<PAGE>
MBL VARIABLE CONTRACT ACCOUNT -- 2
To Contract Holders and Participants
The value of a Variable Accumulation Unit of MBL Variable Contract Account -- 2
(the "Account") as of December 31, 1996 was $144.176, an increase of 24.0% from
the value of $116.231 on December 31, 1995. The Standard & Poor's 500 Stock
Index, a generally accepted market index of unmanaged securities, increased
23.0% during the same period.
The Account invests exclusively in the MBL Growth Fund (the "Fund"). The
accompanying annual report of the Fund contains a review, by the Fund's
Investment Adviser, of its overall performance and commentary related to
specific holdings in the Fund's portfolio.
We thank you for your continued confidence in MBL Variable Contract Account --
2. We remain committed to providing you with quality investment management and
superior customer service.
Following are the audited financial statements of the Account as of, and for the
year ended, December 31, 1996.
Sincerely,
[SIG]
William G. Clark
Senior Vice President
Pension and Investment Products
MBL Life Assurance Corporation
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To Contract Holders and Participants
MBL Variable Contract Account -- 2
We have audited the accompanying statement of assets and liability of MBL
Variable Contract Account -- 2 (the "Account") as of December 31, 1996, the
related statement 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 the Account'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, 1996, 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 MBL Variable Contract Account
- -- 2 as of December 31, 1996, the results of its operations for the year then
ended and the changes in its 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.
Parsippany, New Jersey
February 10, 1997
2
<PAGE>
MBL VARIABLE CONTRACT ACCOUNT -- 2
STATEMENT OF ASSETS AND LIABILITY
DECEMBER 31, 1996
<TABLE>
<S> <C>
ASSETS
Investments in MBL Growth Fund, Inc.
3,931,024 shares at net asset value of $10.68 per share
(cost -- $44,099,385)................................................... $41,983,338
LIABILITY
Due to MBL Life -- Note C................................................. 271,812
-----------
Net assets................................................................ $41,711,526
-----------
-----------
NET ASSETS ATTRIBUTABLE TO VARIABLE ANNUITY CONTRACT HOLDERS
287,783 variable accumulation units at value
of $144.176 per unit................................................ $41,491,465
Variable annuity reserves -- Note A..................................... 220,061
-----------
$41,711,526
-----------
-----------
</TABLE>
See notes to financial statements.
3
<PAGE>
MBL VARIABLE CONTRACT ACCOUNT -- 2
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
Investment income:
Dividends................................................................ $ 805,002
Capital gain distributions............................................... 6,108,093
----------
6,913,095
Expenses -- Note C:
Risk and death benefit charges........................................... 140,636
----------
Net investment income.............................................. 6,772,459
----------
Realized and unrealized gain (loss) on investments -- Note D:
Net realized loss on sales of investments................................ (74,893)
Decrease in unrealized depreciation of investments....................... 1,647,592
----------
Net gain on investments............................................ 1,572,699
----------
Net increase in net assets resulting from operations....................... $8,345,158
----------
----------
</TABLE>
See notes to financial statements.
4
<PAGE>
MBL VARIABLE CONTRACT ACCOUNT -- 2
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------------
1996 1995
-------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS
Net investment income..................................................... $ 6,772,459 $ 2,981,651
Net realized loss on sales of investments................................. (74,893) (610,124)
Decrease in unrealized depreciation of investments........................ 1,647,592 6,990,746
-------------- --------------
Net increase in net assets resulting from operations.................... 8,345,158 9,362,273
-------------- --------------
FROM CONTRACT HOLDERS' TRANSACTIONS -- NOTE B
Net purchase payments..................................................... 18,452 --
Accumulation units surrendered............................................ (2,510,082) (2,012,142)
Annuity payments.......................................................... (25,838) (20,662)
-------------- --------------
Decrease in net assets resulting from Contract Holders' transactions.... (2,517,468) (2,032,804)
-------------- --------------
Increase in amount due MBL Life resulting from investment activities and
mortality gains and losses -- Note C.................................... (50,248) (37,635)
-------------- --------------
Net increase in net assets.............................................. 5,777,442 7,291,834
Net assets
Beginning of year......................................................... 35,934,084 28,642,250
-------------- --------------
End of year............................................................... $ 41,711,526 $ 35,934,084
-------------- --------------
-------------- --------------
</TABLE>
See notes to financial statements.
5
<PAGE>
MBL VARIABLE CONTRACT ACCOUNT -- 2
NOTES TO FINANCIAL STATEMENTS
NOTE A -- MBL Variable Contract Account -- 2 (the "Account") is a unit
investment trust registered under the Investment Company Act of 1940, as
amended, and a separate account of MBL Life Assurance Corporation ("MBL Life")
established under the Insurance Laws of New Jersey. MBL Life provides for
variable accumulation and benefits under the Account's contract by crediting
annuity considerations to the Account or the Fixed Accumulation Account, as
elected by the participant. Significant accounting policies of the Account are
as follows:
INVESTMENTS -- Investments are valued at net asset value. The Account purchases
shares of MBL Growth Fund, Inc. (the "Fund") at the net asset value of such
shares on the date monies are received. Cost represents the aggregate of such
purchases at the respective net asset values, less shares redeemed at average
cost. The Account recognizes dividend income and capital gain distributions, if
any, on the ex-dividend date as set by the Fund.
VARIABLE ANNUITY RESERVES -- The variable annuity reserves are actuarially
determined on the basis of the 1951 Group Annuity Mortality Tables for Males,
modified, at 3.5%.
FEDERAL INCOME TAXES -- The Account does not provide for Federal income taxes
since the operations of the Account form a part of, and are taxed with, the
total operations of MBL Life, which is taxed as a "life insurance company" under
the Internal Revenue Code. Earnings and realized capital gains of the Account
attributable to the Contract Holders are excluded in the determination of the
Federal income tax liability of MBL Life.
ESTIMATES -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts and disclosures in the
financial statements. Actual results could differ from these estimates.
NOTE B -- On April 29, 1994, the Third Amended Plan of Rehabilitation (the
"Plan") of Mutual Benefit Life Insurance Company in Rehabilitation ("Mutual
Benefit Life"), which as confirmed by the Superior Court of New Jersey
reaffirmed the status of the Account as a separate account, was implemented.
Pursuant to the terms of the Plan, substantially all of the assets and
liabilities of Mutual Benefit Life were transferred to MBL Life. In addition,
the assets and liabilities of the Account were transferred to a new separate
account of MBL Life. Also, as of April 29, 1994, the ownership of the stock of
MBL Life was transferred to a Trust, of which the New Jersey Commissioner of
Banking and Insurance is the sole Trustee.
While the terms of the Plan currently prohibit or limit redemptions from the
Fixed Accumulation Account and transfers from the Fixed Accumulation Account to
the Account, annuity payments which commenced prior to July 16, 1991 and any
death benefits payable, both before and after July 16, 1991, are unaffected and
will continue to be paid under the terms of the Plan. In addition, the Plan
permits redemptions of amounts from the Account to continue, as requested, and
transfers from other separate accounts of MBL Life for the purchase of variable
annuities.
In view of the above, applications for new contracts and requests for transfer
of amounts to the Fixed Accumulation Account from the Account are currently not
being accepted.
6
<PAGE>
NOTE C -- A charge at the annual rate of 0.37% is made daily against Account
assets for mortality and expense risks assumed by MBL Life and for provision of
the guaranteed minimum death benefit. The portion of these charges which are
retained in the Account and are due to MBL Life participate ratably in the
investment performance of the Account.
NOTE D -- Aggregate purchases and proceeds from the sales of investments during
the year ended December 31, 1996 amounted to $7,032,250 and $2,752,440,
respectively.
The net realized loss on sales of investments was calculated as follows:
<TABLE>
<S> <C>
Proceeds from sales of investments.......................... $ 2,752,440
Cost of investments sold.................................... 2,827,333
-----------
Net realized loss on investments.......................... $ (74,893)
-----------
-----------
</TABLE>
The decrease in unrealized depreciation of investments was calculated as
follows:
<TABLE>
<S> <C>
Unrealized depreciation of investments:
Beginning of year......................................... $(3,763,639)
End of year............................................... (2,116,047)
-----------
Decrease in unrealized depreciation of investments...... $ 1,647,592
-----------
-----------
</TABLE>
NOTE E -- The change in the number of accumulation units outstanding was as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
Balance at beginning of year............................ 307,509 328,954
Net units purchased..................................... 192 --
Accumulation units surrendered.......................... (19,918) (21,445)
--------- ---------
Balance at end of year.................................. 287,783 307,509
--------- ---------
--------- ---------
</TABLE>
7
<PAGE>
- ----------------------------------------
MBL VARIABLE CONTRACT ACCOUNT -- 2
MBL Life Assurance Corporation
520 Broad Street - Newark, New Jersey 07102
- ---------------------------------------------
THIS REPORT HAS BEEN PREPARED FOR CONTRACT HOLDERS AND PARTICIPANTS IN MBL
VARIABLE CONTRACT ACCOUNT -- 2. IT IS NOT AUTHORIZED FOR OTHER DISTRIBUTION
UNLESS PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS WHICH INCLUDES
INFORMATION CONCERNING THE ACCOUNT AND THE APPLICABLE SALES COMMISSIONS.
FS-307 (2-97)
Annual Report
December 31, 1996
MBL VARIABLE
CONTRACT ACCOUNT -- 2
Group Variable Annuity Contracts
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