<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, 1998
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, 1998, 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, 1998, 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 25, 1999
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. 333-49609 and No. 333-72189) pertaining to the KeyCorp
401(k) Savings Plan of our report dated June 18, 1999, 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, 1998.
/s/ Ernst & Young LLP
Cleveland, Ohio
June 22, 1999
<PAGE> 1
Exhibit 99.1
Audited Financial Statements and
Supplemental Schedules
KEYCORP 401(k) SAVINGS PLAN
Years Ended December 31, 1998 and 1997 with
Report of Independent Auditors
PLAN SPONSOR AND ADMINISTRATOR
KeyCorp
127 Public Square
Cleveland, Ohio 44114-1306
(216) 689-3000
<PAGE> 2
KeyCorp 401(k) Savings Plan
Audited Financial Statements and Supplemental Schedules
December 31, 1998 and 1997
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
Line 27(a)--Schedule of Assets Held for Investment Purposes.................................... 16
Line 27(d)--Schedule of Reportable Transactions................................................ 17
</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, 1998 and 1997, 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, 1998 and 1997, 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 purposes as of December 31, 1998, 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 available 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, 1999
1
<PAGE> 4
KeyCorp 401(k) Savings Plan
Statement of Net Assets Available for Benefits, with Fund Information
December 31, 1998
<TABLE>
<CAPTION>
Money Intermediate Stock
KeyCorp Value Balanced Market Income Index
Stock Fund Fund Fund Fund Fund Fund
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments, at fair value:
KeyCorp common stock (cost
$380,194,160) $916,305,856
Interest in mutual funds and
collective trusts (cost 5,525,718 $299,874,076 $ 94,044,263 $ 88,441,404 $67,947,686 $50,027,610
$542,534,290)
Loans to participants
------------------------------------------------------------------------------------------
Total investments 921,831,574 299,874,076 94,044,263 88,441,404 67,947,686 50,027,610
Receivables:
Contributions:
Employer 1,417,660
Participants 674,435 491,670 206,676 128,132 95,710 195,762
Interest and dividends: 5,869 371,049
Other 248,423 188,185 81,992 649,456 44,837 139,051
------------------------------------------------------------------------------------------
Total receivables 2,346,387 679,855 288,668 1,148,637 140,547 334,813
Cash 600,910
------------------------------------------------------------------------------------------
Total assets 924,778,871 300,553,931 94,332,931 89,590,041 68,088,233 50,362,423
LIABILITIES
ESOP indebtedness 33,754,000
Other liabilities 550,577 679,855 288,668 301 140,547 334,813
------------------------------------------------------------------------------------------
Total liabilities 34,304,577 679,855 288,668 301 140,547 334,813
------------------------------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $890,474,294 $299,874,076 $ 94,044,263 $ 89,589,740 $67,947,686 $50,027,610
==========================================================================================
</TABLE>
<TABLE>
<CAPTION>
Special Convertible
Value Securities Loan
Fund Fund Fund Total
----------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments, at fair value:
KeyCorp common stock (cost
$380,194,160) $ 916,305,856
Interest in mutual funds and
collective trusts (cost $24,389,145 $ 2,165,832 632,415,734
$542,534,290)
Loans to participants $36,864,549 36,864,549
----------------------------------------------------------
Total investments 24,389,145 2,165,832 36,864,549 1,585,586,139
Receivables:
Contributions:
Employer 1,417,660
Participants 120,373 6,112 1,918,870
Interest and dividends: 119,683 496,601
Other 748 516 1,353,208
----------------------------------------------------------
Total receivables 120,373 6,860 120,199 5,186,339
Cash 600,910
----------------------------------------------------------
Total assets 24,509,518 2,172,692 36,984,748 1,591,373,388
LIABILITIES
ESOP indebtedness 33,754,000
Other liabilities 120,373 6,860 505,122 2,627,116
----------------------------------------------------------
Total liabilities 120,373 6,860 505,122 36,381,116
----------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $24,389,145 $ 2,165,832 $36,479,626 $1,554,992,272
==========================================================
</TABLE>
See notes to financial statements.
2
<PAGE> 5
KeyCorp 401(k) Savings Plan
Statement of Net Assets Available for Benefits, with Fund Information
December 31, 1997
<TABLE>
<CAPTION>
Money Intermediate Stock
KeyCorp Value Balanced Market Income Index
Stock Fund Fund Fund Fund Fund Fund
-----------------------------------------------------------------------------------------
<S> <C> <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 $ 71,548,240 $ 90,439,280 $63,097,556 $27,858,306
Loans to participants
-----------------------------------------------------------------------------------------
Total investments 1,028,356,141 260,094,434 71,548,240 90,439,280 63,097,556 27,858,306
Receivables:
Contributions:
Employer 705,555 219,309 84,277 58,876 44,134 45,516
Participants 679,073 522,339 215,170 136,005 101,441 156,809
Interest and dividends 2,992 426,826
Other 1,947,337 123,137 42,619 45,822 62,318 84,235
-----------------------------------------------------------------------------------------
Total receivables 3,334,957 864,785 342,066 667,529 207,893 286,560
Cash 159,978
-----------------------------------------------------------------------------------------
Total assets 1,031,851,076 260,959,219 71,890,306 91,106,809 63,305,449 28,144,866
LIABILITIES
ESOP indebtedness 41,886,000
Other liabilities 1,622,423 864,785 342,065 251,680 207,893 286,560
-----------------------------------------------------------------------------------------
Total liabilities 43,508,423 864,785 342,065 251,680 207,893 286,560
-----------------------------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $ 988,342,653 $260,094,434 $ 71,548,241 $ 90,855,129 $63,097,556 $27,858,306
=========================================================================================
</TABLE>
<TABLE>
<CAPTION>
Special
Value Loan
Fund Fund Total
----------------------------------------------
<S> <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) $25,685,346 544,764,769
Loans to participants $36,574,859 36,574,859
----------------------------------------------
Total investments 25,685,346 36,574,859 1,603,654,162
Receivables:
Contributions:
Employer 40,849 1,198,516
Participants 106,473 1,917,310
Interest and dividends 118,963 548,781
Other 146,576 2,452,044
----------------------------------------------
Total receivables 293,898 118,963 6,116,651
Cash 159,978
----------------------------------------------
Total assets 25,979,244 36,693,822 1,609,930,791
LIABILITIES
ESOP indebtedness 41,886,000
Other liabilities 293,898 507,884 4,377,188
----------------------------------------------
Total liabilities 293,898 507,884 46,263,188
----------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $25,685,346 $36,185,938 $1,563,667,603
==============================================
</TABLE>
See notes to financial statements.
3
<PAGE> 6
KeyCorp 401(k) Savings Plan
Statement of Changes in Net Assets Available for Benefits, with Fund Information
For the Year Ended December 31, 1998
<TABLE>
<CAPTION>
Money Intermediate Stock
KeyCorp Value Balanced Market Income Index
Stock Fund Fund Fund Fund Fund Fund
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Additions to plan assets attributed to:
Investment income:
Common stock dividends $26,990,451
Net investment gain from mutual
funds and collective trusts 1,183,185 $ 46,560,940 $ 7,450,925 $ 4,661,914 $ 3,517,840 $ 1,046,902
Net realized gain and unrealized
appreciation 17,968,078 6,193,456 1,113,669 8,354,940
Interest on participant loans
------------------------------------------------------------------------------------
28,173,636 64,529,018 13,644,381 4,661,914 4,631,509 9,401,842
Contributions:
Employer 32,028,536 3,426,588 1,299,132 813,415 657,769 917,849
Participants 22,476,141 15,265,701 6,240,512 3,967,138 3,044,492 5,249,347
------------------------------------------------------------------------------------
54,504,677 18,692,289 7,539,644 4,780,553 3,702,261 6,167,196
------------------------------------------------------------------------------------
Total additions 82,678,313 83,221,307 21,184,025 9,442,467 8,333,770 15,569,038
Deductions from plan assets attributed to:
Net realized loss and unrealized
depreciation 95,307,973
Participant withdrawals 81,267,519 23,745,186 7,254,898 20,753,088 6,378,334 3,226,263
Interest expense 3,212,563
Administrative and other expenses 586,355
------------------------------------------------------------------------------------
Total deductions 180,374,410 23,745,186 7,254,898 20,753,088 6,378,334 3,226,263
------------------------------------------------------------------------------------
Changes in net assets (97,696,097) 59,476,121 13,929,127 (11,310,621) 1,955,436 12,342,775
Plan mergers 1,286,505 9,551,135 524,296
Interfund transfer in (out) (172,262) (20,982,984) (984,240) 9,520,936 2,894,694 9,826,529
Net assets at beginning of year 988,342,653 260,094,434 71,548,241 90,855,129 63,097,556 27,858,306
------------------------------------------------------------------------------------
NET ASSETS AT END OF YEAR $890,474,294 $ 299,874,076 $94,044,263 $89,589,740 $ 67,947,686 $50,027,610
====================================================================================
</TABLE>
<TABLE>
<CAPTION>
Special
Value Convertible Loan
Fund Securities Fund Total
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Additions to plan assets attributed to:
Investment income:
Common stock dividends $ 26,990,451
Net investment gain from mutual
funds and collective trusts $ 1,116,399 $ 88,252 65,626,357
Net realized gain and unrealized
appreciation 33,630,143
Interest on participant loans $ 3,154,484 3,154,484
---------------------------------------------------------------
1,116,399 88,252 3,154,484 129,401,435
Contributions:
Employer 750,317 4,873 39,898,479
Participants 3,886,031 136,557 60,265,919
---------------------------------------------------------------
4,636,348 141,430 100,164,398
---------------------------------------------------------------
Total additions 5,752,747 229,682 3,154,484 229,565,833
Deductions from plan assets attributed to:
Net realized loss and unrealized
depreciation 3,871,297 223,026 99,402,296
Participant withdrawals 1,983,972 16,960 3,792,679 148,418,899
Interest expense 3,212,563
Administrative and other expenses 586,355
---------------------------------------------------------------
Total deductions 5,855,269 239,986 3,792,679 251,620,113
---------------------------------------------------------------
Changes in net assets (102,522) (10,304) (638,195) (22,054,280)
Plan mergers 1,006,230 1,010,783 13,378,949
Interfund transfer in (out) (2,199,909) 1,165,353 931,883
Net assets at beginning of year 25,685,346 36,185,938 1,563,667,603
---------------------------------------------------------------
NET ASSETS AT END OF YEAR $24,389,145 $ 2,165,832 $36,479,626 $1,554,992,272
===============================================================
</TABLE>
See notes to financial statements.
4
<PAGE> 7
KeyCorp 401(k) Savings Plan
Statement of Changes in Net Assets Available for Benefits, with Fund Information
For the Year Ended December 31, 1997
<TABLE>
<CAPTION>
Money Intermediate Stock
KeyCorp Value Balanced Market Income Index
Stock Fund Fund Fund Fund Fund Fund
----------------------------------------------------------------------------------------
<S> <C> <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 $ 5,455,309 $ 5,043,383 $ 3,822,395 $ 1,684,805
Net realized gain and unrealized
appreciation 299,080,002 34,573,461 5,437,301 607,645 3,005,348
Interest on participant loans
----------------------------------------------------------------------------------------
324,990,403 57,070,548 10,892,610 5,043,383 4,430,040 4,690,153
Contributions:
Employer 19,528,504 6,271,426 2,355,555 1,714,685 1,325,944 886,994
Participants 18,462,479 15,391,907 5,931,955 4,137,382 3,118,514 2,705,595
----------------------------------------------------------------------------------------
37,990,983 21,663,333 8,287,510 5,852,067 4,444,458 3,592,589
----------------------------------------------------------------------------------------
Total additions 362,981,386 78,733,881 19,180,120 10,895,450 8,874,498 8,282,742
Deductions from plan assets attributed to:
Participant withdrawals 68,042,840 20,814,952 6,535,883 23,436,621 7,991,050 1,812,455
Interest expense 3,842,637
Administrative and other expenses 367,405
----------------------------------------------------------------------------------------
Total deductions 72,252,882 20,814,952 6,535,883 23,436,621 7,991,050 1,812,455
----------------------------------------------------------------------------------------
Changes in net assets 290,728,504 57,918,929 12,644,237 (12,541,171) 883,448 6,470,287
Plan mergers 683,220 424,728 2,511,300 93,580 315,739
Interfund transfer in (out) (35,845,663) (5,523,814) 8,001,429 13,757,215 (6,994,661) 12,596,887
Net assets at beginning of year 733,459,812 207,016,099 50,477,847 87,127,785 69,115,189 8,475,393
----------------------------------------------------------------------------------------
NET ASSETS AT END OF YEAR $ 988,342,653 $ 260,094,434 $ 71,548,241 $ 90,855,129 $ 63,097,556 $ 27,858,306
========================================================================================
</TABLE>
<TABLE>
<CAPTION>
Special
Value Loan
Fund Fund Total
--------------------------------------------------------
<S> <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 $ 1,951,001 41,264,314
Net realized gain and unrealized
appreciation 2,292,336 344,996,093
Interest on participant loans $ 3,178,329 3,178,329
--------------------------------------------------------
4,243,337 3,178,329 414,538,803
Contributions:
Employer 770,464 32,853,572
Participants 2,356,476 52,104,308
--------------------------------------------------------
3,126,940 84,957,880
--------------------------------------------------------
Total additions 7,370,277 3,178,329 499,496,683
Deductions from plan assets attributed to:
Participant withdrawals 1,618,422 3,421,470 133,673,693
Interest expense 3,842,637
Administrative and other expenses 367,405
--------------------------------------------------------
Total deductions 1,618,422 3,421,470 137,883,735
--------------------------------------------------------
Changes in net assets 5,751,855 (243,141) 361,612,948
Plan mergers 995,231 5,023,798
Interfund transfer in (out) 11,324,625 2,683,982
Net assets at beginning of year 7,613,635 33,745,097 1,197,030,857
--------------------------------------------------------
NET ASSETS AT END OF YEAR $ 25,685,346 $ 36,185,938 $ 1,563,667,603
========================================================
</TABLE>
See notes to financial statements.
5
<PAGE> 8
KeyCorp 401(k) Savings Plan
Notes to Financial Statements
For the Years Ended December 31, 1998 and 1997
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 of a participating employer are
eligible to participate in the Plan as of their first day of employment with
KeyCorp (the "Plan Sponsor").
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") 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
vested 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.
For pre-tax contributions, participants may not withdraw amounts from their Plan
account prior to attainment of age 59 1/2, separation from service, 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 $5,000. 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, 1998 and 1997.
MUTUAL FUNDS
Closing price as quoted per the Wall Street Journal as of December 31, 1998
and 1997.
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.
LOAN
In the opinion of the Plan Administrator, the outstanding balance
approximates fair value.
7
<PAGE> 10
KeyCorp 401(k) Savings Plan
Notes to Financial Statements--Continued
B. SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
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, or (2)
net realized loss and unrealized depreciation.
Purchases and sales of securities are reflected on a trade-date basis. Gains or
losses on sale of KeyCorp Common Stock are based on the specific cost of
investments sold. Gains or losses on sales of mutual funds and collective trust
funds are based on the average cost per share or per unit at the time of the
sale.
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.
C. PLAN AMENDMENTS AND MERGERS
The Plan was operationally amended and restated as of July 1, 1998, to comply
with the Small Business Job Protection Act of 1996, the Uniformed Servicing
Employment and Re-employment Rights Act of 1994, Tax Payers Relief Act of 1997
and such other changes required by law or deemed advisable by management. In
addition, effective July 1, 1998 the Plan was amended to provide for the
employer match to be in the form of 100% KeyCorp common stock.
Effective April 1, 1998, the Plan introduced the Convertible Securities Fund as
a new investment option.
The Plan was also amended during 1997 to provide for the merger of the following
plans (of companies acquired by KeyCorp or its affiliates) with and into the
Plan:
8
<PAGE> 11
KeyCorp 401(k) Savings Plan
Notes to Financial Statements--Continued
C. PLAN AMENDMENTS AND MERGERS--CONTINUED
Effective December 31, 1997:
o Leasetec Corporation Profit Sharing and Retirement Savings Plan
and Trust
o Spears, Benzak, Salomon & Farrell Salary Deferral Plan
Effective April 1, 1997:
o Knight Insurance Agency, Inc. Savings and Retirement Plan
o Knight Insurance Agency, Inc. and Associated Companies Profit
Sharing Trust
o AutoFinance Group, Inc. 401(k) Savings Plan
o Carleton, McCreary, Holmes & Co. 401(k) Profit Sharing Plan
At the effective merger dates shown above all employed participants in the
merged plans ("Merged Plan") became fully vested in their respective Merged Plan
account balances and began participating in the KeyCorp Plan. Subsequent to the
effective merger dates, all assets of the respective Merged Plans were
transferred to the KeyCorp Plan.
Effective December 31, 1997 the Plan was amended to provide for 100% vesting in
employer contributions to employees of certain divested bank branches and to
certain other separated employees meeting specified conditions, to be effective
as of the date specified in the amendment.
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 of the assets
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.
9
<PAGE> 12
KeyCorp 401(k) Savings Plan
Notes to Financial Statements--Continued
D. INVESTMENTS--CONTINUED
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 seven funds
which hold mutual funds and/or collective investment trust funds: the Value
Fund, the Balanced Fund, the Money Market Fund, the Intermediate Income Fund,
the Stock Index Fund, the Special Value Fund, and the Convertible Securities
Fund. With the exception of the previously mentioned 100% 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.
During the periods ended December 31, 1998 and 1997, the Plan's investments
(including realized gains and losses on investments held for any portion of the
Plan year) (depreciated)/appreciated in fair market value $(65,772,153) and
$344,996,093, respectively as follows:
<TABLE>
<CAPTION>
Net (Depreciation)
Appreciation
in Fair Value Fair Value at
During Year End of Year
----------------------------------------------
<S> <C> <C>
Year ended December 31, 1998:
Fair value as determined by quoted market price:
KeyCorp Stock Fund $ (95,307,973) $ 921,831,574
Value Fund 17,968,078 299,874,076
Balanced Fund 6,193,456 94,044,263
Money Market Fund 88,441,404
Intermediate Income Fund 1,113,669 67,947,686
Stock Index Fund 8,354,940 50,027,610
Special Value Fund (3,871,297) 24,389,145
Convertible Securities Fund (223,026) 2,165,832
Fair value as determined by trustee:
Loan Fund 36,864,549
----------------------------------------------
$ (65,772,153) $ 1,585,586,139
==============================================
</TABLE>
10
<PAGE> 13
KeyCorp 401(k) Savings Plan
Notes to Financial Statements--Continued
D. INVESTMENTS--CONTINUED
<TABLE>
<CAPTION>
Net Appreciation
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
Balanced Fund 5,437,301 71,548,240
Money Market Fund 90,439,280
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
=============================================
</TABLE>
The fair value of investments that represent 5% or more of the Plan's net assets
at December 31, 1998 and 1997, are as follows:
<TABLE>
<CAPTION>
1998 1997
-------------------------------------------
<S> <C> <C>
KeyCorp Common Stock $ 916,305,856 $1,022,314,534
Victory Value Fund 299,874,076 260,094,434
Victory Balance Fund 94,044,263
Victory Institutional Money Market Fund 88,441,404 90,439,280
</TABLE>
11
<PAGE> 14
KeyCorp 401(k) Savings Plan
Notes to Financial Statements--Continued
D. INVESTMENTS--CONTINUED
The total number of units and the net asset value per unit as of December 31,
1998 and 1997, are as follows:
<TABLE>
<CAPTION>
Net Asset Value
Number Per Unit at
of Units End of Year
---------------------------------------------
<S> <C> <C>
Year ended December 31, 1998:
KeyCorp Stock Fund* 12,435,756.521 $ 68.55
Value Fund 17,214,355.655 17.42
Balanced Fund 6,401,923.953 14.69
Money Market Fund 6,606,523.111 13.56
Intermediate Income Fund 6,947,616.140 9.78
Stock Index Fund 101,331.532 493.70
Special Value Fund 1,737,118.598 14.04
Convertible Securities Fund 173,128.044 12.51
</TABLE>
<TABLE>
<CAPTION>
Net Asset Value
Number Per Unit at
of Units End of Year
---------------------------------------------
<S> <C> <C>
Year ended December 31, 1997:
KeyCorp Stock Fund* 12,603,344.398 $ 73.60
Value Fund 15,706,185.605 16.56
Balanced Fund 5,280,312.910 13.55
Money Market Fund 7,065,081.946 12.86
Intermediate Income Fund 6,565,822.644 9.61
Stock Index Fund 2,088,328.808 13.34
Special Value Fund 1,583,560.144 16.22
</TABLE>
* Units disclosed include those units that have already been
assigned to participants and may differ from assets per the
"Statement of Changes in Net Assets" due to the Unallocated Fund
and Forfeiture Fund for which units have not yet been assigned.
12
<PAGE> 15
KeyCorp 401(k) Savings Plan
Notes to Financial Statements--Continued
E. INCOME TAX STATUS
The Internal Revenue Service has ruled that effective January 13, 1998, 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 loan 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 $5,376,000 and $5,083,000 for 1998 and 1997, respectively.
The loan to the ESOP is subject to substantially similar terms as the borrowings
from institutional investors. Under the terms of the loan agreement, the loan
bears interest at 8.404%, and is due in annual installments commencing July 14,
1997, through July 14, 2001, subject to rate increases as described in the
agreement.
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, 1998 and 1997, 631,366 and 600,122 shares of common stock,
respectively, were allocated. At December 31, 1998 and 1997, 2,181,540 and
2,812,906 shares of common stock, respectively, were unallocated.
13
<PAGE> 16
KeyCorp 401(k) Savings Plan
Notes to Financial Statements--Continued
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
1998 and 1997, the Plan received $26,981,294 and $24,840,255, 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 $64,497,405 and $40,343,096 in investment income and capital gains in
1998 and 1997, 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, 1998 and 1997, 1,594,064 and 1,651,956
shares of common stock of KeyCorp were purchased by the Plan for $61,837,801 and
$48,209,302, respectively, and 1,015,086 and 2,610,872 shares of common stock of
KeyCorp were sold by the Plan for $44,450,539 and $74,578,181, respectively.
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 Year 2000 compliant,
computers and the devices they control could generate miscalculations and create
operational problems.
To address this issue, KeyCorp, on behalf of the Plan, developed an extensive
plan, including the formation of a team consisting of internal resources and
third-party experts. The plan, originally developed in 1995, has been in
implementation since that time and consists of five major phases:
awareness-ensuring a common understanding of the issue throughout KeyCorp;
assessment-identifying and prioritizing the systems and third parties with whom
KeyCorp has exposure to Year 2000 issues; renovation-enhancing, replacing or
retiring hardware, software and systems applications; validation-testing
modifications made; and implementation-certifying Year 2000 compliance and user
understanding and acceptance. The awareness and assessment phases have been
completed. The remaining phases are substantially complete and final testing and
refinement will be addressed in 1999. 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.
14
<PAGE> 17
KeyCorp 401(k) Savings Plan
Notes to Financial Statements--Continued
H. YEAR 2000 (UNAUDITED)--CONTINUED
The timing of the project and its completion are based on KeyCorp management's
best estimates, which were derived utilizing 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 availability and cost of personnel trained in this area, the
ability to locate and correct all relevant codes, and similar uncertainties.
15
<PAGE> 18
SUPPLEMENTAL SCHEDULES
<PAGE> 19
KeyCorp 401(k) Savings Plan
Line 27(a)--Schedule of Assets Held for Investment Purposes
December 31, 1998
EIN: 34-6542451 Plan Number: 002
<TABLE>
<CAPTION>
Number
of Shares/ Current
Description of Assets Par Value Cost Value
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
KEYCORP STOCK FUND
* KeyCorp common stock 28,634,558 $ 380,194,160 $ 916,305,856
DTF Short-Term Investment Fund 4,183,663 4,183,663 4,183,663
Collective trust of Key Trust Company of
Ohio, N.A.
** EB Money Market Fund 1,342,055 1,342,055 1,342,055
-------------------------------------------
Total KeyCorp Stock Fund 385,719,878 921,831,574
VALUE FUND
**Victory Value Fund 17,214,356 227,379,152 299,874,076
BALANCED FUND
**Victory Balanced Fund 6,401,924 81,498,736 94,044,263
MONEY MARKET FUND
**Victory Institutional Money
Market Fund 88,441,404 88,441,404 88,441,404
INTERMEDIATE INCOME FUND
**Victory Intermediate Income Fund 6,947,616 66,200,661 67,947,686
STOCK INDEX FUND
Collective trust of Key Trust Company of
Ohio, N.A.
** EB Equity Index Fund 101,332 44,680,532 50,027,610
SPECIAL VALUE FUND
**Victory Special Value Fund 1,737,119 26,456,418 24,389,145
CONVERTIBLE SECURITIES FUND
**Victory Convertible Securities Fund 173,128 2,351,669 2,165,832
LOAN FUND
*Loans to participants 36,864,549 36,864,549
-------------------------------------------
TOTAL ASSETS HELD FOR INVESTMENT $ 922,728,450 $ 1,585,586,139
===========================================
</TABLE>
* Denotes a party-in-interest investment.
** Denotes a party-in-interest investment, managed by KeyCorp's affiliate, Key
Asset Management Inc.
16
<PAGE> 20
KeyCorp 401(k) Savings Plan
Line 27(d)--Schedule of Reportable Transactions
Year Ended December 31, 1998
EIN: 34-6542451 Plan Number: 002
<TABLE>
<CAPTION>
Purchase Cost of
Description Units Price Selling Price Assets Net Gain
- -------------------------------------------------------------------------------------------------------------------------------
CATEGORY (III) - SERIES OF TRANSACTIONS IN EXCESS OF 5 PERCENT OF PLAN ASSETS.
<S> <C> <C> <C> <C> <C>
* KEYCORP COMMON STOCK
53 purchases 1,594,064 $61,837,801
82 sales 1,015,086 $44,450,539 $21,029,970 $23,420,569
DTF SHORT-TERM INVESTMENT FUND
676 purchases 182,224,201 182,224,201
821 sales 183,445,479 183,445,479 183,445,479
** VICTORY VALUE FUND
84 purchases 4,267,128 71,221,549
171 sales 2,758,958 49,409,984 34,363,881 15,046,103
** VICTORY INSTITUTIONAL MONEY
MARKET FUND
171 purchases 78,134,794 78,134,794
194 sales 80,132,671 80,132,671 80,132,671
</TABLE>
The purchase price of securities acquired represented the fair value at the
dates of the above transactions.
There were no category (i), (ii) or (iv) reportable transactions during 1998.
* Denotes a party-in-interest investment.
** Denotes a party-in-interest investment, managed by KeyCorp's affiliate, Key
Asset Management Inc.
17
