EXHIBIT 99.1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 11-K ANNUAL REPORT Pursuant to Section 15(d) of the Securities Exchange Act of 1934 [X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission File Number 1-1430 A. Full title of the plan and the address of the plan, if different from that of the issuer named below: REYNOLDS METALS COMPANY SAVINGS AND INVESTMENT PLAN FOR SALARIED EMPLOYEES B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office: REYNOLDS METALS COMPANY 6601 West Broad Street P. O. Box 27003 Richmond, Virginia 23261-7003 2 REQUIRED INFORMATION FINANCIAL STATEMENTS AND EXHIBITS FINANCIAL STATEMENTS Page No. Report of Independent Auditors........................... F-1 Audited Financial Statements Statements of Net Assets Available for Plan Benefits, with Fund Information.................. F-2 Statement of Changes in Net Assets Available for Plan Benefits, with Fund Information.............. F-4 Notes to Financial Statements........................... F-5 EXHIBITS Exhibit A Consent of Independent Auditors 3 SIGNATURES The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934, the Plan Committee has duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized. REYNOLDS METALS COMPANY SAVINGS AND INVESTMENT PLAN FOR SALARIED EMPLOYEES By: /s/ F. Robert Newman --------------------------------- F. Robert Newman Vice President, Human Resources Reynolds Metals Company and Member, Savings and Investment Plan Committee DATE: June 24, 1998 F-1 Report of Ernst & Young LLP, Independent Auditors Board of Directors Reynolds Metals Company We have audited the accompanying statements of net assets available for plan benefits of the Reynolds Metals Company Savings and Investment Plan for Salaried Employees as of December 31, 1997 and 1996, and the related statement of changes in net assets available for plan benefits for the year ended December 31, 1997. These financial statements are the responsibility of the management of Reynolds Metals Company, the Plan's sponsor. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for plan benefits of the Plan at December 31, 1997 and 1996, and the changes in its net assets available for plan benefits for the year ended December 31, 1997, in conformity with generally accepted accounting principles. Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The Fund Information in the statement of net assets available for plan benefits and the statement of changes in net assets available for plan benefits is presented for purposes of additional analysis rather than to present the net assets available for plan benefits and changes in net assets available for plan benefits of each fund. The Fund Information has been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ ERNST & YOUNG LLP Richmond, Virginia June 19, 1998 F-2 Reynolds Metals Company Savings and Investment Plan for Salaried Employees Statement of Net Assets Available for Plan Benefits, with Fund Information December 31, 1997 (Dollars in Thousands) Fund Information --------------------------------------------------------------------------------- Non- Participant Participant Directed Directed --------------------------------------------------------------------------------- Small Inter- Capita- Reynolds Diversified Balanced Interest national lization Reynolds Stock Equities Investment Income Equities Equities Loan Stock Fund Fund Fund Fund Fund Fund Fund Fund Total -------------------------------------------------------------------------------------------- Assets Investment in Master Trust $76,209 $95,078 $33,492 $92,267 $8,097 $23,919 $10,405 $106,153 $445,620 Accrued income 431 - - - - - - 601 1,032 Contributions receivable 208 62 126 260 54 11 - 355 1,076 -------------------------------------------------------------------------------------------- Net assets available for plan benefits $76,848 $95,140 $33,618 $92,527 $8,151 $23,930 $10,405 $107,109 $447,728 ============================================================================================ See accompanying notes. F-3 Reynolds Metals Company Savings and Investment Plan for Salaried Employees Statement of Net Assets Available for Plan Benefits, with Fund Information December 31, 1996 (Dollars in Thousands) Fund Information --------------------------------------------------------------------------------- Non- Participant Participant Directed Directed --------------------------------------------------------------------------------- Small Inter- Capita- Reynolds Diversified Balanced Interest national lization Reynolds Stock Equities Investment Income Equities Equities Loan Stock Fund Fund Fund Fund Fund Fund Fund Fund Total --------------------------------------------------------------------------------------------- Assets Investment in Master Trust $55,482 $71,995 $27,906 $ 98,504 $7,401 $15,271 $11,327 $103,780 $391,666 Accrued income 340 - - - - - - 637 977 Contributions receivable 107 202 177 137 39 95 - 146 903 Receivable from Executive Life Insurance Company - - - 2,565 - - - - 2,565 --------------------------------------------------------------------------------------------- Total assets 55,929 72,197 28,083 101,206 7,440 15,366 11,327 104,563 396,111 Liabilities Payable to Reynolds Metals Company - - - 2,565 - - - - 2,565 -------------------------------------------------------------------------------------------- Net assets available for plan benefits $55,929 $72,197 $28,083 $ 98,641 $7,440 $15,366 $11,327 $104,563 $393,546 ============================================================================================ See accompanying notes. F-4 Reynolds Metals Company Savings and Investment Plan for Salaried Employees Statement of Changes in Net Assets Available for Plan Benefits, with Fund Information Year Ended December 31, 1997 (Dollars in Thousands) Fund Information --------------------------------------------------------------------------------- Non- Participant Participant Directed Directed --------------------------------------------------------------------------------- Small Inter- Capita- Reynolds Diversified Balanced Interest national lization Reynolds Stock Equities Investment Income Equities Equities Loan Stock Fund Fund Fund Fund Fund Fund Fund Fund Total --------------------------------------------------------------------------------------------- Additions to net assets: Net Investment gain from Master Trust (Note 3): $ 4,535 $24,006 $ 5,927 $ 6,916 $ 221 $ 4,984 $ 944 $ 9,496 $ 57,029 Contributions: Employer - - - - - - - 6,983 6,983 Employee 3,588 6,771 3,219 4,371 1,283 2,660 - - 21,892 --------------------------------------------------------------------------------------------- 3,588 6,771 3,219 4,371 1,283 2,660 - 6,983 28,875 Assets transferred from other plans 11,357 - - - - - - - 11,357 --------------------------------------------------------------------------------------------- Total Additions 19,480 30,777 9,146 11,287 1,504 7,644 944 16,479 97,261 Deductions from net assets: Withdrawals by participants 5,861 6,768 2,287 10,916 722 1,375 788 12,688 41,405 Assets transferred to other plans - 299 78 452 24 30 106 685 1,674 --------------------------------------------------------------------------------------------- Total Deductions 5,861 7,067 2,365 11,368 746 1,405 894 13,373 43,079 Interfund transfers 7,300 (767) (1,246) (6,033) (47) 2,325 (972) (560) - --------------------------------------------------------------------------------------------- Net increase (decrease) 20,919 22,943 5,535 (6,114) 711 8,564 (922) 2,546 54,182 Net assets available for plan benefits: Beginning of year 55,929 72,197 28,083 98,641 7,440 15,366 11,327 104,563 393,546 --------------------------------------------------------------------------------------------- End of year $76,848 $95,140 $33,618 $92,527 $8,151 $23,930 $10,405 $107,109 $447,728 ============================================================================================= See accompanying notes. F-5 Reynolds Metals Company Savings and Investment Plan for Salaried Employees Notes to Financial Statements (Dollars in Thousands) December 31, 1997 1. Significant Accounting Policies The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. The accounting records of the Reynolds Metals Company Savings and Investment Plan for Salaried Employees ("Plan") are maintained on the accrual basis. All securities transactions are recorded as of the trade date. Investments in Reynolds Metals Company Common Stock (stated at fair value) are valued at the last reported sales price on the last business day of the year. Investments in mutual funds are measured by quoted market prices and are reported at aggregate fair value at year-end. Guaranteed investment contracts with insurance companies are reported at "contract value," which equals cost plus accrued income. Structured investment contracts are reported at fair value, which in the case of structured investment contracts equals contract value. 2. Summary of Significant Plan Provisions Reynolds Metals Company (the "Company") established the Plan effective July 1, 1978, covering salaried employees of the Company and certain of its subsidiaries and affiliates. The Plan is a defined contribution plan under the Employee Retirement Income Security Act of 1974 ("ERISA") and qualifies as a "cash or deferred" arrangement under Section 401(k) of the Internal Revenue Code. A complete description of the Plan is contained in the Summary Plan Description and in the Plan document, copies of which are available from the Company. Plan participation is available to eligible employees who have completed 30 days of service and is voluntary. A participant is entitled to make payroll contributions to the Plan in specified amounts ranging from 1% to 16% of compensation in 1% increments. F-6 Reynolds Metals Company Savings and Investment Plan for Salaried Employees Notes to Financial Statements (continued) 2. Summary of Significant Plan Provisions (continued) The Company contributes an amount equal to 50% of each participating employee's payroll contributions up to 6% of compensation. The Company may also contribute up to an additional 50% of each participating employee's payroll contributions up to 6% of compensation. The Company did not elect to make an additional matching contribution for 1997 or 1996. Participants may contribute 1% to 16% (in 1% increments) of any profit sharing award or gainsharing payment received. Such contributions are not matched by the Company. Participants may elect to make their contributions on a before or after tax basis or a combination thereof. Company matching contributions are made on a "pretax" basis. Highly compensated participants may be required to reduce the amount of "pretax" contributions made to or held by the Plan on their behalf to permit the Plan to satisfy the nondiscrimination requirements of Section 401(k) of the Internal Revenue Code. Participants in the Plan are fully vested in their account balances. Withdrawals and distributions are handled in accordance with the Plan provisions and are subject to certain regulatory restrictions. The trustee holds all of the Plan's investment assets and executes transactions therein. Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. The Company is the Plan adminstrator and bears the related costs, except for investment-related and trustee fees, which are paid by the Plan. 3. Commingled Master Trust Investments As of January 1, 1996, all of the assets of the Plan were transferred into a Master Trust under a Master Trust Agreement between Reynolds Metals Company and The Northern Trust Company, as trustee, and are commingled with the assets of three other savings plans of the Company and one of its subsidiaries. All the investments of the Plan were held in the Master Trust as of December 31, 1997 and 1996. Net assets and net investment gains from the Master Trust are allocated to participating plans based on the aggregate account balances of individual participants in each plan. F-7 Reynolds Metals Company Savings and Investment Plan for Salaried Employees Notes to Financial Statements (continued) 3. Commingled Master Trust Investments (continued) Substantially all of the assets held in the Diversified Equities Fund and the Balanced Investment Fund are invested in the Vanguard Institutional Index Fund and the Vanguard STAR Fund, respectively. These are no-load mutual funds held and managed by The Vanguard Group of Investment Companies. Substantially all of the assets held in the International Equities Fund and the Small Capitalization Equities Fund are invested in the T. Rowe Price Foreign Equity Fund and the T. Rowe Price Small-Cap Value Fund, respectively. These are no- load mutual funds held and managed by T. Rowe Price Associates, Inc. The assets held in the Interest Income Fund generally are invested in guaranteed investment contracts ("GICs") at a fixed rate of return and structured investment contracts ("SICs") with various insurance companies and banks. SICs represent a diversified portfolio of high grade investments held in the name of the Plan in conjunction with a corresponding contract with the issuer of the SIC to provide a fixed or variable rate of return (based on the investment experience and reset quarterly) on the cost of the portfolio. GICs and SICs generally provide for the full repayment of principal and interest. Upon the occurrence of certain events (including layoffs by the Company or its applicable affiliates), however, market value of the GIC or SIC, if lower than its book value, may be repaid (a "Market Value Adjustment"). Currently, in the opinion of the Company, the likelihood of a material loss to the Plan as a result of such a Market Value Adjustment is remote. Interest is credited to participants' accounts on the dollar-weighted average (blended rate) basis. The annual rate of return on these contracts during 1997 and 1996 was approximately 6.3% and 6.4%, respectively. The current yield on December 31, 1997 was 6.4% (6.4% on December 31, 1996). The fair value of the Plan's GICs approximates contract value. No individual SIC or GIC exceeded 5% of the Master Trust's assets, except for a SIC with Transamerica Life with a balance of approximately $39,000 at December 31, 1997. Cash and cash equivalents of the Master Trust are invested in a short-term investment fund managed by The Northern Trust Company. F-8 Reynolds Metals Company Savings and Investment Plan for Salaried Employees Notes to Financial Statements (continued) 3. Commingled Master Trust Investments (continued) In April 1991, Executive Life Insurance Company ("Executive Life"), the issuer of one of the guaranteed investment contracts then held by the Plan, was placed into conservator ship. The Company and the Plan entered into an agreement on August 1, 1991, whereby the Company was obligated to provide interest-free loans to the Plan for any amounts due under the guaranteed investment contract which Executive Life failed to pay. As of December 31, 1997, the Company had advanced to the Plan all amounts due under this contract. The Plan is obligated to repay the loans to the extent amounts are subsequently recovered from, or on behalf of, Executive Life, and any remaining balance will be forgiven by the Company. As of December 31, 1997, no additional recoveries from Executive Life are expected. During 1997, certain assets of the Plan were transferred into other plans and from other plans of the Company as a result of employee transfers. There was no effect on any participant's accounts as a result of the transfers. Summarized financial fund information of the commingled accounts within the Master Trust is presented below: Small Inter- Capita- Reynolds Diversified Balanced Interest national lization Stock Equities Investment Income Equities Equities Loan Fund Fund Fund Fund Fund Fund Fund Total --------------------------------------------------------------------------------------- MASTER TRUST NET ASSETS-1997 Assets Accrued Income $ 1,082 $ 1,082 Cash and cash equivalents 2,247 $ 47 $ 11 $ 40,726 $ 6 $ 25 43,062 Contributions receivable 598 195 215 671 79 56 $ 13 1,827 Investments: Common stock 189,068 - - - - - - 189,068 Investment contracts - - - 195,952 - - - 195,952 Mutual funds - 131,723 46,727 - 10,219 34,639 - 223,308 Loans to participants - - - - - - 19,962 19,962 --------------------------------------------------------------------------------------- Master Trust net assets $192,995 $131,965 $46,953 $237,349 $10,304 $34,720 $19,975 $674,261 ======================================================================================= Portion of Master Trust allocable to the Plan $183,957 $ 95,140 $33,618 $ 92,527 $ 8,151 $23,930 $10,405 $447,728 Percent 95% 72% 72% 39% 79% 69% 52% 66% F-9 Reynolds Metals Company Savings and Investment Plan for Salaried Employees Notes to Financial Statements (continued) 3. Commingled Master Trust Investments (continued) Small Inter- Capita- Reynolds Diversified Balanced Interest national lization Stock Equities Investment Income Equities Equities Loan Fund Fund Fund Fund Fund Fund Fund Total --------------------------------------------------------------------------------------- MASTER TRUST NET ASSETS-1996 Assets Accrued Income $ 997 $ 997 Cash and cash equivalents 2,213 $ 48 $ 3 $ 17,070 $ 4 $ 3 19,341 Contributions receivable 259 209 183 143 56 166 1,016 Investments: Common stock 160,346 - - - - - 160,346 Investment contracts - - - 220,145 - - 220,145 Mutual funds - 88,863 36,576 - 8,640 19,993 154,072 Loans to participants - - - - - - $19,326 19,326 --------------------------------------------------------------------------------------- Total assets 163,815 89,120 36,762 237,358 8,700 20,162 19,326 575,243 Liabilities Accounts payable 1 - - 12 - - - 13 --------------------------------------------------------------------------------------- Master Trust net assets $163,814 $89,120 $36,762 $237,346 $8,700 $20,162 $19,326 $575,230 ======================================================================================= Portion of Master Trust allocable to the Plan $160,492 $72,197 $28,083 $ 98,641 $7,440 $15,366 $11,327 $393,546 Percent 98% 81% 76% 42% 86% 76% 59% 68% F-10 Reynolds Metals Company Savings and Investment Plan for Salaried Employees Notes to Financial Statements (continued) 3. Commingled Master Trust Investments (continued) Small Inter- Capita- Reynolds Diversified Balanced Interest national lization Stock Equities Investment Income Equities Equities Loan Fund Fund Fund Fund Fund Fund Fund Total --------------------------------------------------------------------------------------- CHANGES IN MASTER TRUST ASSETS -1997 Additions: Contributions from plans $ 11,682 $ 13,182 $ 5,775 $ 28,736 $ 2,090 $ 4,979 $ 66,444 Net realized and unrealized appreciation (depreciation) of investments 9,977 29,085 6,564 - 109 6,267 52,002 Interest and dividends 4,107 1,976 1,427 15,552 135 549 $ 1,707 25,453 Assets transferred into Master Trust 11,809 - - - - - 25 11,834 --------------------------------------------------------------------------------------- 37,575 44,243 13,766 44,288 2,334 11,795 1,732 155,733 --------------------------------------------------------------------------------------- Deductions: Distributions to plans 19,011 7,595 2,787 23,616 800 1,623 1,270 56,702 Administrative expenses - - - - - - - - --------------------------------------------------------------------------------------- 19,011 7,595 2,787 23,616 800 1,623 1,270 56,702 Interfund transfers-net 10,617 6,197 (788) (20,669) 70 4,386 187 - --------------------------------------------------------------------------------------- Net additions 29,181 42,845 10,191 3 1,604 14,558 649 99,031 Master Trust net assets at beginning of period 163,814 89,120 36,762 237,346 8,700 20,162 19,326 575,230 --------------------------------------------------------------------------------------- Master Trust net assets at end of period $192,995 $131,965 $46,953 $237,349 $10,304 $34,720 $19,975 $674,261 ======================================================================================= F-11 Reynolds Metals Company Savings and Investment Plan for Salaried Employees Notes to Financial Statements (continued) 4. Differences Between Financial Statements and Form 5500 The following is a reconciliation of net assets available for benefits per the financial statements to the Form 5500: December 31, 1997 1996 --------------------- Net assets available for benefits per the financial statements $447,728 $393,546 Amounts allocated to withdrawn participants 870 329 --------------------- Net assets available for benefits per the Form 5500 $446,858 $393,217 ===================== The following is a reconciliation of benefits paid to participants per the financial statements to the Form 5500: Year ended December 31, 1997 -------------- Benefits paid to participants per the financial statements $41,405 Add: Amounts allocated on Form 5500 to withdrawn participants in the current year 870 Less: Amounts allocated on Form 5500 to withdrawn participants in the prior year (329) -------------- Benefits paid to participants per the Form 5500 $41,946 ============== 5. Income Taxes The Internal Revenue Service has determined that the Plan qualifies under Section 401(a) of the Internal Revenue Code (the "Code"). As long as the Plan continues to be qualified, under present Federal income tax laws and regulations participants will not be taxed on employer contributions or investment earnings allocated to their account. Participants will normally be subject to tax thereon at such time as they receive distributions from the Plan. As long as the Plan continues to be qualified, the Plan will not be taxed on its dividend and interest income or on any capital gains realized by it or on any unrealized appreciation of investments. INDEX TO EXHIBITS Exhibit A Consent of Independent Auditors EXHIBIT A CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 33-20498) pertaining to the Reynolds Metals Company Savings and Investment Plan for Salaried Employees and in the related Prospectus of our report dated June 19, 1998, with respect to the financial statements of the Reynolds Metals Company Savings and Investment Plan for Salaried Employees included in this Annual Report (Form 11-K) for the year ended December 31, 1997. /s/ ERNST & YOUNG LLP Richmond, Virginia June 19, 1998