<PAGE>
===============================================================================
--------------------------------
\ OMB APPROVAL \
\------------------------------\
\ OMB Number: 3235-0059 \
\ Expires: December 31, 1997 \
\ Estimated average burden \
\ hours per response......89 \
--------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[x] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Freeport-McMoRan Copper & Gold Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
<PAGE>
[Logo of Freeport-McMoRan Copper & Gold Inc. appears here]
-----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 5, 1998
-----------------
March 23, 1998
The Annual Meeting of Stockholders of Freeport-McMoRan Copper & Gold Inc.
will be held at the office of the corporation, 1615 Poydras Street, New
Orleans, Louisiana, on Tuesday, May 5, 1998, at 9:00 a.m., for the following
purposes:
(1) To elect four of fifteen directors to hold office for three years and
until their respective successors are elected and qualified;
(2) To ratify the appointment of Arthur Andersen LLP as the independent
auditors to audit the financial statements of the corporation and its
subsidiaries for the year 1998;
(3) To consider and vote on a stockholder proposal described in the
attached proxy statement, if presented at the meeting; and
(4) To transact such other business as may properly come before the
meeting.
The Board of Directors has fixed the close of business on March 9, 1998, as
the record date for the determination of stockholders entitled to notice of and
to vote at the meeting.
Your vote is important. Whether or not you plan to attend the meeting, please
complete, sign and date the enclosed proxy card and return it promptly in the
enclosed envelope. Your cooperation will be appreciated.
By Order of the Board of
Directors.
/s/ Michael C. Kilanowski, Jr.
Michael C. Kilanowski, Jr.
Vice President and Secretary
<PAGE>
FREEPORT-MCMORAN COPPER & GOLD INC.
1615 POYDRAS STREET
NEW ORLEANS, LOUISIANA 70112
The 1997 Annual Report to Stockholders, including financial statements, is
being mailed to stockholders together with these proxy materials on or about
March 23, 1998.
PROXY STATEMENT
This proxy statement is furnished in connection with a solicitation of
proxies by the Board of Directors (the "Board of Directors" or the "Board") of
Freeport-McMoRan Copper & Gold Inc. (the "Company") for use at its Annual
Meeting of Stockholders to be held on May 5, 1998, and at any adjournments
thereof (the "Meeting").
VOTING PROCEDURES
Stockholders of record at the close of business on March 9, 1998 (the
"Record Date") will be entitled to vote at the Meeting. On the Record Date
there were outstanding 72,570,444 shares of the Company's Class A Common Stock
("Class A Common Shares"), 108,333,838 shares of the Company's Class B Common
Stock ("Class B Common Shares" and, together with the Class A Common Shares,
the "Common Shares"), 13,999,600 depositary shares, each representing 0.05
shares of the Company's Step-Up Convertible Preferred Stock (the "Step-Up
Preferred Shares"), 6,000,000 depositary shares, each representing 0.05 shares
of the Company's Gold-Denominated Preferred Stock (the "Gold Preferred
Shares"), 4,305,580 depositary shares, each representing 0.05 shares of Gold-
Denominated Preferred Stock, Series II (the "Gold-II Preferred Shares"), and
4,760,000 depositary shares, each representing 0.025 shares of the Company's
Silver-Denominated Preferred Stock (the "Silver Preferred Shares" and together
with the Step-Up Preferred Shares, the Gold Preferred Shares and the Gold-II
Preferred Shares, the "Preferred Shares"). The Common Shares and the Preferred
Shares are referred to herein collectively as the "Company Shares."
The holders of a majority of the Company Shares issued and outstanding and
entitled to vote at the Meeting, present in person or represented by proxy,
will constitute a quorum at the Meeting. The persons whom the Company appoints
to act as inspectors of election will treat the Company Shares represented by
a properly executed and returned proxy as present at the Meeting for purposes
of determining a quorum. The Company Shares present at the Meeting that are
abstained from voting or that are the subject of broker non-votes will be
counted as present for purposes of determining a quorum. A broker non-vote
occurs when a nominee holding Company Shares for a beneficial owner does not
vote on a particular matter because the nominee does not have discretionary
voting power with respect to that item and has not received voting
instructions from the beneficial owner.
<PAGE>
Each of the Company Shares will entitle the holder to one vote on all
matters as to which the holder is entitled to vote. Each record holder of
depositary shares representing Preferred Shares will be entitled to instruct
the depositary as to the exercise of the voting rights pertaining to the
number of Preferred Shares represented by the holder's depositary shares.
Votes cast at the Meeting will be counted by the inspectors of election.
Holders of Class A Common Shares and Preferred Shares, voting together as a
single class, have the right to elect 20% of the Board of Directors, and
holders of Class B Common Shares have the right to elect 80% of the Board of
Directors. The Company's directors are elected by a plurality vote. Except
with respect to the election of directors, the Class A Common Shares and Class
B Common Shares, voting together as a single class, have exclusive voting
rights with respect to all matters to come before the Meeting.
Abstentions and broker non-votes will have no effect upon the election of
directors. Abstentions as to all other matters to come before the Meeting will
have the same effect as votes against those matters, but broker non-votes as
to those matters will not be deemed to be a part of the voting power present
with respect to, will not count as votes for or against, and will not be
included in calculating the number of votes necessary for approval of those
matters.
The Board of Directors is soliciting a proxy in the enclosed form to provide
you with an opportunity to vote on all matters scheduled to come before the
Meeting, whether or not you attend in person. If you properly execute and
return a proxy in the enclosed form, your shares will be voted as you specify.
If you make no specifications, the proxy representing any Common Shares will
be voted in favor of the proposed nominees, for the ratification of the
appointment of auditors and against the stockholder proposal. If you make no
specifications, the proxy representing any Preferred Shares will be voted in
favor of the proposed nominees. If you submit a proxy, you may subsequently
revoke it or submit a revised proxy at any time before it is voted. You may
also attend the Meeting in person and vote by ballot, which would cancel any
proxy that you previously gave. Management expects no matters to be presented
for action at the Meeting other than the items described in this Proxy
Statement. If, however, any other matters properly come before the Meeting,
the persons named as proxies in the enclosed form of proxy intend to vote in
accordance with their judgment on the matters presented.
PROXY SOLICITATION
The Company will pay all expenses of soliciting proxies for the Meeting. In
addition to solicitations by mail, arrangements have been made for brokers and
nominees to send proxy materials to their principals, and the Company will
reimburse them for their reasonable expenses in doing so. The Company has
retained Georgeson & Co. Inc., Wall Street Plaza, New York, New York, to
assist with the solicitation of proxies from brokers and nominees. It is
estimated that the fees for Georgeson's services will be $8,500 plus its
reasonable out-of-pocket expenses. Certain representatives of the Company, who
will receive no compensation for their services, may also solicit proxies by
telephone, telegram, telex, telecopy or personal interview.
2
<PAGE>
STOCKHOLDER PROPOSALS
In order to be considered for inclusion in the Company's 1999 proxy
materials, stockholder proposals must be received by the Company no later than
November 23, 1998. In addition, the Company's By-Laws provide that
stockholders intending to nominate a director or bring any other matter before
a stockholders' meeting must furnish timely written notice containing
specified information concerning, among other things, the matters to be
brought before the meeting and the stockholder proposing the matters. In
general, to be timely a stockholder's notice must be received by the Company's
Secretary not less than 60 nor more than 90 days prior to the stockholders'
meeting. If less than 70 days' notice or prior public disclosure of the date
of the stockholders' meeting is made, the Secretary must receive the
stockholder's notice within 10 days of the mailing of the meeting notice or
public disclosure of the meeting date. The Company will be permitted to
disregard any nomination or other matter that fails to comply with these By-
Law procedures.
CORPORATE GOVERNANCE
The Board of Directors, which held six meetings during 1997, has primary
responsibility for directing the management of the business and affairs of the
Company. The Board currently consists of fifteen members. To provide for
effective direction and management of the Company's business, the Board of
Directors has established five committees, including the Audit Committee, the
Nominating Committee and the Corporate Personnel Committee.
The Audit Committee reviews the Company's financial statements and exercises
general oversight with respect to the activities of the Company's independent
auditors, principal accounting officer and internal auditing group and related
matters. The Audit Committee currently consists of Mr. Day as Chairman, and
Messrs. Bruce, Harrison, Johnston, Kissinger, Lackey, Leslie and Rankin, none
of whom is an officer or employee of the Company or any of its subsidiaries.
The Audit Committee met three times during 1997.
The Nominating Committee makes recommendations to the Board concerning the
structure of the Board, corporate governance and proposed new members of the
Board, and nominates individuals to stand for election as directors. The
Nominating Committee will consider recommendations by the Company's
stockholders of potential nominees for election as directors. The Company's
Secretary will, upon written request from any stockholder, furnish information
concerning the procedures required to be followed in connection with such
recommendation. The Nominating Committee currently consists of Mr. Rankin as
Chairman, and Messrs. Davis, Day and Moffett. The Nominating Committee met
twice during 1997.
The Corporate Personnel Committee, which is described further below,
currently consists of Mr. Bruce as Chairman, and Messrs. Harrison, Putnam and
Wharton and Ms. McDonald. The Corporate Personnel Committee met three times
during 1997.
3
<PAGE>
During 1997 each of the current directors, except Ms. McDonald, attended at
least 75% of the aggregate number of meetings held of the Board and Board
committees on which he or she served.
ELECTION OF DIRECTORS
The holders of Class A Common Shares and Preferred Shares, voting as a
class, elect 20% of the Board, and the holders of Class B Common Shares elect
the remaining 80%. The Board of Directors has fixed the number of directors at
fifteen, three of whom are elected by the holders of Class A Common Shares and
Preferred Shares (the "Class A Directors") and twelve of whom are elected by
the holders of Class B Common Shares (the "Class B Directors"). In addition,
the Board consists of three classes, each of which serves for three years,
with one class being elected each year.
Pursuant to an agreement (the "Rio Tinto Agreement") among the Company, Rio
Tinto plc ("Rio Tinto"), a mining and smelting company, and certain of Rio
Tinto's affiliates (the "Rio Tinto Affiliates"), Rio Tinto has the right to
submit for nomination for election by the Company's stockholders the
percentage of directors, rounded to the nearest whole number, that is
proportionately equal to the Rio Tinto Affiliates' aggregate percentage
ownership of all outstanding Common Shares. The Rio Tinto Affiliates may
nominate directors either as Class A Directors or Class B Directors, but the
percentage of Class B Directors so nominated, if any, cannot exceed the
percentage of the total number of Class B Common Shares outstanding that the
Rio Tinto Affiliates own. As of the Record Date, Rio Tinto Indonesia Limited,
a Rio Tinto Affiliate, owned 23,931,100 Class A Common Shares, or 13.2% of the
Common Shares outstanding. In the Rio Tinto Agreement, the Company agreed to
include Rio Tinto's nominees with the directors nominated by the Board and to
refrain from taking any action that may hinder the election of Rio Tinto's
nominees. Messrs. Davis and Leslie are the directors selected by Rio Tinto and
both serve as Class A Directors.
The persons named as proxies in the enclosed form of proxy intend to vote
your proxy, unless otherwise directed, for the election of Leon A. Davis (who
serves currently as a Class A Director) and James R. Moffett, George Putnam
and B.M. Rankin, Jr. (all of whom serve currently as Class B Directors) as the
members of Class III to serve until the 2001 Annual Meeting of Stockholders.
Messrs. Bruce, Day, Lackey, Leslie and Mealey and Ms. McDonald are members of
Class I and are serving terms that expire at the 1999 Annual Meeting of
Stockholders, and Messrs. Harrison, Johnston, Kissinger, Latiolais and Wharton
are members of Class II and are serving terms that expire at the 2000 Annual
Meeting of Stockholders.
4
<PAGE>
INFORMATION ABOUT NOMINEES AND DIRECTORS
The following table provides certain information as of March 2, 1998 with
respect to each director nominee and each other director whose term will
continue after the Meeting. Unless otherwise indicated, each person has been
engaged in the principal occupation shown for the past five years.
<TABLE>
<CAPTION>
YEAR FIRST
NAME OF NOMINEE PRINCIPAL OCCUPATIONS, OTHER DIRECTORSHIPS ELECTED A
OR DIRECTOR AGE AND POSITIONS WITH THE COMPANY DIRECTOR
--------------- --- ------------------------------------------------ ----------
<S> <C> <C> <C>
Robert W. Bruce III 53 President, The Robert Bruce Management Co., 1995
Inc., investment managers. Managing Partner,
Steamboat Group, until 1992. Director of IMC
Global Inc. ("IGL").
Leon A. Davis 58 Director and Chief Executive of Rio Tinto, 1996
worldwide mining and smelting, and of Rio Tinto
Limited ("RTL"), a mining company. Deputy Chief
Executive and Chief Operating Officer of Rio
Tinto until 1996. Mining Director of Rio Tinto
until 1994.
Robert A. Day 54 Chairman of the Board of Trust Company of the 1995
West, an investment management company.
Chairman and President of W.M. Keck Foundation.
Director of Fisher Scientific International,
Inc. and McMoRan Oil & Gas Co. ("MOXY"), an oil
and gas exploration and production company.
William B. Harrison, Jr. 54 Vice Chairman of The Chase Manhattan Corporation 1995
and its subsidiary, The Chase Manhattan Bank.
Director of Dillard Department Stores, Inc.
J. Bennett Johnston 65 Chairman of Johnston and Associates, LLC, a 1997
legal and business consulting firm, and
Chairman of Johnston Development Co. LLC, a
project development firm. United States Senator
until January 1997. Director of Chevron Corp.,
URS Corp. and Columbia Energy Group Inc.
Henry A. Kissinger 74 Chairman of the Board and Chief Executive 1995
Officer, Kissinger Associates, Inc.,
international consultants and consultants to
the Company. Director of Revlon, Inc.,
Hollinger International Inc., and Gulfstream
Aerospace Corporation.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
YEAR FIRST
NAME OF NOMINEE PRINCIPAL OCCUPATIONS, OTHER DIRECTORSHIPS ELECTED A
OR DIRECTOR AGE AND POSITIONS WITH THE COMPANY DIRECTOR
--------------- --- ------------------------------------------------ ----------
<S> <C> <C> <C>
Bobby Lee Lackey 60 President and Chief Executive Officer of J.S. 1995
McManus Produce Company, Inc., grower of
vegetables and shipper of fruits and
vegetables.
Rene L. Latiolais 55 Vice Chairman of the Board of the Company. 1993
Commissioner of P.T. Freeport Indonesia Company
("PT-FI"), an operating subsidiary of the
Company. Co-Chairman of the Board of Freeport-
McMoRan Sulphur Inc. ("FSC"), a sulphur mining
and transportation company. President and Chief
Executive Officer of Freeport-McMoRan Inc.
("FTX"), a natural resources company, until
1997. Chief Operating Officer of FTX until
1995. Executive Vice President of FTX until
1993. Director of IGL.
Jonathan C.A. Leslie 47 Director and Chief Executive Copper of Rio 1997
Tinto. Managing Director of Rossing Uranium
Limited, a mining company, until 1994. Director
of RTL.
Gabrielle K. McDonald 55 Judge, International Criminal Tribunal for the 1995
Former Yugoslavia. Distinguished Visiting
Professor of Law, Texas Southern University,
Thurgood Marshall School of Law, until 1995.
Visiting Professor of Law, St. Mary's
University School of Law, and of counsel,
Walker & Satterthwaite, law firm, until 1993.
George A. Mealey 64 Vice President Commissioner of PT-FI and 1988
consultant to the Company. President and Chief
Operating Officer of the Company and Executive
Vice President of FTX until 1996.
James R. Moffett 59 Chairman of the Board and Chief Executive 1992
Officer of the Company. President Commissioner
of PT-FI. Co-Chairman of the Board of FSC and
Co-Chairman of the Board of MOXY. Chairman of
the Board of FTX until 1997. Director of IGL.
George Putnam 71 Chairman of The Putnam Investment Management 1995
Company, Inc. and of each of the members of the
Putnam group of mutual funds. Director of
Houghton-Mifflin Company, Marsh-McLennan
Companies Inc. and Rockefeller Group, Inc.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
YEAR FIRST
NAME OF NOMINEE PRINCIPAL OCCUPATIONS, OTHER DIRECTORSHIPS ELECTED A
OR DIRECTOR AGE AND POSITIONS WITH THE COMPANY DIRECTOR
--------------- --- ------------------------------------------------ ----------
<S> <C> <C> <C>
B. M. Rankin, Jr. 68 Private investor. Director of FSC and MOXY. 1995
J. Taylor Wharton 59 Chairman of the Department of Gynecology at the 1995
University of Texas M.D. Anderson Cancer
Center.
</TABLE>
DIRECTOR COMPENSATION
Each non-employee and non-officer director receives (i) an annual fee of
$25,000 for serving on the Board, (ii) a fee of $1,000 for attendance at each
Board committee meeting, and (iii) an annual fee of $2,000 for each Board
committee of which a director is the chairperson. Each director receives a fee
of $1,000 for attendance at each Board meeting and is also reimbursed for
reasonable out-of-pocket expenses incurred in attending Board and committee
meetings.
RETIREMENT PLAN FOR NON-OFFICER DIRECTORS
The Company has a retirement plan for the benefit of non-officer directors
who reach age sixty-five. Under the retirement plan, an eligible director will
be entitled to an annual benefit equal to a percentage of the standard portion
of the annual fee for a director at the time of his or her retirement. The
percentage, which is at least 50% but not greater than 100%, will depend on
the number of years the retiree served as a non-officer director of the
Company or its predecessors. The benefit is payable from the date of
retirement until the retiree's death. Each eligible director who was also a
director of FTX, the former parent of the Company, at the time of the merger
of FTX into IGL and who was ineligible to retire from the board of directors
of FTX at that time will receive upon retirement from the Company, in addition
to the amount set forth above, an annual benefit of $20,000, which is also
payable from the date of retirement until the retiree's death.
STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
Each non-employee and non-officer director of the Company is eligible for
the grant of options under the Company's 1995 Stock Option Plan for Non-
Employee Directors (the "1995 Plan"). On August 1 of each year through 2004,
each eligible director will be granted a non-qualified option to purchase
10,000 Class B Common Shares at 100% of the fair market value of such shares
on the date of grant. Each option granted under the 1995 Plan expires ten
years after the date of grant, and each eligible director may transfer his
options during his lifetime to his immediate family members or certain
entities owned by or for the benefit of his immediate family members or
pursuant to a domestic relations order. In accordance with the 1995 Plan, on
August 1, 1997 each non-employee director was granted an option to purchase
10,000 Class B Common Shares at an exercise price of $29.1563. During 1997
none of the current non-employee and non-officer directors exercised options
granted under the 1995 Plan.
7
<PAGE>
MATCHING GIFTS PROGRAM
The Freeport-McMoRan Foundation (the "Foundation") administers a matching
gifts program in which the Company participates. The program is available to
the Company's directors, officers, employees, full-time consultants and
retirees. Under the program, the Foundation will match gifts made by a
participant to eligible institutions, including educational institutions,
educational associations, educational funds, cultural institutions, social
service community organizations, hospital organizations and environmental
organizations. The Foundation provides the gifts directly to the institution.
The Foundation double matches gifts by a director not in excess of $1,000 and
gifts by any other participant not in excess of $500. The annual amount of
Company matching gifts for any director may not exceed $40,000, and for any
other participant may not exceed $20,000. The matching gifts made by the
Foundation on behalf of the Company in 1997 for each of the participating
directors were as follows: $40,000 for Mr. Bruce; $40,000 for Mr. Day; $33,000
for Mr. Harrison; $40,000 for Mr. Kissinger; $14,880 for Mr. Lackey; $35,629
for Mr. Latiolais; $6,520 for Mr. Mealey; $40,000 for Mr. Moffett; $20,000 for
Mr. Putnam; $28,170 for Mr. Rankin; and $5,000 for Mr. Wharton.
8
<PAGE>
STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information regarding the ownership of the
Class A Common Shares and Class B Common Shares by (i) each director nominee
and each other director whose term will continue after the Meeting, (ii) each
executive officer for whom compensation information is disclosed under the
heading "Executive Officer Compensation" and (iii) all directors and executive
officers of the Company as a group, determined in accordance with Rule 13d-3
of the Securities and Exchange Commission ("SEC") based on information
furnished by them. None of the persons shown below beneficially owns any
Preferred Shares, except for certain persons who beneficially own depositary
shares representing Step-Up Preferred Shares as reflected in the notes below.
Unless otherwise indicated, all information is presented as of December 31,
1997 and all shares shown are held with sole voting and investment power.
<TABLE>
<CAPTION>
NUMBER OF CLASS A NUMBER OF CLASS B COMMON
COMMON SHARES SHARES
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED (1) BENEFICIALLY OWNED (1)(2)
------------------------ ---------------------- -------------------------
<S> <C> <C>
Richard C. Adkerson 5,503 302,621(3)
Robert W. Bruce III 130,500(4) 164,879(4)
Leon A. Davis 0 0
Robert A. Day 7,992(5) 142,697(5)
William B. Harrison, Jr. 208(6) 26,949(6)
J. Bennett Johnston 0 0
Henry A. Kissinger 240 57,334
Bobby Lee Lackey 128 63,591
Rene L. Latiolais 12,492 578,064(3)
Jonathan C.A. Leslie 0 0
Adrianto Machribie 0 7,881
John A. Macken 3,314(7) 22,406
Gabrielle K. McDonald 6 16,758
George A. Mealey 16,792 240,823
James R. Moffett 16,342(8) 1,696,443(3)(8)
George Putnam 8,800,192(9) 6,221,039(9)
B. M. Rankin, Jr. 83,567(10) 691,856(10)
Steven D. Van Nort 350 109,216
J. Taylor Wharton 5,193(11) 47,043(11)
Directors and executive
officers as a group (23
persons) 9,089,741(12) 10,623,906(12)
</TABLE>
- ---------
(1) With the exception of Mr. Moffett (who beneficially owns 1.5% of the
outstanding Class B Common Shares) and Mr. Putnam (who beneficially owns
11.6% of the outstanding Class A Common Shares and 5.6% of the
outstanding Class B Common Shares), each individual holds less than 1% of
the outstanding Class A Common Shares and Class B Common Shares,
respectively.
(2) Includes Class B Common Shares that could be acquired within sixty days
after December 31, 1997, upon the exercise of options granted pursuant to
Company stock option plans for the benefit of such individuals, as
follows: Mr. Adkerson, 184,909 shares; Mr. Bruce, 46,475
9
<PAGE>
shares; Mr. Day, 57,845 shares; Mr. Harrison, 24,002 shares; Mr.
Kissinger, 53,966 shares; Mr. Lackey, 61,724 shares; Mr. Latiolais,
446,919 shares; Mr. Machribie, 7,881 shares; Ms. McDonald, 16,576 shares;
Mr. Mealey, 229,667 shares; Mr. Moffett, 703,250 shares; Mr. Putnam,
61,724 shares; Mr. Rankin, 61,724 shares; Mr. Wharton, 24,002 shares; all
directors and executive officers as a group, 2,333,264 shares.
(3) Includes Class B Common Shares held by the trustee under the Company's
Employee Capital Accumulation Program, as follows: Mr. Adkerson, 268
shares; Mr. Latiolais, 161 shares; Mr. Moffett, 18,567 shares.
(4) Includes 130,000 Class A Common Shares and 111,387 Class B Common Shares
held by a limited partnership with respect to which Mr. Bruce shares
voting and investment power.
(5) Includes 240 Class A Common Shares and 6,268 Class B Common Shares held
by accounts and funds managed by affiliates of a corporation of which Mr.
Day is the chief executive officer and in which he is a stockholder. Mr.
Day has shared voting and investment power with respect to these Shares
but disclaims beneficial ownership thereof.
(6) Includes 60 Class A Common Shares and 842 Class B Common Shares owned by
Mr. Harrison's spouse.
(7) Includes 1,572 Class A Common Shares held by Mr. Macken's spouse as
custodian for Mr. Macken's children.
(8) Includes (i) 824,001 Class B Common Shares held by a limited liability
company with respect to which Mr. Moffett, as a member, shares voting and
investment power and (ii) 16,342 Class A Common Shares and 150,625 Class
B Common Shares held for the benefit of a trust with respect to which Mr.
Moffett, as co-trustee, shares voting and investment power but as to
which he disclaims beneficial ownership.
(9) Includes (i) 7,409,683 Class A Common Shares, 6,147,570 Class B Common
Shares and 1,389,837 Class A Common Shares that may be acquired upon the
conversion of Step-Up Preferred Shares held by mutual funds with respect
to which Mr. Putnam shares voting and investment power but as to which he
disclaims beneficial ownership and (ii) 2,266 Class B Common Shares held
by a charitable corporation with respect to which Mr. Putnam, as a
director and president, shares voting and investment power but as to
which he disclaims beneficial ownership.
(10) Includes (i) 3,340 Class A Common Shares that may be acquired upon the
conversion of Step-Up Preferred Shares, (ii) 48,269 Class A Common
Shares, 243,496 Class B Common Shares and 3,340 Class A Common Shares
that may be acquired upon the conversion of Step-Up Preferred Shares with
respect to which Mr. Rankin, under a power of attorney, has sole voting
and investment power but as to which he disclaims beneficial ownership
and (iii) 3,340 Class A Common Shares that may be acquired upon the
conversion of Step-Up Preferred Shares with respect to which Mr. Rankin,
under a power of attorney, shares investment power but as to which he
disclaims beneficial ownership.
(11) Includes (i) 3,011 Class A Common Shares and 8,926 Class B Common Shares
held by Mr. Wharton's spouse, (ii) 160 Class A Common Shares held in a
retirement trust for the benefit of Mr. Wharton's spouse and (iii) 332
Class A Common Shares and 4,757 Class B Common Shares held by Mr. Wharton
as custodian for his children.
(12) Includes 750 Class A Common Shares held by an executive officer as
custodian for his children. Represents approximately 12.0% of the
outstanding Class A Common Shares and approximately 9.4% of the
outstanding Class B Common Shares, respectively.
10
<PAGE>
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information with respect to each person known
by the Company to be a beneficial owner of more than 5% of any class of the
Company's voting securities determined in accordance with Rule 13d-3 of the
SEC based on information furnished by them. Unless otherwise indicated, all
information is presented as of December 31, 1997, and all shares indicated as
beneficially owned are held with sole voting and investment power.
<TABLE>
<CAPTION>
NUMBER OF CLASS A PERCENT NUMBER OF CLASS B PERCENT
NAME AND ADDRESS OF COMMON SHARES OF COMMON SHARES OF
PERSON BENEFICIALLY OWNED CLASS BENEFICIALLY OWNED CLASS
------------------- ------------------ ------- ------------------ -------
<S> <C> <C> <C> <C>
Putnam Investments, Inc. 8,799,520(1) 11.6% 6,147,570(1) 5.6%
One Post Office Square
Boston, Massachusetts
02109
Rio Tinto Indonesia
Limited 23,931,100 32.3% -- --
6 St. James's Square
London SW1Y 4LD
England
The Capital Group
Companies, Inc. -- -- 6,755,960(2) 6.1%
333 South Hope Street
Los Angeles, California
90071
Oppenheimer Group, Inc. -- -- 28,405,459(3) 25.8%
Oppenheimer Tower
World Financial Center
New York, New York 10281
</TABLE>
- ---------
(1) Based on the Schedule 13G dated January 28, 1998 that Putnam Investments,
Inc. filed with the SEC, Putnam Investments, Inc., through its affiliates,
may acquire 1,389,837 Class A Common Shares upon the conversion of Step-Up
Preferred Shares, shares voting power with respect to 3,400 Class A Common
Shares, and shares investment power with respect to all Class A Common
Shares and Class B Common Shares shown but disclaims beneficial ownership
of such shares.
(2) Based on the Schedule 13G dated February 10, 1998 that The Capital Group
Companies, Inc. filed with the SEC, The Capital Group Companies, Inc.,
through its affiliates, has sole voting power with respect to only
4,566,000 of such shares but disclaims beneficial ownership of all
6,755,960 shares.
(3) Based on the Schedule 13G dated January 4, 1997 that Oppenheimer Group,
Inc. filed with the SEC, Oppenheimer Group, Inc., through its affiliates,
shares voting and investment power with respect to all shares shown but
disclaims beneficial ownership of such shares.
------------------
11
<PAGE>
EXECUTIVE OFFICER COMPENSATION
The following table sets forth information regarding the compensation that
the Company paid to its chief executive officer and each of its four most
highly compensated executive officers (with respect to salary and bonus only)
other than the chief executive officer (collectively, the "Named Executive
Officers"). During 1997, Messrs. Moffett, Adkerson and Latiolais also provided
services to and received compensation from FTX. Messrs. Macken and Van Nort
were elected executive officers of the Company in December 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
---------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------------------ ------------ --------
SECURITIES
NAME AND PRINCIPAL OTHER ANNUAL UNDERLYING LTIP ALL OTHER
POSITION YEAR SALARY(1) BONUS COMPENSATION(2) OPTIONS/SARS PAYOUTS COMPENSATION(3)
------------------ ---- ---------- ---------- --------------- ------------ -------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
James R. Moffett 1997 $1,062,500 $5,000,000 $187,164(4) -- $446,109 $84,814
Chairman of the 1996 1,069,444 5,725,000 161,208(4) 930,000 271,283 84,975
Board and Chief 1995 -- 1,819,336 -- 2,456,799 102,485 2,000
Executive Officer
Richard C. Adkerson 1997 401,562 2,500,000 92,243(5) -- 178,444 30,850(6)
President, Chief 1996 397,727 2,433,000 78,726(5) 250,000 54,257 28,465(6)
Operating Officer and 1995 -- 849,660 -- 494,203 20,497 --
Chief Financial Officer
Adrianto Machribie 1997 381,250 500,000 320,211(7) 65,000 17,841 --
President Director 1996 287,497 450,000 79,413(7) 5,500 -- --
PT-FI 1995 167,917 100,000 86,235(7) 16,838 -- --
John A. Macken 1997 231,250 450,000 42,616 50,000 -- 29,379(8)
Senior Vice
President
Steven D. Van Nort 1997 196,692 400,000 -- 10,000 26,766 9,809
Senior Vice
President
</TABLE>
- ---------
(1) Prior to January 1, 1996, the Named Executive Officers, other than Mr.
Machribie, were employed by FTX and received salaries from FTX rather than
from the Company.
(2) In addition to items disclosed in notes 4, 5 and 7, includes the Company's
payment of taxes in connection with certain benefits the Company provided
to the Named Executive Officers as follows:
<TABLE>
<CAPTION>
NAME YEAR AMOUNT
---- ---- -------
<S> <C> <C>
Mr. Moffett 1997 $44,909
1996 38,806
Mr. Adkerson 1997 30,568
1996 14,822
Mr. Macken 1997 42,616
</TABLE>
12
<PAGE>
Does not include perquisites that the Company provided to each Named
Executive Officer unless the aggregate amount in any year exceeded $50,000.
(3) Comprised of the Company's contributions to defined contribution plans,
the Company's premium payments for universal life insurance policies and
director fees as follows:
<TABLE>
<CAPTION>
LIFE
PLAN INSURANCE DIRECTOR
NAME YEAR CONTRIBUTIONS PREMIUMS FEES
---- ---- ------------- --------- --------
<S> <C> <C> <C> <C>
Mr. Moffett 1997 $53,477 $25,337 $6,000
1996 53,473 25,502 6,000
1995 -- -- 2,000
Mr. Adkerson 1997 20,077 4,192 --
1996 19,886 1,877 --
Mr. Macken 1997 10,479 -- --
Mr. Van Nort 1997 9,809 -- --
</TABLE>
(4) Includes $142,255 and $122,402 of perquisites that the Company provided to
Mr. Moffett in 1997 and 1996, respectively, consisting of (a) $40,000 of
matching gifts under the matching gifts program in each of 1997 and 1996,
(b) $16,150 and $16,256 for financial counseling and tax return
preparation and certification services in 1997 and 1996, respectively, and
(c) $86,105 and $66,146 for use of the Company's aircraft in 1997 and
1996, respectively.
(5) Includes $61,675 and $63,904 of perquisites that the Company provided to
Mr. Adkerson in 1997 and 1996, respectively, consisting of (a) $40,000 of
matching gifts under the matching gifts program in each of 1997 and 1996,
(b) $21,675 and $3,977 for financial counseling and tax return preparation
and certification services in 1997 and 1996, respectively, and (c) $19,927
for use of the Company's aircraft in 1996.
(6) Includes $6,581 and $6,702 for a scholarship that the Company provided in
1997 and 1996, respectively, for the benefit of Mr. Adkerson's child.
(7) Includes $320,211, $79,413 and $86,235 of perquisites that the Company
provided to Mr. Machribie in 1997, 1996 and 1995, respectively, consisting
of (a) $53,333, $60,000 and $60,000 of principal payments of non-interest
bearing loans to Mr. Machribie from the Company that were forgiven in each
of 1997, 1996 and 1995, respectively, (b) $13,653, $19,413 and $26,235 of
imputed interest in 1997, 1996 and 1995, respectively, on these loans, (c)
$230,948 for use of the Company's house in 1997 and (d) $22,277 for other
perquisites that the Company provided to Mr. Machribie in 1997.
(8) Includes $18,900 for scholarships that the Company provided in 1997 for
the benefit of Mr. Macken's children.
------------------
13
<PAGE>
The following table sets forth information with respect to all stock options
that the Company granted to each of the Named Executive Officers in 1997. No
grants were made to Messrs. Moffett and Adkerson in 1997.
OPTION GRANTS IN 1997
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES PERCENT OF TOTAL
UNDERLYING OPTIONS GRANTED EXERCISE GRANT DATE
OPTIONS TO EMPLOYEES IN OR BASE EXPIRATION PRESENT
NAME GRANTED(1) 1997 PRICE DATE VALUE(2)
---- ---------- ---------------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Adrianto Machribie 65,000 7.6% $29.1875 04/29/07 $672,100
John A. Macken 50,000 5.8% $29.1875 04/29/07 $517,000
Steven D. Van Nort 10,000 1.2% $29.1875 04/29/07 $103,400
</TABLE>
- ---------
(1) The stock options will become exercisable over a four-year period. The
stock options will become immediately exercisable in their entirety if (a)
any person or group of persons acquires beneficial ownership of shares
representing 20% or more of the Company's total voting power or (b) under
certain circumstances, the composition of the Board of Directors is
changed after a tender offer, exchange offer, merger, consolidation, sale
of assets or contested election or any combination thereof. Each stock
option has an equal number of tandem "limited rights," which may be
exercisable only for a limited period in the event of a tender offer,
exchange offer, a series of purchases or other acquisitions or any
combination thereof resulting in a person or group of persons becoming a
beneficial owner of shares representing 40% or more of the Company's total
voting power. Each limited right entitles the holder to receive cash equal
to the amount by which the highest price paid in such transaction exceeds
the exercise price.
(2) The Black-Scholes option pricing model was used to determine the grant
date present value of the stock options granted by the Company to the
Named Executive Officers. Under the Black-Scholes option pricing model,
the grant date present value of each option referred to in the table was
calculated to be $10.34. The following facts and assumptions were used in
making this calculation: (a) an exercise price for each option of
$29.1875; (b) a fair market value of $29.1875 for one Class B Common Share
on the grant date; (c) a dividend yield of 3.08% derived from dividing (i)
$.90, which was the value of the dividend being paid on one Class B Common
Share in 1997, by (ii) the fair market value of one Class B Common Share
on the grant date; (d) a term for such stock options as set forth under
the column labeled "Expiration Date"; (e) a stock volatility of 30.5%,
based on an analysis of weekly closing prices of Class B Common Shares
over a 78-week period; and (f) an assumed risk-free interest rate of
6.94%, this rate being equivalent to the yield on the grant date on a
treasury note with a maturity date comparable to the expiration date of
the options. No other discounts or restrictions related to vesting or the
likelihood of vesting of the options were applied. The resulting grant
date present value for the options was multiplied by the total number of
options granted to each of the Named Executive Officers to determine their
total grant date present values.
------------------
14
<PAGE>
The following table sets forth information with respect to all outstanding
Company stock options and SARs held by each of the Named Executive Officers as
of December 31, 1997, none of which were in-the-money as of that date. None of
the Named Executive Officers exercised stock options or SARs in 1997.
AGGREGATE OPTION/SAR VALUES AT DECEMBER 31, 1997
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED
OPTIONS/SARS AT DECEMBER
31, 1997
-------------------------
NAME EXERCISABLE/UNEXERCISABLE
---- -------------------------
<S> <C>
James R. Moffett 961,873/744,000
Richard C. Adkerson 215,381/221,076
Adrianto Machribie 7,881/ 71,043
John A. Macken 22,593/ 57,924
Steven D. Van Nort 110,566/ 15,668
</TABLE>
The following table sets forth information with respect to all long-term
incentive plan awards made in 1997 by the Company to each of the Named
Executive Officers.
LONG-TERM INCENTIVE PLANS--AWARDS IN 1997
<TABLE>
<CAPTION>
ESTIMATED
PERFORMANCE FUTURE
NUMBER OF OR OTHER PAYOUTS UNDER
SHARES, UNITS PERIOD UNTIL NON-STOCK
OR MATURATION PRICE-BASED
NAME OTHER RIGHTS(1) OR PAYOUT PLANS(2)
---- --------------- ------------ -------------
<S> <C> <C> <C>
James R. Moffett 180,000 12/31/00 $1,044,000
Richard C. Adkerson 100,000 12/31/00 580,000
Adrianto Machribie 25,000 12/31/00 145,000
John A. Macken 25,000 12/31/00 145,000
Steven D. Van Nort 13,200 12/31/00 76,560
</TABLE>
- ---------
(1) Represents the number of performance units covered by the Company's
performance awards granted in 1997 under the 1995 Long-Term Performance
Incentive Plan (the "Long-Term Plan"). As of December 31 of each year,
each Named Executive Officer's performance award account will be credited
with an amount equal to the "annual earnings per share" or "net loss per
share" (as defined in the Long-Term Plan) for that year multiplied by the
number of performance units then credited to such performance award
account. Annual earnings per share or net loss per share includes the net
income or net loss of each majority-owned subsidiary of the Company that
is attributable to equity interests that are not owned by the Company. The
Corporate Personnel Committee may, however, in the exercise of its
discretion, prior to
15
<PAGE>
crediting the Named Executive Officers' performance award accounts with
respect to a particular year, reduce or eliminate the amount of the annual
earnings per share that otherwise would be credited to any performance
award account for such year. The balance in such performance award account
is generally paid as soon as practicable after December 31 of the year in
which the third anniversary of the award occurs.
(2) The amounts represent the annual earnings per share for 1997, as
determined by the Corporate Personnel Committee, applied over a four-year
period.
-----------------
Retirement Benefit Programs. Under the Company's retirement benefit program
and that of a corporation in which the Company owns a 40% equity interest (the
"Services Company"), each participant, including each of the Named Executive
Officers other than Mr. Machribie, who participates in PT-FI's retirement plan
described below, is entitled to benefits based upon the sum of his starting
account balance, annual benefit credits and annual interest credits allocated
to his "account." The starting account balance is equal to the value of the
participant's accrued benefit as of June 30, 1996, under the prior plan. The
annual benefit credit consists of two parts: (1) 4% of the participant's
earnings for the year in excess of the social security wage base for the year;
and (2) a percentage of the participant's total earnings for the year. The
percentage of total earnings is determined as follows:
. 15%, if as of January 1, 1997, the participant's age plus service totaled
65 or more, he was at least 50 years old and had at least 10 years of
service;
. 10%, if as of January 1, 1997, the participant's age plus service totaled
55 or more, he had at least 10 years of service, and he did not meet the
requirements for a 15% allocation;
. 7%, if as of January 1, 1997, the participant's age plus service totaled
45 or more, he had at least 5 years of service, and he did not meet the
requirements for a greater allocation;
. 4%, if the participant did not meet the requirements for a greater
allocation.
The annual interest credit is equal to the account balance at the end of the
prior year multiplied by the annual yield on 10-year U.S. Treasury securities
on the last day of the preceding year. The interest credit was 6.43% for 1997.
Interest credits stop at the end of the year in which the participant reaches
age 60. Upon retirement a participant's account balance is payable either in a
lump sum or an annuity, as selected by the participant. A participant's
"earnings" are comprised of annual base salary (see "Salary" in the Summary
Compensation Table above), plus a percentage of certain bonuses (See "Bonus"
in the Summary Compensation Table above), which percentage is the lesser of
50% or the percentage of the bonus not deferred. Years of service include not
only years with the Company or the Services Company but also any years with
the Company's predecessors.
Benefits payable to a participant under the Company's and the Services
Company's retirement benefit programs are no longer determined primarily by
such individual's final average compensation and years of service. However, if
a participant's age plus service equaled 65 or more as of January 1,
16
<PAGE>
1997, and as of that date the participant had both attained age 50 and had at
least 10 years of service, the participant is "grandfathered" into a benefit
of no less than the benefit under the former retirement benefit formula based
on years of service and final average earnings.
Under PT-FI's retirement plan, each participant, including Mr. Machribie, is
entitled to benefits based upon the participant's years of service and monthly
base salary at the time of retirement. All benefits under the retirement plan
are payable in rupiah, Indonesia's currency. A participant's retirement
benefit is calculated by multiplying 1.5 by the participant's years of service
by the participant's monthly base salary at the time of retirement.
The following is the estimated annual retirement benefit, payable as an
annuity for life, of each of the Named Executive Officers, assuming retirement
at age 60, and allowing for reasonable annual increases in earnings until
retirement: Mr. Moffett, $182,615; Mr. Adkerson, $257,398; Mr. Machribie,
$63,550 (payable in rupiah, translated at current exchange rate); Mr. Van
Nort, $37,424; and Mr. Macken, $195,301.
CORPORATE PERSONNEL COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Corporate Personnel Committee is composed of five independent directors,
none of whom is an officer or employee of the Company or any of its
subsidiaries. The Committee met three times in 1997. The Committee determines
the compensation of the Company's Chief Executive Officer and other executives
("Executive Officers") and administers the Company's annual incentive plan,
performance incentive awards program, long-term incentive plans and stock
option plans.
For 1997 the Committee reviewed the results of a comparison of Company
performance relative to a group of mining companies (the "Peer Group"), which
group is comprised of the companies included in the Dow Jones Other Non-
Ferrous Metals Index and the Dow Jones Precious Metals Index. An independent
executive compensation consultant conducted this review to help the Committee
ensure that overall executive compensation levels relate appropriately to
Company performance when compared to performance of the Peer Group. Provided
below in the section entitled "Annual Cash Awards" is a listing of the
financial performance factors covered in this comparison of Company
performance and a summary of the Company's operational and strategic
accomplishments during 1997 that the Committee considered.
The Committee uses the policies described below as a framework for the
compensation programs in which the Executive Officers participate.
Base Salaries
Base salaries of the Executive Officers are established at appropriate
levels after consideration of each executive's responsibilities and market
salaries for similarly situated Executive Officers in other organizations.
These organizations generally are not included in the Peer Group, but are
organizations whose operational, corporate financing and other activities are
considered comparable to those that the Company accomplished in recent years
under the direction of the Executive Officers. The Company increased base
salaries for certain Executive Officers in 1997 in recognition of
17
<PAGE>
significant changes in their responsibilities during 1997. The Chief Executive
Officer did not receive a base salary increase during 1997.
Annual Cash Awards
The Company's annual incentive plan is designed to provide incentives, in
the form of annual cash awards, to certain Executive Officers whose
performance can have a major impact on the profitability and future growth of
the Company.
Under the terms of the annual incentive plan, in which the Chief Executive
Officer participates, no awards will be made for any year if the five-year
average return on investment (generally, consolidated net income divided by
consolidated stockholders' equity and long-term debt, including the minority
interests' share of subsidiaries' income and stockholders' equity) is less
than 6%. During the five-year period ending in 1997, the average return on
investment was 11.9%. When determining the aggregate awards granted under the
annual incentive plan for 1997, the Committee considered as a guideline 2.5%
of net cash provided by operating activities in 1997, which amount is the
maximum that may be awarded under the annual incentive plan to Executive
Officers whose compensation is subject to the limitation on deductible
compensation imposed by Section 162(m) of the Internal Revenue Code ("Section
162(m)").
The Company's performance incentive awards program is designed to provide
incentives in the form of annual cash awards to certain Executive Officers and
middle managers who do not participate in the annual incentive plan. In 1997,
each participant in the performance incentive awards program was assigned a
guideline amount, expressed as a percentage of the base salary paid to the
participant, which when combined with base salary, was generally designed to
achieve total annual cash compensation substantially equal to 75th percentile
Peer Group levels if Company performance for the year meets expectations.
Actual performance incentive awards will also vary according to individual
performance and may range from zero to a multiple of the guideline amount,
with the result being that the competitive position of total annual cash
compensation for participants in the performance incentive awards program may
vary substantially from year to year depending on performance.
To determine the total amount available for incentive awards in 1997 within
the plan limits and guidelines of both plans described above, the Committee
considered certain Company financial performance factors and operational and
strategic accomplishments achieved in 1997. These performance factors were not
individually weighted.
The financial performance factors included the percentage change in net cash
provided by operating activities over the prior year, the percentage change in
total managed net income (generally, consolidated net income plus the minority
interests' share of subsidiaries' net income) over the prior year, return on
managed equity, and return on investment. Results of these performance factors
for 1997 were compared to the Company's historical results during each of the
last three years, and to the Peer Group's estimated 1997 results and actual
results during the last three years.
18
<PAGE>
Operational and strategic accomplishments of the Company and its
subsidiaries during 1997 considered by the Committee included: (i) increased
annual mill throughput to 128,600 tons per day vs. 126,000 tons per day
budgeted, while recoveries improved to 85.4% for copper and 81.4% for gold vs.
84.6% copper and 76.6% gold budgeted; (ii) realized record production in 1997
of 1.17 billion pounds of copper and 1.80 million ounces of gold vs. budgets
of 1.09 billion pounds of copper and 1.63 million ounces of gold; (iii)
initiated operation of several key projects on time and within budget
including the fabrication and assembly of three 65-megawatt coal power units
to provide lower cost electricity, the erection of 74 miles of dual circuit
transmission lines, the construction of a 100,000 ton per day SAG milling
circuit, and the construction of a 400 ton per day lime plant; (iv) increased
throughput potential from feasibility tonnage of 190,000 tons to 240,000 tons;
(v) restructuring of existing power asset privatization and sale of coal-fired
assets, a total of $550 million; (vi) initiation of the highwall steepening
concept and studies for the Grasberg pit; (vii) additions to the aggregate
proved and probable reserves of the Grasberg and other Block A ore bodies
totaling approximately 204.8 million metric tons of ore representing 5.0
billion recoverable pounds of copper, 9.2 million recoverable ounces of gold,
and 22.3 million recoverable ounces of silver; (viii) quickly and accurately
determined through due diligence efforts that only insignificant amounts of
gold were located in the Busang gold project exploration area, allowing the
Company to withdraw from the project with minimal cash expended and a
strengthened image in the industry as a well-respected mining expert; (ix)
developed water sources and expedited the Grasberg dewatering program so that
the mill could continue to operate during the severe "El Nino" drought in
Irian Jaya; (x) decreased drilling costs by introducing smaller, man-portable
rigs; (xi) made significant improvements at Grasberg to mine planning and ore
control, tire usage and costs, road construction and maintenance, and other
efficiency improvements resulting from introduction of global positioning
systems on trucks, shovels, crushers and dumps; (xii) improved productivity in
underground development activities by 40% over 1996 results; (xiii) made
significant progress with the introduction of remote operated loaders for
safely dealing with wet muck underground; (xiv) received approval from
Indonesia's Minister of Environment for a Regional AMDAL study, which will
permit the expansion of the milling rate up to a maximum of 300,000 tonnes of
ore per day; (xv) the Tailings and River Management Plan levees were
completely closed off by the end of January, 1997; (xvi) maintained near
neutral pH and low copper levels in the Wanagon minesite drainage throughout
1997; (xvii) completed the debottlenecking of the Atlantic Copper smelter to
expand capacity to 290,000 tons of metal per year; established new production
and sales volume records for Atlantic Copper; (xviii) reduced cathode cash
production costs at Atlantic Copper from $0.15 per pound in 1996 to $0.12 per
pound in 1997; (xix) successfully joint-ventured exploration concessions in
Southwest Spain; (xx) the Gresik smelter/refinery construction proceeded
within budget and is on schedule for completion in mid-1998; (xxi) negotiated
a totally restructured 2-year collective labor agreement for non-staff
employees in Irian Jaya; and (xxii) hired over 200 full-time Irianese
employees for ongoing operations, with an additional 1,500 Irianese hired for
the Fourth Concentrator mill expansion project.
19
<PAGE>
After reviewing these performance factors, the Committee concluded that the
Company's overall financial results for 1997 exceeded the estimated 1997 Peer
Group median for the financial factors considered (with the exception of
change in annual cash flow from operations), and that operational and
strategic accomplishments exceeded expectations.
Based on its review, the Committee approved an incentive pool for the annual
incentive plan of 1.6% of net cash provided by operating activities, which is
less than the maximum amount permitted under the plan, and each individual
award under the annual incentive plan for 1997 was below the individual award
maximum. Performance awards for those Executive Officers participating in the
performance incentive awards program in 1997 on average approximated 272% of
their guideline amounts. The specific amounts awarded under the annual
incentive plan and the performance incentive awards program to the Company's
five most highly compensated Executive Officers for 1997, including the Chief
Executive Officer, are as shown in the "Summary Compensation Table."
Stock Option and Long-Term Incentives
Stock option and long-term incentive award guidelines are intended to
provide a significant potential value to reinforce the importance of
shareholder value creation. Award guidelines for these incentives are
expressed as a fixed number of options or units that vary according to the
position level of each participating Executive Officer. The guidelines were
developed originally by the Committee and confirmed by a review of
compensation practices of the Peer Group conducted by an independent executive
compensation consultant. The total value of long-term incentive awards is
generally intended to produce total compensation based on future performance
that exceeds 75th percentile levels of the Peer Group for the Executive
Officers. Stock options are generally emphasized over other long-term
incentive awards.
The Committee encourages Executive Officers to accumulate significant equity
ownership in the Company by granting stock options. The Committee believes
that large periodic stock option awards rather than smaller annual awards
provide a more powerful incentive to Executive Officers to achieve sustained
growth in shareholder value over the long term. Consequently, certain
Executive Officers, including the Chief Executive Officer, who received stock
options in 1996 were not granted stock options in 1997. The exercise price of
a stock option is equal to the fair market value of a share of the Company's
Class B Common Stock on the grant date. The stock options granted to certain
Executive Officers for 1997 are shown in the "Summary Compensation Table."
The Committee supplements stock option grants to Executive Officers with
annual grants of performance units. Performance units are designed to link a
portion of executive compensation to cumulative earnings per share because the
Company believes that sustained profit performance will help support increases
in shareholder value. Each outstanding performance unit is annually credited
with an amount equal to the annual earnings per share as defined in the plan
(generally, consolidated net income (or net loss) per share plus minority
interests' share of net income (or net loss) per share)
20
<PAGE>
generally for a four-year period. These credits are generally paid as soon as
practicable after the end of the four-year period. The performance units
granted to certain Executive Officers for 1997, including the Chief Executive
Officer, are shown in the table entitled "Long-Term Incentive Plans--Awards in
1997."
Section 162(m) limits the tax deduction to $1 million for compensation paid
to its most highly compensated executive officers. Qualified performance based
compensation is excluded from this deduction limitation if certain
requirements are met. The Committee believes that the stock options, annual
incentive awards, and performance units qualify for the exclusion from the
deduction limitation under Section 162(m). The Committee anticipates that the
remaining components of individual executive compensation that do not qualify
for an exclusion from Section 162(m) should not exceed $1 million in any given
year for most Executive Officers, and therefore will qualify for deductibility
in most instances.
Robert W. Bruce III, Chairman George Putnam
William B. Harrison, Jr. J. Taylor Wharton
Gabrielle K. McDonald
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Company's Corporate Personnel Committee are
Messrs. Bruce, Harrison, Putnam and Wharton and Ms. McDonald. In 1997, no
Company executive officer served as a director or member of the compensation
committee of another entity, where an executive officer of the entity served
as a Company director or on the Company's Corporate Personnel Committee.
21
<PAGE>
PERFORMANCE GRAPH
The following graph compares the change in the cumulative total stockholder
return on Class A Common Shares from 1992 to July 1995 at which time the Class
B Common Shares were publicly distributed and began trading on the New York
Stock Exchange, and on Class B Common Shares from July 1995 through December
1997 with the cumulative total return of the Standard & Poor's 500 Stock Index
and the cumulative total return of the Dow Jones Other Non-Ferrous Metals
Group Index from 1993 through 1997.
COMPARISON OF CUMULATIVE TOTAL RETURN*
FREEPORT-MCMORAN COPPER & GOLD INC.,
S & P 500 STOCK INDEX AND DOW JONES
OTHER NON-FERROUS METALS GROUP INDEX
[Graph Appears Here]
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Freeport-McMoRan Copper & Gold
Inc. $100.00 $117.49 $102.39 $139.62 $152.72 $ 83.18
S&P 500 Stock Index $100.00 $110.08 $111.53 $153.45 $188.68 $251.63
Dow Jones Other Non-Ferrous
Metals Group Index $100.00 $ 97.37 $117.62 $123.66 $124.51 $107.94
</TABLE>
ASSUMES $100 INVESTED ON DECEMBER
31, 1992 IN FREEPORT- McMoRan COPPER . FREEPORT-MCMORAN COPPER &
& GOLD INC. CLASS A COMMON STOCK AND GOLD INC.
THE CLASS A COMMON STOCK WAS
EXCHANGED FOR CLASS B COMMON STOCK
IN JULY 1995, S&P 500 STOCK INDEX & [] S&P 500 STOCK INDEX
DOW JONES OTHER NON-FERROUS METALS
GROUP INDEX
* DOW JONES OTHER NON-
* TOTAL RETURN ASSUMES FERROUS METALS GROUP INDEX
REINVESTMENT OF DIVIDENDS
22
<PAGE>
CERTAIN TRANSACTIONS
During 1997, Mr. Rankin received compensation of $87,986 for reimbursement
for a portion of his office rent and the service of an executive secretary
employed by the Services Company. The Services Company and Mr. Rankin are
parties to an agreement, renewable annually, under which Mr. Rankin is
obligated to render services to the Company relating to finance, accounting
and business development and the Services Company provides Mr. Rankin
compensation, medical coverage under the Services Company medical plan, and
reimbursement of taxes in connection with those medical benefits. In 1997, the
Services Company paid Mr. Rankin $56,000 pursuant to this agreement. During
1997, the Services Company and a corporation wholly owned by Mr. Rankin were
parties to an arrangement under which the Services Company and the Company
were entitled to the use of a Cessna Citation V Ultra aircraft in which such
corporation has an interest. Under the arrangement, which terminated in 1997,
the Services Company paid charges, assessments and an annual fee to such
corporation that were directly related to the Company's use of the plane and a
fixed monthly fee. In 1997, the Services Company paid the corporation
$432,820. In addition, in 1997 the Company incurred $81,800 of costs for Mr.
Rankin's use of the Company's aircraft.
Kissinger Associates, Inc. ("Kissinger Associates"), a corporation of which
Mr. Kissinger is Chairman of the Board and the sole stockholder, and the
Services Company are parties to agreements (the "Kissinger Consulting
Agreements") pursuant to which Kissinger Associates provides to the Company
advice and consultation on specified world political, economic, strategic and
social developments affecting the Company's affairs. As compensation for such
services, the Services Company pays Kissinger Associates an annual fee of
$200,000, additional consulting fees based on the services rendered and
reasonable out-of-pocket expenses incurred in connection with providing such
services. In 1997, the Services Company paid Kissinger Associates $250,000 for
all services under the Kissinger Consulting Agreements.
Pursuant to a consulting agreement Mr. Mealey provides consulting services
relating to the Company's businesses, operations and prospects through March
1, 1999. Under this agreement, Mr. Mealey receives an annual fee of $630,000
and reimbursement of reasonable out-of-pocket expenses incurred in connection
with rendering consulting services. Pursuant to this agreement, Mr. Mealey
receives no annual fee for serving on the Board, no Board attendance fees and
no stock options under the 1995 Plan.
In January 1997, the Services Company entered into an agreement with Mr.
Johnston under which Mr. Johnston has agreed to provide consulting services
relating to international relations and commercial matters to the Services
Company and its affiliates, including the Company. Under the agreement, which
is renewable annually, Mr. Johnston receives an annual consulting fee of
$150,000 (which includes Mr. Johnston's annual fee for serving on the
Company's Board) and reimbursement of reasonable out-of-pocket expenses
incurred in connection with providing services.
23
<PAGE>
In December 1997, the Services Company entered into an agreement pursuant to
which Mr. Latiolais will provide consulting services relating to the Company's
businesses, operations, and prospects during 1998. Under this agreement, Mr.
Latiolais will receive an annual fee of $230,000 and reimbursement of
reasonable out-of-pocket expenses incurred in connection with rendering
consulting services. Pursuant to this agreement, Mr. Latiolais receives no
annual fee for serving on the Board, no Board attendance fees and no stock
options under the 1995 Plan.
RATIFICATION OF THE APPOINTMENT OF AUDITORS
The Board of Directors seeks stockholder ratification of the Board's
appointment of Arthur Andersen LLP to act as the independent auditors of the
Company's financial statements and its subsidiaries for the year 1998. The
Board has not determined what, if any, action would be taken should the
appointment of Arthur Andersen LLP not be ratified. One or more
representatives of Arthur Andersen LLP will be available at the Meeting to
respond to appropriate questions, and those representatives will also have an
opportunity to make a statement.
STOCKHOLDER PROPOSAL
Mr. Harold J. Mathis, Jr., P.O. Box 1209, Richmond, Texas 77406, record
owner of 430 Class A Common Shares and 24,154 Class B Common Shares, has
proposed the adoption of the following resolution and has furnished the
following statement in support of his proposal:
RESOLVED: That the stockholders of Freeport-McMoRan Copper and Gold
Inc., assembled in annual meeting in person and by proxy, hereby
request that the Board of Directors take the needed steps to provide
that, at future elections of directors, new directors be elected
annually and not by classes, as is now provided, and that on
expiration of present terms of directors their subsequent election
shall also be on an annual basis.
REASONS
It is my belief that classification of the Board of Directors is
not in the best interest of Freeport-McMoRan Copper and Gold Inc. and
its shareholders. We believe that it makes a Board less accountable
to shareholders when directors do not stand for annual election.
Increasingly, large institutional investors are also taking a
position to end the system of staggered voting. Concerns that the
annual election of directors might destroy continuity or leave the
company without experienced board members are unfounded. A classified
board does protect the incumbency of the board of directors and
current management, which in turn limits accountability to
stockholders.
24
<PAGE>
Corporations currently electing their directors annually include
Compaq Computer, Bank of America, Motorola, AT&T, American Express,
Atlantic Richfield, General Electric, Johnson and Johnson,
Haliburton, Schlumberger, Bankers Trust Co., Hewlett Packard, Exxon,
IBM, General Motors, Litton Industries, Chevron, URS, Chase Manhattan
Corporation, Hollinger International, Revlon and Dillard Department
Stores.
Your support is needed to allow shareholders the opportunity to
register their vote on the performance of all directors annually.
PLEASE MARK YOUR PROXY IN FAVOR OF THIS PROPOSAL.
STATEMENT BY THE BOARD OF DIRECTORS
IN OPPOSITION TO THE STOCKHOLDER PROPOSAL
The Company's Board of Directors is divided into three classes, serving
staggered three-year terms, with one class being elected each year. The
Company is confident that a classified board (that is, one where only a
portion of the board is elected each year) is in the best interests of the
stockholders. In fact, most of the corporations included in the S&P 500 index
currently have classified boards.
The Company believes that the classified board structure assures continuity
and stability of the Company's management and policies, since a majority of
the directors at any given time have prior experience as directors of the
Company. In addition, the Company believes that directors elected for
staggered terms are not any less accountable to stockholders than they would
be if elected annually.
The Company also believes that a classified board reduces the vulnerability
of the Company to certain potentially abusive takeover tactics and encourages
potential acquirors to negotiate with the board. The classified board does not
preclude unsolicited acquisition proposals but, by eliminating the threat of
imminent removal, positions the incumbent board to act to maximize the value
of a potential acquisition to all stockholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE AGAINST THE ADOPTION OF
THE STOCKHOLDER PROPOSAL.
25
<PAGE>
FREEPORT-MCMORAN COPPER & GOLD INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR ANNUAL MEETING OF
STOCKHOLDERS, MAY 5, 1998
The undersigned hereby appoints James R. Moffett, Richard C. Adkerson, and
Michael J. Arnold as proxies, with full power of substitution, to vote the
shares of the undersigned in Freeport-McMoRan Copper & Gold Inc. at the Annual
Meeting of Stockholders to be held on Tuesday, May 5, 1998, at 9:00 a.m., and
at any adjournment thereof, on all matters coming before the meeting. THE
PROXIES WILL VOTE: (1) AS YOU SPECIFY ON THE BACK OF THIS CARD, (2) AS THE
BOARD OF DIRECTORS RECOMMENDS WHERE YOU DO NOT SPECIFY YOUR VOTE ON A MATTER
LISTED ON THE BACK OF THIS CARD, AND (3) AS THE PROXIES DECIDE ON ANY OTHER
MATTER.
If you wish to vote on all matters as the Board of Directors recommends,
please sign, date and return this card. If you wish to vote on items
individually, please also mark the appropriate boxes on the back of this card.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY
IN THE ENCLOSED ENVELOPE
________________________________________________________________________________
(continued on reverse side)
- --------------------------------------------------------------------------------
* FOLD AND DETACH HERE *
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Please mark
your votes as [X]
indicated in
this example
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR: THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST:
FOR WITHHELD FOR AGAINST ABSTAIN
ITEM 1--Election of the nominee for director. [ ] [ ] ITEM 3--Stockholder proposal [ ] [ ] [ ]
Nominee for director of Freeport- regarding the
McMoRan Copper & Gold Inc. classification of the
Leon A. Davis board of directors.
FOR AGAINST ABSTAIN
ITEM 2-- Ratification of appointment of [ ] [ ] [ ]
Arthur Andersen LLP as
independent auditors.
SIGNATURE(S)______________________________________________________________________________________ DATED:_______________1998
YOU MAY SPECIFY YOUR VOTES BY MARKING THE APPROPRIATE BOXES ON THIS SIDE. YOU NEED NOT MARK ANY BOXES, HOWEVER, IF YOU WISH TO
VOTE ALL ITEMS IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATION. IF YOUR VOTES ARE NOT SPECIFIED, THIS PROXY WILL BE
VOTED FOR THE ELECTION OF THE NOMINEE FOR DIRECTOR, FOR PROPOSAL 2 AND AGAINST PROPOSAL 3.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
<PAGE>
FREEPORT-MCMORAN COPPER & GOLD INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR ANNUAL MEETING OF
STOCKHOLDERS, MAY 5, 1998
The undersigned hereby appoints James R. Moffett, Richard C. Adkerson, and
Michael J. Arnold as proxies, with full power of substitution, to vote the
shares of the undersigned in Freeport-McMoRan Copper & Gold Inc. at the Annual
Meeting of Stockholders to be held on Tuesday, May 5, 1998, at 9:00 a.m., and
at any adjournment thereof, on all matters coming before the meeting. THE
PROXIES WILL VOTE: (1) AS YOU SPECIFY ON THE BACK OF THIS CARD, (2) AS THE
BOARD OF DIRECTORS RECOMMENDS WHERE YOU DO NOT SPECIFY YOUR VOTE ON A MATTER
LISTED ON THE BACK OF THIS CARD, AND (3) AS THE PROXIES DECIDE ON ANY OTHER
MATTER.
If you wish to vote on all matters as the Board of Directors recommends,
please sign, date and return this card. If you wish to vote on items
individually, please also mark the appropriate boxes on the back of this card.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
PROMPTLY IN THE ENCLOSED ENVELOPE
_______________________________________________________________________________
(continued on reverse side)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
^ FOLD AND DETACH HERE ^
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Please mark
your votes [X]
as indicated
in this example
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR: THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST:
FOR WITHHELD FOR AGAINST ABSTAIN
ITEM 1--Election of the nominees for directors. [ ] [ ] ITEM 3--Stockholder proposal [ ] [ ] [ ]
Nominees for directors of Freeport-McMoRan regarding the
Copper & Gold Inc. classification of the
James R. Moffett B.M. Rankin, Jr. board of directors.
George Putnam
[ ] FOR, EXCEPT WITHHELD FROM:
______________________________________________________________
(Write nominee name(s) in the space provided above to withhold authority.)
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
ITEM 2-- Ratification of appointment of
Arthur Andersen LLP as
independent auditors.
SIGNATURE(S)_________________________________________________________________________________ DATED:____________________ 1998
YOU MAY SPECIFY YOUR VOTES BY MARKING THE APPROPRIATE BOXES ABOVE. YOU NEED NOT MARK ANY BOXES, HOWEVER, IF YOU WISH TO VOTE ALL
ITEMS IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATION. IF YOUR VOTES ARE NOT SPECIFIED, YOUR SHARES WILL BE VOTED FOR
THE ELECTION OF THE NOMINEES FOR DIRECTORS, FOR PROPOSAL 2 AND AGAINST PROPOSAL 3.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
<PAGE>
DEPOSITARY RECEIPTS EVIDENCING DEPOSITARY SHARES REPRESENTING PREFERRED SHARES
OF
FREEPORT-MCMORAN COPPER & GOLD INC.
VOTING INSTRUCTIONS FOR ANNUAL MEETING OF
STOCKHOLDERS, MAY 5, 1998
The undersigned hereby instructs ChaseMellon Shareholder Services, L.L.C., as
Depositary under the Deposit Agreement pertaining to Depositary Shares (the
"Depositary Shares") representing shares of certain preferred stock (the
"Stock") of Freeport-McMoRan Copper & Gold Inc. (the "Company"), to vote the
shares of Stock represented by Depositary Shares evidenced by Depositary
Receipts issued by the Depositary in the name of the undersigned at the Annual
Meeting of Stockholders to be held on Tuesday, May 5, 1998, at 9:00 a.m., and
at any adjournment thereof, on all matters coming before the meeting with
respect to which the owners of shares of Stock are entitled to vote. THE
DEPOSITARY WILL (1) VOTE AS YOU SPECIFY ON THE BACK OF THIS CARD OR (2) ABSTAIN
FROM VOTING WHERE YOU DO NOT SPECIFY YOUR VOTE ON THE MATTER LISTED ON THE BACK
OF THIS CARD.
PLEASE MARK, SIGN, DATE AND RETURN THIS CARD PROMPTLY
IN THE ENCLOSED ENVELOPE
_______________________________________________________________________
(continued on reverse side)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
^ FOLD AND DETACH HERE ^
<PAGE>
Please mark
your votes [X]
as indicated
in this example
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR:
FOR WITHHELD
ITEM 1--Election of the nominee for director. [ ] [ ]
Nominee for director of Freeport-McMoRan
Copper & Gold Inc.
Leon A. Davis
SIGNATURE(S)_______________________________________________ DATED:________ 1998
YOU MAY SPECIFY YOUR VOTE BY MARKING THE APPROPRIATE BOX ABOVE. IF YOUR VOTE IS
NOT SPECIFIED, YOUR SHARES WILL BE COUNTED AS HAVING ABSTAINED FROM VOTING.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
