to KeyCorp’s three business groups appears in the “Line of Business Results” section beginning on page 13 and in Note 4 (“Line of Business Results”), beginning on page 58. In addition to the customary banking services of accepting deposits and making loans, KeyCorp’s bank and trust company subsidiaries provide specialized services, including personal and corporate trust services, personal financial services, customer access to mutual funds, cash management services, investment banking and capital markets products, and international banking services. Through its subsidiary banks, trust company and registered investment adviser subsidiaries, KeyCorp provides investment management services to clients that include large corporate and public retirement plans, foundations and endowments, high net worth individuals and Taft-Hartley plans (i.e., multiemployer trust funds established for providing pension, vacation or other benefits to employees). This section generally reviews the financial condition and results of operations of KeyCorp and its subsidiaries for each of the past three years. Some tables may cover a longer period to comply with disclosure requirements or to illustrate trends in greater depth. When you read this discussion, you should also refer to the consolidated financial statements and related notes that appear on pages 46 through 84. This report contains some shortened names and industry-specific terms. We want to explain some of these terms at the outset so you can better understand the discussion that follows. KeyCorp provides other financial services both inside and outside of its primary banking markets through its nonbank subsidiaries. These services include accident and health insurance on loans made by subsidiary banks, principal investing, community development financing, securities underwriting and brokerage, merchant services and other financial services. Key’s long-term goals are to achieve an annual return on average equity in the range of 16% to 18% and to grow earnings per common share at an annual rate of 7% to 8%. In addition to our long-term goals, this report may contain “forward- looking statements” about other issues like anticipated earnings, anticipated levels of net loan charge-offs and nonperforming assets, and anticipated improvement in profitability and competitiveness. These statements usually can be identified by the use of forward-looking language such as “our goal,” “our objective,” “our plan,” “will likely result,” “will be,” “are expected to,” “as planned,” “is anticipated,” “intends to,” “is projected,” or similar words. Forward-looking statements pertaining to our goals and other matters are subject to assumptions, risks and uncertainties. For a variety of reasons, including the following factors, Key’s actual results could differ materially from those contained in or implied by forward-looking statements. Economic conditions. If the economy or segments of the economy fail to continue to recover, or decline, the demand for new loans and the ability of borrowers to repay outstanding loans may be affected adversely. Interest rates. The extent to which market interest rates change, the direction in which they move and the composition of Key’s interest- earning assets and interest-bearing liabilities could affect its net interest income. Market dynamics. Key’s revenue is susceptible to changes in the markets Key serves, including those resulting from: mergers, acquisitions and consolidations among major clients and competitors; regional and global economic conditions; outsourcing decisions; changes in laws and regulations; and corporate improprieties involving other large companies. At December 31, 2003, KeyCorp was one of the nation’s largest bank- based financial services companies with consolidated total assets of $84.5 billion. KeyCorp’s subsidiaries provide a wide range of retail and commercial banking, commercial leasing, investment management, consumer finance and investment banking products and services to individual, corporate and institutional clients through three major business groups: Consumer Banking, Corporate and Investment Banking and Investment Management Services. As of December 31, 2003, these services were provided across much of the country through subsidiaries operating 906 KeyCenters, a telephone banking call center services group and 2,167 ATMs in 17 states. Additional information pertaining INTRODUCTION Terminology Long-term goals and related factors Description of business • KeyCorp refers solely to the parent holding company. • KBNA refers to Key’s lead bank, KeyBank National Association. • Key refers to the consolidated entity consisting of KeyCorp and its subsidiaries. •A KeyCenter is one of Key’s full-service retail banking facilities or branches. • Key engages in  capital markets activities . These activities encompass a variety of products and services. Among other things, we trade securities as a dealer, enter into derivative contracts (both to accommodate clients’ financing needs and for proprietary trading purposes), and conduct transactions in foreign currencies (both to accommodate clients’ needs and to benefit from fluctuations in exchange rates). • All earnings per share data included in this discussion are presented on a  diluted basis, which takes into account all common shares outstanding as well as potential common shares that could result from the exercise of outstanding stock options. Some of the financial information tables also include  basic earnings per share, which takes into account only common shares outstanding. • For regulatory purposes, capital is divided into two classes. Federal regulations prescribe that at least one-half of a bank or bank holding company’s  total risk-based capital must qualify as  Tier 1 . Both total and Tier 1 capital serve as bases for several measures of capital adequacy, which is an important indicator of financial stability and condition. You will find a more detailed explanation of total and Tier 1 capital and how they are calculated in the section entitled “Capital,” which begins on page 30. MANAGEMENTGLYPH<213>S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS KEYCORP AND SUBSIDIARIES 8 NEXT PAGE PREVIOUS PAGE SEARCH BACK TO CONTENTS