<PAGE> 1
Exhibit 99.1
AUDITED FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES
KeyCorp 401(k) Savings Plan
Years Ended December 31, 1999 and 1998
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, 1999 and 1998
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.................................................. 3
Notes to Financial Statements............................................................................... 4
SUPPLEMENTAL SCHEDULE
Schedule H, Line 4(i)--Schedule of Assets Held for
Investment Purposes at End of Year....................................................................... 13
Schedule H, Line 4(j)--Schedule of Reportable Transactions................................................... 15
</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, 1999 and 1998, 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 auditing standards generally accepted
in the United States. 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, 1999 and 1998, and the changes in its net
assets available for benefits for the years then ended, in conformity with
accounting principles generally accepted in the United States.
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 at end of year as of December 31, 1999, and
reportable transactions for the year then ended, are presented for purpose of
additional analysis and are not a required part of the financial statements but
are supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. These supplemental schedules are the responsibility of the
Plan's management. The supplemental schedules 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 19, 2000
1
<PAGE> 4
KeyCorp 401(k) Savings Plan
Statement of Net Assets Available for Benefits
<TABLE>
<CAPTION>
DECEMBER 31
1999 1998
----------------------------------------------
<S> <C> <C>
ASSETS
Investments, at fair value:
KeyCorp common stock (cost $407,272,933
and $384,194,160) $ 627,079,760 $ 916,305,856
Interest in mutual funds and collective trusts 655,226,397 632,415,734
(cost $572,022,600 and $542,534,283)
Loans to participants 35,847,797 36,864,549
----------------------------------------------
Total investments 1,318,153,954 1,585,586,139
Receivables:
Contributions:
Employer 1,072,450 1,417,660
Participants 1,143,639 1,918,870
Interest and dividends 501,950 496,601
Other 498,745 1,353,208
----------------------------------------------
Total receivables 3,216,784 5,186,339
Cash 47,952 600,910
----------------------------------------------
Total assets 1,321,418,690 1,591,373,388
LIABILITIES
ESOP indebtedness 23,963,000 33,754,000
Other liabilities 918,614 2,627,116
----------------------------------------------
Total liabilities 24,881,614 36,381,116
----------------------------------------------
Net assets available for benefits $ 1,296,537,076 $ 1,554,992,272
==============================================
</TABLE>
See notes to financial statements.
2
<PAGE> 5
KeyCorp 401(k) Savings Plan
Statement of Changes in Net Assets Available for Benefits
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998
----------------------------------------------
<S> <C> <C>
ADDITIONS TO PLAN ASSETS ATTRIBUTED TO
Investment income:
Common stock dividends $ 31,542,368 $ 26,990,451
Net investment gain from mutual 53,986,263 65,626,357
funds and collective trusts
Net realized gain and unrealized appreciation 73,127,349 33,630,143
Interest on participant loans 3,567,285 3,154,484
----------------------------------------------
162,223,265 129,401,435
Contributions:
Employer 37,588,868 39,898,479
Participants 57,337,890 60,265,919
----------------------------------------------
94,926,758 100,164,398
----------------------------------------------
Total additions 257,150,023 229,565,833
DEDUCTIONS FROM PLAN ASSETS ATTRIBUTED TO
Net realized loss and unrealized depreciation 343,449,117 99,402,296
Participant withdrawals 169,193,248 148,418,899
Interest expense 2,466,410 3,212,563
Administrative and other expenses 496,444 586,355
----------------------------------------------
Total deductions 515,605,219 251,620,113
----------------------------------------------
Changes in net assets (258,455,196) (22,054,280)
Plan mergers 13,378,949
Net assets at beginning of year 1,554,992,272 1,563,667,603
----------------------------------------------
Net assets at end of year $ 1,296,537,076 $ 1,554,992,272
==============================================
</TABLE>
See notes to financial statements.
3
<PAGE> 6
KeyCorp 401(k) Savings Plan
Notes to Financial Statements
For the Years Ended December 31, 1999 and 1998
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).
4
<PAGE> 7
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, 1999 and 1998.
Mutual Funds--Closing price as quoted per the Wall Street Journal as of
December 31, 1999 and 1998.
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.
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.
5
<PAGE> 8
KeyCorp 401(k) Savings Plan
Notes to Financial Statements (continued)
B. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
Certain amounts in the 1998 financial statements have been reclassified to
conform to the 1999 presentation.
C. PLAN AMENDMENTS
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 November 1, 1999, the Plan introduced the Growth Fund, the Small
Company Opportunity Fund and the International Growth Fund as new investment
options.
Effective April 1, 1998, the Plan introduced the Convertible Securities Fund as
a new investment option.
6
<PAGE> 9
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 of the assets
held in trust by Wachovia Bank of North Carolina, N.A.
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 ten 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, the Convertible Securities Fund,
the Growth Fund, the Small Company Opportunity Fund and the International Growth
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.
7
<PAGE> 10
KeyCorp 401(k) Savings Plan
Notes to Financial Statements (continued)
D. INVESTMENTS (CONTINUED)
During the years ended December 31, 1999 and 1998, the Plan's investments
(including realized gains and losses on investments held for any portion of the
Plan year) depreciated in fair market value $270,321,768 and $65,772,153,
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, 1999:
Fair value as determined by quoted
market price:
KeyCorp Stock Fund $ (274,045,658) $ 634,522,058
Value Fund (2,939,481) 295,721,413
Balanced Fund (3,338,804) 90,636,285
Money Market Fund 78,461,586
Intermediate Income Fund (3,705,292) 52,517,437
Stock Index Fund 14,869,386 95,970,525
Special Value Fund (1,730,911) 18,954,895
Convertible Securities Fund (10,493) 2,868,521
Growth Fund 208,886 6,876,157
Small Company Opportunity Fund 52,534 1,098,493
International Growth Fund 318,065 4,678,787
Fair value as determined by trustee:
Loan Fund 35,847,797
----------------------------------------------
$ (270,321,768) $ 1,318,153,954
==============================================
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>
8
<PAGE> 11
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
at December 31, 1999 and 1998, are as follows:
<TABLE>
<CAPTION>
1999 1998
--------------------------------------------
<S> <C> <C>
KeyCorp Common Stock* $ 627,079,760 $ 916,305,856
Victory Value Fund 295,721,413 299,874,076
Stock Index Fund 95,970,525
Victory Balance Fund 90,636,285 94,044,263
Victory Institutional Money Market Fund 78,461,586 88,441,404
</TABLE>
* Nonparticipant-directed.
Information about net assets and the significant components of changes in net
assets related to the nonparticipant-directed investment is as follows:
<TABLE>
<CAPTION>
DECEMBER 31
1999 1998
--------------------------------------------
<S> <C> <C>
Net assets:
KeyCorp Stock Fund $ 613,066,211 $ 890,474,294
============================================
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1999
-------------------------
<S> <C>
Change in net assets:
Contributions $ 54,546,910
Dividends and interest 32,055,707
Other receipts 462,984
Net realized and unrealized depreciation in fair value (274,045,658)
Distributions to participants (70,588,719)
Transfers to participant-directed investments (16,876,449)
Administrative and other expenses (2,962,858)
-------------------------
$ (277,408,083)
=========================
</TABLE>
9
<PAGE> 12
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,
1999 and 1998, are as follows:
<TABLE>
<CAPTION>
Net Asset Value
Number Per Unit at
of Units End of Year
---------------------------------------------
<S> <C> <C>
Year ended December 31, 1999:
KeyCorp Stock Fund* 12,208,182.858 $ 49.24
Value Fund 17,233,182.899 17.16
Balanced Fund 6,414,457.290 14.13
Money Market Fund 5,520,416.023 14.25
Intermediate Income Fund 5,708,417.033 9.20
Stock Index Fund 963,726.874 99.58
Special Value Fund 1,452,482.502 13.05
Convertible Securities Fund 226,402.605 12.67
Growth Fund 270,395.465 25.43
International Growth Fund 259,212.641 18.05
Small Company Opportunity Fund 47,864.504 22.95
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>
* 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.
10
<PAGE> 13
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. Once qualified, the Plan is required to operate in conformity with the
Code to maintain its qualification. The Plan Sponsor has indicated that it will
take the necessary steps, if any, to maintain the Plan's qualified status.
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 $5,558,000 and $5,376,000 for 1999 and 1998, 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 years ended
December 31, 1999 and 1998, 665,615 and 631,366 shares of Common Stock,
respectively, were allocated. At December 31, 1999 and 1998, 1,515,925 and
2,181,540 shares of Common Stock, respectively, were unallocated.
11
<PAGE> 14
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
1999 and 1998, the Plan received $31,542,368 and $26,981,294, 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 $53,439,315 and $64,497,405 in investment income and capital gains in
1999 and 1998, respectively. Key Asset Management Inc., an affiliate of the Plan
Sponsor, is the investment advisor for these collective investment and mutual
funds.
During the years ended December 31, 1999 and 1998, 2,314,159 and 1,594,064
shares of Common Stock of KeyCorp were purchased by the Plan for $65,678,51 and
$61,837,801, respectively, and 1,470,935 and 1,015,086 shares of common stock of
KeyCorp were sold by the Plan for $45,926,707 and $44,450,539, respectively.
12
<PAGE> 15
SUPPLEMENTAL SCHEDULES
<PAGE> 16
KeyCorp 401(k) Savings Plan
EIN: 34-6542451 Plan Number: 002
Schedule H, Line 4(i)--Schedule of Assets Held for
Investment Purposes At End of Year
December 31, 1999
<TABLE>
<CAPTION>
NUMBER OF
SHARES/ CURRENT
DESCRIPTION OF ASSETS PAR VALUE COST VALUE
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
KEYCORP STOCK FUND
*KeyCorp Common Stock 28,342,588 $ 407,272,933 $ 627,079,760
DTF Short-Term Investment Fund 6,058,245 6,058,245 6,058,245
Collective trust of Key Trust Company of Ohio, N.A.
** EB Money Market Fund 1,384,053 1,384,043 1,384,053
-----------------------------------------
Total KeyCorp Stock Fund 414,715,221 634,522,058
VALUE FUND
**Victory Value Fund 17,233,183 295,721,413
BALANCED FUND
**Victory Balanced Fund 6,414,458 90,636,285
MONEY MARKET FUND
**Victory Institutional Money
Market Fund 78,461,586 78,461,586
INTERMEDIATE INCOME FUND
**Victory Intermediate Income Fund 5,708,417 52,517,437
STOCK INDEX FUND
Collective trust of Key Trust Company of Ohio, N.A.
**EB Equity Index Fund 963,727 95,970,525
SPECIAL VALUE FUND
**Victory Special Value Fund 1,452,482 18,954,895
CONVERTIBLE SECURITIES FUND
**Victory Convertible Securities Fund 226,402 2,868,521
GROWTH FUND
**Victory Growth Fund 270,395 6,876,157
</TABLE>
13
<PAGE> 17
KeyCorp 401(k) Savings Plan
EIN: 34-6542451 Plan Number: 002
Schedule H, Line 4(i)--Schedule of Assets Held for
Investment Purposes At End of Year (continued)
<TABLE>
<CAPTION>
NUMBER OF
SHARES/ CURRENT
DESCRIPTION OF ASSETS PAR VALUE COST VALUE
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INTERNATIONAL GROWTH FUND
**Victory International Growth Fund 259,213 4,678,787
SMALL COMPANY OPPORTUNITY FUND
**Victory Small Company Opportunity Fund 47,864 1,098,493
LOAN FUND
*Loans to participants 35,847,797 35,847,797
----------------------
Total assets held for investment $ 1,318,153,954
======================
</TABLE>
* Denotes a party-in-interest investment.
** Denotes a party-in-interest investment, managed by KeyCorp's affiliate, Key
Asset Management Inc.
14
<PAGE> 18
KeyCorp 401(k) Savings Plan
EIN: 34-6542451 Plan Number: 002
Schedule H, Line 4(j)--Schedule of Reportable Transactions
Year Ended December 31, 1999
<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
54 purchases 2,314,159 $ 65,678,517
88 sales 1,470,935 $ 45,926,707 $ 20,837,521 $ 25,089,186
</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 1999.
* Denotes a party-in-interest investment.
15
