EXHIBIT 99.3
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:
EMPLOYEES SAVINGS PLAN
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
Statement 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, Reynolds Metals Company, which
administers the Plan, has duly caused this annual report to be
signed on its behalf by the undersigned hereunto duly authorized.
EMPLOYEES SAVINGS PLAN
By: /s/ F. Robert Newman
---------------------------------
F. Robert Newman
Vice President, Human Resources
Reynolds Metals Company
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 Employees Savings Plan 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
Employees Savings Plan
Statement of Net Assets Available for Plan Benefits, with Fund Information
(Dollars in Thousands)
December 31, 1997
---------------------------------------------------------------------------------------
Fund Information
---------------------------------------------------------------------------
Small
Inter- Capita-
Reynolds Diversified Balanced Interest national lization
Stock Equities Investment Income Equities Equities Loan
Fund Fund Fund Fund Fund Fund Fund Total
---------------------------------------------------------------------------------------
Assets
Investment in Master Trust $1,315 $2,038 $818 $4,676 $175 $637 $438 $10,097
Accrued income 7 - - - - - - 7
Contributions receivable 5 8 5 7 2 2 - 29
---------------------------------------------------------------------------------------
Net assets available for plan benefits $1,327 $2,046 $823 $4,683 $177 $639 $438 $10,133
=======================================================================================
See accompanying notes.
F-3
Employees Savings Plan
Statement of Net Assets Available for Plan Benefits, with Fund Information
(Dollars in Thousands)
December 31, 1996
-------------------------------------------------------------------------------------
Fund Information
---------------------------------------------------------------------------
Small
Inter- Capita-
Reynolds Diversified Balanced Interest national lization
Stock Equities Investment Income Equities Equities Loan
Fund Fund Fund Fund Fund Fund Fund Total
-------------------------------------------------------------------------------------
Assets
Investment in Master Trust $242 $642 $342 $3,875 $70 $150 $255 $5,576
Accrued income 1 - - - - - - 1
Contributions receivable - 7 3 6 1 2 - 19
---------------------------------------------------------------------------------------
Net assets available for plan benefits $243 $649 $345 $3,881 $71 $152 $255 $5,596
=======================================================================================
See accompanying notes.
F-4
Employees Savings Plan
Statement of Changes in Net Assets Available for Plan Benefits, with Fund Information
(Dollars in Thousands)
Year ended December 31, 1997
---------------------------------------------------------------------------------------
Fund Information
---------------------------------------------------------------------------
Small
Inter- Capita-
Reynolds Diversified Balanced Interest national lization
Stock Equities Investment Income Equities Equities Loan
Fund Fund Fund Fund Fund Fund Fund Total
---------------------------------------------------------------------------------------
Additions to net assets:
Net investment gain from
Master Trust (Note 3) $ 101 $ 397 $119 $ 288 $114 $ 33 $ 1,052
Assets transferred from other plans 1,057 334 105 850 $ 35 57 146 2,584
Contributions:
Employer 30 81 41 137 14 25 - 328
Employee 114 335 182 686 66 147 - 1,530
---------------------------------------------------------------------------------------
144 416 223 823 80 172 - 1,858
---------------------------------------------------------------------------------------
Total Additions 1,302 1,147 447 1,961 115 343 179 5,494
Deductions from net assets:
Withdrawals by participants 167 94 52 566 7 14 57 957
Interfund transfers (51) 344 83 (593) (2) 158 61 -
---------------------------------------------------------------------------------------
Net increase 1,084 1,397 478 802 106 487 183 4,537
Net assets available for plan benefits:
Beginning of year 243 649 345 3,881 71 152 255 5,596
---------------------------------------------------------------------------------------
End of year $1,327 $2,046 $823 $4,683 $177 $639 $438 $10,133
=======================================================================================
See accompanying notes.
F-5
Employees Savings Plan
Notes to Financial Statements
December 31, 1997
(Dollars in Thousands)
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 Employees Savings Plan
("Plan") are maintained on the accrual basis. All
securities transactions are recorded as of the trade date.
Investments in Reynolds Metals Company 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 January 1, 1990, covering all eligible employees
of the Company and designated subsidiaries (each an
"Employer") who elect to contribute. 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
on the later of (a) 30 days after beginning their employment
with an Employer, or (b) the date at which their Employer adopts
the Plan. Plan participation is voluntary.
F-6
Employees Savings Plan
Notes to Financial Statements (continued)
2. Summary of Significant Plan Provisions (continued)
A participant may elect to make payroll contributions to the
Plan in specified amounts ranging from 1% to 12% of
compensation in 1% increments. At certain locations, the
Employer will contribute to the Plan on behalf of each
participant a fixed percentage of a portion of the payroll
contributions made by the participant.
Eligible employees who receive a profit-sharing award,
gainsharing payment or other designated type of lump sum
payment are also allowed to contribute between 10% and 50%
of the award and/or payment (in 10% increments) to the Plan.
Such contributions are not matched by the Company or any other
Employer.
Participants may elect to make their contributions on a
before or after tax basis, or a combination thereof.
Employer 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 in order to permit the Plan to satisfy the
nondiscrimination requirements of Section 401(k) of the
Internal Revenue Code.
Participants 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 an intent to do so, the
Company has the right under the Plan document to discontinue
contributions at any time and to terminate the Plan subject
to the provisions of ERISA.
The Company is the Plan administrator and bears the related
costs, except for investment-related and trustee fees, which
are paid by the Plan.
F-7
Employees Savings Plan
Notes to Financial Statements (continued)
3. Commingled Master Trust Investments
All of the investments of the Plan as of December 31, 1997
and 1996 were held in 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. 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.
Substantially all the assets held in the Balanced Investment
Fund and the Diversified Equities Fund are invested in the
Vanguard STAR Fund and the Vanguard Institutional Index
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 of 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 high grade investments held in the name of
the Master Trust in conjunction with a corresponding contract
with the issuer of the SIC to provide a fixed or variable
rate of return (based on investment experience and reset
quarterly) on the cost of the investment. 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 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.
The annual rate of return on these contracts during 1997 and
1996 was 6.3% and 6.3%, respectively. The current yield on
these contracts at December 31, 1997 was 6.3% (6.4% at
December 31, 1996). Interest is credited to participants'
accounts on the dollar-weighted average (blended rate)
basis. 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
Employees Savings Plan
Notes to Financial Statements (continued)
3. Commingled Master Trust Investments (continued)
During 1997 and 1996, 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 transfer.
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 $ 1,327 $ 2,046 $ 823 $ 4,683 $ 177 $ 639 $ 438 $ 10,133
Percent 1% 2% 2% 2% 2% 2% 2% 2%
F-9
Employees Savings Plan
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 $ 243 $ 649 $ 345 $ 3,881 $ 71 $ 152 $ 255 $ 5,596
Percent 1% 1% 1% 2% 1% 1% 1% 1%
F-10
Employees Savings Plan
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
Employees Savings Plan
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 $10,133 $5,596
Amounts allocated to withdrawn
participants 13 11
-------------------
Net assets available for benefits per
the Form 5500 $10,120 $5,585
===================
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 $957
Add: Amounts allocated on Form 5500 to
withdrawn participants in the current year 13
Less: Amounts allocated on Form 5500 to
withdrawn participants in the prior year (11)
---------------
Benefits paid to participants per the Form
5500 $959
===============
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 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. 33-53847) pertaining to the Employees
Savings Plan and in the related Prospectus of our report dated
June 19, 1998, with respect to the financial statements of the
Employees Savings Plan included in this Annual Report (Form 11-K)
for the year ended December 31, 1997.
/s/ ERNST & YOUNG LLP
Richmond, Virginia
June 19, 1998