NOTES TO CONSOLIDATED FINANCIAL STATEMENTS KEYCORP AND SUBSIDIARIES 15. STOCK OPTIONS DEFERRED COMPENSATION OBLIGATION “Accounting for Deferred Compensation Arrangements Where Amounts Earned Are Held in a Rabbi Trust and Invested.” Among other things, EITF 97-14, which became effective March 19, 1998, for deferrals after that date, requires that the deferred compensation obligation to be settled by the delivery of shares be classified in equity without any subsequent expense recognition for changes in the market value of the underlying shares. Key did not reclassify its obligation in years prior to 2002, because it was not material. Key maintains various deferred compensation plans, under which employees and directors can defer a portion of their compensation for future distribution. All or a portion of such deferrals will be distributed in the form of KeyCorp common shares. Effective December 31, 2002, Key reclassified its $68 million obligation relating to the portion of deferred compensation payable in KeyCorp common shares from “other liabilities” to “capital surplus” in accordance with EITF 97-14, one year from their grant date and expire no later than 10 years from their grant date. At December 31, 2003, KeyCorp had 2,828,605 common shares available for future grant, compared with 1,680,959 at December 31, 2002.  The following table summarizes activity, pricing and other information about Key’s stock options. Key’s compensation plans allow for the granting of stock options, stock appreciation rights, limited stock appreciation rights, restricted stock, performance shares, discounted stock purchases and certain deferred compensation related awards to eligible employees and directors. Under all of the option plans, exercise prices cannot be less than the fair value of Key’s common stock on the grant date. Generally, options become exercisable at the rate of 33% per year beginning 2003 2002 Weighted-Average Weighted-Average Options Price Per Option Options Price Per Option Outstanding at beginning of year 37,675,931 $25.14 34,246,323 $24.66 Granted 7,697,048 25.65 7,918,780 24.85 Exercised 3,687,143 17.51 2,346,983 16.08 Lapsed or canceled 1,711,442 26.70 2,142,189 26.54 Outstanding at end of year 39,974,394 $25.87 37,675,931 $25.14 Exercisable at end of year 24,271,664 $26.20 16,368,542 $26.45 Weighted-average fair value of options  granted during the year $4.26 $3.95 The following table summarizes the range of exercise prices and other related information pertaining to Key’s stock options at December 31, 2003. Options Outstanding Options Exercisable Range of Weighted- Weighted-Average Weighted- Exercise Number of Average Remaining  Number of Average  Prices Options Price Life (Years) Options Price $10.38-$14.99 884,356 $13.38 1.0 884,356 $13.38 15.00-19.99 4,065,821 17.72 5.1 3,360,071 17.55 20.00-24.99 9,313,577 23.54 7.4 5,166,859 22.75 25.00-29.99 16,857,990 26.66 8.0 6,007,728 27.63 30.00-34.99 8,540,650 31.36 4.6 8,540,650 31.36 35.00-50.00 312,000 43.53 4.8 312,000 43.53 Total 39,974,394 $25.87 6.6 24,271,664 $26.20 included in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Stock-Based Compensation” on page 54. Information pertaining to Key’s method of accounting for employee stock options, including pro forma disclosures of the net income and earnings per share effect of stock options using the “fair value method,” is 72 NEXT PAGE PREVIOUS PAGE SEARCH BACK TO CONTENTS