<PAGE>
MBL VARIABLE CONTRACT ACCOUNT -- 2
To Contract Holders and Participants:
PERFORMANCE AND RECOGNITION
The value of each Variable Accumulation Unit of MBL Variable Contract Account-2
("VCA-2") as of June 30, 1998 was $212.833, versus a value of $188.325 on
December 31, 1997. This represents a 13.0% increase for the six month period.
The Standard & Poor's 500 Stock Index, a generally accepted market index of
unmanaged equity securities, increased 17.7% during the same period. The
accompanying semiannual report of MBL Growth Fund (the "Fund") in which VCA-2
invests exclusively, contains its customary review by Markston Investment
Management, the Fund's Investment Adviser, of its overall performance.
We are pleased to report that MORNINGSTAR, INC., the widely recognized
independent fund rating company, has continued to give the Account its highest
variable annuity rating, five stars, (***** ) as of June 30, 1998.(1) There are
2,118, 1,361, and 678 subaccounts in Morningstar's domestic equity variable
annuity category for the 3-, 5-, and 10-year periods, respectively.
IMPORTANT ORGANIZATIONAL DEVELOPMENTS
Recently, you received a "sticker" supplement to your VCA-2 prospectus dated
August 6. This notice announced the proposed sale of most of the life insurance
and annuity businesses of VCA-2's sponsor, MBL Life Assurance Corporation ("MBL
Life"), to Anchor National Life Insurance Company, a subsidiary of SunAmerica,
Inc.
As an MBL Life group annuity contract holder or participant, you will also
receive additional detailed information about the proposed sale. In this letter,
however, I want to tell you how the sale will affect VCA-2, and also note that
you may have, among other options, the opportunity to exchange your VCA-2
account tax-free for a product offered by one of the SunAmerica life companies.
The sale of MBL Life's insurance businesses will effect a resolution of the
Mutual Benefit Life Rehabilitation, probably in June of 1999. At that time,
VCA-2 will be dissolved; MBL Life will then begin the process of terminating all
business operations.
Before this happens, you will receive detailed information and adequate time to
decide to exchange, transfer or redeem your account. There is nothing that you
need to do now.
In the meantime, we appreciate your continued support and welcome your comments
and observations. We thank you for your continued confidence in MBL Variable
Contract Account-2. If you have any questions, please call your Customer Service
Representative at 1-800-435-3191.
Sincerely,
[SIG]
William G. Clark
Senior Vice President
Pension and Investment Products August 12, 1998
MBL Life Assurance Corporation
(1) Morningstar's proprietary ratings for variable annuity subaccounts reflect
risk-adjusted performance and are subject to change each month. Past performance
is no guarantee of future results. A subaccount's rating is determined by
subtracting its risk score from its performance score for the 3-, 5-, and
10-year periods. These ratings compare annuities in the same investment class,
in this case domestic equity. The top 10% of subaccounts in an investment
category receive five stars. For more information, please call your Customer
Service Representative at MBL Life Assurance Corporation, 1-800-435-3191.
<PAGE>
MBL VARIABLE CONTRACT ACCOUNT -- 2
STATEMENT OF ASSETS AND LIABILITY
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments in MBL Growth Fund, Inc.
4,195,792 shares at net asset value of $13.78 per share
(cost -- $47,604,990)................................................... $57,818,007
LIABILITY
Due to MBL Life -- Note D................................................. 356,463
-----------
NET ASSETS................................................................ $57,461,544
-----------
-----------
NET ASSETS ATTRIBUTABLE TO VARIABLE ANNUITY CONTRACT HOLDERS
268,635 variable accumulation units at value
of $212.833 per unit................................................ $57,174,492
Variable annuity reserves -- Note A................................... 287,052
-----------
$57,461,544
-----------
-----------
</TABLE>
See notes to financial statements.
2
<PAGE>
MBL VARIABLE CONTRACT ACCOUNT -- 2
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
Investment expenses -- Note D:
Risk and death benefit charges........................................... $ 104,964
----------
Net investment loss................................................ 104,964
----------
Realized and unrealized gain on investments -- Note E:
Net realized gain on sales of investments................................ 296,244
Net increase in unrealized appreciation of investments................... 6,618,820
----------
Net gain on investments............................................ 6,915,064
----------
Net increase in net assets resulting from operations....................... $6,810,100
----------
----------
</TABLE>
See notes to financial statements.
3
<PAGE>
MBL VARIABLE CONTRACT ACCOUNT -- 2
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS YEAR
ENDED ENDED
JUNE 30, DECEMBER 31,
1998 1997
-------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS
Net investment income (loss).............................................. $ (104,964) $ 6,657,709
Net realized gain on sales of investments................................. 296,244 245,598
Net change in unrealized appreciation/depreciation of
investments.............................................................. 6,618,820 5,710,244
-------------- --------------
Net increase in net assets resulting from operations.................... 6,810,100 12,613,551
-------------- --------------
FROM CONTRACT HOLDERS' TRANSACTIONS -- NOTE B
Net purchase payments..................................................... 107,170 173,226
Accumulation units surrendered............................................ (1,668,440) (2,112,509)
Annuity payments.......................................................... (19,761) (32,996)
-------------- --------------
Decrease in net assets resulting from Contract Holders' transactions.... (1,581,031) (1,972,279)
-------------- --------------
Increase in amount due MBL Life resulting from investment activities and
mortality gains and losses -- Note D....................................... (64,901) (55,422)
-------------- --------------
Net increase in net assets.............................................. 5,164,168 10,585,850
Net assets
Beginning of period....................................................... 52,297,376 41,711,526
-------------- --------------
End of period............................................................. $ 57,461,544 $ 52,297,376
-------------- --------------
-------------- --------------
</TABLE>
See notes to financial statements.
4
<PAGE>
MBL VARIABLE CONTRACT ACCOUNT -- 2
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
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 (see Notes B and C). 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") was implemented. The Plan, as confirmed by the Superior Court of
New Jersey (the "Court"), reaffirmed the status of the Account as a separate
account. 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.
The Plan permits redemptions of amounts from the Account to continue, as
requested. 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. While both deposits and
transfers from other separate accounts of MBL Life, for the purchase of variable
annuities, may be made to the Account by participants under existing contracts,
applications for new contracts are not being accepted. The terms of the Plan
currently prohibit or limit redemptions from the Companion Contract and
transfers between the Account and the Companion Contract.
Approximately 69% of the Accounts outstanding units are owned by three separate
Contract Holders.
5
<PAGE>
NOTE C -- On July 15, 1998, MBL Life entered into an agreement with Anchor
National Life Insurance Company ("Anchor National"), a subsidiary of SunAmerica,
Inc., pursuant to which Anchor National will purchase the individual life and
individual and group annuity businesses of MBL Life (the "Acquisition"). In
accordance with the Plan of Rehabilitation of Mutual Benefit Life, the
Acquisition is subject to certain judicial and regulatory approvals. Assuming
that the necessary approvals are obtained, it is currently anticipated that the
Acquisition will occur no later than December 31, 1998. The Acquisition will
effect a resolution to the proceedings associated with the Plan.
As part of the resolution of the proceedings associated with the Plan, MBL Life
has indicated that it intends to seek a court order to terminate the Account.
Pursuant to the proposed court order, group annuity contract holders and
participants will be provided with adequate notice and disclosure regarding the
termination of the Account.
NOTE D -- 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 E -- Aggregate purchases and proceeds from the sales of investments during
the period ended June 30, 1998 amounted to $173,575 and $1,931,596,
respectively.
The net realized gain on sales of investments was calculated as follows:
<TABLE>
<S> <C>
Proceeds from sales of investments.......................... $ 1,931,596
Cost of investments sold.................................... 1,635,352
-----------
Net realized gain on investments.......................... $ 296,244
-----------
-----------
</TABLE>
The net increase in unrealized appreciation of investments was calculated as
follows:
<TABLE>
<S> <C>
Unrealized appreciation of investments:
Beginning of period....................................... $ 3,594,197
End of period............................................. 10,213,017
-----------
Net increase in unrealized appreciation of
investments............................................. $ 6,618,820
-----------
-----------
</TABLE>
NOTE F -- The change in the number of accumulation units outstanding was as
follows:
<TABLE>
<CAPTION>
SIX MONTHS YEAR
ENDED ENDED
JUNE 30, DECEMBER 31,
1998 1997
----------- ---------------
<S> <C> <C>
Balance at beginning of period................... 276,202 287,783
Net units purchased.............................. 522 1,043
Accumulation units surrendered................... (8,089) (12,624)
----------- -------
Balance at end of period......................... 268,635 276,202
----------- -------
----------- -------
</TABLE>
6
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
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 (8-98)
Semiannual Report
June 30, 1998
MBL VARIABLE
CONTRACT ACCOUNT -- 2
Group Variable Annuity Contracts
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