<PAGE>
MBL GROWTH FUND, INC.
Dear Shareholders and Variable Annuity Participants:
MBL Growth Fund's return for 1996 was 24.6% compared to 23.0% for the Standard &
Poor's 500 Index, a generally accepted index of unmanaged securities. For the
year, the Fund achieved this return with an estimated average risk level equal
to 77% of the risk level of the Standard & Poor's 500 Index. Thus the Fund
continued its record of providing excellent risk-adjusted returns.
As you probably know, the Fund is the underlying investment vehicle for variable
annuity contracts. I am pleased to report that for the 5 year period ending
December 31, 1996, MORNINGSTAR, INC., an independent mutual fund ranking
organization, ranked MBL Variable Contract Account-2 ("VCA-2"), one of the
variable annuity sub-accounts that invest in the Fund, with the fourth best
total return out of the 271 variable annuity sub-accounts in the growth
category. For the 1-year and 10-year periods ended December 31, 1996, VCA-2
ranked 69 out of 587 and 11 out of 161 variable annuity sub-accounts,
respectively, for total return. MORNINGSTAR does not include loads or charges in
its calculations. Also past performance is not a guarantee of future results. If
you would like more information, please contact First Priority Investment
Corporation.
In the letter that follows, Michael Mullarkey, the Fund's lead portfolio
manager, discusses some of the portfolio issues that impacted 1996 performance.
During 1996, the Board of Directors declared total income and capital gains
distributions of $0.24 and $1.82, respectively.
The Board of Directors continues to invite you to send your comments and
suggestions and thanks you for your continued support and confidence in MBL
Growth Fund, Inc.
Sincerely,
EUGENE J. CIARKOWSKI
PRESIDENT
February 10, 1997
<PAGE>
REPORT OF THE INVESTMENT ADVISER
Dear Shareholders and Variable Annuity Participants:
During the last five years MBL Growth Fund has returned 17.5%, annualized after
expenses, versus 15.2% for the Standard & Poor's 500 Index. During that period,
we estimate the portfolio ran a risk level that was 74% of that Index. For those
interested in consistency of performance, the Fund, after expenses, outperformed
the S&P 500 Index, which is unburdened by expenses, over a one, five and ten
year period.
Among our better performers for the full year were Intel Corp., ShowBiz Pizza
Time, American Express Co. and PanEnergy Corp.
INTEL is our largest holding and was our best performer for the year,
appreciating 131%. We have followed Intel for years, including the periods when
Intel made wristwatches (the Microma), and when the Japanese semiconductor
companies collectively lost $2 billion driving American companies, such as
Intel, out of the dynamic random access memory (DRAM) market. During 1996, we
realized that Intel's X86 architecture was so dominant that the Company was
likely to be able to simultaneously successfully attack several distinct
markets, thereby assuring continuing high profit growth. Part of this
realization was our belief that Intel's next generation microprocessor was very
much on schedule and will be positioned strategically when the computer industry
moves from 32 bit to 64 bit architectures. This implied Intel will be an
effective competitor in the growing data warehousing and broad graphics market
while also competing effectively in the workstation, server and small mainframe
markets.
SHOWBIZ PIZZA TIME was another of the portfolio's best performing stocks for all
of 1996, ShowBiz is a leading factor in children's restaurants/game rooms. Its
main competitor, Discovery Zone, went bankrupt and has closed 35% of its stores
since September, 1995. In the meantime ShowBiz posted comparable store sales of
10% during 1996. Continued growth is expected in 1997 because ShowBiz has
renovated almost its entire chain. It has also increased its store base 8% by
acquiring its largest franchisee at an attractive price. In addition, as
Discovery Zone continues to close stores, we believe there is a possibility
ShowBiz could buy all or part of Discovery Zone out of bankruptcy.
AMERICAN EXPRESS, also a large holding, appreciated 36% during the year. We
attribute part of the appreciation to the fact that this highly profitable
enterprise is priced at less than a market price earnings multiple at a time
when, under the new leadership of Harvey Golub, it has stopped its dramatic
market share losses in the charge and credit card industry. Speculation on a
takeover by Citibank helped fuel the shares price increase.
PANENERGY stock appreciated 61% during 1996, helped by its announcement that it
was merging with Duke Power on a favorable basis. As one of the leaders in the
consolidation of the natural gas market, PanEnergy has emerged as a substantial
national marketer of both gas and electricity. Duke's Board believes the de-
regulation of electric power will lead to merging of the gas and electricity
markets into a larger energy market. PanEnergy was viewed as an
entrepreneurially run enterprise that, because it had successfully negotiated
the perils of gas de-regulation, could contribute to Duke's challenges as it
faced de-regulation of the electric market.
Some of our poorer performers in the fourth quarter were Electronic Data Systems
Corp ("EDS") and Ogden Corp.
EDS declined after the company forecast slower growth for the fourth quarter of
1996 and early 1997. The Company faces several challenges from increased
competition in the very competitive services market. Despite these challenges,
we believe that the basic business is growing fast enough and that EDS is
sufficiently well positioned to make the stock attractive.
2
<PAGE>
We attribute OGDEN'S poor fourth quarter performance to a disappointing earnings
report which resulted from uninspiring performance in its Aviation group and a
large decline in earnings from its Waste to Energy Projects group. The fact the
company's restructuring is taking longer than originally expected probably also
contributed to the under performance.
Sincerely,
[SIG]
MICHAEL J. MULLARKEY
Managing Director
MARKSTON INVESTMENT MANAGEMENT
February 10, 1997
3
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE MBL GROWTH FUND
AND THE STANDARD & POOR'S 500 INDEX
FOR THE TEN YEAR PERIOD ENDED DECEMBER 31, 1996
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
<S> <C> <C>
1 Year 5 Year 10 Year
24.57% 17.47% 15.34%
MBL Growth Fund S&P 500
1986 10000 10000
1987 9783 10500
1988 12484 12243
1989 16044 16112
1990 15189 15612
1991 18637 20358
1992 21371 21906
1993 24315 24118
1994 24832 24434
1995 33461 33604
1996 41683 41320
</TABLE>
THE GRAPH ABOVE DEPICTS THE PERFORMANCE OF MBL GROWTH FUND VERSUS THE STANDARD &
POOR'S 500 INDEX (AN UNMANAGED INDEX OF STOCKS CONSIDERED REPRESENTATIVE OF THE
OVERALL STOCK MARKET). IT IS IMPORTANT TO NOTE THAT MBL GROWTH FUND IS A
PROFESSIONALLY MANAGED MUTUAL FUND WHILE THE INDEX IS NOT AVAILABLE FOR
INVESTMENT, IS UNMANAGED AND IS SHOWN FOR COMPARISON ONLY.
THIS GRAPH ASSUMES AN INITIAL INVESTMENT OF $10,000 AS WELL AS REINVESTMENT OF
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. THIS FUND IS ONLY AVAILABLE FOR
PURCHASE BY INSURANCE COMPANY SEPARATE ACCOUNTS. DEDUCTIONS AND CHARGES,
INCLUDING SALES CHARGES, APPLICABLE TO THE VARIOUS INSURANCE PRODUCTS THAT
INVEST IN THE FUND, ARE NOT REFLECTED IN THIS GRAPH. PAST PERFORMANCE IS NOT A
GUARANTEE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL
FLUCTUATE SO THAT, WHEN REDEEMED, AN INVESTOR'S SHARES MAY BE WORTH MORE OR LESS
THAN WHEN ORIGINALLY PURCHASED.
4
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and
Board of Directors of
MBL Growth Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of portfolio 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 MBL Growth Fund, Inc. (the "Fund")
at December 31, 1996, 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 four 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 the Fund'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, 1996 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above. The financial highlights for each of the six years
in the period ended December 31, 1992 were audited by other independent
accountants whose report dated February 12, 1993 expressed an unqualified
opinion on those statements.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
February 10, 1997
5
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
MBL GROWTH FUND, INC.
DECEMBER 31, 1996
<TABLE>
<S> <C>
ASSETS
Investments:
Common stocks (cost $28,922,425)................................. $38,185,342
Preferred stock (cost $30,852)................................... 36,075
Corporate bonds (cost $479,579).................................. 637,328
Short-term investments (cost $7,159,801)......................... 7,159,801
-----------
46,018,546
Cash............................................................... 57,490
Dividends and interest receivable.................................. 70,608
Other assets....................................................... 5,109
-----------
Total Assets............................................... 46,151,753
-----------
LIABILITIES
Payable for investment securities purchased........................ 86,447
Payable for Fund shares redeemed................................... 6,844
Accrued investment advisory fee.................................... 43,997
Accounts payable and accrued expenses.............................. 22,922
-----------
Total Liabilities.......................................... 160,210
-----------
Net Assets................................................. $45,991,543
-----------
-----------
NET ASSETS
Capital stock (4,307,150 shares of $1.00 par value capital stock
outstanding, 21,000,000 shares authorized)....................... $ 4,307,150
Capital paid-in.................................................... 32,131,599
Accumulated undistributed net investment income.................... 34,526
Accumulated undistributed net realized gain from security
transactions..................................................... 92,379
Net unrealized appreciation of investments......................... 9,425,889
-----------
Net Assets................................................. $45,991,543
-----------
-----------
Net asset value, offering price, and redemption price per share
($45,991,543 DIVIDED BY 4,307,150 shares of
capital stock outstanding)....................................... $10.68
-----------
-----------
</TABLE>
See notes to financial statements.
STATEMENT OF OPERATIONS
MBL GROWTH FUND, INC.
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
Investment Income:
Dividends......................................................... $ 642,483
Interest.......................................................... 561,952
----------
1,204,435
Expenses:
Investment advisory fee........................................... 181,194
Custodian......................................................... 68,723
Audit............................................................. 26,924
Transfer agent.................................................... 19,642
Legal............................................................. 17,127
Printing.......................................................... 10,419
Insurance expense................................................. 9,340
Directors' fees................................................... 6,300
Miscellaneous..................................................... 3,010
Registration and filing fees...................................... 708
----------
343,387
----------
Net Investment Income....................................... 861,048
----------
Realized and Unrealized Gain on
Investments:
Net realized gain from security transactions...................... 6,498,070
Increase in unrealized appreciation of investments................ 1,938,476
----------
Net Gain on Investments......................................... 8,436,546
----------
Net Increase in Net Assets Resulting from Operations............ $9,297,594
----------
----------
</TABLE>
6
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
MBL GROWTH FUND, INC.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS
Net investment income........................... $ 861,048 $ 951,647
Net realized gain from security transactions
($6,498,070 and $2,228,783, respectively, for
federal income tax purposes).................. 6,498,070 2,228,794
Increase in unrealized appreciation of
investments................................... 1,938,476 7,376,436
------------ ------------
Net Increase in Net Assets Resulting from
Operations.................................. 9,297,594 10,556,877
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income ($.24 and
$.26, per share, respectively)................ (883,492) (950,032)
Distributions from net realized gain from
security transactions ($1.82 and $.68, per
share, respectively).......................... (6,691,860) (2,494,342)
------------ ------------
Total Distributions to Shareholders........... (7,575,352) (3,444,374)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS
Net increase in net assets from capital share
transactions.................................. 4,118,244 1,039,015
------------ ------------
Net Increase in Net Assets.................... 5,840,486 8,151,518
NET ASSETS
Beginning of year............................... 40,151,057 31,999,539
------------ ------------
End of year (including undistributed net
investment income of $34,526 and $56,970
respectively)................................. $45,991,543 $40,151,057
------------ ------------
------------ ------------
</TABLE>
See notes to financial statements.
7
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS
MBL GROWTH FUND, INC.
DECEMBER 31, 1996
<TABLE>
<CAPTION>
NUMBER
OF MARKET
SHARES VALUE
- ---------- -----------
<C> <S> <C>
COMMON STOCKS (83.03%)
AEROSPACE AND DEFENSE (0.26%)
5,240 Allegheny Teledyne, Inc................................ $ 120,520
-----------
AGRICULTURE (0.65%)
7,700 IMC Global Inc......................................... 301,262
-----------
BANKING AND FINANCE (5.20%)
37,100 American Express Co.................................... 2,096,150
6,000 Northern Trust Corp.................................... 217,500
2,000 Wilmington Trust Corp.................................. 79,000
-----------
2,392,650
-----------
BUILDING (3.69%)
10,900 Lone Star Industries, Inc.............................. 401,937
22,600 Morgan Products Ltd.*.................................. 166,675
18,500 Vulcan Materials Co.................................... 1,126,188
-----------
1,694,800
-----------
CHEMICALS (0.26%)
3,800 Lubrizol Corp.......................................... 117,800
-----------
COMPUTERS AND COMPUTING (10.49%)
6,700 Calcomp Technology, Inc.*.............................. 18,006
21,500 Data General Corp.*.................................... 311,750
6,500 Electronic Data Systems Corp........................... 281,125
2,690 Imation Corp.*......................................... 75,656
72,900 National Computer Systems, Inc......................... 1,822,500
35,900 Novell, Inc.*.......................................... 338,806
53,200 Sequent Computer Systems, Inc.*........................ 937,650
16,700 Storage Technology Corp.*.............................. 795,338
16,900 Symantec Corp.*........................................ 245,050
-----------
4,825,881
-----------
CONGLOMERATES (4.85%)
26,900 Minnesota Mining & Manufacturing Co.................... 2,229,338
-----------
CONSUMER GOODS AND SERVICES (7.97%)
4,200 American Greetings Corp., Class A...................... 119,175
23,200 Eastman Kodak Co....................................... 1,861,800
3,100 Hasbro, Inc............................................ 120,512
8,500 Mattel, Inc............................................ 235,875
22,400 National Service Industries, Inc....................... 837,200
3,400 Time Warner, Inc....................................... 127,500
6,400 Valspar Corp........................................... 362,400
-----------
3,664,462
-----------
<CAPTION>
NUMBER
OF MARKET
SHARES VALUE
- ---------- -----------
<C> <S> <C>
ELECTRICAL AND ELECTRONICS (11.64%)
14,400 Avnet Inc.............................................. $ 838,800
20,000 Intel Corp............................................. 2,617,500
30,900 Motorola, Inc.......................................... 1,896,488
-----------
5,352,788
-----------
FOOD AND BEVERAGES (4.67%)
5,600 Coca-Cola Co........................................... 294,700
5,600 Quaker Oats Co......................................... 213,500
70,650 Showbiz Pizza Time, Inc.*.............................. 1,280,531
28,900 Vicorp Restaurants, Inc.*.............................. 361,250
-----------
2,149,981
-----------
HEALTHCARE AND MEDICAL (3.51%)
30,400 Cooper Companies, Inc.*................................ 524,400
12,036 Medpartners, Inc.*..................................... 252,756
17,000 Shared Medical System Corp............................. 835,125
-----------
1,612,281
-----------
INDUSTRIAL SERVICES (1.44%)
35,300 Ogden Corp............................................. 661,875
-----------
INSURANCE (5.47%)
70,400 Allmerica Property & Casualty Companies, Inc........... 2,138,400
9,900 Argonaut Group, Inc.................................... 304,425
3,500 USF&G Corp............................................. 73,063
-----------
2,515,888
-----------
INVESTMENT COMPANIES (0.69%)
3,700 Dean Witter Government Income Trust.................... 30,525
17,300 Quest for Value Dual Purpose Fund, Inc., Income
Shares............................................... 198,950
2,400 Quest for Value Dual Purpose Fund, Inc., Capital
Shares*.............................................. 86,700
-----------
316,175
-----------
MISCELLANEOUS (0.13%)
6,100 Reading Entertainment, Inc.*........................... 57,950
-----------
</TABLE>
8
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS -- CONTINUED
MBL GROWTH FUND, INC.
DECEMBER 31, 1996
<TABLE>
<CAPTION>
NUMBER
OF MARKET
SHARES VALUE
- ---------- -----------
<C> <S> <C>
OIL AND GAS (5.81%)
6,000 Amoco Corp............................................. $ 483,000
914 Apache Corp............................................ 32,333
35,025 PanEnergy Corp......................................... 1,576,125
3,000 Petroleum Helicopters, Inc., voting.................... 51,000
8,100 Petroleum Helicopters, Inc., non-voting................ 127,575
7,000 Piedmont Natural Gas, Inc.............................. 163,625
16,900 Quaker State Corp...................................... 238,713
-----------
2,672,371
-----------
PRINTING AND PUBLISHING (2.27%)
18,800 Nelson, Thomas Inc..................................... 279,650
15,400 Times Mirror Co., Series A............................. 766,150
-----------
1,045,800
-----------
REAL ESTATE INVESTMENT (2.20%)
17,168 First Union Real Estate Equity & Mortgage
Investments.......................................... 210,308
10,700 Health Care Property Investors, Inc.................... 374,500
37,016 IRT Property Co........................................ 425,684
-----------
1,010,492
-----------
RETAIL TRADE (5.41%)
42,100 Burlington Coat Factory Warehouse Corp.*............... 547,300
11,456 Cash America International, Inc........................ 97,376
49,300 Revco D.S., Inc.*...................................... 1,824,100
11,700 Universal International, Inc.*......................... 20,475
-----------
2,489,251
-----------
TEXTILE & APPAREL (0.80%)
24,200 Oshkosh B'Gosh, Inc., Class A.......................... 369,050
-----------
UTILITIES -- ELECTRIC AND GAS (3.06%)
21,800 Cinergy Corp........................................... 727,575
6,900 Eastern Utilities Assoc................................ 119,887
17,800 Noram Energy Corp...................................... 273,675
12,000 Northwest Natural Gas Co............................... 285,000
-----------
1,406,137
-----------
<CAPTION>
NUMBER
OF MARKET
SHARES VALUE
- ---------- -----------
<C> <S> <C>
UTILITIES -- TELEPHONE (0.66%)
5,401 Sprint Corp............................................ $ 215,365
3,800 360 Communications Co.*................................ 87,875
-----------
303,240
-----------
VOCATIONAL TRAINING (1.90%)
57,400 National Education Corp.*.............................. 875,350
-----------
TOTAL COMMON STOCKS.................................... 38,185,342
-----------
PREFERRED STOCK (0.08%)
CONSUMER GOODS AND SERVICES
2,600 Craig Corp., Class A*.................................. 36,075
-----------
<CAPTION>
PRINCIPAL
AMOUNT
- ----------
<C> <S> <C>
CORPORATE BONDS (1.38%)
INSURANCE (0.25%)
$ 129,000 CII Financial, Inc.,
7.50% conv. sub. deb.,
due September 15, 2001............................... 115,778
-----------
VOCATIONAL TRAINING (1.13%)
570,000 National Education Corp.,
6.50% conv. sub. deb.,
due May 15, 2011..................................... 521,550
-----------
TOTAL CORPORATE BONDS.................................. 637,328
-----------
SHORT-TERM INVESTMENTS (15.57%)
7,180,000 U.S. Treasury Bills, 4.70% to 4.97%, due January 9 to
February 13, 1997.................................... 7,159,801
-----------
TOTAL INVESTMENTS (100.06%)............................ 46,018,546
-----------
Liabilities, less cash, receivables and other assets
(-0.06%)............................................. (27,003)
-----------
NET ASSETS (100.00%)................................... $45,991,543
-----------
-----------
</TABLE>
- ---------
* Non-income producing security.
The percentage shown for each investment category is the total value of that
category expressed as a percentage of the total net assets of the Fund.
See notes to financial statements.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS
MBL GROWTH FUND, INC.
NOTE A -- ACCOUNTING POLICIES
MBL Growth Fund, Inc. (the "Fund") is a diversified, open-end, management
investment company registered under the Investment Company Act of 1940, as
amended.
The Fund functions as the investment vehicle for certain variable contract
accounts of MBL Life Assurance Corporation ("MBL Life") which are unit
investment trusts ("Separate Accounts") registered under the Investment Company
Act of 1940, as amended. Significant accounting policies of the Fund are as
follows:
INVESTMENTS: Investments, except for short-term investments which are stated at
amortized cost, which approximates market value, are valued at closing prices on
national securities exchanges. Securities traded on a national securities
exchange for which there are no sales on the valuation date and securities
traded over-the-counter, are valued at closing bid prices. Investment security
transactions are recorded on the date of purchase or sale. Realized gains and
losses on investment transactions are determined on the basis of identified
cost.
FEDERAL INCOME TAXES: The Fund does not provide for federal income taxes since
it intends to continue to qualify as a "regulated investment company" under the
Internal Revenue Code and to maintain this qualification by distributing each
year substantially all of its taxable net income and net realized capital gains
to its shareholders.
DIVIDENDS: Dividends receivable on investment securities and dividends payable
to shareholders are recorded on the ex-dividend date.
ESTIMATES: The preparation of financial statements in accordance 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 those estimates.
NOTE B -- INVESTMENT ADVISORY AND SERVICE AGREEMENTS
The Fund has investment advisory and service agreements with Markston Investment
Management ("Adviser"), a partnership between Markston International, Inc.
("Markston") and MBL Sales Corporation ("MBL Sales"). Markston is a 49% general
partner of Adviser, and MBL Sales is a 51% general partner. MBL Sales is a
wholly-owned subsidiary of MBLLAC Holding Corporation, which is a wholly-owned
subsidiary of MBL Life. Under the investment advisory and service agreements,
the Fund pays Adviser a periodic fee (basic fee) at the annual rate of .50% of
the first $200,000,000 of the Fund's net assets, .45% of the next $100,000,000
of such value, .40% of the next $100,000,000 of such value, and .35% of such
value in excess of $400,000,000. The basic fee may be adjusted by an amount
determined according to a formula based on the Fund's performance in relation to
the Standard & Poor's 500 Index ("Index"). The formula provides for a weekly
increase or decrease in the basic fee by an amount equal to .05% of net assets
per annum for each full two percentage points that the Fund's investment
performance, over a 24-month period, is better or worse than that of the Index.
The maximum adjustment is .30%. The fee is computed and accrued daily and paid
quarterly. For the year ended December 31, 1996, the basic advisory fee amounted
to $208,830. The actual fee amounted to $181,194 which reflected a downward
performance adjustment of $27,636.
10
<PAGE>
NOTE B -- INVESTMENT ADVISORY AND SERVICE AGREEMENTS -- CONTINUED
In the event operating expenses of the Fund, exclusive of taxes and interest,
but including the investment advisory fee, exceed 1.5% of the first $30,000,000
of the Fund's average daily net asset value and 1% of the Fund's average daily
net asset value in excess of $30,000,000 for any fiscal year related thereto,
Adviser will reimburse the Fund promptly after the end of the fiscal year for
such excess. No reimbursement was required for the year ended December 31, 1996.
In addition, the Fund has a distribution agreement with First Priority
Investment Corporation ("FPIC") a wholly-owned subsidiary of MBLLAC Holding
Corporation.
The compensation of each disinterested director is paid by the Fund at the rate
of $400 per meeting attended, plus an annual retainer of $900. Aggregate fees
paid during the year to the Fund's disinterested directors amounted to $6,300.
Two of the directors of the Fund and all officers of the Fund are either
officers or employees of MBL Life. The compensation of the directors and
officers and any employees of the Fund affiliated with Adviser or FPIC is paid
by the affiliated entities.
NOTE C -- RELATED PARTY TRANSACTIONS
At December 31, 1996, MBL Life owned 81,194 Fund shares. In addition, 4,225,956
Fund shares are held by MBL Life Separate Accounts, for the benefit of variable
annuity contract holders.
On April 29, 1994, the Third Amended Plan of Rehabilitation of the Mutual
Benefit Life Insurance Company in Rehabilitation ("Mutual Benefit Life") was
implemented. Substantially all of the assets and liabilities of Mutual Benefit
Life, including Mutual Benefit Life's investment in the Fund, were transferred
to MBL Life. In addition, the assets and liabilities of the Separate Accounts
which invest in the Fund were transferred to new separate accounts of MBL Life.
Effective May 1, 1996 MBL Variable Contract Account-2 began accepting additional
deposits under existing contracts which, in turn, were invested in the Fund.
NOTE D -- CAPITAL STOCK
A summary of capital share transactions follows:
<TABLE>
<CAPTION>
Year Ended December 31, Year Ended December 31,
1996 1995
------------------------- -------------------------
Shares Amount Shares Amount
---------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Shares sold...................................... 46,710 $ 504,068 0 $ 0
Shares issued in reinvestment of income dividends
and capital gain distributions.................. 713,719 7,575,352 347,421 3,444,374
---------- ------------- ---------- -------------
760,429 8,079,420 347,421 3,444,374
Less shares repurchased.......................... (361,268) (3,961,176) (266,102) (2,405,359)
---------- ------------- ---------- -------------
Net increase in number of shares outstanding and
net assets resulting from capital share
transactions.................................... 399,161 $ 4,118,244 81,319 $ 1,039,015
---------- ------------- ---------- -------------
---------- ------------- ---------- -------------
</TABLE>
11
<PAGE>
NOTE E -- PURCHASES AND SALES OF INVESTMENTS
Purchases and proceeds from sales of investments during the year ended December
31, 1996, other than short-term investments, aggregated $21,289,703 and
$20,851,347, respectively.
The identified cost of investments owned at December 31, 1996 for federal income
tax purposes was $36,592,657. At December 31, 1996, gross unrealized
appreciation of investments was $10,185,117, and gross unrealized depreciation
of investments was $759,228 resulting in net unrealized appreciation of
$9,425,889, for federal income tax purposes.
- -------------------------------------------------------------------------------
12
<PAGE>
FINANCIAL HIGHLIGHTS
MBL GROWTH FUND, INC.
Selected data for each share of capital stock outstanding throughout the years
indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
-------- -------- -------- -------- -------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year........................ $10.27 $ 8.36 $ 9.55 $ 9.36 $11.00 $15.45 $17.18 $14.06 $11.69 $14.28
-------- -------- -------- -------- -------- -------- -------- -------- --------- --------
Net investment income......... 0.23 0.26 0.21 0.17 0.31 0.66 0.56 0.44 0.46 0.41
Net realized and unrealized
gain (loss) on
investments................. 2.24 2.59 (0.01) 1.10 1.25 2.72 (1.46) 3.57 2.735 (0.45)
-------- -------- -------- -------- -------- -------- -------- -------- --------- --------
Net increase (decrease) in net
assets from operations...... 2.47 2.85 0.20 1.27 1.56 3.38 (0.90) 4.01 3.195 (0.04)
-------- -------- -------- -------- -------- -------- -------- -------- --------- --------
Dividends from net investment
income...................... (0.24) (0.26) (0.21) (0.17) (0.31) (0.66) (0.58) (0.47) (0.44) (0.59)
Distributions from net
realized gain from security
transactions................ (1.82) (0.68) (1.18) (0.91) (2.89) (7.17) (0.25) (0.42) (0.385) (1.96)
-------- -------- -------- -------- -------- -------- -------- -------- --------- --------
Total distributions........... (2.06) (0.94) (1.39) (1.08) (3.20) (7.83) (0.83) (0.89) (0.825) (2.55)
-------- -------- -------- -------- -------- -------- -------- -------- --------- --------
Net Asset Value, End of
Year........................ $10.68 $10.27 $ 8.36 $ 9.55 $ 9.36 $11.00 $15.45 $17.18 $14.06 $11.69
-------- -------- -------- -------- -------- -------- -------- -------- --------- --------
-------- -------- -------- -------- -------- -------- -------- -------- --------- --------
Total Return.................. 24.57% 34.75% 2.13% 13.77% 14.67% 22.71% -5.33% 28.51% 27.61% -2.10%
-------- -------- -------- -------- -------- -------- -------- -------- --------- --------
-------- -------- -------- -------- -------- -------- -------- -------- --------- --------
Ratios/Supplemental Data:
Net Assets, End of Year
(thousands)................... $45,992 $40,151 $32,000 $35,864 $33,685 $37,523 $59,108 $56,805 $40,166 $31,506
-------- -------- -------- -------- -------- -------- -------- -------- --------- --------
-------- -------- -------- -------- -------- -------- -------- -------- --------- --------
Ratio of Expenses to Average
Net Assets.................. 0.83% 0.86% 1.13% 1.20% 0.99% 0.57% 0.68% 1.06% 0.94% 0.73%
-------- -------- -------- -------- -------- -------- -------- -------- --------- --------
-------- -------- -------- -------- -------- -------- -------- -------- --------- --------
Ratio of Net Investment Income
to Average Net Assets....... 2.07% 2.73% 2.15% 1.67% 2.39% 3.26% 3.62% 2.80% 3.39% 3.05%
-------- -------- -------- -------- -------- -------- -------- -------- --------- --------
-------- -------- -------- -------- -------- -------- -------- -------- --------- --------
Portfolio Turnover Rate....... 65.37% 47.49% 78.29% 47.46% 48.10% 33.74% 7.11% 14.69% 19.43% 18.81%
-------- -------- -------- -------- -------- -------- -------- -------- --------- --------
-------- -------- -------- -------- -------- -------- -------- -------- --------- --------
Average Commission Rate
Paid........................ $0.0250 -- -- -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- -------- --------- --------
-------- -------- -------- -------- -------- -------- -------- -------- --------- --------
</TABLE>
See notes to financial statements.
13
<PAGE>
NET ASSET VALUES AND PAYOUTS (UNAUDITED)
Following is a tabular illustration of the Fund's history since shares of the
Fund were first offered for sale on December 17, 1982.
<TABLE>
<CAPTION>
Per Share
--------------------------
Dividends
Net asset from net Capital
value investment gains
Year ended per share income distributions
<S> <C> <C> <C>
- -------------------------------------------------------
December 31,
1982 $ 10.30 -- --
December 31,
1983 12.67 $ .15 $ .05
December 31,
1984 11.20 .51 1.11
December 31,
1985 12.73 .46 .99
December 31,
1986 14.28 .38 .61
December 31,
1987 11.69 .59 1.96
December 31,
1988 14.06 .44 .385
December 31,
1989 17.18 .47 .42
December 31,
1990 15.45 .58 .25
December 31,
1991 11.00 .66 7.17
December 31,
1992 9.36 .31 2.89
December 31,
1993 9.55 .17 .91
December 31,
1994 8.36 .21 1.18
December 31,
1995 10.27 .26 .68
December 31,
1996 10.68 .24 1.82
- -------------------------------------------------------
</TABLE>
PORTFOLIO CHANGES (UNAUDITED)
For the year ended December 31, 1996:
INVESTMENTS ADDED
AIM Strategic Income Fund, Inc.
Amoco Corp.
Avnet, Inc.
Burlington Coat Factory Warehouse Corp.
Cash America International, Inc.
Counsellors Tandem Securities Fund, Inc.
Data General Corp.
Dean Witter Government Income Trust
Eastman Kodak Co.
Electronic Data Systems Corp.
Imation Corp.
IMC Global, Inc.
Intel Corp.
Medpartners, Inc.
Motorola, Inc.
Nelson, Thomas Inc.
Novell, Inc.
Quest for Value Dual Purpose Fund, Inc.
(Income and Capital Shares)
Reading Entertainment, Inc.
Revco D.S., Inc.
Sequent Computer Systems, Inc.
Silicon Graphics, Inc.
Storage Technology Corp.
Symantec Corp.
360 Communications Co.
Vicorp Restaurants, Inc.
INVESTMENTS ELIMINATED
AIM Strategic Income Fund, Inc.
Caremark International, Inc.
CCH, Inc. (Classes A and B)
Counsellors Tandem Securities Fund, Inc.
Cray Research, Inc.
Digital Equipment Corp.
Emerging Tigers Fund, Inc.
Global Government Plus Fund, Inc.
Global Total Return Fund, Inc.
Grossman's, Inc.
Intel Corp.
NextHealth, Inc.
Reading Co., Class A
Rhone-Poulenc Rorer, Inc.
Rite Aid Corp.
Silicon Graphics, Inc.
Smith's Food & Drug Centers, Inc., Class B
Teledyne, Inc., Series E (preferred)
Western Gas Resources, Inc.
14
<PAGE>
MBL GROWTH FUND, INC.
520 Broad Street
Newark, New Jersey 07102-3111
1-800-559-5535
FUND DIRECTORS
Eugene J. Ciarkowski
Horace J. DePodwin
Herbert M. Groce Jr.
Kathleen M. Koerber
Jerome M. Scheckman
INVESTMENT ADVISER
Markston Investment Management
1 North Lexington Avenue
White Plains, New York 10601-1702
DISTRIBUTOR
First Priority Investment Corporation
520 Broad Street
Newark, New Jersey 07102-3111
1-800-559-5535
CUSTODIAN and TRANSFER AGENT
State Street Bank & Trust Co.
P.O. Box 8500
Boston, Massachusetts 02266-8500
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
THIS REPORT HAS BEEN PREPARED FOR THE SHAREHOLDERS OF THE FUND. IT IS NOT
AUTHORIZED FOR OTHER DISTRIBUTION UNLESS PRECEDED OR ACCOMPANIED BY A CURRENT
PROSPECTUS, WHICH INCLUDES ADDITIONAL INFORMATION ABOUT THE FUND.
FS-629 (2-97)
15152
Annual Report
December 31, 1996
MBL GROWTH FUND, INC.
Distributed by
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