-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CwvyGKie0jCF4HxT0AYGodruZG64fT0C1zY3qoIKipazEqvY4gamNgSKf+ZRqQpI dZVvJWRv7/1T7s13y/nMFA== 0000950152-99-005477.txt : 19990628 0000950152-99-005477.hdr.sgml : 19990628 ACCESSION NUMBER: 0000950152-99-005477 CONFORMED SUBMISSION TYPE: 11-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990625 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KEYCORP /NEW/ CENTRAL INDEX KEY: 0000091576 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 346542451 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 11-K SEC ACT: SEC FILE NUMBER: 001-11302 FILM NUMBER: 99652835 BUSINESS ADDRESS: STREET 1: 127 PUBLIC SQ CITY: CLEVELAND STATE: OH ZIP: 44114-1306 BUSINESS PHONE: 2166896300 MAIL ADDRESS: STREET 1: 127 PUBLIC SQ CITY: CLEVELAND STATE: OH ZIP: 44114-1306 FORMER COMPANY: FORMER CONFORMED NAME: SOCIETY CORP DATE OF NAME CHANGE: 19920703 11-K 1 KEYCORP 401(K) SAVINGS PLAN 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) 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 EX-23.1 2 EXHIBIT 23.1 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 EX-99.1 3 EXHIBIT 99.1 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 2 KeyCorp 401(k) Savings Plan Audited Financial Statements and Supplemental Schedules December 31, 1998 and 1997 CONTENTS 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
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 4 KeyCorp 401(k) Savings Plan Statement of Net Assets Available for Benefits, with Fund Information December 31, 1998
Money Intermediate Stock KeyCorp Value Balanced Market Income Index Stock Fund Fund Fund Fund Fund Fund ------------------------------------------------------------------------------------------ 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 ==========================================================================================
Special Convertible Value Securities Loan Fund Fund Fund Total ---------------------------------------------------------- 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 ==========================================================
See notes to financial statements. 2 5 KeyCorp 401(k) Savings Plan Statement of Net Assets Available for Benefits, with Fund Information December 31, 1997
Money Intermediate Stock KeyCorp Value Balanced Market Income Index Stock Fund Fund Fund Fund Fund Fund ----------------------------------------------------------------------------------------- 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 =========================================================================================
Special Value Loan Fund Fund Total ---------------------------------------------- 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 ==============================================
See notes to financial statements. 3 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
Money Intermediate Stock KeyCorp Value Balanced Market Income Index Stock Fund Fund Fund Fund Fund Fund ------------------------------------------------------------------------------------ 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 ====================================================================================
Special Value Convertible Loan Fund Securities Fund Total --------------------------------------------------------------- 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 ===============================================================
See notes to financial statements. 4 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
Money Intermediate Stock KeyCorp Value Balanced Market Income Index Stock Fund Fund Fund Fund Fund Fund ---------------------------------------------------------------------------------------- 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 ========================================================================================
Special Value Loan Fund Fund Total -------------------------------------------------------- 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 ========================================================
See notes to financial statements. 5 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 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 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 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 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:
Net (Depreciation) Appreciation in Fair Value Fair Value at During Year End of Year ---------------------------------------------- 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 ==============================================
10 13 KeyCorp 401(k) Savings Plan Notes to Financial Statements--Continued D. INVESTMENTS--CONTINUED
Net Appreciation in Fair Value Fair Value at During Year End of Year --------------------------------------------- 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 =============================================
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:
1998 1997 ------------------------------------------- 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
11 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:
Net Asset Value Number Per Unit at of Units End of Year --------------------------------------------- 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
Net Asset Value Number Per Unit at of Units End of Year --------------------------------------------- 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
* 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 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 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 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 18 SUPPLEMENTAL SCHEDULES 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
Number of Shares/ Current Description of Assets Par Value Cost Value - -------------------------------------------------------------------------------------------------------------- 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 ===========================================
* Denotes a party-in-interest investment. ** Denotes a party-in-interest investment, managed by KeyCorp's affiliate, Key Asset Management Inc. 16 20 KeyCorp 401(k) Savings Plan Line 27(d)--Schedule of Reportable Transactions Year Ended December 31, 1998 EIN: 34-6542451 Plan Number: 002
Purchase Cost of Description Units Price Selling Price Assets Net Gain - ------------------------------------------------------------------------------------------------------------------------------- CATEGORY (III) - SERIES OF TRANSACTIONS IN EXCESS OF 5 PERCENT OF PLAN ASSETS. * 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
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 -----END PRIVACY-ENHANCED MESSAGE-----