo Topete Managing Director for Ferrocarril Mexicano, 52
S.A. de C.V. and Grupo Ferroviario
Mexicano, S.A. de C.V. since 1997.
Alternate Director of Grupo Mexico
since 1998. Managing Director for
Exploration and Development of Grupo
Mexico from 1994 to 1997.
Alfredo Casar Perez Managing Director for Development of Grupo 46
Mexico since 1997. Alternate Director
of Grupo Mexico since 1998. Managing
Director of Compania Perforadora
Mexico, S.A. de C.V. since 1992.
Daniel Chavez Carreon Managing Director for Industrial Minera 47
Mexico, S.A. de C.V. since 1997.
Alternate Director of Grupo Mexico
since 1998. Corporate Purchasing
Director for Grupo Mexico from 1991 to
1997.
Manuel Calderon Cardenas Director of Mine Planning and Control for 67
Grupo Mexico since 1994.
Alberto de la Parra Zavala Associate at Santamarina y Steta from 1986 to 33
1996. Partner at Santamarina y Steta
since 1996.
- ---------------------------------------
(1) German Larrea Mota-Velasco and Genaro Larrea Mota-Velasco are brothers.
</TABLE>
CORPORATE GOVERNANCE AND BOARD OF DIRECTORS
Pursuant to the New Jersey Business Corporation Act and ASARCO's
Certificate of Incorporation and by-laws, ASARCO's business, property and
affairs are managed under the direction of the Board of Directors. Members
of the Board are kept informed of ASARCO's business through discussions
with the Chairman and other officers, by reviewing materials provided to
them, and by participating in Board and committee meetings.
BOARD AND COMMITTEE MEMBERSHIP AND MEETINGS
During 1998, the Board of Directors met nine times. The following
is a description of the Organization and Compensation and Pension Advisory
Committees.
Organization and Compensation Committee. The functions of the
Organization and Compensation Committee (currently composed of Chairman,
John D. Ong, Vincent A. Calarco, James W. Kinnear and James Wood) include
making recommendations to the Board with respect to nomination and tenure
policy for directors and election of and title changes for all corporate
executive officers. The Committee considers recommendations for nominees to
the Board of Directors from all sources. The Committee met seven times
during 1998.
Pension Advisory Committee. The Pension Advisory Committee of the
Board of Directors (currently composed of Chairman, David C. Garfield, E.
Gordon Gee, Michael T. Nelligan, Richard de J. Osborne and Manuel T.
Pacheco) reviews pension fund and savings plan matters affecting directors,
officers and employees of ASARCO and makes recommendations on such matters
to the Board of Directors. The Committee met two times during 1998.
The Board of Directors has two additional committees: the Audit
Committee (currently composed of Chairman, Michael T. Nelligan, Vincent A.
Calarco, James C. Cotting, David C. Garfield, James W. Kinnear and Manuel
T. Pacheco) and the Finance Committee (currently composed of Chairman,
James C. Cotting, E. Gordon Gee, John D. Ong, Richard de J. Osborne and
James Wood). Such committees met three times and twice, respectively.
COMPENSATION OF DIRECTORS
Meeting Fees. During 1998 directors who are not officers or
employees of ASARCO were paid a basic fee of $26,000 plus $1,200 for
attendance at each meeting of the Board or of any Committee of the Board on
which they served.
Deferred Compensation Plan for Non-Employee Directors. Directors
may defer payment of fees payable for serving on the Board or a Committee
under the Deferred Fee Plan for Directors. Deferred compensation will be
credited to an ASARCO Stock subaccount and /or to an investment subaccount.
The ASARCO Stock subaccount is credited with a bookkeeping entry in shares
of ASARCO Common Stock plus quarterly credits for shares of Common Stock
that could be purchased with dividends at fair market value. Transfers to
or from the ASARCO Stock subaccount are not permitted, except that
beginning one year prior to retirement, a participant may transfer funds
from the ASARCO Stock subaccount to an investment subaccount. The
investment subaccount is credited with a deemed investment return
equivalent to the earnings, gains, losses, expenses and changes in fair
market value of one or more investment funds selected by the participant
from funds available under the Plan, as if the amounts deferred had been so
invested. The value of a participant's deferred compensation is payable, at
the participant's election, in cash in a lump sum, or in up to ten annual
installments commencing on January 15 of the year following the year of
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 certain financial
hardship, prior notice or penalty requirements. In the event of a
participant's death, the value of the participant's account is paid in a
lump sum on the first January or July 15 following the participant's death
unless the participant had elected to continue the schedule for payment of
benefits previously elected.
The Directors' Deferred Payment Plan provides that, in addition to
the annual cash retainer, ASARCO will credit to the deferred payment
account of each director who has less than ten years of Board service an
annual amount equal to 75% of the annual cash retainer for up to ten years
of service. For 1998, the credit was $19,500. At least 50% of such amount
will be credited to an ASARCO Stock subaccount and the balance may, at each
director's election, be credited to such account or to an investment
subaccount, as under the Deferred Fee Plan. Provisions regarding transfers,
payment, early withdrawal and further deferral are the same as under the
Deferred Fee Plan. In the event of a change of control, the value of a
participant's accounts under the Deferred Fee Plan and the Deferred Payment
Plan will be paid in a lump sum immediately.
Stock Plan for Non-Employee Directors. Non-employee directors also
receive compensation under a stock award plan providing for the award of
200 shares of ASARCO Common Stock per annum payable following each annual
meeting to non-employee directors who continue to serve or who are elected
or reelected at such meeting, or payable to non-employee directors who are
first elected between annual meetings or at a special meeting.
DIRECTORS AND EXECUTIVE OFFICERS
The name, present principal occupation or employment and five-year
employment history of the current directors and executive officers of
ASARCO are set forth below.
DIRECTORS
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATION AND EMPLOYMENT HISTORY AGE DIRECTOR SINCE
- ------------------------------------------------------------------- --- --------------
<S> <C> <C> <C>
Vincent A. Calarco...... President and Chief Executive Officer of 57 1997
CK Witco Corporation (specialty chemicals,
additives, polymers and processing
equipment)and previously Chairman, President
and Chief Executive Officer of its
predecessor, Crompton & Knowles Corporation,
since 1986 and its President and Chief
Executive Officer since 1985.
James C. Cotting........ Director of USG Corporation and member 66 1987
of the Board of Governors of the Chicago
Stock Exchange. Mr. Cotting was Chairman of
the Board of Navistar International
Corporation (truck and engine manufacturer)
from April 1995 to March 1996. He was
Chairman and Chief Executive Officer of
Navistar from 1987 through March 1995.
David C. Garfield....... Director of Schering-Plough Corporation. 72 1984
Mr. Garfield was consultant to
Ingersoll-Rand Company (machinery
manufacturer) from June 1986 until June
1992. Mr. Garfield was President of
Ingersoll-Rand Company from 1981 through May
1986 and previously its Vice Chairman.
E. Gordon Gee........... President of Brown University since 55 1989
January 1998; President of The Ohio State
University from September 1990 until
December 1997; from 1985 until August 1990,
President of the University of Colorado;
from 1981 to 1985, President of West
Virginia University; director of The
Limited, Inc., Glimcher Realty Trust,
Intimate Brands Inc., Allmerica Financial
Corporation, Hasbro Inc. and Citizens Bank.
James W. Kinnear........ Director of Corning Incorporated and 71 1990
PaineWebber Group Inc. and Saudi Arabian Oil
Company; President and Chief Executive
Officer of Texaco Inc. (crude oil, natural
gas and petroleum products) from 1987 to
April 1993; previously its Vice Chairman of
the Board from 1983 to 1987, Executive Vice
President from 1978 to 1983, and a director
from July 1977 to May 1994.
Francis R. McAllister... Chairman and CEO of ASARCO since April 57 1988
1999 and previously its President and Chief
Operating Officer since January 1998,
previously its Executive Vice President in
charge of copper operations from April 1993
until January 1998, and its Chief Financial
Officer from April 1982 until April 1993;
non-executive Chairman of the Board of
Southern Peru Copper Corporation since April
1999; director of Southern Peru Copper
Corporation, Cleveland-Cliffs, Inc. and
Coeur d'Alene Mines Corporation.
Kevin R. Morano......... President and Chief Operating Officer of 46 1998
ASARCO since April 1999, and previously its
Executive Vice President and Chief Financial
Officer since January 1998; previously its
Vice President, Finance and Chief Financial
Officer from 1993 until January 1998, and
general manager of ASARCO's Ray Complex from
1991 to 1993; Vice President and director of
Southern Peru Copper Corporation; director
of Coeur d'Alene Mines Corporation.
Michael T. Nelligan..... Chief Executive Officer of Don Ward 60 1984
Transport, Inc. (specialty trucking) since
January 1987, its Chairman since August 1995
and previously its President. Mr. Nelligan
was Chairman of the Board of Ideal Basic
Industries, Inc. (cement products) from
October 1985 until January 1986, its Chief
Executive Officer from July 1983 until
January 1986, and its President from 1982
until January 1986.
John D. Ong............. Chairman Emeritus of The BFGoodrich 66 1991
Company (diversified chemicals and
aerospace) since July 1, 1997, formerly
Chairman and director of The BFGoodrich
Company from December 1996 to July 1997, and
its Chairman and Chief Executive Officer
from July 1979 until December 1996, and its
President from 1975 to 1984; director of
Cooper Industries, Inc., Ameritech
Corporation, The Geon Company, TRW, Inc. and
Marsh & McLennan Companies Inc.
Richard de J. Osborne... Chairman of the Board and Chief 65 1976
Executive of ASARCO since December 1985
until retiring from those positions in April
1999, also its President from 1982 until
January 1998; non-executive Chairman of the
Board of Southern Peru Copper Corporation
since 1996 until retiring in April 1999;
director of Southern Peru Copper
Corporation; director of Schering-Plough
Corporation, The BFGoodrich Company,
Birmingham Steel Corporation, NACCO
Industries, Inc. and The Tinker Foundation
Incorporated.
Manuel T. Pacheco....... President of the University of Missouri 58 1997
since August 1997; from 1991 to 1997,
President of the University of Arizona.
James Wood.............. Chairman of the Board of Directors of 69 1989
The Great Atlantic & Pacific Tea Company,
Inc. (supermarket chain); previously its
Chairman and Chief Executive Officer from
1980 to 1998, and its President from 1988 to
1993 and at other times since 1980; prior to
1980, Chairman of the Board and Chief
Executive Officer of The Grand Union
Company; director of Schering-Plough
Corporation.
</TABLE>
EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME OFFICE AND EXPERIENCE DATES
- ---------------------------- ------------------------------------------- ----------------
<S> <C> <C>
Francis R. McAllister Chairman of the Board and Chief Executive April, 1999-present
Officer
President and Chief Operating 1998-April, 1999
Officer
Executive Vice President, Copper Operations 1994-1998
Kevin R. Morano President and Chief Operating Officer April, 1999-present
Executive Vice President and Chief 1998-April, 1999
Financial Officer
Vice President, Finance and Chief Financial 1994-1998
Officer
William Dowd Vice President and Chief Financial Officer April, 1999-present
Controller 1995-April, 1999
Assistant Controller 1994-1995
Augustus B. Kinsolving Vice President and General Counsel 1996-present
Vice President, General Counsel and 1994-1995
Secretary
William L. Paul Vice President, Commercial 1997-present
Manager Omaha Plant 1994-1996
Gerald D. Van Voorhis Vice President, Exploration 1994-present
Michael O. Varner Vice President, Environmental 1994-present
Operations
David B. Woodbury Vice President, Human Resources 1994-present
Robert Ferri Secretary 1995-present
Associate General Counsel 1994-1995
Christopher F. Schultz Treasurer 1997-present
Assistant Treasurer 1994-1997
James L. Wiers General Auditor 1994-present
</TABLE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
BENEFICIAL OWNERSHIP OF DIRECTORS AND MANAGEMENT OF ASARCO
The following table sets forth the beneficial ownership of ASARCO
Common Stock as of June 30, 1999, by (a) each current director, (b) the
five most highly compensated executive officers of ASARCO, and (c) all
directors and officers as a group. Unless otherwise specified, the
directors and officers have sole voting and investment power with respect
to these securities.
<TABLE>
<CAPTION>
SHARES OF ADDITIONAL
ASARCO SHARES
COMMON STOCK DEEMED
BENEFICIALLY BENEFICIALLY PERCENT
NAME OWNED (A) OWNED (B) TOTAL OF CLASS
---------------- --------------- --------------- ---------- -----------
<S> <C> <C> <C> <C>
Vincent A. Calarco (c).................... 600 - 600 (d)
James C. Cotting (c)...................... 2,200 - 2,200 (d)
William Dowd (f).......................... 10,228 42,300 52,528 (d)
David C. Garfield (c) (e)................. 18,300 - 18,300 (d)
E. Gordon Gee (c)......................... 1,800 - 1,800 (d)
James W. Kinnear (c)...................... 2,000 - 2,000 (d)
Francis R. McAllister (f)................. 65,724 202,340 268,064 0.7%
Kevin R. Morano (f)....................... 32, 468 124,500 156,968 (d)
Michael T. Nelligan (c)................... 2,215 - 2,215 (d)
John D. Ong (c)........................... 1,600 - 1,600 (d)
Richard de J. Osborne (c) (g)............. 112,730 377,450 490,180 1.2%
Manuel T. Pacheco (c)..................... 615 - 615 (d)
William L. Paul (f)....................... 8,184 41,400 49,584 (d)
James Wood (c)............................ 28,800 - 28,800 (d)
Augustus B. Kinsolving (f)................ 18,351 83,300 101,651 (d)
All directors and officers as a group (23
individuals) (f)........................ 340,835 939,554 1,280,389 3.2%
- --------------------
(a) Information with respect to beneficial ownership is based upon
information furnished by each director or officer. Except as noted
below, all directors and officers have sole voting and investment
power over the shares beneficially owned by them.
(b) Consists of shares deemed beneficially owned under regulations of the
Securities and Exchange Commission because such shares may be acquired
within 60 days after June 30, 1999, through the exercise of options
granted under ASARCO's 1996 Stock Incentive
Plan or the previous Stock Incentive Plan.
(c) See also the information below on Common Stock Equivalents.
(d) Less than 0.5%.
(e) Does not include 2,000 shares owned by Mr. Garfield's wife. Mr.
Garfield disclaims beneficial ownership of these shares.
(f) Includes restricted shares of ASARCO Common Stock awarded under
ASARCO's 1996 Stock Incentive Plan or the previous Stock Incentive
Plan to certain of ASARCO's executive officers, and still subject to
restrictions, as follows: 31,820 to Mr. McAllister; 17,520 to Mr. Morano;
6,440 to Mr. Dowd; 8,340 to Mr. Kinsolving; 5,460 to Mr. Paul; and 19,270
to other executive officers. All restricted shares will vest upon the
occurrence of a change of control.
(g) Includes 5,027 shares of ASARCO Common Stock over which Mr. Osborne
and his wife share voting and investment power.
--------------------------------------------
</TABLE>
BENEFICIAL OWNERSHIP OF CERTAIN STOCKHOLDERS
The following table sets forth information about stockholders we
know are beneficial owners of more than 5% of ASARCO common stock. This
information is based on information from public filings. Percentages shown
are based on shares outstanding on September 30, 1999.
<TABLE>
<CAPTION>
SHARES OF ASARCO
COMMON STOCK PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS
- ----------------------------------------- ------------------- -----------------
<S> <C> <C>
Grupo Mexico, S.A. de C.V................................. 3,900,000(a) 9.8%
Baja California 200
06760 Mexico City, Mexico
Merrill Lynch & Co., Inc. ("ML&Co."....................... 2,764,493(b) 6.9%
(on behalf of Merrill Lynch Asset
Management Group ("AMG"))
World Financial Center, North Tower
250 Vesey Street
New York, NY 10381
Donald Smith & Co., Inc................................... 2,003,000(c) 5.0%
East 80 Route 4
Paramus, New Jersey 07652
- ----------------------
(a) Information is provided as of September 27, 1999, in reliance upon
information included in the Schedule 14D-1 of Grupo Mexico
filed with the Commission on such date.
(b) Information is provided in reliance upon information included in
Amendment No. 4, dated February 14, 1999, to a Schedule 13G,
filed with respect to holdings by Merrill Lynch Asset Management,
L.P., and Fund Asset Management, L.P., each of which is an
investment adviser registered under Section 203 of the Investment
Advisers Act of 1940, and acts as an investment adviser to
investment companies registered under Section 8 of the Investment
Company Act of 1940. The investment advisers are indirectly owned
by ML&Co. through AMG, one of its operating divisions. The
investment advisers exercise voting and investment powers over
portfolio securities independently from the other direct and
indirect subsidiaries of ML&Co. ML&Co. disclaims beneficial
ownership of such shares.
(c) Information is provided in reliance upon information included in a
Schedule 13G, dated February 4, 1999, filed by Donald Smith
& Co., Inc.
</TABLE>
COMMON STOCK EQUIVALENTS
The following table sets forth the per share number of common stock
equivalents credited as of June 30, 1999 to the accounts of ASARCO's
non-employee directors under the ASARCO's Deferred Fee Plan for Directors
and under its Directors' Deferred Payment Plan. Under both plans, payments
are made in cash following retirement or upon a change in control based on
the market value of the common stock at that time.
COMMON STOCK
NAME EQUIVALENTS (A)
-------- ---------------
Vincent A. Calarco.................................... 3,996
James C. Cotting...................................... 3,461
David C. Garfield..................................... 4,029
E. Gordon Gee......................................... 2,499
James W. Kinnear...................................... 23,419
Michael T. Nelligan................................... 4,934
John D. Ong........................................... 5,830
Richard de J. Osborne................................. 87
Manuel T. Pacheco..................................... 3,862
James Wood............................................ 11,502
--------
Total......................................... 63,619
- ----------------------
(a) Amounts shown reflect the number of share equivalents credited to the
Deferred Fee Plan and the Directors' Deferred Payment Plan
plus share equivalents of dividends credited.
BENEFICIAL OWNERSHIP OF SOUTHERN PERU COPPER CORPORATION
The following table sets forth the beneficial ownership of Southern
Peru Copper Corporation common stock by (a) each current director, (b) the
five most highly compensated executive officers of ASARCO, and (c) all
directors and executive officers as a group. Southern Peru Copper
Corporation is a publicly-traded subsidiary of ASARCO. This information is
stated as of June 30, 1999.
SHARES OF
COMMON STOCK
BENEFICIALLY PERCENT OF
NAME OWNED (A) CLASS
--------- -------------- -------------
Vincent A. Calarco....................... -- (b)
James C. Cotting......................... -- (b)
William Dowd ............................ 1,200 (b)
David C. Garfield........................ -- (b)
E. Gordon Gee............................ -- (b)
James W. Kinnear......................... -- (b)
Francis R. McAllister.................... 3,286 (b)
Kevin R. Morano.......................... 2,286 (b)
Michael T. Nelligan...................... 1,000 (b)
John D. Ong.............................. -- (b)
Richard de J. Osborne (c)................ 3,455 (b)
Manuel T. Pacheco........................ -- (b)
William L. Paul.......................... 500 (b)
James Wood............................... -- (b)
Augustus B. Kinsolving (d)............... 1,263 (b)
All directors and officers as a group
(23 individuals)................. 18,713 (b)
- ----------------------
(a) Information with respect to beneficial ownership is based upon
information furnished by each director or executive officer. Except
as noted below, all directors and officers have sole voting and
investment power over the shares beneficially owned by them.
(b) Less than 0.5%.
(c) Includes 2,357 shares of common stock over which Mr. Osborne and
his wife share voting and investment power.
(d) Does not include 100 shares owned by Mr. Kinsolving's son, as to
which beneficial ownership is disclaimed.
SOUTHERN PERU COPPER CORPORATION COMMON STOCK EQUIVALENTS
The following table sets forth the per share number of common stock
equivalents of Southern Peru Copper Corporation credited as of June 30,
1999 to the accounts of ASARCO designees to the Southern Peru Copper
Corporation's Board of Directors under the Deferred Fee Plan for Directors.
Under the plan, payments are made in cash following retirement based on the
market value of Southern Peru Copper Corporation common stock at that time.
NAME COMMON STOCK
EQUIVALENTS
--------- -----------
Francis R. McAllister....................... 5,122
Kevin R. Morano............................. 5,973
Augustus B. Kinsolving...................... -
William Dowd................................ 1,172
David B. Woodbury........................... 4,310
Michael O. Varner........................... 2,678
Richard de J. Osborne....................... -
Gerald D. Van Voorhis....................... 334
All directors and officers as a group
(23 individuals).................... 19,589
EXECUTIVE COMPENSATION
The Organization and Compensation Committee of the Board of
Directors has furnished in the ASARCO Incorporated Annual Meeting Proxy
Statement, dated March 15, 1999, the following report on executive
compensation.
The compensation of ASARCO's executive officers other than those
who are also directors is reviewed and established annually by the
Organization and Compensation Committee of the Board of Directors. For
officers who were also directors in 1998 (Messrs. Osborne, McAllister and
Morano) the Committee made compensation recommendations to the Board absent
those officers, which established their compensation. The Board did not
modify or reject in any material way the Committee's recommendations for
1998 compensation. The Committee met a total of seven times during 1998.
Long-term incentive compensation awards for 1998 to officers and other
salaried employees were approved by the Committee (and recommended to the
Board with respect to Messrs. Osborne and McAllister) at the Committee's
January 1998 meeting.
ASARCO retains an independent compensation consulting organization
to advise and assist ASARCO and the Committee in connection with
compensation matters. During 1998 the consulting organization made
recommendations to the Committee on base salary, cash incentive
compensation and long-term incentive compensation matters for the Chief
Executive officer and each other ASARCO executive position. Such
recommendations included target levels for base salary and cash incentive
compensation, long-term income targets, weighting of stock option and
restricted stock values, and appropriate stock option and restricted stock
valuation methods. The Committee carefully considered the recommendations
and acted within the scope of the recommendations in these areas.
ASARCO's executive officer compensation is composed of base salary
and incentive compensation.
ASARCO's policy for base salary for executive officers is to
establish par compensation levels for each position based on competitive
data and the responsibilities and value of each executive position to
ASARCO. The Committee considers compensation information from other
companies in the mining and metals industry. It also considers compensation
information from smaller, larger and comparably sized companies in other
industries. The Committee then considers individual and corporate
performance in establishing salary levels within a competitive range.
The Committee believes that the S&P Metals Miscellaneous Group,
which includes only four metals companies in addition to ASARCO, and the
S&P 500 Index, both used for comparing shareholder returns, do not
necessarily represent ASARCO's most direct competitors for executive
talent. In making decisions that affect executive compensation the
Committee reviews three different comparator groups proposed by its
independent consultants: one group includes 13 process-oriented companies;
another group is comprised of 50 companies engaged in heavy industry; and a
third group consists of approximately 175 companies having annual revenues
of $1 billion to $6 billion (the "Comparator Groups"). These groups
represent companies whose operational and performance characteristics are
capable of comparison with those of ASARCO, allowing for meaningful
comparisons of executive compensation. The Comparator Groups include three
of the five companies in the S&P Metals Miscellaneous Group and
approximately 110 companies in the S&P 500 Index.
Base salaries for ASARCO's executive officers in 1998 were slightly
above the median of the Comparator Groups studied by the Committee and
represented a slightly greater percentage of total compensation, relative
to the median for the Comparator Groups. Because the cyclical nature of
ASARCO's business can result in significant changes in incentive
compensation from year to year the Committee believes that compensation
levels are more stable and, accordingly, more competitive when base
salaries comprise a larger portion of total cash compensation. In general,
the Committee structures total compensation for each salaried position to
be approximately at the median of total compensation for comparable
positions among the Comparator Groups.
Although ASARCO's base salaries are set at levels intended to be
competitive with ASARCO's industry peers, the Committee also takes into
consideration ASARCO's performance relative to companies in the Comparator
Groups as part of its compensation review. In this regard, ASARCO's success
in meeting transactional, operational and financial objectives are all
taken into consideration. Because the relative importance of each objective
may change over time, the Committee does not set fixed Company performance
targets for purposes of setting base salaries. ASARCO's success or failure
in achieving certain objectives or financial results, however, will
generally affect executive salaries. Thus, in a downward part of the
business cycle, salary increases may be delayed or salaries even reduced;
in strong financial years, ASARCO may award larger increases.
In 1998, base salaries for Mr. McAllister and Mr. Morano were
increased effective February 1, 1998, by 16.7% and 9.4%, respectively,
associated with the promotion of Mr. McAllister to President and Mr. Morano
to Executive Vice President. The salary of one other officer was increased
by 6.8% effective April 1, 1998, in connection with a promotion. Base
salaries for other executive officers have not been increased since May
1997.
Incentive compensation consists of cash incentive compensation
awarded annually if justified, and long-term incentive compensation.
Long-term incentive compensation combines restricted stock and stock
options and is designed to link the interests of executive officers with
those of stockholders by providing each executive an incentive to manage
the business as an owner with an equity stake.
Annual cash incentive payments are determined under the ASARCO
Incentive Compensation Plan and the ASARCO Incentive Compensation Plan for
Senior Officers ("Senior Officers' Plan"), which are administered by the
Organization and Compensation Committee. Approximately 75% of all active
salaried employees of ASARCO are eligible for annual cash incentive
compensation payments under the Incentive Compensation Plan. The sole
purpose of the Senior Officers' Plan, which covers only the five most
highly compensated officers with respect to a year in which compensation is
awarded, is to assure current federal income tax deductibility of incentive
compensation earned by those five officers whose compensation might
otherwise not be deductible under the Internal Revenue Code. Incentive
awards to the five covered officers are determined pursuant to the Senior
officers' Plan and the Incentive Compensation Plan, and to the extent they
exceed award levels under the Senior Officers' Plan, such awards may not be
deductible. The ASARCO Compensation Deferral Plan permits officers and
eligible employees to defer all or a portion of awards made under the
Incentive Compensation Plan (and, if applicable, the Senior Officers'
Plan), and to defer that portion of salary that could have been deferred
under the Savings Plan but for limitations imposed by the Internal Revenue
Code.
Under the 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 with
ASARCO. For executive officers these targets are set slightly below
competitive median levels to compensate for salary targets which are set
slightly above competitive median levels. The officers' levels of
responsibility are determined by the Committee after review of
substantially equivalent positions among the Comparator Groups. Awards to
employees are increased or decreased from a predetermined target level,
based upon performance measured at three levels: individual, operating unit
or staff group and Company-wide. Incentive compensation for ASARCO's
executive officers, and particularly for the Chief Executive Officer, is
determined by individual and Company performance levels. Company
performance in 1998 was evaluated against objectives previously established
by the Board of Directors.
In November 1998 and January 1999 the Committee concluded that,
although ASARCO had made favorable progress in 1998 towards goals in areas
including reduction of copper operating costs and sale of non-core assets,
no incentive compensation should be awarded under the Incentive
Compensation Plan or the Senior Officers' Plan with respect to 1998 in view
of ASARCO's net loss for the year.
In meetings in April, June and September 1998, followed in each
case by discussion with the Board, the Committee developed a new
formula-based incentive compensation plan for ASARCO, which was approved by
the Board in October 1998 effective for the year beginning January 1, 1999.
The revised ASARCO Incentive Compensation Plan has been designed,
among other things, to reward management for achieving and exceeding annual
Return on Equity ("ROE") targets approved by the Board. The ROE targets
will be reviewed by the Board each year and may be revised by the Board in
response to changes in ASARCO's strategy. If minimum or better ROE targets
are achieved, incentive compensation will be paid, subject to adjustments
for overall corporate and for unit or performance management group
performance, and also for individual performance.
In January 1998 the Committee approved awards of stock options and
restricted stock to ASARCO's officers other than Messrs. Osborne and
McAllister, and recommended to the Board awards to those officers. These
awards were made within long-term incentive income targets based upon
analyses by ASARCO's compensation consultant. The consultant supplements
data from the Comparator Groups with broad based survey data to develop
target levels of "long-term gain opportunity" for various levels of total
compensation, with greater percentages of long-term gain opportunity
attaching to higher responsibility levels. ASARCO's consultant surveys a
broader group of companies than those in the Comparator Groups so as to
provide a more complete analysis of competitive long term incentive
compensation award levels.
ASARCO normally makes long-term incentive awards on an annual basis
and has not established specific stock ownership objectives for its
officers. In 1998, long-term incentive compensation awards to ASARCO's
executive officers were at the median of awards made by the companies
included in the Comparator Groups and the consultant's surveys. In making
1998 long-term incentive awards the Committee also considered each
officer's performance. The Committee also considered outstanding options
and shares of restricted stock previously awarded to the executive
officers. In the case of the Chief Executive Officer the Committee also
considered his performance and responsibility in establishing ASARCO's
strategic goals and directing all elements of its performance.
In July 1998 the Committee approved an award of 118,075 stock
options exercisable at the then current market price of $21.75 per share to
a broad group of 1,217 of ASARCO's middle management and other employees.
The options were granted during a period when ASARCO was deferring any
general salary increases in view of low copper prices.
In meetings in October and November 1998 the Committee determined
that it would be in the best interests of ASARCO for Mr. Osborne to be
entitled to an office and certain executive-level services following his
retirement. The Committee recommended to the Board, and the Board approved,
a one-year consulting agreement under which Mr. Osborne will provide
consulting services to ASARCO for a daily consulting fee of $4,500 with an
annual minimum of 23 consulting days of service. ASARCO agreed to nominate
Mr. Osborne for reelection in April 1999 as a Company director for a term
ending April 2001.
Section 162(m) of the Internal Revenue Code eliminates ASARCO's
Federal income tax deductions for certain compensation in excess of $1
million paid in a taxable year to each of ASARCO's five highest paid
officers as reported in the proxy statement, unless compensation programs
meet certain requirements, principally concerning the adoption of fixed
targets. Accordingly, changes in ASARCO executive compensation programs for
annual incentive compensation and for stock option grants as a result of
the provision were approved by ASARCO shareholders in 1996. While ASARCO
considers that restricted stock provides a form of long-term compensation
the value of which is directly related to Company stock performance, the
Committee believes that it is not practical to change ASARCO's restricted
stock plan provisions to meet the requirements of Section 162(m). The
Committee intends, to the extent practicable, to preserve deductibility
under the Internal Revenue Code of compensation paid to ASARCO's executive
officers. Although compensation paid is generally deductible, certain
compensation paid to some executives may not be deductible.
Willard C. Butcher, Chairman*
James W. Kinnear
Martha T. Muse*
John D. Ong
James Wood
- ----------------
*Retired
COMPENSATION TABLES
Set forth below is certain information concerning the annual and
long-term compensation for services in all capacities to ASARCO for fiscal
years 1998, 1997 and 1996 of ASARCO's Chief Executive Officer and the other
four most highly compensated executive officers of ASARCO:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLES
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------------------------ ------------------------
OTHER SECURITIES
ANNUAL RESTRICTED UNDERLYING
NAME AND COMPENSA- STOCK OPTIONS ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS TION(1) AWARDS(2) (SHARES) COMPENSATION(3)
- ---------------------- ---- ------- ------- ----------- ---------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Richard de J. Osborne. 1998 $885,000 -- $24,969 $528,710 73,950 $26,550
Chairman of the Board 1997 865,000 $957,000 25,588 577,500 67,500 25,950
and Chief Executive
Officer 1996 811,672 485,000 28,850 539,750 50,000 24,350
Francis R. McAllister. 1998 518,750 -- 21,969 140,270 27,500 15,563
President and Chief 1997 441,668 335,300 22,588 159,500 25,500 13,250
Operating Officer 1996 419,008 172,600 25,850 142,875 19,000 12,570
Kevin R. Morano....... 1998 382,258 -- 24,969 116,532 22,500 11,468
Executive Vice 1997 345,340 259,700 25,588 140,250 21,800 10,360
President 1996 324,672 141,800 28,150 114,300 15,200 9,740
Robert J. Muth........ 1998 300,000 -- 21,969 75,530 15,200 9,000
Vice President 1997 296,668 76,500 22,588 88,000 15,200 8,900
1996 286,672 74,300 24,825 76,200 10,400 8,900
Augustus B. Kinsolving 1998 299,004 -- 20,969 64,740 12,600 1,600
Vice President and 1997 295,004 132,500 22,588 77,000 12,600 1,600
General Counsel 1996 283,672 75,200 25,850 62,250 9,000 1,500
- -------------------
(1) Represents annual retainer, stock award and fees received for
services as a director of Southern Peru Copper
Corporation.
(2) Dollar values of restricted stock awards are shown as of the date
of grant. The number and dollar value of shares of restricted stock
holdings owned at December 31, 1998, and still subject to
restrictions are as follows: Mr. Osborne, 61,500 shares/$930,188;
Mr. McAllister, 16,520 shares/$249,865; Mr. Morano, 13,840
shares/$209,330; Mr. Muth, 8,800 shares/$133,100 and Mr.
Kinsolving, 7,600 shares/$114,950. Restrictions on such shares
lapse in equal installments over five years beginning with the
grant dates which occurred during the period from January 1994
through January 1998, except upon a change of control, in which
case all shares vest immediately. Cash dividends paid on shares of
restricted stock are not subject to restrictions.
(3) Amounts shown reflect matching contributions made by ASARCO for the
named individuals under ASARCO's Savings Plan and Compensation
Deferral Plan (formerly the Supplemental Savings Plan). The Savings
Plan is a qualified defined contribution profit sharing plan
available generally to all United States salaried employees with
one month of service with ASARCO. Savings Plan contributions are
immediately vested and may be withdrawn subject to certain
restrictions, penalties and suspension periods. 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. Matching contributions under both
plans may not exceed 3% of the employee's salary. Compensation
deferred and amounts contributed by ASARCO may be withdrawn subject
to certain restrictions and penalties. Deferrals of incentive
compensation are not eligible for a Company matching contribution.
</TABLE>
OPTION GRANTS
Set forth below is further information on grants of stock options
under the Company's 1996 Stock Incentive Plan for the period January 1,
1998 to December 31, 1998. No stock appreciation rights ("SARs") were
granted in 1998 or outstanding as of December 31, 1998.
<TABLE>
<CAPTION>
OPTION GRANTS IN 1998
INDIVIDUAL GRANTS GRANT VALUE
------------------------------------------------ -----------
NUMBER OF % OF TOTAL
SHARES OPTIONS EXERCISE
UNDERLYING GRANTED TO OR BASE GRANT DATE
OPTIONS EMPLOYEES IN PRICE EXPIRA- PRESENT
NAME GRANTED (1) FISCAL YEAR $/SH TION DATE VALUE(2)
- ----------------------- ------------- --------------- -------- --------- -------------
<S> <C> <C> <C> <C> <C>
Richard de J. Osborne.. 73,950 15.1% $21.58 1/27/08 $359,323
Francis R. McAllister.. 27,500 5.6% $21.58 1/28/08 133,623
Kevin R. Morano........ 22,500 4.6% $21.58 1/27/08 133,623
Robert J. Muth......... 15,200 3.1% $21.58 1/27/08 73,857
Augustus B. Kinsolving. 12,600 2.6% $21.58 1/27/08 61,223
- ----------------
(1) The options were awarded under ASARCO's stockholder-approved 1996
Stock Incentive Plan. The option price per share equals the fair
market value of ASARCO'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
ASARCO's common Stock and are designated as such by the Committee
that administers the Plan, including a tender or exchange offer for
shares of ASARCO's Common Stock, the replacement of a majority of
the Board as a result of a proxy contest, a merger or
reorganization of ASARCO, or a liquidation or dissolution of
ASARCO. 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 29.4% based on actual monthly volatility for
the preceding five years, risk-free rate of return of 5.6% based on
the yield of the five year U.S. treasury note as of the grant date,
annual dividend rate of $0.94 per share based on average dividends
paid per share over the preceding ten years, 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 ASARCO's
Stock Incentive Plan which cannot be sold.
</TABLE>
OPTION EXERCISES AND FISCAL YEAR-END VALUES
Set forth below is information concerning stock option exercises by
named executive officers during 1998, including the aggregate value of
gains on the date of exercise, the number of shares covered by exercisable
options and the value of "in-the-money" options as of December 31, 1998.
All outstanding options were exercisable at December 31, 1998.
AGGREGATED OPTION EXERCISES IN 1998 AND DECEMBER 31, 1998 OPTION VALUES
<TABLE>
<CAPTION>
------------------------------------------- ------------------
NUMBER OF
SECURITIES
UNDERLYING
UNEXERCISED VALUE OF
OPTIONS AT UNEXERCISED
SHARES YEAR END IN-THE MONEY
ACQUIRED EXERCISABLE/ OPTIONS AT
NAME ON EXERCISE VALUE REALIZED UNEXERCISABLE(1) YEAR END (2)
- ----------------------- ------------ --------------- ---------------- ------------
<S> <C> <C> <C> <C>
Richard de J. Osborne.. -- -- 399,450 --
Francis R. McAllister.. 9,000 $13,290 151,840 --
Kevin R. Morano........ -- -- 93,200 --
Robert J. Muth......... -- -- 52,614 --
Augustus B. Kinsolving. 2,044 $6,457(3) 73,300 --
- ---------------
(1) The above officers held no unexercisable Options at December 31, 1998.
(2) Based on the New York Stock Exchange--composite Transactions price for
ASARCO's Common Stock of $15.125 on December 31, 1998.
(3) All after-tax net value realized was received in shares of Common
Stock.
</TABLE>
EMPLOYMENT AGREEMENTS
ASARCO has entered into change of control employment agreements
with 12 of its executive officers, including Messrs. McAllister, Morano,
William Dowd, Kinsolving and William L. Paul, which provide for severance
payments following termination of their employment with ASARCO. The
employment agreements are for a term of one year, renewable automatically
on a year-to-year basis unless terminated by ASARCO at least nine months
prior to the anniversary date. The employment agreements continue in effect
for not less than three years following occurrence of a change of control
of ASARCO.
If, as a result of a change in control, the executive's employment
is involuntarily terminated within three years of the change of control,
the executive is entitled to receive from ASARCO as severance pay a
lump-sum payment equal to the total of three times such executive's:
o annual base salary,
o average incentive compensation payments received for the
highest of either the three-year or five-year period
immediately preceding the date of termination or the change
of control, and
o the annual cost to ASARCO of certain benefits such executive
is entitled to receive immediately preceding the date of
termination.
Involuntary termination following a change of control includes
instances where:
o the executive's responsibilities or status are materially
diminished without his consent,
o the executive's annual base salary is reduced or not
increased by a minimum percentage following a change of
control, or the executive is not paid an annual bonus in
accordance with bonus policies in effect prior to the change
of control,
o ASARCO (or a successor) fails to continue any incentive,
bonus, compensation, pension or other employee benefit plan
prior to or following the change of control,
o ASARCO's principal executive offices are relocated outside the
Borough of Manhattan,
o the executive's vacation days are reduced,
o ASARCO (or a successor) fails to pay the executive's
compensation or deferred compensation, or
o the successor corporation does not assume and agree to
perform the employment agreement.
The executive would also be entitled to continuation of health and
other insurance benefits for a period of three years following termination.
Upon such a termination after a change of control, each executive is also
entitled to payment from ASARCO of the value of the executive's stock
options. The amount of the severance payment from ASARCO will also include
any amount necessary to make whole the executive with respect to any excise
taxes imposed by section 4999 of the Internal Revenue Code in respect of
the payments described above.
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
Set forth below is a line graph comparing the yearly percentage
change in the cumulative total return on ASARCO'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 five year period 1993 to 1998.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
ASARCO INCORPORATED, S&P 500 INDEX & S&P METALS MISC. GROUP INDEX
"ASARCO" "S&P 500" "S&P Metal"
------ ------- ---------
1993 100 100 100
1994 126.44 101.32 116.76
1995 145.19 139.40 129.16
1996 116.06 171.41 131.78
1997 107.58 228.59 88.58
1998 74.77 293.92 63.72
*Total Return Assumes Reinvestment of Dividends
**Assumes $100 Invested on 12/31/93 in ASARCO Common Stock, S&P 500 Index &
S&P Metals Group Index
The preceding chart analyzes the total return on ASARCO's Common
Stock compared to the S&P 500 and the S&P Metals Miscellaneous Group over
the five year period commencing December 31, 1993. In the first year of
this period, through December 31, 1994, ASARCO's stock had a positive
return of 26.4%, the S&P 500 returned 1.3% and the S&P Metal Miscellaneous
Group returned 16.8%. In 1995, the return for ASARCO's stock was a positive
14.8% compared to positive returns of 37.6% for the S&P 500 and 10.6% for
the S&P Metals Miscellaneous Group. In 1996, ASARCO's stock provided a
negative return of 20.1% compared to positive returns of 23.0% for the S&P
500 and 2.0% for the S&P Metals Miscellaneous Group. In 1997, ASARCO's
return was a negative 7.3%, the S&P 500 returned a positive 33.4% and the
S&P Metals Miscellaneous Group returned a negative 32.8%. In 1998, ASARCO
's stock provided a negative return of 30.5% 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.
RETIREMENT PLANS
The following table shows the estimated amount of annual retirement
income (calculated as a single life annuity benefit) payable to employees
for life, commencing at normal retirement at age 65 in 1999, under ASARCO's
qualified Retirement Benefit Plan for Salaried Employees ("Plan"), covering
substantially all salaried employees, a prior plan of ASARCO and a
supplemental retirement benefit plan (the "Supplemental Plan"). The
Supplemental Plan is a non-qualified supplemental retirement benefit plan
under which any benefits not payable from Plan assets by reason of the
limitations imposed by the Internal Revenue Code of 1986, as amended (the
"Code") and the loss due to the deferrals of salaries made under ASARCO's
Deferred Income Benefit System and the Compensation Deferral Plan are paid
from ASARCO's general corporate funds. The table assumes Social Security
benefit levels as in effect on January 1, 1999.
PENSION PLAN TABLE
APPROXIMATE ANNUAL RETIREMENT BENEFITS
--------------------------------------------------------
FINAL AVERAGE 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
COMPENSATION OF SERVICE OF SERVICE OF SERVICE OF SERVICE OF SERVICE
- --------------- ---------- ---------- ---------- ---------- ----------
$300,000 64,525 86,033 107,541 129,049 150,557
400,000 87,025 116,033 145,041 174,049 203,057
500,000 109,525 146,033 182,541 219,049 255,557
600,000 132,025 176,033 220,041 264,049 308,057
700,000 154,525 206,033 257,541 309,049 360,557
800,000 177,025 236,033 295,041 354,049 413,057
900,000 199,525 266,033 332,541 399,049 465,557
1,000,000 222,025 296,033 370,041 444,049 518,057
1,100,000 244,525 326,033 407,541 489,049 570,557
1,200,000 267,025 356,033 445,041 534,049 623,057
1,300,000 289,525 386,033 482,541 579,049 675,557
1,400,000 312,025 416,033 520,041 624,049 728,057
1,500,000 334,525 446,033 557,541 669,049 780,557
1,600,000 357,025 476,033 595,041 714,049 833,057
1,700,000 379,525 506,033 632,541 759,049 885,557
1,800,000 402,025 536,033 670,041 804,049 938,057
1,900,000 424,525 566,033 707,541 849,049 990,557
2,000,000 447,025 596,033 745,041 894,049 1,043,057
Benefits are calculated using a final average earnings formula
(i.e., average of the highest consecutive 60 months of the last 120 months
of compensation received "Final Average Compensation"), minus a Social
Security offset.
As of January 31, 1999, the following officers had completed the
number of years of service indicated opposite their names: Richard de J.
Osborne, 24 years; Francis R. McAllister, 32 years; Kevin R. Morano, 20
years; Robert J. Muth, 30 years and Augustus B. Kinsolving, 24 years. Under
the Plan and Supplemental Plan, the amounts of covered compensation of such
persons for calendar year 1998 were Richard de J. Osborne, $1,842,000,
Francis R. McAllister, $854,050, Kevin R. Morano, $641,958, Robert J. Muth,
$376,500 and Augustus B. Kinsolving, $431,504 and consisted of basic salary
and cash incentive compensation payments in the year received as shown in
the Summary Compensation Table and in prior proxy statements. Cash
incentive compensation payments are generally received in the year
following that in which they are earned.
Messrs. Osborne, Muth and Kinsolving are eligible to receive
additional benefits, not included in the amounts shown in the table, under
ASARCO's supplemental plan for designated officers hired in mid-career (the
"Mid-Career Plan"). The Mid-Career Plan provides supplemental retirement
benefits out of the general funds of ASARCO for officers holding the rank
of Vice President or higher who are determined by the Organization and
Compensation Committee to have had prior business or professional
experience valuable to ASARCO and relevant to the positions for which they
were employed by ASARCO, and who at retirement or termination of employment
with the consent of ASARCO will have been with ASARCO as a Vice President
or higher for 10 years or more. The Mid-Career Plan provides for annual
benefits equal to 55% of the Final Average Compensation, which amount is
reduced by any benefits payable by ASARCO or any other employer under any
other pension plan not attributable to the employee's contributions, and by
all Social Security benefits payable at the time of retirement or early
termination. All benefits under the Mid-Career Plan are forfeited by a
participant who prior to attaining age 65 terminates employment with ASARCO
without its consent, except in the case of a change in control.
Participants in the Supplemental Plan and the Mid-Career Plan receive their
benefits in a lump-sum payment at retirement (which payment may be
deferred) unless they elect, in accordance with the terms of the plan, to
receive an annuity benefit. Messrs. Osborne and Muth retired in April 1999.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based upon copies of filings furnished to ASARCO and upon
statements furnished by known insiders that no filings were required
pursuant to Section 16(a) of the Securities Exchange Act of 1934, ASARCO
believes that during 1998, all filings of its officers, directors, and 10%
beneficial owners timely complied with Section 16(a) reporting
requirements.
ASARCO Incorporated
October 29, 1999
