<PAGE> 1
Keynote Series Account
---------------------------------
MONY LIFE INSURANCE COMPANY
---------------------------------
ANNUAL REPORT
DECEMBER 31, 1998
<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 financial crisis which threatened world economics and markets during
the summer and early fall has eased. Central banks around the world lowered
rates and increased liquidity helping to avert the impending financial meltdown.
The massive flight to quality, which was both the result of the turmoil and the
cause of some of it, has also abated. Markets have stabilized in many countries,
and have recovered sharply in others, notably the U.S. However, the world
financial system continues to be fragile and subject to shocks as the recent
events in Brazil have demonstrated.
Economic growth is slowing on a worldwide basis. The international market
reaction to Brazil has stabilized, but their economic problems remain and
significant disappointments (followed by potential unrest in many other South
American economies) are possible. Japan is still experiencing weakness and
Russia continues to have major problems. The U.S. remains one of the stronger
and faster growing economies, and Europe is stable, but slower growth is likely
in both in 1999. Inflation remains low with excess capacity in almost everything
and commodity prices are weak, especially oil and copper.
In the U.S., the consumer, buoyed by rising real wages, a good job outlook
and the recovering stock market, exhibits rising confidence and a propensity to
spend. Manufacturing, on the other hand, suffers from a lack of pricing power,
slower revenues, rising wages and excess capacity. While the consumer is
spending, generally discounts and sales are required to move merchandise.
Spending onY2K remedies will be increasing as the year progresses. All of this
puts pressure on corporate earnings, which is the problem that the market was
worrying about before the financial crisis began. Earnings are expected to rise
about 5 percent for the popular averages, which are influenced by technology and
growth stocks, but overall corporate profits may not be as strong.
On the positive side, interest rates should continue to be low and could
decline further. Slower growth, deflationary pressures around the world, a
declining Federal deficit and an accommodative or neutral Federal Reserve should
keep downward pressure on rates. The question for stock market valuation in 1999
will be whether what the market loses from lower earnings is offset by what it
gains from lower rates. As of now, the answer seems to be positive. As long as
rates stay low and earnings are stable, the flow of money into equity funds
should continue. Valuations are high, though, and parts of the world are still
fragile and after four very strong years, it would be understandable if the
market paused for breath.
Sincerely,
Kenneth M. Levine
Chairman
1
<PAGE> 4
KEYNOTE SERIES ACCOUNT
STATEMENTS OF ASSETS AND LIABILITIES December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
IVA SUBACCOUNT
---------------------------------------
NON-TAX VARIABLE
TAX QUALIFIED QUALIFIED PAYOUTS
------------- --------- --------
<S> <C> <C> <C>
ASSETS
Investments at cost (Note 4)............................ $ 9,860,099 $2,502,044 $31,351
=========== ========== =======
Investments in MONY Series Fund, Inc. at net asset
value (Note 2)................................... $13,867,760 $3,268,961 $33,607
Amount due from MONY............................... 19 0 0
Amount due from MONY Series Fund, Inc. ............ 0 0 14,783
----------- ---------- -------
Total assets............................................ 13,867,779 3,268,961 48,390
----------- ---------- -------
LIABILITIES
Amount due to MONY...................................... 0 0 14,783
Amount due to MONY Series Fund, Inc. ................... 19 0 0
----------- ---------- -------
Net assets.............................................. $13,867,760 $3,268,961 $33,607
=========== ========== =======
Net assets consist of:
Contractholders' net payments...................... $(1,922,904) $ (239,307) $ 2,554
Undistributed net investment income................ 6,912,241 1,511,874 14,601
Accumulated net realized gain on investments....... 4,870,762 1,229,477 14,196
Unrealized appreciation of investments............. 4,007,661 766,917 2,256
----------- ---------- -------
Net assets.............................................. $13,867,760 $3,268,961 $33,607
=========== ========== =======
Number of units outstanding*............................ 102,567 25,866 255
----------- ---------- -------
Net asset value per unit outstanding*................... $ 135.21 $ 126.38 $131.99
=========== ========== =======
* 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, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
IVA SUBACCOUNT
---------------------------------------
NON-TAX VARIABLE
TAX-QUALIFIED QUALIFIED PAYOUTS
------------- --------- --------
<S> <C> <C> <C>
Dividend income........................................ $ 2,330,954 $ 532,040 $ 2,904
Mortality and expense risk charges (Note 3)............ (140,523) (32,835) 0
----------- --------- ---------
Net investment income.................................. 2,190,431 499,205 2,904
----------- --------- ---------
Realized and unrealized gain (loss) on investments
(Note 2):
Proceeds from sales.................................. 2,477,133 1,067,869 117,218
Cost of shares sold.................................. (1,337,136) (513,785) (117,791)
----------- --------- ---------
Net realized gain (loss) on investments................ 1,139,997 554,084 (573)
Net increase (decrease) in unrealized appreciation of
investments.......................................... (1,780,657) (663,529) 2,156
----------- --------- ---------
Net realized and unrealized gain (loss) on
investments.......................................... (640,660) (109,445) 1,583
----------- --------- ---------
Net increase in net assets resulting from operations... $ 1,549,771 $ 389,760 $ 4,487
=========== ========= =========
</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
------------------------- ------------------------ --------------------
1998 1997 1998 1997 1998 1997
----------- ----------- ----------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income......... $ 2,190,431 $ 1,442,829 $ 499,205 $ 340,069 $ 2,904 $ 2,364
Net realized gain (loss) on
investments................. 1,139,997 1,134,570 554,084 212,258 (573) 3,628
Net increase (decrease) in
unrealized appreciation of
investments................. (1,780,657) 1,078,091 (663,529) 335,934 2,156 (3,316)
----------- ----------- ----------- ---------- --------- --------
Net increase in net assets
resulting from operations........ 1,549,771 3,655,490 389,760 888,261 4,487 2,676
----------- ----------- ----------- ---------- --------- --------
FROM UNIT TRANSACTIONS:
Net proceeds from the issuance
of units.................... 248,720 96,048 14,437 23,698 107,936 78,388
Net asset value of units
redeemed or used to meet
contract obligations........ (2,342,032) (2,426,175) (688,766) (428,049) (117,218) (73,141)
----------- ----------- ----------- ---------- --------- --------
Net increase (decrease) from unit
transactions..................... (2,093,312) (2,330,127) (674,329) (404,351) (9,282) 5,247
----------- ----------- ----------- ---------- --------- --------
Net increase (decrease) in net
assets........................... (543,541) 1,325,363 (284,569) 483,910 (4,795) 7,923
Net assets beginning of year....... 14,411,301 13,085,938 3,553,530 3,069,620 38,402 30,479
----------- ----------- ----------- ---------- --------- --------
Net assets end of year*............ $13,867,760 $14,411,301 $ 3,268,961 $3,553,530 $ 33,607 $ 38,402
=========== =========== =========== ========== ========= ========
Units outstanding beginning of
year............................. 118,885 140,321 31,362 35,214 328 341
Units issued during the year....... 1,838 891 89 62 883 686
Units redeemed during the year..... (18,156) (22,327) (5,585) (3,914) (956) (699)
----------- ----------- ----------- ---------- --------- --------
Units outstanding end of year...... 102,567 118,885 25,866 31,362 255 328
=========== =========== =========== ========== ========= ========
*Includes undistributed net
investment income of: $ 6,912,241 $ 4,721,810 $ 1,511,874 $1,012,669 $ 14,601 $ 11,697
</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 MONY Life Insurance Company ("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
owner of the assets in Keynote. This report contains information related to
Individual Plans only.
There is one separate account which consists of three subaccounts, 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 hereinafter of this report and should be
read in conjunction with these financial statements.
2. SIGNIFICANT ACCOUNTING POLICIES
A. Investment Valuation:
The investment in shares of the Fund's portfolio is stated at net asset
value. The Fund's portfolio net asset value is based upon market valuations of
the securities held.
B. Taxes
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.
3. RELATED PARTY TRANSACTIONS
Because Keynote purchases shares of the Fund's Portfolio, the net assets of
Keynote reflect the Fund's Portfolio 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% of the average daily net assets of
the IVA Tax Qualified and 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, 1998 consist of the following:
<TABLE>
<CAPTION>
IVA SUBACCOUNT
----------------------------------------
NON-TAX VARIABLE
TAX QUALIFIED QUALIFIED PAYOUTS
------------- ---------- ---------
<S> <C> <C> <C>
Shares beginning of year:
Shares........................................... 531,782 131,126 1,417
Amount........................................... $ 8,622,983 $2,123,084 $ 38,302
----------- ---------- ---------
Share acquired:
Shares........................................... 9,842 12,103 4,404
Amount........................................... $ 243,298 $ 360,705 $ 107,936
Shares received for reinvestment of dividends:
Shares........................................... 90,277 20,606 112
Amount........................................... $ 2,330,954 $ 532,040 $ 2,904
Shares redeemed:
Shares........................................... (97,498) (37,865) (4,638)
Amount........................................... $(1,337,136) $ (513,785) $(117,791)
----------- ---------- ---------
Net change:
Shares........................................... 2,621 (5,156) (122)
Amount........................................... $ 1,237,116 $ 378,960 $ (6,951)
----------- ---------- ---------
Shares end of year:
Shares........................................... 534,403 125,970 1,295
Amount........................................... $ 9,860,099 $2,502,044 $ 31,351
=========== ========== =========
</TABLE>
6
<PAGE> 9
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
MONY Life Insurance Company and the
Contractholders of Keynote Series Account:
In our opinion, the accompanying statements of assets and liabilities and the
related statements of operations and of changes in net assets present fairly, in
all material respects, the financial position of the IVA Tax Qualified, IVA
Non-Tax Qualified, and IVA Variable Payouts Subaccounts (three of the
subaccounts constituting the Keynote Series Account) at December 31, 1998, the
results of each of their operations for the year then ended and the changes in
each of their net assets for each of the two years in the period then ended, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of MONY Life Insurance Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
New York, New York
February 12, 1999
7
<PAGE> 10
EQUITY INCOME PORTFOLIO
With the expectation for slower economic growth, low inflation and lack of
pricing power and uncertain earnings, selectivity becomes important. In this
environment, companies who can achieve unit growth and who do not need price
increases to succeed should be favored. This means an emphasis on healthcare --
pharmaceuticals and hospital supplies and telecommunications -- primarily
telephones. Selected technology names such as GE, Xerox and Pitney Bowes should
also do well. Financials -- banks and insurance should benefit from lower
interest rates.
At the other end of spectrum from the stable growers are the economy
sensitive or cyclical stocks. The economic backdrop seems all wrong for them,
but that is already well known and is reflected in the very depressed prices
they sell at. If S.E. Asia is stabilizing and shows any signs of improvement;
the energy, basic materials and capital goods stocks which were hurt the most by
the economic crisis should benefit. The Portfolio is slowly increasing exposure
to international oils, papers, forest products and chemical stocks. It may be
early, but usually these groups move in anticipation of a change in the world
outlook.
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
AVERAGE ANNUAL TOTAL RETURN
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS
- ------ ------- --------
<S> <C> <C>
12.63% 18.88% 15.14%
</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, 1998
<TABLE>
<S> <C>
ASSETS
Securities, at value (Note 2)*.............................. $20,076,848
Dividends receivable........................................ 31,253
Receivable for fund shares sold............................. 57
Prepaid expense............................................. 1
-----------
Total assets...................................... 20,108,159
-----------
LIABILITIES
Bank overdraft.............................................. 231,645
Payable for fund shares redeemed............................ 14,793
Payable for securities purchased............................ 35,482
Accrued expenses:
Investment advisory fees............................... 8,239
Custodian fees......................................... 2,655
Accounting fees........................................ 2,150
Professional fees...................................... 9,275
Miscellaneous fees..................................... 2,433
-----------
Total liabilities................................. 306,672
-----------
NET ASSETS.................................................. $19,801,487
===========
Net assets consist of:
Capital stock -- $.01 par value........................ $ 7,629
Additional paid-in capital............................. 9,840,765
Undistributed net investment income.................... 365,228
Undistributed net realized gain on investments......... 3,109,108
Net unrealized appreciation of investments............. 6,478,757
-----------
NET ASSETS.................................................. $19,801,487
===========
Shares of capital stock outstanding......................... 762,967
-----------
Net asset value per share of outstanding capital stock...... $ 25.95
===========
*Investments at cost........................................ $13,598,091
</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, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest............................................... $ 37,915
Dividends.............................................. 486,698
-----------
Total investment income........................... 524,613
-----------
EXPENSES:
Investment advisory fees (Note 3)...................... 100,307
Custodian fees......................................... 8,078
Accounting fees (Note 3)............................... 29,965
Professional fees...................................... 9,074
Directors fees......................................... 2,249
Miscellaneous fees..................................... 2,500
-----------
Total expenses.................................... 152,173
Expenses reduced by a custodian fee arrangement... (2,799)
-----------
Net expenses...................................... 149,374
-----------
Net investment income....................................... 375,239
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE 2):
Realized gain from security transactions (excluding
short-term securities):
Proceeds from sales............................... 8,724,523
Less: Cost of securities sold..................... 5,637,884
-----------
Net realized gain on investments............................ 3,086,639
Net decrease in unrealized appreciation of investments...... (1,030,272)
-----------
Net realized and unrealized gain on investments............. 2,056,367
-----------
Net increase in net assets resulting from operations........ $ 2,431,606
===========
</TABLE>
See notes to financial statements.
10
<PAGE> 13
MONY SERIES FUND, INC.
EQUITY INCOME PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
FROM OPERATIONS:
Net investment income.................................. $ 375,239 $ 444,144
Net realized gain on investments (Note 2).............. 3,086,639 2,832,463
Net increase (decrease) in unrealized appreciation of
investments........................................... (1,030,272) 2,149,816
----------- -----------
Net increase in net assets resulting from operations........ 2,431,606 5,426,423
----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (Note 4)......................... (632,565) (774,467)
Net realized gain from investment transactions (Note
4).................................................... (2,642,564) (1,471,218)
----------- -----------
Total dividends and distributions to
shareholders................................... (3,275,129) (2,245,685)
----------- -----------
FROM SHARE TRANSACTIONS:
Proceeds from the issuance of shares................... 796,187 321,172
Proceeds from dividends and distributions reinvested... 3,275,129 2,245,685
Net asset value of shares redeemed..................... (4,147,192) (3,599,056)
----------- -----------
Net decrease in net assets resulting from share
transactions.............................................. (75,876) (1,032,199)
----------- -----------
Net increase (decrease) in net assets....................... (919,399) 2,148,539
Net assets beginning of year................................ 20,720,886 18,572,347
----------- -----------
Net assets end of year*..................................... $19,801,487 $20,720,886
=========== ===========
Shares issued and redeemed:
Issued................................................. 29,633 12,780
Issued in reinvestment of dividends and
distributions......................................... 126,845 104,450
Redeemed............................................... (158,014) (144,920)
----------- -----------
Net decrease in outstanding shares................ (1,536) (27,690)
=========== ===========
*Including undistributed net investment income of: $ 365,228 $ 444,144
</TABLE>
See notes to financial statements.
11
<PAGE> 14
MONY SERIES FUND, INC.
EQUITY INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998
VALUE VALUE
DESCRIPTION SHARES (NOTE
2) DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
COMMON STOCK -- 98.9%
- ---------------------------------------------------------------------
AEROSPACE/DEFENSE -- 2.3%
Northrop Grumman Corp. 2,500 $ 182,813
United Technologies Corp. 2,500 271,875
-----------
454,688
-----------
AUTOMOBILES -- 2.3%
Ford Motor Co. 4,000 234,750
General Motors Corp. 3,000 214,688
-----------
449,438
-----------
AUTOMOTIVE PARTS -- 1.4%
Dana Corp. 4,000 163,500
Eaton Corp. 1,500 106,031
-----------
269,531
-----------
BANKS/MAJOR -- 5.1%
Bank of New York, Inc. 6,000 241,500
BankAmerica Corp. 4,000 240,500
Bankers Trust New York Corp. 700 59,806
Chase Manhattan Corp. 3,500 238,219
Citigroup, Inc. 4,800 237,600
-----------
1,017,625
-----------
BANKS/REGIONAL -- 4.4%
BankBoston Corp. 3,800 147,962
First Union Corp. 3,000 182,438
Fleet Financial Group, Inc. 4,000 178,750
Mellon Bank Corp. 2,500 171,875
Wells Fargo & Co. 5,000 199,688
-----------
880,713
-----------
CHEMICALS -- 2.0%
duPont (E.I.) de Nemours & Co. 3,000 159,188
Olin Corp. 4,000 113,250
Rohm & Haas Co. 4,000 120,500
-----------
392,938
-----------
CONGLOMERATES -- 1.7%
Harsco Corp. 3,500 106,531
Textron, Inc. 3,000 227,813
-----------
334,344
-----------
CONTAINERS AND PACKAGING -- 0.6%
Temple-Inland, Inc. 2,000 118,625
-----------
COSMETICS -- 1.8%
Avon Products, Inc. 8,000 354,000
-----------
DRUGS -- 9.3%
American Home Products Corp. 6,000 337,875
Baxter International, Inc. 4,000 257,250
Bristol Myers Squibb Co. 2,500 334,531
Lilly (Eli) & Co. 1,000 88,875
Merck and Co., Inc. 1,000 147,688
Pharmacia & UpJohn, Inc. 4,000 226,500
Schering-Plough Corp. 1,000 55,250
SmithKline Beecham, plc, ADR 4,000 278,000
Warner Lambert Co. 1,500 112,781
-----------
1,838,750
-----------
ELECTRICAL EQUIPMENT -- 5.1%
Emerson Electric Co. 4,000 $ 250,250
General Electric Co. 7,500 765,469
-----------
1,015,719
-----------
ELECTRONICS -- 2.0%
AMP, Inc. 5,700 296,756
Thomas & Betts Corp. 2,500 108,281
-----------
405,037
-----------
FINANCIAL SERVICES -- 0.6%
Morgan (JP) Co. 1,200 126,075
-----------
FOREST PRODUCT -- 0.8%
Weyerhaeuser Co. 3,000 152,438
-----------
INSURANCE -- 3.8%
CIGNA Corp. 4,500 347,906
Lincoln National Corp. 3,000 245,438
St. Paul Cos., Inc. 4,500 156,375
-----------
749,719
-----------
MACHINERY -- 1.6%
Caterpillar Tractor Co. 3,500 161,000
Cooper Industries, Inc. 2,000 95,375
Timken Co. 3,500 66,063
-----------
322,438
-----------
METALS -- 1.3%
Carpenter Technology Corp. 3,000 101,813
USX-Marathon Group 5,000 150,625
-----------
252,438
-----------
MISCELLANEOUS -- 0.9%
Minnesota Mining & Manufacturing
Co. 1,500 106,688
Phelps-Dodge Corp. 1,500 76,312
-----------
183,000
-----------
NATURAL GAS -- 3.9%
Consolidated Natural Gas Co. 4,000 216,000
El Paso Energy Corp. 6,000 208,875
Enron Corp. 4,000 228,250
Questar Corp. 6,000 116,250
-----------
769,375
-----------
OFFICE & BUSINESS EQUIPMENT -- 4.2%
Pitney-Bowes, Inc. 5,500 363,344
Xerox Corp. 4,000 472,000
-----------
835,344
-----------
OIL -- DOMESTIC -- 1.3%
Amoco Corp. 2,000 120,750
Atlantic Richfield Co. 2,000 130,500
-----------
251,250
-----------
</TABLE>
See notes to financial statements.
12
<PAGE> 15
MONY SERIES FUND, INC.
EQUITY INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 1998
VALUE VALUE
DESCRIPTION SHARES (NOTE
2) DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------------------------------------------
<TABLE>
OIL -- INTERNATIONAL -- 4.7%
British Petroleum, plc, ADR 1,500 $ 134,438
Chevron Corp. 2,000 165,875
Exxon Corp. 3,000 219,375
Mobil Corp. 2,800 243,950
Royal Dutch Petroleum Co. 1,400 67,025
Texaco, Inc. 2,000 105,750
-----------
936,413
-----------
OIL -- SERVICES & DRILLING -- 4.1%
Baker Hughes Inc. 5,000 88,437
Diamond Offshore Drilling 4,000 94,750
Halliburton Co. 5,000 148,125
Schlumberger Limited 3,000 138,375
Williams (The) Companies, Inc. 11,000 343,063
-----------
812,750
-----------
PAPER & PAPER PRODUCTS -- 3.8%
Bowater, Inc. 3,000 124,312
Georgia-Pacific Group 3,500 204,969
International Paper Co. 4,000 179,250
Union Camp Corp. 3,500 236,250
-----------
744,781
-----------
PHOTOGRAPHY -- 0.2%
Eastman Kodak Co. 500 36,000
-----------
PUBLISHING -- 2.1%
McGraw-Hill Companies, Inc. 4,000 407,500
-----------
REAL ESTATE INVESTMENT
TRUSTS -- 3.5%
Avalon Bay Communities, Inc. 2,000 68,500
Boston Properties, Inc. 2,500 76,250
Crescent Real Estate Equities
Trust 4,000 92,000
Developers Diversified Realty
Corp. 5,000 88,750
Equity Office Properties Trust 4,000 96,000
Equity Residential Properties
Trust 2,000 80,875
Felcor Suite Hotels, Inc. 2,000 46,125
Health Care Property Investors,
Inc. 5,000 153,750
-----------
702,250
-----------
RETAIL SERVICES -- 0.6%
Sears Roebuck & Co. 3,000 127,500
-----------
SAVINGS & LOAN -- 1.2%
Washington Mutual, Inc. 6,000 229,125
-----------
SOAPS -- 0.9%
Colgate-Palmolive Co. 2,000 185,750
-----------
TELECOMMUNICATIONS
EQUIPMENT -- 0.4%
Harris Corp. 2,000 73,250
-----------
TOBACCO -- 1.7%
Fortune Brands, Inc. 3,500 110,688
Philip Morris Companies, Inc. 4,300 230,050
-----------
340,738
-----------
U.S. GOVERNMENT AGENCIES -- 1.1%
Federal National Mortgage Assn. 3,000 222,000
-----------
UTILITIES -- ELECTRIC -- 5.7%
American Electric Power, Inc. 3,000 $ 141,188
CMS Energy Corp. 4,000 193,750
Carolina Power & Light Co. 4,000 188,250
Duke Energy Corp. 4,000 256,250
Edison Int'l 6,000 167,250
FPL Group, Inc. 3,000 184,875
-----------
1,131,563
-----------
UTILITIES -- TELEPHONE -- 12.5%
AT&T Corp. 4,000 301,000
Ameritech Corp. 4,500 285,187
Bell Atlantic Corp. 4,500 255,656
Bellsouth Corp. 6,000 299,250
Frontier Corp. 6,000 204,000
GTE Corp. 4,000 269,750
SBC Communications, Inc. 5,500 294,938
Sprint Corp. "FON" 3,000 252,375
Sprint Corp. "PCS"* 1,500 34,688
US West Communications Group 4,000 258,495
-----------
2,455,339
-----------
TOTAL COMMON STOCKS
(COST $13,099,687) $19,578,444
- ---------------------------------------------------------------------
PRINCIPAL
AMOUNT
--------
<S> <C> <C>
COMMERCIAL PAPER -- 0.6%
Enterprise Funding Corp., 5.42%,
due 01/19/99 (COST $124,661) $125,000 $ 124,661
- ---------------------------------------------------------------------
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- 1.9%
Federal Home Loan Mortgage,
5.04%, due 01/20/99 $200,000 $ 199,468
Federal Home Loan Mortgage,
5.04%, due 02/12/99 100,000 99,412
Federal National Mortgage Assn.,
5.08%, due 01/14/99 75,000 74,863
-----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(COST $373,743) $ 373,743
- ---------------------------------------------------------------------
TOTAL INVESTMENTS -- 101.4%
(COST $13,598,091) $20,076,848
LIABILITIES IN EXCESS OF OTHER ASSETS -- (1.4%) (275,361)
- ---------------------------------------------------------------------
NET ASSETS -- 100.0% $19,801,487
=====================================================================
The aggregate cost of securities for Federal income tax purpose at
December 31, 1998 is $13,584,864.
The following amounts are based on costs for Federal income tax
purposes:
Aggregate gross unrealized appreciation $ 6,859,022
Aggregate gross unrealized depreciation (367,038)
-----------
Net unrealized appreciation $ 6,491,984
===========
</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, 1998, 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 MONY Life Insurance Company ("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, 1998, the fees incurred by the Equity Income Portfolio was
$100,307. 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 portfolios
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.
Directors' fees incurred for non-affiliated Directors of the Fund for the
year ended December 31, 1998, amounted to $2,249 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.
At December 31, 1998, the Equity Income Portfolio increased undistributed
realized gains by $10,010, and decreased undistributed net investment income by
$10,010. These differences are primarily due to return of capital distributions
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 only 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,
1998 were $5,336,860 and $8,724,523, respectively.
16
<PAGE> 19
MONY SERIES FUND, INC.
FINANCIAL HIGHLIGHTS
EQUITY INCOME PORTFOLIO
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................. $ 27.10 $ 23.44 $ 19.61 $ 15.53 $ 16.43 $ 15.56
----------- ----------- ----------- ----------- ----------- ------------
Income from investment operations
Net investment income.............. 0.78 0.61 0.98 0.69 0.64 0.52
Net gains (losses) on investments
(both realized and unrealized)... 2.62 5.96 2.89 4.45 (0.51) 1.68
----------- ----------- ----------- ----------- ----------- ------------
Total from investment
operations..................... 3.40 6.57 3.87 5.14 0.13 2.20
----------- ----------- ----------- ----------- ----------- ------------
Less distributions
Dividends (from net investment
income).......................... (0.88) (1.00) (0.04) (0.65) (0.64) (0.52)
Distributions (from realized
capital gains)................... (3.67) (1.91) 0.00 (0.41) (0.39) (0.81)
----------- ----------- ----------- ----------- ----------- ------------
Total distributions.............. (4.55) (2.91) (0.04) (1.06) (1.03) (1.33)
----------- ----------- ----------- ----------- ----------- ------------
Net asset value, end of period....... $ 25.95 $ 27.10 $ 23.44 $ 19.61 $ 15.53 $ 16.43
=========== =========== =========== =========== =========== ============
Total return..................... 12.63% 31.26% 19.76% 33.12% 0.78% 14.14%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period............ $19,801,487 $20,720,886 $18,572,347 $18,091,035 $16,204,925 $151,330,311
Ratio of net investment income to
average net assets................. 1.88% 2.20% 2.79% 3.54% 3.53% 3.22%
Ratio of expenses to average net
assets............................. 0.76% 0.59% 0.55% 0.56% 0.48% 0.46%
Portfolio turnover rate.............. 27.71% 29.32% 29.37% 26.80% 32.48% 28.48%
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------------------------
1992 1991 1990 1989
------------ ------------ ----------- ----------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period............................. $ 14.64 $ 12.70 $ 14.26 $ 12.67
------------ ------------ ----------- ----------
Income from investment operations
Net investment income.............. 0.59 0.64 0.54 0.64
Net gains (losses) on investments
(both realized and unrealized)... 0.92 1.94 (1.50) 2.20
------------ ------------ ----------- ----------
Total from investment
operations..................... 1.51 2.58 (0.96) 2.84
------------ ------------ ----------- ----------
Less distributions
Dividends (from net investment
income).......................... (0.59) (0.64) (0.60) (0.64)
Distributions (from realized
capital gains)................... 0.00* 0.00* 0.00 (0.61)
------------ ------------ ----------- ----------
Total distributions.............. (0.59) (0.64) (0.60) (1.25)
------------ ------------ ----------- ----------
Net asset value, end of period....... $ 15.56 $ 14.64 $ 12.70 $ 14.26
============ ============ =========== ==========
Total return..................... 10.31% 20.31% (6.73%) 22.42%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period............ $121,540,392 $118,114,947 $99,878,151 $6,185,876
Ratio of net investment income to
average net assets................. 3.68% 4.46% 5.39% 4.66%
Ratio of expenses to average net
assets............................. 0.46% 0.49% 0.52% 0.88%
Portfolio turnover rate.............. 35.62% 25.84% 8.89% 19.55%
</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.:
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets, and the financial highlights present fairly, in all
material respects, the financial position of the Equity Income Portfolio (one of
the portfolios constituting MONY Series Fund, Inc.), which is available for
purchase by the Keynote Series Account, at December 31, 1998, 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. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of MONY
Series Fund, Inc.'s management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which 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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1998 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
New York, New York
February 12, 1999
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 Company of America
1740 Broadway
New York, New York 10019
PRINCIPAL UNDERWRITER AND DISTRIBUTOR
MONY Securities Corporation
1740 Broadway
New York, New York 10019
CUSTODIAN
Chase Manhattan Bank
4 New York Plaza
New York, New York 10004
TRANSFER AGENT
MONY Life Insurance Company
1740 Broadway
New York, New York 10019
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
</TABLE>
<PAGE> 22
V
LOGO
MONY LIFE INSURANCE COMPANY
One MONY Plaza
PO Box 48-30
Syracuse, New York 13221
MONY Life Insurance Company, New York, NY
