<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 11-K
[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 0-850
KEYCORP 401(K) SAVINGS PLAN
------------------------------------------------------
(Full title of the plan)
KEYCORP
127 PUBLIC SQUARE
CLEVELAND, OHIO 44114
------------------------------------------------------
(Name of issuer of the securities held
pursuant to the plan and the address
of its principal executive office)
<PAGE> 2
KEYCORP
401(K) SAVINGS PLAN
FORM 11-K
REQUIRED INFORMATION
- --------------------
Item 4. Financial Statements and Supplemental Schedules for the Plan.
The KeyCorp 401(k) Savings Plan ("Plan") is subject to the Employee Retirement
Income Security Act of 1974 ("ERISA"). In lieu of the requirements of Items 1-3
of this Form, the Plan is filing financial statements and supplemental schedules
prepared in accordance with the financial reporting requirements of ERISA. The
Plan financial statements and supplemental schedules for the fiscal year ended
December 31, 1997, are included as Exhibit 99.1 to this report on Form 11-K and
are incorporated herein by reference. The Plan financial statements and
supplemental schedules have been examined by Ernst & Young LLP, Independent
Auditors, and their report is included therein.
EXHIBITS
- --------
23.1 Consent of Independent Auditors, Ernst & Young LLP
99.1 Financial statements and supplemental schedules of the KeyCorp 401(k)
Savings Plan for the fiscal year ended December 31, 1997, prepared in
accordance with the financial reporting requirements of ERISA.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the trustees (or
other persons who administer the plan) have duly caused this annual report to be
signed on its behalf by the undersigned hereunto duly authorized.
KeyCorp 401(k) Savings Plan
Date: June 26, 1998
By: /s/Richard V. Mazzola
Richard V. Mazzola
Vice President,
Human Resources
<PAGE> 1
Exhibit 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the KeyCorp Registration
Statements (Form S-8 No. 33-45518, No. 33-46278, No. 33-54819 and No. 333-49609)
pertaining to the KeyCorp 401(k) Savings Plan of our report dated June 22, 1998,
with respect to the financial statements and schedules of the KeyCorp 401(k)
Savings Plan included in this Annual Report (Form 11-K) for the period ended
December 31, 1997.
/s/ Ernst & Young LLP
Cleveland, Ohio
June 22, 1998
<PAGE> 1
Exhibit 99.1
Financial Statements and
Supplemental Schedules
KEYCORP 401(K) SAVINGS PLAN
Years Ended December 31, 1997 and 1996
<PAGE> 2
KeyCorp 401(k) Savings Plan
Financial Statements and Supplemental Schedules
December 31, 1997 and 1996
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors............................................................ 1
FINANCIAL STATEMENTS
Statements of Net Assets Available for Benefits........................................... 2
Statements of Changes in Net Assets Available for Benefits................................ 4
Notes to Financial Statements............................................................. 6
SUPPLEMENTAL SCHEDULES
Supplemental Schedule 27(a)--Schedule of Assets Held for Investment........................ 15
Supplemental Schedule 27(d)--Schedule of Reportable Transactions........................... 16
</TABLE>
<PAGE> 3
Report of Independent Auditors
Compensation and Organization Committee
KeyCorp
We have audited the accompanying statements of net assets available for benefits
of the KeyCorp 401(k) Savings Plan as of December 31, 1997 and 1996, and the
related statements of changes in net assets available for benefits for the years
then ended. These financial statements are the responsibility of the Plan's
management. 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 benefits of the KeyCorp
401(k) Savings Plan at December 31, 1997 and 1996, and the changes in its net
assets available for benefits for the years then ended, in conformity with
generally accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedules of assets
held for investment as of December 31, 1997, and reportable transactions for the
year then ended, are presented for purposes of complying with the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974, and are not a required part of the
financial statements. The fund information in the statements of net assets
available for benefits and the statements of changes in net assets available for
benefits is presented for purposes of additional analysis rather than to present
the net assets available for benefits and changes in net assets avaliable for
benefits of each fund. The supplemental schedules and fund information have been
subjected to the auditing procedures applied in our audits of the financial
statements and, in our opinion, are fairly stated in all material respects in
relation to the financial statements taken as a whole.
/s/ Ernst & Young LLP
Cleveland, Ohio
June 22, 1998
1
<PAGE> 4
KEYCORP 401(K) SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
Money Intermediate
KeyCorp Value Market Balanced Income
Stock Fund Fund Fund Fund Fund
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments, at fair value:
KeyCorp common stock
(cost $346,466,014) $ 1,022,314,534
Interest in mutual funds and
collective trusts (cost
$461,353,403) 6,041,607 $260,094,434 $90,439,280 $71,548,240 $63,097,556
Loans to participants
--------------------------------------------------------------------------------
Total investments 1,028,356,141 260,094,434 90,439,280 71,548,240 63,097,556
Receivables:
Employer contributions 705,555 219,309 58,876 84,277 44,134
Participant contributions 679,073 522,339 136,005 215,170 101,441
Interest and dividends 2,992 426,826
Other 1,947,337 123,137 45,822 42,619 62,318
--------------------------------------------------------------------------------
Total receivables 3,334,957 864,785 667,529 342,066 207,893
Cash 159,978
--------------------------------------------------------------------------------
Total assets 1,031,851,076 260,959,219 91,106,809 71,890,306 63,305,449
LIABILITIES
ESOP indebtedness 41,886,000
Other liabilities 1,622,423 864,785 251,680 342,065 207,893
--------------------------------------------------------------------------------
Total liabilities 43,508,423 864,785 251,680 342,065 207,893
--------------------------------------------------------------------------------
Net assets available for benefits $ 988,342,653 $ 260,094,434 $ 90,855,129 $71,548,241 $ 63,097,556
================================================================================
</TABLE>
<TABLE>
<CAPTION>
Stock Special
Index Value Loan
Fund Fund Fund Total
------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments, at fair value:
KeyCorp common stock
(cost $346,466,014) $1,022,314,534
Interest in mutual funds and
collective trusts (cost
$461,353,403) $ 27,858,306 $25,685,346 544,764,769
Loans to participants $ 36,574,859 36,574,859
------------------------------------------------------------------
Total investments 27,858,306 25,685,346 36,574,859 1,603,654,162
Receivables:
Employer contributions 45,516 40,849 1,198,516
Participant contributions 156,809 106,473 1,917,310
Interest and dividends 118,963 548,781
Other 84,235 146,576 2,452,044
------------------------------------------------------------------
Total receivables 286,560 293,898 118,963 6,116,651
Cash 159,978
------------------------------------------------------------------
Total assets 28,144,866 25,979,244 36,693,822 1,609,930,791
LIABILITIES
ESOP indebtedness 41,886,000
Other liabilities 286,560 293,898 507,884 4,377,188
------------------------------------------------------------------
Total liabilities 286,560 293,898 507,884 46,263,188
------------------------------------------------------------------
Net assets available for benefits $ 27,858,306 $ 25,685,346 $ 36,185,938 $1,563,667,603
==================================================================
</TABLE>
See notes to financial statements.
2
<PAGE> 5
KEYCORP 401(K) SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Money Intermediate
KeyCorp Value Market Balanced Income
Stock Fund Fund Fund Fund Fund
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments, at fair value:
KeyCorp common stock
(cost $338,442,936) $ 774,608,794
Interest in mutual funds and
collective trusts (cost
$384,523,670) 5,607,845 $ 207,017,566 $86,477,309 $50,479,565 $ 69,026,690
Insurance company contract 1,000,000
Loans to participants 93,642
--------------------------------------------------------------------------------
Total investments 781,216,639 207,017,566 86,477,309 50,479,565 69,120,332
Receivables:
Employer contributions 1,120,368 250,406 73,821 92,327 60,586
Participant contributions 699,851 583,609 169,405 217,692 138,399
Interest and dividends 204,148 4,898 380,808 3,400 389
Other 254,607 122,816 52,521 88,974 38,631
--------------------------------------------------------------------------------
Total receivables 2,278,974 961,729 676,555 402,393 238,005
Cash 33,891 389 63
--------------------------------------------------------------------------------
Total assets 783,529,504 207,979,684 87,153,927 50,881,958 69,358,337
LIABILITIES
ESOP indebtedness 48,864,000
Other liabilities 1,205,692 963,585 26,142 404,111 243,148
--------------------------------------------------------------------------------
Total liabilities 50,069,692 963,585 26,142 404,111 243,148
--------------------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $ 733,459,812 $ 207,016,099 $87,127,785 $50,477,847 $ 69,115,189
================================================================================
</TABLE>
<TABLE>
<CAPTION>
Stock Special
Index Value Loan
Fund Fund Fund Total
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments, at fair value:
KeyCorp common stock
(cost $338,442,936) $ 774,608,794
Interest in mutual funds and
collective trusts (cost
$384,523,670) $ 8,475,397 $ 7,613,636 434,698,008
Insurance company contract 1,000,000
Loans to participants $ 34,138,156 34,231,798
-------------------------------------------------------------------
Total investments 8,475,397 7,613,636 34,138,156 1,244,538,600
Receivables:
Employer contributions 18,841 16,197 1,632,546
Participant contributions 45,853 39,601 1,894,410
Interest and dividends 593,643
Other 40,692 33,497 631,738
-------------------------------------------------------------------
Total receivables 105,386 89,295 4,752,337
Cash 291 34,634
-------------------------------------------------------------------
Total assets 8,580,783 7,702,931 34,138,447 1,249,325,571
LIABILITIES
ESOP indebtedness 48,864,000
Other liabilities 105,390 89,296 393,350 3,430,714
-------------------------------------------------------------------
Total liabilities 105,390 89,296 393,350 52,294,714
-------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $ 8,475,393 $ 7,613,635 $ 33,745,097 $ 1,197,030,857
===================================================================
</TABLE>
See notes to financial statements.
3
<PAGE> 6
KEYCORP 401(K) SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Money Intermediate
KeyCorp Value Market Balanced Income
Stock Fund Fund Fund Fund Fund
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Additions to plan assets attributed to:
Investment income:
Common stock dividends $ 25,100,067
Net investment gain from mutual
funds and collective trusts 810,334 $ 22,497,087 $ 5,043,383 $ 5,455,309 $ 3,822,395
Net realized gain and unrealized
appreciation 299,080,002 34,573,461 5,437,301 607,645
Interest on participant loans
------------------------------------------------------------------------------
324,990,403 57,070,548 5,043,383 10,892,610 4,430,040
Contributions:
Employer 19,528,504 6,271,426 1,714,685 2,355,555 1,325,944
Participants 18,462,479 15,391,907 4,137,382 5,931,955 3,118,514
------------------------------------------------------------------------------
37,990,983 21,663,333 5,852,067 8,287,510 4,444,458
------------------------------------------------------------------------------
Total additions 362,981,386 78,733,881 10,895,450 19,180,120 8,874,498
Deductions from plan assets attributed to:
Participant withdrawals 68,042,840 20,814,952 23,436,621 6,535,883 7,991,050
Interest expense 3,842,637
Administrative and other expenses 367,405
------------------------------------------------------------------------------
Total deductions 72,252,882 20,814,952 23,436,621 6,535,883 7,991,050
------------------------------------------------------------------------------
Changes in net assets 290,728,504 57,918,929 (12,541,171) 12,644,237 883,448
Plan mergers 683,220 2,511,300 424,728 93,580
Interfund transfer in (out) (35,845,663) (5,523,814) 13,757,215 8,001,429 (6,994,661)
Net assets at beginning of period 733,459,812 207,016,099 87,127,785 50,477,847 69,115,189
------------------------------------------------------------------------------
NET ASSETS AT END OF PERIOD $988,342,653 $ 260,094,434 $ 90,855,129 $ 71,548,241 $ 63,097,556
==============================================================================
</TABLE>
<TABLE>
<CAPTION>
Stock Special
Index Value Loan
Fund Fund Fund Total
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Additions to plan assets attributed to:
Investment income:
Common stock dividends $ 25,100,067
Net investment gain from mutual
funds and collective trusts $1,684,805 $1,951,001 41,264,314
Net realized gain and unrealized
appreciation 3,005,348 2,292,336 344,996,093
Interest on participant loans $ 3,178,329 3,178,329
-------------------------------------------------------------------
4,690,153 4,243,337 3,178,329 414,538,803
Contributions:
Employer 886,994 770,464 32,853,572
Participants 2,705,595 2,356,476 52,104,308
-------------------------------------------------------------------
3,592,589 3,126,940 84,957,880
-------------------------------------------------------------------
Total additions 8,282,742 7,370,277 3,178,329 499,496,683
Deductions from plan assets attributed to
Participant withdrawals 1,812,455 1,618,422 3,421,470 133,673,693
Interest expense 3,842,637
Administrative and other expenses 367,405
-------------------------------------------------------------------
Total deductions 1,812,455 1,618,422 3,421,470 137,883,735
-------------------------------------------------------------------
Changes in net assets 6,470,287 5,751,855 (243,141) 361,612,948
Plan mergers 315,739 995,231 5,023,798
Interfund transfer in (out) 12,596,887 11,324,625 2,683,982
Net assets at beginning of period 8,475,393 7,613,635 33,745,097 1,197,030,857
-------------------------------------------------------------------
NET ASSETS AT END OF PERIOD $ 27,858,306 $ 25,685,346 $ 36,185,938 $ 1,563,667,603
===================================================================
</TABLE>
See notes to financial statements.
4
<PAGE> 7
KEYCORP 401(K) SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Money Intermediate
KeyCorp Value Market Balanced Income
Stock Fund Fund Fund Fund Fund
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Additions to plan assets attributed to:
Investment income:
Common stock dividends $ 23,760,859
Net investment gain from mutual
funds and collective trusts 1,158,314 $ 3,219,488 $4,187,943 $ 1,265,290 $ 4,551,477
Net realized gain and unrealized
appreciation 222,326,623 34,788,267 4,148,111
Interest on participant loans
------------------------------------------------------------------------------
247,245,796 38,007,755 4,187,943 5,413,401 4,551,477
Contributions:
Employer 23,353,542 6,465,460 1,988,220 2,318,459 1,726,989
Participants 18,925,989 16,088,581 5,045,469 6,211,129 4,123,410
------------------------------------------------------------------------------
42,279,531 22,554,041 7,033,689 8,529,588 5,850,399
------------------------------------------------------------------------------
Total additions 289,525,327 60,561,796 11,221,632 13,942,989 10,401,876
Deductions from plan assets attributed to:
Net realized loss and unrealized
depreciation 999,074
Participant withdrawals 51,456,386 16,110,636 14,116,731 3,317,763 7,810,028
Interest expense 4,662,170
Administrative and other expenses 262,540 1,693
------------------------------------------------------------------------------
Total deductions 56,381,096 16,110,636 14,116,731 3,319,456 8,809,102
------------------------------------------------------------------------------
Changes in net assets 233,144,231 44,451,160 (2,895,099) 10,623,533 1,592,774
Interfund transfer in (out) (29,603,347) 2,035,444 10,834,521 13,094,329 (11,842,813)
Net assets at beginning of period 529,918,928 160,529,495 79,188,363 26,759,985 79,365,228
------------------------------------------------------------------------------
NET ASSETS AT END OF PERIOD $ 733,459,812 $ 207,016,099 $ 87,127,785 $ 50,477,847 $ 69,115,189
==============================================================================
</TABLE>
<TABLE>
<CAPTION>
Stock Special
Index Value Loan
Fund Fund Fund Total
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Additions to plan assets attributed to:
Investment income:
Common stock dividends $ 23,760,859
Net investment gain from mutual
funds and collective trusts $ 81,126 $ 30,954 14,494,592
Net realized gain and unrealized
appreciation 503,266 275,549 262,041,816
Interest on participant loans $ 2,388,367 2,388,367
-----------------------------------------------------------------
584,392 306,503 2,388,367 302,685,634
Contributions:
Employer 140,112 106,974 36,099,756
Participants 500,064 522,345 51,416,987
-----------------------------------------------------------------
640,176 629,319 87,516,743
-----------------------------------------------------------------
Total additions 1,224,568 935,822 2,388,367 390,202,377
Deductions from plan assets attributed to
Net realized loss and unrealized
depreciation 999,074
Participant withdrawals 45,592 87,688 2,911,028 95,855,852
Interest expense 4,662,170
Administrative and other expenses 264,233
-----------------------------------------------------------------
Total deductions 45,592 87,688 2,911,028 101,781,329
-----------------------------------------------------------------
Changes in net assets 1,178,976 848,134 (522,661) 288,421,048
Interfund transfer in (out) 7,296,417 6,765,501 1,419,948
Net assets at beginning of period 32,847,810 908,609,809
-----------------------------------------------------------------
NET ASSETS AT END OF PERIOD $ 8,475,393 $ 7,613,635 $ 33,745,097 $ 1,197,030,857
=================================================================
</TABLE>
See notes to financial statements.
5
<PAGE> 8
KeyCorp 401(k) Savings Plan
Notes to Financial Statements
For the Years Ended December 31, 1997 and 1996
A. DESCRIPTION OF THE PLAN
The following provides only general information regarding the KeyCorp 401(k)
Savings Plan (the "Plan"). Participants should refer to the Plan document or
summary plan description for a more complete description of the Plan's
provisions.
The Plan is a defined contribution plan which contains two primary features. The
portion of the Plan that is attributable to participant contributions is a cash
or deferred arrangement authorized under Section 401(k) of the Internal Revenue
Code of 1986, as amended ("Code"). In addition, as authorized under the
provisions of Section 4975(e)(7) of the Code, the Plan constitutes an employee
stock ownership plan ("ESOP").
Regular full-time and part-time employees are eligible to participate in the
Plan as of their first day of employment with KeyCorp.
Participants make contributions to the Plan by means of payroll deferrals.
Participants can elect to make contributions (pre-tax) from 1% to 10% of their
compensation. KeyCorp matches the contributions dollar-for-dollar up to a
maximum of 6% of compensation ("Matching Contribution"). A minimum of 50% of the
Matching Contribution is in the form of KeyCorp common stock. Matching
Contributions of KeyCorp common stock are made either by releasing shares from
the Plan's ESOP feature or by purchasing such shares in the open market.
In addition, in years of favorable corporate performance, KeyCorp may contribute
to the Plan a profit sharing contribution in such amount as determined by the
Board of Directors. Participants' contributions are currently limited to the
maximum allowable amount under the Code.
A participant's interest in those Matching Contributions allocated to the
participant's Plan Account becomes vested after completion of three years of
vesting service. Plan forfeitures may be used to reduce Matching Contributions,
to resolve claims in respect to benefit payments, to offset administrative
expenses of the Plan or to facilitate stock transactions required for Plan
investment or distribution purposes.
Participants may not withdraw amounts from their Plan account prior to
attainment of age 59 1/2, termination, retirement, death or disability (subject
to special grandfathered distribution provisions).
6
<PAGE> 9
KeyCorp 401(k) Savings Plan
Notes to Financial Statements--Continued
A. DESCRIPTION OF THE PLAN-CONTINUED
The Plan includes a Loan Program, which enables Plan participants to borrow
their vested Plan funds without incurring a taxable distribution from the Plan.
Loans are available to participants on a uniform and nondiscriminatory basis and
are limited to 50% of their vested Plan interest not to exceed $50,000. Upon
termination, participants may receive a distribution of their Plan account
balance in cash, or may elect to have their interest in the KeyCorp Stock Fund
distributed in common stock of KeyCorp. Participants may leave their balance in
the Plan if the balance is greater than $3,500. Upon retirement, the
distribution of benefits to participants is made in either a lump sum payment or
monthly cash installments at the participant's option.
KeyCorp has the right under the Plan to discontinue contributions at any time
and terminate the Plan. In the event of termination of the Plan, the assets of
the Plan will be distributed to the participants based on the amounts in their
respective accounts.
B. SIGNIFICANT ACCOUNTING POLICIES
The accounting records of the Plan are maintained on the accrual basis.
Investments are stated at aggregate fair value which is determined based on the
closing price reported on the last business day of the Plan year as follows:
KEYCORP COMMON STOCK
Closing market price as quoted on the New York Stock Exchange as of
December 31, 1997 and 1996.
MUTUAL FUNDS
Closing price as quoted per the Wall Street Journal as of December 31, 1997
and 1996.
COLLECTIVE TRUST FUNDS
Market values of units held in collective trust funds are determined daily
by the trustee of the funds based on reported redemption values.
7
<PAGE> 10
KeyCorp 401(k) Savings Plan
Notes to Financial Statements--Continued
B. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INSURANCE CONTRACTS
At contract value, which in the opinion of the Plan Administrator
represents fair value.
The change in the difference between fair value and the cost of investments is
reflected in the statements of changes in net assets available for benefits as a
component of either (1) net realized gain and unrealized appreciation, KeyCorp
common stock, or (2) net realized gain and unrealized appreciation
(depreciation), collective trusts and mutual funds.
Purchases and sales of securities are reflected on a trade-date basis. Gains or
losses on sale of securities are based on the specific cost of investments sold.
Dividend income is recorded on the ex-dividend date. Income from other
investments is recorded as earned on the accrual basis.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
On January 15, 1998, KeyCorp announced a two-for-one stock split effected by
means of a 100% stock dividend payable March 6, 1998, to shareholders of record
as of February 18, 1998. All relevant common stock data in this report has been
adjusted to reflect the split.
Certain 1996 amounts have been reclassified to conform to current period
presentation.
C. PLAN AMENDMENTS AND MERGERS
Several plan amendments were adopted in both 1997 and 1996.
Effective December 31, 1997, the Plan was amended to provide for 100% vesting in
employer contributions to employees of certain divested bank branches of an
affiliate and to certain other separated employees meeting specified conditions,
to be effective as of the date specified in the amendment.
8
<PAGE> 11
KeyCorp 401(k) Savings Plan
Notes to Financial Statements--Continued
C. PLAN AMENDMENTS AND MERGERS - CONTINUED
The plan was also amended during 1997 to provide for the merger of the following
plans (of companies acquired by KeyCorp affiliates) with and into the plan:
Effective April 1, 1997:
* Knight Insurance Agency, Inc. Savings and Retirement Plan
* Knight Insurance Agency, Inc. and Associated Companies Profit
Sharing Trust
* AutoFinance Group, Inc. 401(k) Savings Plan
* Carleton, McCreary, Holmes & Co. 401(k) Profit Sharing Plan
Effective December 31, 1997:
* Leasetec Corporation Profit Sharing and Retirement Savings Plan and
Trust
* Spears, Benzak, Salomon & Farrell Salary Deferral Plan
At the effective merger dates shown above all assets of the respective merged
plans ("Merged Plans") were transferred to the KeyCorp Plan. All employed
participants in the Merged Plans became fully vested in their Merged Plan
account balances.
On July 1, 1996, the Plan was amended and restated. The following amendments are
effective:
* The name of the Equity Fund was changed to the Value Fund.
* The name of the Bond Fund was changed to the Intermediate Income
Fund.
* The Special Value Fund and Stock Index Fund were added as
investment options.
9
<PAGE> 12
KeyCorp 401(k) Savings Plan
Notes to Financial Statements--Continued
D. INVESTMENTS
Key Trust Company of Ohio, N.A. ("Key Trust"), an affiliate of KeyCorp, serves
as the trustee for certain assets of the Plan with the balance held in trust by
Wachovia Bank of North Carolina, N.A. Financial information regarding the assets
held by the Plan are included in the accompanying financial statements and in
the table below based on information provided by the trustees.
Upon enrollment, participants direct all of their participant contributions for
investment in one of several funds in 5% increments. Plan participants have the
option to invest in the KeyCorp Stock Fund and/or a combination of six funds
which hold mutual funds and/or collective investment trust funds: the Value
Fund, the Institutional Money Market Fund, the Balanced Fund, the Intermediate
Income Fund, the Stock Index Fund, and the Special Value Fund. With the
exception of the previously mentioned 50% minimum of employer matching
contributions that are invested in the KeyCorp Stock Fund, participants may
reallocate amounts previously invested between investment funds on a daily
basis.
All of the above mentioned mutual funds and collective investment trust funds
are sponsored by affiliates of KeyCorp. The aggregate cost of investment sales
in all of the above collective trust funds is the average cost per share or per
unit at the time of the sale.
During the periods ended December 31, 1997 and 1996, the Plan's investments
(including realized gains and losses on investments held for any portion of the
Plan year) appreciated in fair market value $344,996,093 and $261,042,742,
respectively as follows:
10
<PAGE> 13
KeyCorp 401(k) Savings Plan
Notes to Financial Statements--Continued
D. INVESTMENTS--CONTINUED
<TABLE>
<CAPTION>
Net Appreciation
(Depreciation)
in Fair Value Fair Value at
During Year End of Year
--------------------------------------------
<S> <C> <C>
Year ended December 31, 1997:
Fair value as determined by quoted market price:
KeyCorp Stock Fund $299,080,002 $1,028,356,141
Value Fund 34,573,461 260,094,434
Money Market Fund 90,439,280
Balanced Fund 5,437,301 71,548,240
Intermediate Income Fund 607,645 63,097,556
Stock Index Fund 3,005,348 27,858,306
Special Value Fund 2,292,336 25,685,346
Fair value as determined by trustee:
Loan Fund 36,574,859
--------------------------------------------
$344,996,093 $1,603,654,162
============================================
Year ended December 31, 1996:
Fair value as determined by quoted market price:
KeyCorp Stock Fund $222,326,623 $ 781,216,639
Value Fund 34,788,267 207,017,566
Money Market Fund 86,477,309
Balanced Fund 4,148,111 50,479,565
Intermediate Income Fund (999,074) 69,120,332
Stock Index Fund 503,266 8,475,397
Special Value Fund 275,549 7,613,636
Fair value as determined by trustee:
Loan Fund 34,138,156
---------------------------------------------
$261,042,742 $1,244,538,600
=============================================
</TABLE>
11
<PAGE> 14
KeyCorp 401(k) Savings Plan
Notes to Financial Statements--Continued
D. INVESTMENTS--CONTINUED
The fair value of investments that represent 5% or more of the Plan's net assets
are as follows:
<TABLE>
<CAPTION>
1997 1996
---------------------------------------------
<S> <C> <C>
KeyCorp common stock $1,022,314,534 $774,608,794
Victory Value Fund 260,094,434 207,016,105
Victory Institutional Money Market Fund 90,439,280 86,505,083
Victory Intermediate Income Fund 69,002,100
</TABLE>
E. INCOME TAX STATUS
The Internal Revenue Service has ruled that effective June 11, 1997, the Plan,
as amended, qualified under Section 401(a) of the Internal Revenue Code and
therefore, the related trust is not subject to tax under present income tax
laws.
Participants will not be subject to income tax for contributions made on their
behalf by KeyCorp nor on any money earned by the Plan and credited to their
account until the participants withdraw all or a portion of their accumulative
balance.
F. EMPLOYEE STOCK OWNERSHIP PLAN
The Plan structure includes a leveraged ESOP. The Plan sponsor loaned the
proceeds of funds borrowed from several institutional investors to the ESOP.
These funds were used to purchase shares of KeyCorp's common stock. The ESOP
debt is secured by KeyCorp common stock held by the ESOP trustee. The ESOP will
repay the loans from KeyCorp using corporate contributions made to the Plan on
behalf of participants and dividends on the common stock acquired with the
loans. The amount of dividends received on ESOP shares used for debt service
totaled approximately $5,083,000 and $5,047,000 for 1997 and 1996, respectively.
12
<PAGE> 15
KeyCorp 401(k) Savings Plan
Notes to Financial Statements--Continued
F. EMPLOYEE STOCK OWNERSHIP PLAN--CONTINUED
Except for the repayment schedule, the loans to the ESOP are subject to
substantially similar terms as the borrowings from institutional investors. The
loan agreement consisted of two separate loans, one bearing interest at 8.255%,
due June 26, 1996 (which was paid in full in March 1996), and the other at
8.404%, due in annual installments commencing July 14, 1997, through July 14,
2001, each subject to rate increases as described in the agreements.
The common stock of KeyCorp held by the ESOP was initially classified as
unallocated by the Plan. Shares of common stock are allocated to participants as
KeyCorp elects to make matching contributions from the ESOP. The allocation is
made based on market value at the time of allocation. The related carrying value
is determined based on the original purchase price. During the periods ended
December 31, 1997 and 1996, 600,122 and 470,314 shares of common stock,
respectively, were allocated. At December 31, 1997 and 1996, 2,812,906 and
3,413,028 shares of common stock, respectively, were unallocated.
G. TRANSACTIONS WITH PARTIES-IN-INTEREST
The Plan's trustee, Key Trust, is an affiliate of the plan sponsor. All
investments and transactions are maintained and initiated by the trustee. During
1997 and 1996, the Plan received $24,840,255 and $23,763,251, respectively, in
common stock dividends from shares of KeyCorp. The Plan invests in certain
mutual funds and in certain collective investment funds from which the Plan
received $40,343,096 and $13,316,523 in investment income and $70,119 and
$31,030 of dividend income and capital gains in 1997 and 1996, respectively. Key
Asset Management Inc., an affiliate of the plan sponsor, is the investment
advisor for these collective investment and mutual funds.
During the periods ended December 31, 1997 and 1996, 1,651,956 and 2,951,614
shares of common stock of KeyCorp were purchased by the Plan for $48,209,302 and
$59,191,723, respectively, and 2,610,872 and 3,255,456 shares of common stock of
KeyCorp were sold by the Plan for $74,578,181 and $66,276,498, respectively.
13
<PAGE> 16
KeyCorp 401(k) Savings Plan
Notes to Financial Statements--Continued
H. YEAR 2000 (UNAUDITED)
The Year 2000 issue refers to computer systems that were originally programmed
using two digits rather than four digits to identify the applicable year. When
the Year 2000 occurs, these systems could interpret the Year as 1900 rather than
2000. Unless hardware, system software and applications are corrected to be Year
2000 compliant, computers and the devices they control could generate
miscalculations and create operational problems.
To address this issue, in 1995, KeyCorp developed a comprehensive,
corporate-wide plan to verify Year 2000 compliance across all of its systems,
including those of the Plan. A central team was formed consisting of KeyCorp
internal resources and third-party experts. KeyCorp, on behalf of the Plan,
prioritized the various systems that could be affected by the Year 2000,
including those maintained by the Plan's trustees, business partners and service
providers (internal and third party). Efforts to ensure compliance of core
systems deemed critical have been accelerated. KeyCorp is closely monitoring the
efforts of the Plan's trustees, business partners and service providers to
ensure the potential problem is adequately addressed. KeyCorp expects to
complete substantially all of the necessary work by the end of 1998, allowing
1999 as a year of final testing and refinement. None of the costs associated
with compliance efforts will be borne by the Plan. KeyCorp believes the efforts
described above will ensure the Plan's systems are adequately prepared for the
Year 2000.
The timing of the project and its completion are based on KeyCorp management's
best estimates, which were derived using numerous assumptions of future events,
including the continued availability of certain resources and other factors.
However, there can be no guarantee that these estimates will be achieved and
actual results could differ materially from those anticipated. Specific factors
that might cause such material differences include, but are not limited to the
efforts of the Plan's trustees, business partners and service providers, the
availability and cost of personnel trained in this area, the ability to locate
and correct all relevant system codes, and similar uncertainties.
14
<PAGE> 17
KeyCorp 401(k) Savings Plan
Supplemental Schedule 27(a)--Schedule of Assets Held for Investment
December 31, 1997
<TABLE>
<CAPTION>
Number
of Shares/ Current
Description of Assets Par Value Value Cost
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
KEYCORP STOCK FUND
* KeyCorp common stock 28,873,640 $ 1,022,314,534 $ 346,466,014
DTF Short-Term Investment Fund 5,404,941 5,404,941 5,404,941
Collective trust of Key Trust
Company of Ohio, N.A
**EB Money Market Fund 636,666 636,666 636,666
-------------------------------------------
Total KeyCorp Stock Fund 1,028,356,141 352,507,621
VALUE FUND
**Victory Value Fund 15,706,186 260,094,434 190,521,484
MONEY MARKET FUND
**Victory Institutional Money 90,439,280 90,439,280 90,439,280
Market Fund
BALANCED FUND
**Victory Balanced Fund 5,280,313 $ 71,548,240 $ 63,286,442
INTERMEDIATE INCOME FUND
**Victory Intermediate Income Fund 6,565,823 63,097,556 62,142,936
STOCK INDEX FUND
**Key Stock Index Fund 2,088,329 27,858,306 25,034,623
SPECIAL VALUE FUND
**Victory Special Value Fund 1,583,560 25,685,346 23,887,031
LOAN FUND
Loans to participants 36,574,859 36,574,859 36,574,859
-------------------------------------------
TOTAL ASSETS HELD FOR INVESTMENT $ 1,603,654,162 $844,394,276
===========================================
* Denotes a party-in-interest investment.
** Denotes a party-in-interest investment, managed by KeyCorp's affiliate, Key
Asset Management Inc.
</TABLE>
15
<PAGE> 18
KeyCorp 401(k) Savings Plan
Supplemental Schedule 27(d)--Schedule of Reportable Transactions
Transactions or Series of Transactions
in Excess of 5% of the Current Value of Plan Assets
Period Ended December 31, 1997
<TABLE>
<CAPTION>
Purchase
Description Units Price Selling Price Cost of Net Gain
Assets
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
*KEYCORP COMMON STOCK
53 purchases 1,651,956 $ 48,209,302
160 sales 2,610,872 $ 74,578,181 $ 30,342,991 $ 44,235,190
DTF SHORT-TERM INVESTMENT FUND
280 purchases 127,703,357 127,703,357
415 sales 127,005,470 127,005,470 127,005,470
**VICTORY VALUE FUND
119 purchases 3,322,659 53,577,355
147 sales 2,154,121 35,072,488 24,669,440 10,403,048
**VICTORY INSTITUTIONAL MONEY
MARKET FUND
103 purchases 141,902,428 141,902,428
169 sales 137,960,055 137,960,055 137,960,055
</TABLE>
The purchase price of securities acquired represented the fair value at the
dates of the above transactions.
* Denotes a party-in-interest investment.
** Denotes a party-in-interest investment, managed by KeyCorp's affiliate,
Key Asset Management Inc.
16
