<PAGE> 1
[KEYNOTE SERIES ACCOUNT LOGO]
---------------------------------
MUTUAL OF NEW YORK
---------------------------------
ANNUAL REPORT
DECEMBER 31, 1997
<PAGE> 2
THIS REPORT IS NOT TO BE CONSTRUED AS AN OFFERING FOR SALE OF ANY CONTRACTS
PARTICIPATING IN THE KEYNOTE SERIES ACCOUNT, OR AS A SOLICITATION AS AN OFFER TO
BUY ANY CONTRACTS UNLESS PRECEDED BY OR ACCOMPANIED BY A CURRENT PROSPECTUS
WHICH CONTAINS THE COMPLETE INFORMATION OF CHARGES AND EXPENSES.
<PAGE> 3
MONY SERIES FUND, INC.
Dear Shareholder,
The turmoil in Southeast Asia, which began during the fourth quarter, has
become the major market influence of the moment. The crisis is still developing
with new problems surfacing daily, and the extent is still to be determined.
Many remedies are being put forward, but the problems vary from country to
country and no one solution fits all. Time will be required as well as money,
and no near term resolution is expected.
The risks have increased as a result of the problems in Southeast Asia. In
general the initial impact on the U.S. economy is somewhat positive: growth will
be slower, and inflation and interest rates lower than they would have been.
Investors had been concerned that if growth were too fast, wages would begin to
increase rapidly and inflation would rise, which would cause the Federal Reserve
to tighten the money supply. This seems much less likely now, at least in the
near term, and thus the economic outlook is favorable -- there is neither
recession nor boom in the immediate future.
This outlook should be favorable for financial assets, and it is, but
mostly for bonds which have already rallied strongly. For the stock market, the
benefits are mixed, and the question is whether the favorable effects of lower
interest rates offset the unfavorable effects of lower earnings. (Many valuation
models use a tradeoff between interest rates and earnings to determine fair
value.) The same conditions that are positive for interest rates will put
pressure on earnings. Slower growth will mean lower revenues, lack of pricing
power will inhibit price increases, companies will put pressure on suppliers to
hold costs down, but falling unemployment will put upward pressure on
compensation. The result is that corporate earnings will be squeezed, earnings
growth will be positive but will be slower than in recent years.
The combination of still developing Asian problems, relatively high
valuations and slower earnings growth makes the environment for stocks less
attractive. As the year goes on and the Asian crisis unfolds, it is likely that
a number of unforeseen negatives will surface both for the economy and for
individual companies. There are many interrelated links that are unknown now,
but will likely become evident as companies begin to see the impact of the
turmoil on their business. All these factors argue for a less ebullient stock
market in 1998. On the positive side is the relatively stable economy, lower
interest rates, the stronger dollar and the idea of the U.S. as a safe haven for
investors. These positive factors should contain the expected market correction
and keep it from turning into something worse.
The MONY Series Fund, Inc. has conducted a comprehensive review of the
computer systems used in connection with the portfolios. The Fund is addressing
the Year 2000 issues by modifying existing software and converting to an
accounting system that is Year 2000 compliant. The costs to remedy these issues
are being borne by the Investment Adviser. As a result, the Fund does not expect
the Year 2000 issue to pose a material adverse effect to its operations and
financial condition.
Sincerely,
/s/ KENNETH M. LEVINE
Kenneth M. Levine
Chairman
1
<PAGE> 4
KEYNOTE SERIES ACCOUNT
STATEMENTS OF ASSETS AND LIABILITIES December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
IVA SUBACCOUNT
--------------------------------------
TAX NON-TAX VARIABLE
QUALIFIED QUALIFIED PAYOUTS
----------- ---------- -------
<S> <C> <C> <C>
ASSETS
Investments at cost (Note 4)............................ $ 8,622,983 $2,123,084 $38,302
=========== ========== =======
Investments in MONY Series Fund, Inc. at net asset
value (Note 2)................................... $14,411,301 $3,553,530 $38,402
Amount due from MONY............................... 0 0 27,210
----------- ---------- -------
Total assets............................................ 14,411,301 3,553,530 65,612
----------- ---------- -------
LIABILITIES
Amount due to MONY Series Fund, Inc. ................... 0 0 27,210
----------- ---------- -------
Net assets.............................................. $14,411,301 $3,553,530 $38,402
=========== ========== =======
Net assets consist of:
Contractholders' net payments...................... $ 170,408 $ 435,022 $11,836
Undistributed net investment income................ 4,721,810 1,012,669 11,697
Accumulated net realized gain on investments....... 3,730,765 675,393 14,769
Unrealized appreciation of investments............. 5,788,318 1,430,446 100
----------- ---------- -------
Net assets.............................................. $14,411,301 $3,553,530 $38,402
=========== ========== =======
Number of units outstanding*............................ 118,885 31,362 328
----------- ---------- -------
Net asset value per unit outstanding*................... $ 121.22 $ 113.31 $117.19
=========== ========== =======
* Units outstanding have been rounded for presentation purposes.
</TABLE>
See notes to financial statements.
2
<PAGE> 5
KEYNOTE SERIES ACCOUNT
STATEMENTS OF OPERATIONS For the year ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
IVA SUBACCOUNT
----------------------------------------
NON-TAX VARIABLE
TAX-QUALIFIED QUALIFIED PAYOUTS
------------- --------- --------
<S> <C> <C> <C>
Dividend income......................................... $ 1,584,918 $ 374,420 $ 2,364
Mortality and expense risk charges (Note 3)............. (142,089) (34,351) 0
---------- -------- -------
Net investment income................................... 1,442,829 340,069 2,364
---------- -------- -------
Realized and unrealized gain (loss) on investments (Note
2):
Proceeds from sales................................... 2,567,976 462,399 73,142
Cost of shares sold................................... (1,433,406) (250,141) (69,514)
---------- -------- -------
Net realized gain on investments........................ 1,134,570 212,258 3,628
Net increase (decrease) in unrealized appreciation of
investments........................................... 1,078,091 335,934 (3,316)
---------- -------- -------
Net realized and unrealized gain on investments......... 2,212,661 548,192 312
---------- -------- -------
Net increase in net assets resulting from operations.... $ 3,655,490 $ 888,261 $ 2,676
========== ======== =======
</TABLE>
See notes to financial statements.
3
<PAGE> 6
KEYNOTE SERIES ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS For the years ended December 31,
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
IVA SUBACCOUNT
---------------------------------------------------------------------------
NON-TAX VARIABLE
TAX QUALIFIED QUALIFIED PAYOUTS
--------------------------- ----------------------- -------------------
1997 1996 1997 1996 1997 1996
------------- ----------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income
(loss)................... $ 1,442,829 ($ 104,330) $ 340,069 ($ 24,518) $ 2,364 $ 108
Net realized gain on
investments.............. 1,134,570 788,910 212,258 184,140 3,628 5,893
Net increase (decrease) in
unrealized appreciation
of investments........... 1,078,091 1,524,818 335,934 354,447 (3,316) 3,387
----------- ---------- ---------- ---------- -------- --------
Net increase in net assets
resulting from operations..... 3,655,490 2,209,398 888,261 514,069 2,676 9,388
----------- ---------- ---------- ---------- -------- --------
FROM UNIT TRANSACTIONS:
Net proceeds from the
issuance of units........ 96,048 135,833 23,698 16,967 78,388 72,049
Net asset value of units
redeemed or used to meet
contract obligations..... (2,426,175) (2,081,034) (428,049) (496,194) (73,141) (77,195)
----------- ---------- ---------- ---------- -------- --------
Net increase (decrease) from
unit transactions............. (2,330,127) (1,945,201) (404,351) (479,227) 5,247 (5,146)
----------- ---------- ---------- ---------- -------- --------
Net increase in net assets...... 1,325,363 264,197 483,910 34,842 7,923 4,242
Net assets beginning of year.... 13,085,938 12,821,741 3,069,620 3,034,778 30,479 26,237
----------- ---------- ---------- ---------- -------- --------
Net assets end of year*......... $ 14,411,301 $13,085,938 $3,553,530 $3,069,620 $ 38,402 $ 30,479
=========== ========== ========== ========== ======== ========
Units outstanding beginning of
year.......................... 140,321 163,054 35,214 41,289 341 352
Units issued during the year.... 891 1,633 62 215 686 926
Units redeemed during the
year.......................... (22,327) (24,366) (3,914) (6,290) (699) (937)
----------- ---------- ---------- ---------- -------- --------
Units outstanding end of year... 118,885 140,321 31,362 35,214 328 341
=========== ========== ========== ========== ======== ========
*Includes undistributed net
investment income of: $ 4,721,810 $ 3,278,981 $1,012,669 $ 672,600 $ 11,697 $ 9,333
</TABLE>
See notes to financial statements.
4
<PAGE> 7
KEYNOTE SERIES ACCOUNT
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS
Keynote Series Account ("Keynote") is a separate investment account
established on December 16, 1987 by The Mutual Life Insurance Company of New
York ("MONY"), under the laws of the State of New York.
Keynote operates as a unit investment trust under the Investment Company
Act of 1940 (the "1940 Act"). Keynote holds assets that are segregated from all
of MONY's other assets and, at present, is used as a funding vehicle for
retirement plans maintained by state educational organizations and certain other
organizations to purchase tax-deferred annuities for their employees ("Group
Plans") and as a funding vehicle for annuities purchased by individuals,
principally for retirement purposes ("Individual Plans"). MONY is the legal
holder of the assets in Keynote. This report contains information related to
Individual Plans only.
There is one separate account which consists of three sub-accounts, two of
which are available to Individual Plans. They all invest solely in the Equity
Income Portfolio (the "Portfolio") of the MONY Series Fund, Inc. (the "Fund").
The Fund is registered under the 1940 Act as an open end, diversified,
management investment company.
The financial statements of the Portfolio, including the portfolio of
investments, are contained on pages 8 through 18 of this report and should be
read in conjunction with these financial statements.
The operations of Keynote form a part of, and are taxed with, the
operations of MONY. MONY does not expect, based upon current tax law to incur
any income tax burden upon the earnings or realized capital gains attributed to
Keynote. Based upon this expectation, no charges are currently being deducted
from Keynote for federal income tax purposes.
2. SIGNIFICANT ACCOUNTING POLICIES
Investment Valuation:
The investment in shares of the Fund is stated at the net asset value of
the Portfolio. The Fund's net asset value is based upon market valuations of the
securities held.
3. RELATED PARTY TRANSACTIONS
Because Keynote purchases shares of the Fund, the net assets of Keynote
reflect the investment management fee charged by MONY Life Insurance Company of
America (a wholly-owned subsidiary of MONY), the investment adviser, which
provides investment advice and related services for each of the Fund's
portfolios.
Daily charges against Keynote for mortality and expense risks assumed by
MONY are computed at an annual rate of 1.0% for the IVA Tax Qualified and IVA
Non-Tax Qualified subaccounts and no charges are made against the IVA Variable
Payouts subaccount.
5
<PAGE> 8
KEYNOTE SERIES ACCOUNT
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. INVESTMENTS
Investments in the Equity Income Portfolio of the MONY Series Fund, Inc. at
cost, at December 31, 1997 consist of the following:
<TABLE>
<CAPTION>
IVA SUBACCOUNT
---------------------------------------
TAX NON-TAX VARIABLE
QUALIFIED QUALIFIED PAYOUTS
----------- ---------- --------
<S> <C> <C> <C>
Shares beginning of year:
Shares............................................ 558,274 130,956 1,300
Amount............................................ $ 8,375,711 $1,975,108 $ 27,063
----------- ---------- --------
Share acquired:
Shares............................................ 3,963 934 2,959
Amount............................................ $ 95,760 $ 23,697 $ 78,389
Shares received for reinvestment of dividends:
Shares............................................ 73,717 17,415 110
Amount............................................ $ 1,584,918 $ 374,420 $ 2,364
Shares redeemed:
Shares............................................ (104,172) (18,179) (2,952)
Amount............................................ $(1,433,406) $ (250,141) $(69,514)
----------- ---------- --------
Net change:
Shares............................................ (26,492) 170 117
Amount............................................ $ 247,272 $ 147,976 $ 11,239
----------- ---------- --------
Shares end of year:
Shares............................................ 531,782 131,126 1,417
Amount............................................ $ 8,622,983 $2,123,084 $ 38,302
========== ========= ========
</TABLE>
6
<PAGE> 9
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of the
Mutual Life Insurance Company of New York and the
Contractholders of Keynote Series Account:
We have audited the accompanying statements of assets and liabilities of
IVA Tax Qualified, IVA Non-Tax Qualified and IVA Variable Payouts Subaccounts
(three of the subaccounts constituting the Keynote Series Account) as of
December 31, 1997, the related statements of operations for the year then ended
and the statements of changes in net assets for each of the two years in the
period then ended. These financial statements are the responsibility of MONY'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. Our procedures included
confirmation of securities owned as of December 31, 1997, by correspondence with
the custodian. 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 financial position of the IVA Tax Qualified, IVA
Non-Tax Qualified and IVA Variable Payouts Subaccounts of the Keynote Series
Account as of December 31, 1997, the results of their operations for the year
then ended, and the changes in their net assets for each of the two years in the
period then ended, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
New York, New York
February 11, 1998
7
<PAGE> 10
MONY SERIES FUND, INC.
EQUITY INCOME PORTFOLIO
The stock market has enjoyed an unprecedented three very strong (greater
than 20 percent) years in a row. Valuations and expectations are high and the
risks and unknowns are increasing. The most prudent approach is a strategy that
emphasizes defensive sectors and companies, and relatively assured earnings
growth.
Cyclical and economy sensitive sectors have been reduced, mostly in the
basic materials industries but also in capital spending related industries. Any
industry or company which has depended on Asia for incremental growth is now
more likely to disappoint. Eventually these stocks will become cheap enough to
be interesting again, but for now this area is being de-emphasized.
Telephone sectors are a major overweight. They are attractive for their
high yields, stable earnings and the consolidation which is occurring in the
industry. The same holds for electric utilities. They are a smaller part of the
Portfolio but are being increased in weight. Financial stocks continue as a
major overweight, but the emphasis is being changed more toward regional banks
and insurance and less toward money center banks.
In the stable growth sector, healthcare, primarily pharmaceutical
companies, continues as an area of major emphasis. Household products, cosmetics
and to a lesser extent food names have been increased in weight. In a difficult
environment for stocks in general, with corporate profit disappointments likely
and the full ramifications of the Asian turmoil still to come, these defensive
and higher yield sectors should be attractive to investors.
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENTS IN MONY SERIES FUND, INC.
EQUITY INCOME PORTFOLIO AND TOTAL RETURN ON S&P 500 INDEX
<TABLE>
<CAPTION>
MONEY Series Fund, Inc.
Equity Income Portfolio S&P 500 Index
- ------------------------------------------------------------
<S> <C> <C>
12/31/87 10000 10000
12/31/88 10973 11681
12/31/89 13399 15359
12/31/90 13727 14872
12/31/91 16519 19416
12/31/92 16682 20905
12/31/93 18504 22994
12/31/94 18696 23295
12/31/95 23619 32014
12/31/96 27030 39313
12/31/97 33785 52444
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
-------------------------------
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
<S> <C> <C>
31.26% 19.21% 15.79%
</TABLE>
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. ASSUMES REINVESTMENT OF
DIVIDENDS.
8
<PAGE> 11
MONY SERIES FUND, INC.
EQUITY INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<S> <C>
ASSETS
Securities, at value (Note 2)*.................................................. $20,614,580
Cash............................................................................ 56,256
Dividends receivable............................................................ 28,953
Receivable for fund shares sold................................................. 27,210
Receivable for securities sold.................................................. 10,071
Prepaid expense................................................................. 780
-----------
Total assets.......................................................... 20,737,850
-----------
LIABILITIES
Payable for fund shares redeemed................................................ 9
Accrued expenses:
Investment advisory fees................................................... 9,290
Custodian fees............................................................. 3,089
Accounting fees............................................................ 2,651
Professional fees.......................................................... 202
Miscellaneous fees......................................................... 1,723
-----------
Total liabilities..................................................... 16,964
-----------
Net assets...................................................................... $20,720,886
===========
Net assets consist of:
Capital stock -- $.01 par value............................................ $ 7,645
Additional paid-in capital................................................. 9,916,625
Undistributed net investment income........................................ 444,144
Undistributed net realized gain on investments............................. 2,843,443
Net unrealized appreciation of investments................................. 7,509,029
-----------
Net assets...................................................................... $20,720,886
===========
Shares of capital stock outstanding............................................. 764,503
-----------
Net asset value per share of outstanding capital stock.......................... $ 27.10
===========
*Investments at cost............................................................ $13,105,551
</TABLE>
See notes to financial statements.
9
<PAGE> 12
MONY SERIES FUND, INC.
EQUITY INCOME PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................................... $ 24,980
Dividends................................................................... 513,188
Other....................................................................... 23,692
----------
Total investment income................................................ 561,860
----------
EXPENSES:
Investment advisory fees (Note 3)........................................... 85,565
Custodian fees.............................................................. 11,560
Accounting fees (note 3).................................................... 6,267
Professional fees........................................................... 9,396
Directors fees.............................................................. 3,192
Miscellaneous fees.......................................................... 3,533
----------
Total expenses......................................................... 119,513
Expenses reduced by a custodian fee arrangement........................ (1,797)
----------
Net expenses........................................................... 117,716
----------
Net investment income............................................................ 444,144
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE 2):
Realized gain from security transactions (excluding short-term securities):
Proceeds from sales.................................................... 8,293,158
Less: Cost of securities sold.......................................... 5,460,695
----------
Net realized gain on investments................................................. 2,832,463
Net increase in unrealized appreciation of investments........................... 2,149,816
----------
Net realized and unrealized gain on investments.................................. 4,982,279
----------
Net increase in net assets resulting from operations............................. $5,426,423
==========
</TABLE>
See notes to financial statements.
10
<PAGE> 13
MONY SERIES FUND, INC.
EQUITY INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
From operations:
Net investment income........................................ $ 444,144 $ 506,646
Net realized gain on investments (Note 2).................... 2,832,463 1,744,115
Net increase in unrealized appreciation of investments....... 2,149,816 1,057,847
----------- -----------
Net increase in net assets resulting from operations.............. 5,426,423 3,308,608
----------- -----------
Dividends and distributions to shareholders from:
Net investment income (Note 4)............................... (774,467) (34,413)
Net realized gain from investment transactions (Note 4)...... (1,471,218) 0
----------- -----------
Total dividends and distributions to shareholders....... (2,245,685) (34,413)
----------- -----------
From share transactions:
Proceeds from the issuance of shares......................... 321,172 427,851
Proceeds from dividends and distributions reinvested......... 2,245,685 34,413
Net asset value of shares redeemed........................... (3,599,056) (3,255,147)
----------- -----------
Net decrease in net assets resulting from share transactions...... (1,032,199) (2,792,883)
----------- -----------
Net increase in net assets........................................ 2,148,539 481,312
Net assets beginning of year...................................... 18,572,347 18,091,035
----------- -----------
Net assets end of year*........................................... $20,720,886 $18,572,347
=========== ===========
Shares issued and redeemed:
Issued....................................................... 12,780 20,290
Issued in reinvestment of dividends and distributions........ 104,450 1,654
Redeemed..................................................... (144,920) (152,508)
----------- -----------
Net decrease............................................ (27,690) (130,564)
=========== ===========
*Including undistributed net investment income of: $444,144 $500,290
</TABLE>
See notes to financial statements.
11
<PAGE> 14
MONY SERIES FUND, INC.
EQUITY INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- -----------------------------------------------------------------------------
COMMON STOCKS -- 99.2%
- -----------------------------------------------------------------------------
<S> <C> <C>
AEROSPACE/DEFENSE -- 2.2%
Northrop Grumman Corp. 2,000 $ 230,000
United Technologies Corp. 3,000 218,436
----------
448,436
----------
AUTOMOBILES -- 1.8%
Ford Motor Co. 4,000 194,748
General Motors Corp. 3,000 181,875
----------
376,623
----------
AUTOMOTIVE PARTS -- 2.7%
Dana Corp. 6,000 285,000
Eaton Corp. 3,000 267,750
----------
552,750
----------
BANKS/MAJOR -- 4.7%
Bank of New York Inc. 4,000 231,248
BankAmerica Corp. 4,000 292,000
Bankers Trust New York Corp. 2,000 224,874
Chase Manhattan Corp. 2,000 219,000
----------
967,122
----------
BANKS/REGIONAL -- 6.6%
BankBoston Corp. 3,000 281,811
First Union Corp. 5,500 281,875
Fleet Financial Group, Inc. 1,500 112,406
Mellon Bank Corp. 3,500 212,188
NationsBank Corp. 3,000 182,436
Wells Fargo & Co. 900 305,493
----------
1,376,209
----------
CHEMICALS -- 3.4%
duPont (E.I.) de Nemours & Co. 5,000 300,310
Monsanto Co. 5,000 210,000
Olin Corp. 4,000 187,500
----------
697,810
----------
CONGLOMERATES -- 2.9%
General Signal Corp. 4,000 168,748
Harsco Corp. 4,000 172,500
Textron Inc. 4,000 250,000
----------
591,248
----------
COSMETICS -- 1.2%
Avon Products, Inc. 4,000 245,500
----------
DRUGS -- 9.1%
American Home Products Corp. 3,500 267,750
Baxter International, Inc. 4,000 201,748
Bristol Myers Squibb Co. 2,500 236,563
Lilly (Eli) & Co. 3,000 208,875
Merck and Co., Inc. 1,500 159,375
Schering -- Plough Corp. 4,000 248,500
SmithKline Beecham PLC 6,000 308,621
Warner Lambert Co. 2,000 248,000
----------
1,879,432
----------
ELECTRICAL EQUIPMENT -- 4.5%
Emerson Electric Co. 5,000 282,185
General Electric Co. 9,000 660,375
----------
942,560
----------
ELECTRONICS -- 2.1%
AMP, Inc. 6,000 252,000
Thomas & Betts Corp. 4,000 189,000
----------
441,000
----------
FOOD PRODUCTS -- 1.0%
General Mills, Inc. 1,500 107,438
Quaker Oats Co.* 2,000 105,500
----------
212,938
----------
FOREST PRODUCTS -- 0.6%
Georgia -- Pacific Corp. 1,000 22,625
Weyerhaeuser Co. 2,000 98,124
----------
120,749
----------
INSURANCE -- 3.4%
CIGNA Corp. 1,500 259,593
Lincoln National Corp. 3,000 234,375
St. Paul Cos., Inc. 2,500 205,155
----------
699,123
----------
MACHINERY -- 2.1%
Cooper Industries, Inc. 4,000 196,000
Timken Co. 7,000 240,625
----------
436,625
----------
METALS -- 1.3%
Carpenter Technology Corp. 3,000 144,186
Reynolds Metals Co. 2,000 120,000
----------
264,186
----------
MISCELLANEOUS -- 1.2%
Minnesota Mining &
Manufacturing Co. 1,500 123,093
Public Storage Inc. 4,000 117,500
----------
240,593
----------
NATURAL GAS -- 3.3%
Consolidated Natural Gas Co. 4,000 242,000
El Paso Natural Gas Co. 3,500 232,750
MCN Energy Group Inc. 1,000 40,375
Questar, Corp. 4,000 178,500
----------
693,625
----------
OFFICE & BUSINESS
EQUIPMENT -- 2.7%
Pitney -- Bowes, Inc. 3,000 269,811
Xerox Corp. 4,000 295,248
----------
565,059
----------
OIL -- DOMESTIC -- 1.4%
Amoco, Corp. 1,500 127,688
Atlantic Richfield Co. 2,000 160,250
----------
287,938
----------
</TABLE>
See notes to financial statements.
12
<PAGE> 15
MONY SERIES FUND, INC.
EQUITY INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- -----------------------------------------------------------------------------
<S> <C> <C>
OIL -- INTERNATIONAL -- 4.8%
British Petroleum PLC ADR 2,022 $ 161,127
Chevron Corp. 2,000 154,000
Exxon Corp. 3,000 183,560
Mobil Corp. 2,500 180,468
Royal Dutch Petroleum Co. 3,000 162,561
Texaco, Inc. 3,000 163,125
----------
1,004,841
----------
OIL -- SERVICE &
DRILLING -- 2.9%
Dresser Industries, Inc. 6,000 251,622
Williams (The) Companies, Inc. 6,000 340,500
----------
592,122
----------
PAPER -- 1.8%
Georgia -- Pacific Group 1,000 60,750
International Paper Co. 2,000 86,250
Kimberly -- Clark Corp. 2,500 123,280
Union Camp Corp. 2,000 107,374
----------
377,654
----------
PHOTOGRAPHY -- 0.3%
Eastman Kodak Co. 1,000 60,812
----------
PUBLISHING -- 1.4%
McGraw -- Hill Companies, Inc. 4,000 296,000
----------
RAILROADS -- 1.3%
Norfolk Southern Corp. 5,000 154,060
Union Pacific Corp. 2,000 124,874
----------
278,934
----------
REAL ESTATE INVESTMENT
TRUSTS -- 4.4%
Bay Apartment Community, Inc. 2,000 78,000
Crescent Real Estate Equities
Trust 4,000 157,500
Developers Diversified Realty
Corp. 2,500 95,625
Equity Office Properties Trust 2,000 63,124
Equity Residential Properties
Trust 2,000 101,124
Felcor Suite Hotels Inc. 3,500 124,250
Health Care Property
Investors, Inc. 5,000 189,060
Irvine Apartment Communities,
Inc 3,500 111,341
----------
920,024
----------
RETAIL SERVICES -- 1.0%
Penney (J.C.) & Co., Inc. 1,000 60,312
Sears Roebuck & Co. 3,000 135,750
----------
196,062
----------
SAVINGS & LOAN -- 3.5%
Ahmanson (H.F.) & Co. 6,000 401,622
Washington Mutual Inc. 5,000 319,060
----------
720,682
----------
SOAPS -- 1.1%
Colgate -- Palmolive Co. 3,000 220,500
----------
TELECOMMUNICATIONS
EQUIPMENT -- 1.3%
Harris Corp. 6,000 275,250
----------
TOBACCO -- 2.1%
Fortune Brands, Inc. 4,000 148,248
Gallaher Group PLC ADR 3,500 74,813
Philip Morris Companies, Inc. 4,500 203,904
----------
426,965
----------
UTILITIES -- ELECTRIC -- 2.4%
American Electric Power, Inc. 3,000 154,875
Carolina Power & Light Co. 4,000 169,748
FPL Group, Inc. 3,000 177,561
----------
502,184
----------
UTILITIES -- TELEPHONE -- 11.9%
AT&T Corp. 5,000 306,250
Ameritech Corp. 3,500 281,750
Bell Atlantic Corp. 5,000 455,000
Bellsouth Corp. 4,500 253,404
Frontier Corp. 6,000 144,372
GTE Corp. 4,000 209,000
SBC Communications Inc. 5,000 366,250
Sprint Corp. 4,500 263,812
U.S. West Communications Group 4,000 180,500
----------
2,460,338
----------
US GOVERNMENT AGENCY -- 0.8%
Federal National Mortgage
Assn. 3,000 171,186
----------
TOTAL COMMON STOCKS
(COST $13,029,179) $ 20,543,080
- -----------------------------------------------------------------------------
PREFERRED STOCK -- 0.3%
AETNA INC., 6.25%, CLASS C
(COST $76,372) 1,000 $ 71,500
- -----------------------------------------------------------------------------
TOTAL INVESTMENTS
(COST $13,105,551) -- 99.5% $ 20,614,580
OTHER ASSETS LESS LIABILITIES -- 0.5% 106,306
- -----------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 20,720,886
=============================================================================
</TABLE>
The aggregate cost of securities for federal income tax purpose at December
31, 1997 is $13,093,092.
The following amounts are based on costs for federal income tax purposes:
<TABLE>
<S> <C>
Aggregate gross unrealized appreciation $ 7,606,901
Aggregate gross unrealized depreciation (85,413)
----------
Net unrealized appreciation $ 7,521,488
==========
</TABLE>
See notes to financial statements.
- --------------------------------------------------------------------------------
* Non-income producing security as defined by the Investment Company Act of
1940.
ADR = American Depository Receipt.
Percentages are based on net assets.
13
<PAGE> 16
MONY SERIES FUND, INC.
EQUITY INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS
The Equity Income Portfolio (the "Portfolio") is one of the portfolios
offered within the MONY Series Fund, Inc. (the "Fund"). The Fund is registered
under the Investment Company Act of 1940 (the "1940 Act") as an open end,
diversified, management investment company. This registration does not imply any
supervision by the Securities and Exchange Commission over the Fund's
management. The Equity Income Portfolio is presented here since it is the only
portfolio available to the Individual Plans of the Keynote Series Account
("Keynote").
2. SIGNIFICANT ACCOUNTING POLICIES
A. Portfolio Valuations:
Short-term securities with 61 days or more to maturity at time of purchase
are valued at market through the 61st day prior to maturity, based on quotations
obtained from market makers or other appropriate sources; thereafter, any
unrealized appreciation or depreciation existing on the 61st day is amortized on
a straight-line basis over the remaining number of days to maturity. Short-term
securities with 60 days or less to maturity at time of purchase are valued at
amortized cost. The amortized cost of a security is determined by valuing it at
original cost and thereafter amortizing any discount or premium at a constant
rate until maturity.
Common stocks traded on national securities exchanges are valued at the
last sales price as of the close of the New York Stock Exchange or at the last
bid price for over-the-counter securities.
All other securities, when held by the Portfolio, including any restricted
securities, are valued at their fair value as determined in good faith by the
Board of Directors. As of December 31, 1997, there were no such securities.
B. Federal Income Taxes:
Each portfolio of the Fund is a separate entity for federal income tax
purposes and intends to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
taxable income to its shareholders. Therefore, no federal income tax provision
is required.
C. Security Transactions and Investment Income:
Security transactions are recorded as of the trade date.
Dividend income is recorded on the ex-dividend date, income from other
investments is accrued as earned.
Realized gains and losses from investments sold are determined on the basis
of identified cost for accounting and federal income tax purposes.
D. Other:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
Earnings credits received from the custodian are shown as a reduction of
total expenses.
14
<PAGE> 17
MONY SERIES FUND, INC.
EQUITY INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. INVESTMENT ADVISORY FEES AND RELATED PARTY TRANSACTIONS
Under an investment advisory agreement between the Fund and MONY Life
Insurance Company of America ("Investment Adviser" or "MONY America"), a
wholly-owned subsidiary of The Mutual Life Insurance Company of New York
("MONY"), the Investment Adviser provides investment advice and related services
for the Portfolio, administers the overall day-to-day affairs of the Portfolio,
bears all expenses associated with organizing the Fund, the initial registration
of its securities, and the compensation of the directors, officers and employees
of the Portfolio who are affiliated with the Investment Adviser.
For these services, the Investment Adviser receives an investment advisory
fee. The fee is a daily charge equal to an annual rate of .50% of the first
$400,000,000 of the average daily net assets of the Portfolio; .35% of the next
$400,000,000 of the average daily net assets of the Portfolio; and .30% of the
average daily net assets of the Portfolio in excess of $800,000,000. Prior to
October 14, 1997, the fee for the first $400,000,000 was .40% of the aggregate
average daily net assets for all of the Fund's Portfolios. For the year ended
December 31, 1997, the fees incurred by the Equity Income Portfolio was $85,565.
On October 15, 1997, the Investment Adviser began assessing the Fund an
accounting fee. This fee is based on an allocation of expenses borne by the
Investment Adviser for personnel, facilities and services necessary to calculate
the Portfolios' daily net asset values. The fee is allocated to the Fund at
$25,000 per portfolio, per annum, with the excess of the Investment Adviser's
expenses allocated to each portfolio daily based on each portfolio's net assets
in relation to the total net assets of the Fund.
The Investment Adviser has a service agreement with MONY to provide it with
personnel, services, facilities, supplies and equipment in order to carry out
its duties to provide investment management services under the Investment
Advisory Agreement. MONY also provides transfer agent services to the Portfolio.
The Investment Adviser pays MONY for these services.
Aggregate remuneration incurred to non-affiliated Directors of the Fund for
the year ended December 31, 1997, amounted to $3,192 for the Equity Income
Portfolio.
4. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends and distributions to shareholders are recorded on the ex-dividend
date. Dividends from net investment income and net realized capital gains, if
any, of the Equity Income Portfolio will normally be declared and reinvested
annually in additional full and fractional shares.
Dividends from net investment income and distributions from net realized
capital gains are determined in accordance with U.S. federal income tax
regulations which may differ from generally accepted accounting principles.
During the year ended December 31, 1997, the Equity Income Portfolio
increased undistributed realized gains by $5,354 and decreased undistributed net
investment income by $5,354. These differences are primarily due to return of
capital distribution received on investments.
5. CAPITAL STOCK
A. Authorized Capital Stock:
The Equity Income Portfolio has 150 million authorized shares of capital
stock with a par value of $.01 per share.
15
<PAGE> 18
MONY SERIES FUND, INC.
EQUITY INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. CAPITAL STOCK (CONTINUED)
B. Purchases of Portfolio Shares:
Shares of the Portfolio are sold to MONY America and MONY for allocation to
MONY America Variable Account L and MONY Variable Account L to fund benefits
under Flexible Premium Variable Life Insurance Contracts, to MONY America
Variable Account S and MONY Variable Account S to fund benefits under Variable
Life Insurance with Additional Premium Option Contracts; and to MONY America
Variable Account A and MONY Variable Account A, to fund benefits under Flexible
Payment Variable Annuity Contracts issued by those companies. Shares of the Fund
are also sold to MONY for allocation to the Keynote Series Account ("Keynote")
to fund benefits under Individual Annuity Plans issued by MONY.
6. PURCHASES AND SALES OF INVESTMENTS
The aggregate cost of investments purchased and proceeds from sales or
maturities, other than short-term investments, for the year ended December 31,
1997 were $5,730,202 and $8,293,087, respectively
16
<PAGE> 19
MONY SERIES FUND, INC.
EQUITY INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year.... $ 23.44 $ 19.61 $ 15.53 $ 16.43 $ 15.56 $ 14.64
---------- ---------- ---------- ---------- ----------- -----------
Income from investment operations
Net investment income............... 0.61 0.98 0.69 0.64 0.52 0.59
Net gains (losses) on investments
(both realized and unrealized).... 5.96 2.89 4.45 (0.51) 1.68 0.92
---------- ---------- ---------- ---------- ----------- -----------
Total from investment
operations...................... 6.57 3.87 5.14 0.13 2.20 1.51
Less distributions
Dividends (from net investment
income)........................... (1.00) (0.04) (0.65) (0.64) (0.52) (0.59)
Distributions (from realized capital
gains)............................ (1.91) 0.00 (0.41) (0.39) (0.81) 0.00*
---------- ---------- ---------- ---------- ----------- -----------
Total distributions............... (2.91) (0.04) (1.06) (1.03) (1.33) (0.59)
Net asset value, end of year.......... $ 27.10 $ 23.44 $ 19.61 $ 15.53 $ 16.43 $ 15.56
========== ========== ========== ========== =========== ===========
Total return...................... 31.26% 19.76% 33.12% 0.78% 14.14% 10.31%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year............... $20,720,886 $18,572,347 $18,091,035 $16,204,925 $151,330,311 $121,540,392
Average commission rate............... $ 0.0491 $ 0.0593 N/A N/A N/A N/A
Ratio of net investment income to
average net assets.................. 2.20% 2.79% 3.54% 3.53% 3.22% 3.68%
Ratio of expenses to average net
assets.............................. 0.59% 0.55% 0.56% 0.48% 0.46% 0.46%
Portfolio turnover rate............... 29.32% 29.37% 26.80% 32.48% 28.48% 35.62%
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------------------
1991 1990 1989 1988
------------ ----------- ---------- ----------
<S> <C> <C> <C> <C>
Net asset value, beginning of year.... $ 12.70 $ 14.26 $ 12.67 $ 12.03
----------- ---------- ---------- ----------
Income from investment operations
Net investment income............... 0.64 0.54 0.64 0.70
Net gains (losses) on investments
(both realized and unrealized).... 1.94 (1.50) 2.20 1.64
----------- ---------- ---------- ----------
Total from investment
operations...................... 2.58 (0.96) 2.84 2.34
Less distributions
Dividends (from net investment
income)........................... (0.64) (0.60) (0.64) (0.66)
Distributions (from realized capital
gains)............................ 0.00* 0.00 (0.61) (1.04)
----------- ---------- ---------- ----------
Total distributions............... (0.64) (0.60) (1.25) (1.70)
Net asset value, end of year.......... $ 14.64 $ 12.70 $ 14.26 $ 12.67
=========== ========== ========== ==========
Total return...................... 20.31% (6.73%) 22.42% 19.45%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year............... $118,114,947 $99,878,151 $6,185,876 $5,054,514
Average commission rate............... N/A N/A N/A N/A
Ratio of net investment income to
average net assets.................. 4.46% 5.39% 4.66% 5.24%
Ratio of expenses to average net
assets.............................. 0.49% 0.52% 0.88% 0.91%
Portfolio turnover rate............... 25.84% 8.89% 19.55% 22.70%
</TABLE>
- ---------------
* Less than $.01 per share.
17
<PAGE> 20
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
MONY Series Fund, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments of the Equity Income Portfolio (one of
the portfolios constituting MONY Series Fund, Inc.), which is available for
purchase by the Keynote Series Account, as of December 31, 1997, the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended, and the financial
highlights for each of the ten years in the period then ended. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights 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 and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1997, by correspondence with the custodian and brokers. 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 and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Equity Income Portfolio of MONY Series Fund, Inc., as of December 31, 1997, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the ten years in the period then ended, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
New York, New York
February 11, 1998
18
<PAGE> 21
MONY SERIES FUND, INC.
1740 BROADWAY
NEW YORK, NEW YORK 10019
<TABLE>
<S> <C>
DIRECTORS AND PRINCIPAL OFFICERS
Kenneth M. Levine Chairman, President and Director
Joel Davis Director
Michael J. Drabb Director
Alan J. Hartnick Director
Floyd L. Smith Director
Edward E. Hill Vice President-Compliance
David V. Weigel Treasurer
John P. Keller Controller
Frederick C. Tedeschi Secretary
INVESTMENT ADVISER
MONY Life Insurance Co. of America
1740 Broadway
New York, New York 10019
PRINCIPAL UNDERWRITER AND DISTRIBUTOR
MONY Securities Corp.
1740 Broadway
New York, New York 10019
CUSTODIAN
Chase Manhattan Bank
4 New York Plaza
New York, New York 10004
TRANSFER AGENT
The Mutual Life Insurance Co. of New York
1740 Broadway
New York, New York 10019
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
1301 Avenue of the Americas
New York, New York 10019
</TABLE>
<PAGE> 22
[KEYNOTE SERIES ACCOUNT LOGO]
MUTUAL OF NEW YORK
One MONY Plaza
PO Box 48-30
Syracuse, New York 13221
The Mutual Life Insurance Company of New York, New York, NY
