<PAGE>
MBL VARIABLE CONTRACT ACCOUNT -- 2
To Contract Holders and Participants:
The value of each Variable Accumulation Unit of MBL Variable Contract
Account -- 2 (the "Account") as of December 31, 1997 was $188.325, versus a
value of $144.176 on December 31, 1996. This represents a 30.6% increase for the
one-year period. The Standard & Poor's 500 Stock Index, a generally accepted
market index of unmanaged equity securities, increased 33.4% during the same
period.
The Account invests exclusively in MBL Growth Fund (the "Fund"). The
accompanying annual report of the Fund contains a review by Markston Investment
Management, the Fund's Investment Adviser, of its overall performance and
commentary related to specific holdings in the Fund's portfolio.
We are pleased to report that MORNINGSTAR, INC., the widely recognized
independent fund rating company, recently gave the Account its highest variable
annuity rating, five stars, (*****) as of December 31, 1997.(2) There are 1,820,
1,199, and 604 subaccounts in Morningstar's domestic equity variable annuity
category for the 3-, 5-, and 10-year periods, respectively.
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. If you have any questions, please call
your Customer Service Representative at 1-800-435-3191.
Following are the audited financial statements of the Account as of, and for the
one year period ended, December 31, 1997.
Sincerely,
[SIG]
William G. Clark
Senior Vice President
Pension and Investment Products
MBL Life Assurance Corporation January 31, 1998
(2) 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>
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, 1997, 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, 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 MBL Variable Contract Account
- -- 2 as of December 31, 1997, 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, 1998
2
<PAGE>
MBL VARIABLE CONTRACT ACCOUNT -- 2
STATEMENT OF ASSETS AND LIABILITY
DECEMBER 31, 1997
<TABLE>
<S> <C>
ASSETS
Investments in MBL Growth Fund, Inc.
4,327,113 shares at net asset value of $12.17 per share
(cost -- $49,066,767)................................................... $52,660,964
LIABILITY
Due to MBL Life -- Note C................................................. 363,588
-----------
NET ASSETS................................................................ $52,297,376
-----------
-----------
NET ASSETS ATTRIBUTABLE TO VARIABLE ANNUITY CONTRACT HOLDERS
276,202 variable accumulation units at value
of $188.325 per unit................................................ $52,015,686
Variable annuity reserves -- Note A................................... 281,690
-----------
$52,297,376
-----------
-----------
</TABLE>
See notes to financial statements.
3
<PAGE>
MBL VARIABLE CONTRACT ACCOUNT -- 2
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
Investment Income:
Dividends............................................................... $ 495,469
Capital gain distributions.............................................. 6,339,230
-----------
6,834,699
Expenses -- Note C:
Risk and death benefit charges.......................................... 176,990
-----------
Net investment income............................................. 6,657,709
-----------
Realized and unrealized gain on investments -- Note D:
Net realized gain on sales of investments............................... 245,598
Net change in unrealized appreciation/depreciation of investments....... 5,710,244
-----------
Net gain on investments........................................... 5,955,842
-----------
Net increase in net assets resulting from operations...................... $12,613,551
-----------
-----------
</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,
------------------------------
1997 1996
-------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS
Net investment income..................................................... $ 6,657,709 $ 6,772,459
Net realized gain (loss) on sales of investments.......................... 245,598 (74,893)
Net change in unrealized appreciation/depreciation of
investments.............................................................. 5,710,244 1,647,592
-------------- --------------
Net increase in net assets resulting from operations.................... 12,613,551 8,345,158
-------------- --------------
FROM CONTRACT HOLDERS' TRANSACTIONS -- NOTE B
Net purchase payments..................................................... 173,226 18,452
Accumulation units surrendered............................................ (2,112,509) (2,510,082)
Annuity payments.......................................................... (32,996) (25,838)
-------------- --------------
Decrease in net assets resulting from Contract Holders' transactions.... (1,972,279) (2,517,468)
-------------- --------------
Increase in amount due MBL Life resulting from investment activities and
mortality gains and losses -- Note C....................................... (55,422) (50,248)
-------------- --------------
Net increase in net assets.............................................. 10,585,850 5,777,442
Net assets
Beginning of year......................................................... 41,711,526 35,934,084
-------------- --------------
End of year............................................................... $ 52,297,376 $ 41,711,526
-------------- --------------
-------------- --------------
</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 (see Note B). 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 ("Commissioner") is the sole Trustee. On January 9, 1997,
the Court entered an order approving a Settlement Agreement among the
Commissioner in her capacity as Rehabilitator and Trustee, MBL Life and the
Class Four Creditors, as identified in the Plan. Class Four Creditors and
eligible Policyholders/Contract Holders who remain with MBL Life after the end
of the Rehabilitation Period (December 31, 1999) will share in the future value
of MBL Life. The sharing will be based on a ratio of 70% to the Class Four
Creditors and 30% to eligible Policyholders/Contract Holders. If MBL Life does
not meet its capital growth projections, the Policyholder/Contract Holder share
may be reduced below 30%.
On September 15, 1997, the Board of Directors of MBL Life announced that it had
engaged an investment banking firm to assist in exploring a possible sale of MBL
Life before the end of the Rehabilitation Period. Any resulting transaction must
go through an extensive approval process
6
<PAGE>
NOTE B (CONTINUED) --
including reviews by the New Jersey Department of Banking and Insurance, the
Superior Court of New Jersey, and the then existing Class Four Creditors.
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.
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, 1997 amounted to $7,333,506 and $2,611,722,
respectively.
The net realized gain on sales of investments was calculated as follows:
<TABLE>
<S> <C>
Proceeds from sales of investments.......................... $ 2,611,722
Cost of investments sold.................................... 2,366,124
-----------
Net realized gain on investments.......................... $ 245,598
-----------
-----------
</TABLE>
The net change in unrealized appreciation/depreciation of investments was
calculated as follows:
<TABLE>
<S> <C>
Unrealized appreciation (depreciation) of investments:
Beginning of year......................................... $(2,116,047)
End of year............................................... 3,594,197
-----------
Net change in unrealized appreciation/depreciation of
investments............................................. $ 5,710,244
-----------
-----------
</TABLE>
NOTE E -- The change in the number of accumulation units outstanding was as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
--------------------
1997 1996
--------- ---------
<S> <C> <C>
Balance at beginning of year............................... 287,783 307,509
Net units purchased........................................ 1,043 192
Accumulation units surrendered............................. (12,624) (19,918)
--------- ---------
Balance at end of year..................................... 276,202 287,783
--------- ---------
--------- ---------
</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 (2-98)
Annual Report
December 31, 1997
MBL VARIABLE
CONTRACT ACCOUNT -- 2
Group Variable Annuity Contracts
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