<PAGE>
MBL GROWTH FUND, INC.
To Our Shareholders and Variable Annuity Participants:
PERFORMANCE
For the six months ending June 30, 1998, MBL Growth Fund returned 13.2% after
expenses versus the Standard & Poor's 500 Index return of 17.7%. However, we
estimate that the risk level of the portfolio was 92.2% of the market for the
period.
IMPORTANT ORGANIZATIONAL DEVELOPMENTS
Recently, you received a "sticker" supplement to your MBL Growth Fund prospectus
dated August 6. This notice announced the proposed sale of most of the life
insurance and annuity businesses of MBL Growth Fund's sponsor, MBL Life
Assurance Corporation, to Anchor National Life Insurance Company, a subsidiary
of SunAmerica, Inc.
Shares in the MBL Growth Fund are currently owned by MBL Life and MBL Life's
Separate Accounts. As an MBL Life 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 is likely to affect the
Separate Accounts, and its related impact on the Fund.
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, the
Separate Accounts will be terminated or dissolved. MBL Life, along with First
Priority Investment Corporation, the distributor of the Fund, will then begin
the process of terminating all business operations.
Before all this happens, Separate Account contract holders or participants will
receive detailed information and adequate time to decide to exchange, transfer
or redeem their accounts. Meanwhile, First Priority will assume the operating
expenses of the Fund (with some exceptions) through the end of the
Rehabilitation to the extent the expenses exceed one percent (on an annualized
basis) of daily net assets.
In light of these expected events, the Fund's Board of Directors must consider
whether it is economically viable for the Fund to continue beyond the end of the
Rehabilitation. The Board may well decide that the Fund should be terminated. If
this occurs, the plan of dissolution would be subject to Separate Account
contract holders' and participants' approval.
We will notify you of any proposed plan in a timely manner. In the meantime, we
appreciate your continued support and welcome your comments and observations.
Sincerely,
[SIG]
KATHLEEN M. KOERBER
PRESIDENT
August 10, 1998
<PAGE>
REPORT OF THE INVESTMENT ADVISER
Dear Shareholders and Variable Annuity Participants:
Under Markston's management, the MBL Growth Fund returned 13.2% after expenses
during the first six months of 1998. MBL Variable Contract Account-2, which
invests in the fund, retained its Morningstar Five Star Rating (*****)(1). We
estimate that the risk level in the portfolio was 91.7% of the market during the
quarter and 92.2% for the first six months.
Recent market volatility has served as a wake-up call for many investors. The
relatively smooth ride they have come to enjoy and expect appears to have hit a
bump in the road. While not able to predict the future, we continue to strive to
deliver long-term appreciation of capital coupled with a moderate level of risk.
Among our better performers were Allmerica Financial, National Computer Systems
and Harte-Hanks.
ALLMERICA appreciated 30% during the first half. It is a former mutual insurance
company that has been transformed by Jack O'Brien, formerly #2 to Ned Johnson at
Fidelity. Under O'Brien, Allmerica has emerged as one of the fastest growing
sellers of annuities in the U.S.
NATIONAL COMPUTER SYSTEMS (NLCS) also helped performance by appreciating 36%
during the first half. The new CEO at NLCS, Russ Gullotti, has changed the
culture at the company and narrowed its focus to the domestic education market.
The company's competitive position has been strengthened through a series of
small acquisitions which have made NLCS one of the leaders in supplying software
and services to the Kindergarten through 12(th) grade market. All of this is
happening against a culture wide move toward higher expectations from our
schools. The change in cultural expectation shows up in the statewide testing
contracts NLCS is receiving to measure the competency of our schools. NLCS
dominates this business. Overall, we expect the company to post 15% to 17%
internal growth over the next three to five years.
HARTE-HANKS also helped appreciating 39% in the first half. Harte-Hanks is the
leading domestic provider of marketing services, as well as the largest
publisher of weekly shoppers. Both businesses enjoy above average internal
growth and above average cash margins. This has enabled Harte-Hanks to further
enhance its growth by acquiring complementary small marketing companies. All of
this became apparent after Harte-Hanks sold its slow growing newspapers in
October 1997. In our view, Wall Street is just beginning to recognize the
positive changes.
Among our poorer performers were Global DirectMail and Pennzoil.
GLOBAL DIRECTMAIL declined after it announced that sales in May were below
budget and that second quarter earnings were likely to come in at roughly half
of previous expectations. We believe that this entrepreneurially run enterprise
will adjust operations to achieve acceptable profitability.
PENNZOIL declined after investors were disappointed with the company's plans to
split the company in two -- and then merge the products company with Quaker
State. Also, there is lingering frustration with management's refusal in 1997 to
discuss a merger with Union Pacific at a price significantly higher than
- ---------
(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 the investment category
receive five stars. 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. For more information, please call your Customer Service
Representative at MBL Life Assurance Corporation, 1-800-435-3191.
2
<PAGE>
today's price. And of course, oil prices have declined precipitously which
negatively affects the exploration and production business. Our stock was
purchased after the proposed merger with Union Pacific fell apart. We view the
merger with Quaker State as a reasonable strategic decision. Finally, we believe
that management will be under tremendous pressure to increase the share price in
the next couple of years to justify refusing the Union Pacific takeover
overture.
Sincerely,
[SIG]
MICHAEL J. MULLARKEY
Managing Director
MARKSTON INVESTMENT MANAGEMENT
August 10, 1998
3
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
MBL GROWTH FUND, INC.
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments:
Common stocks (cost $37,566,721)................................. $54,663,219
Preferred stocks (cost $163,798)................................. 499,497
Short-term investments (cost $7,019,290)......................... 7,019,290
-----------
62,182,006
Cash............................................................... 39,663
Receivable for investment securities sold.......................... 19,514
Receivable for Fund shares sold.................................... 15,964
Dividends and interest receivable.................................. 47,428
Other assets....................................................... 4,392
-----------
Total Assets............................................... 62,308,967
-----------
LIABILITIES
Payable for investment securities purchased........................ 42,573
Payable for Fund shares redeemed................................... 4,790
Accrued investment advisory fee.................................... 65,363
Accounts payable and accrued expenses.............................. 27,812
-----------
Total Liabilities.......................................... 140,538
-----------
Net Assets................................................. $62,168,429
-----------
-----------
NET ASSETS
Capital stock (4,512,959 shares of $1.00 par value capital stock
outstanding, 21,000,000 shares authorized)....................... $ 4,512,959
Paid-in capital.................................................... 34,073,932
Accumulated undistributed net investment income.................... 391,924
Accumulated undistributed net realized gain from security
transactions..................................................... 5,757,417
Net unrealized appreciation of investments......................... 17,432,197
-----------
Net Assets................................................. $62,168,429
-----------
-----------
Net asset value, offering price, and redemption price per share
($62,168,429 DIVIDED BY 4,512,959 shares of
capital stock outstanding)....................................... $13.78
-----------
-----------
</TABLE>
See notes to financial statements.
STATEMENT OF OPERATIONS
MBL GROWTH FUND, INC.
SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
Investment Income:
Dividends......................................................... $ 413,130
Interest.......................................................... 163,981
----------
577,111
Expenses:
Investment advisory fee........................................... 144,986
Custodian......................................................... 33,408
Audit............................................................. 13,633
Transfer agent.................................................... 9,624
Legal............................................................. 9,281
Printing.......................................................... 5,981
Insurance expense................................................. 4,456
Directors' fees................................................... 4,000
Miscellaneous..................................................... 1,877
Filing fees....................................................... 776
----------
228,022
----------
Net Investment Income....................................... 349,089
----------
Realized and Unrealized Gain on
Investments:
Net realized gain from security transactions...................... 4,424,589
Increase in unrealized appreciation of investments................ 2,744,588
----------
Net Gain on Investments......................................... 7,169,177
----------
Net Increase in Net Assets Resulting from Operations............ $7,518,266
----------
----------
</TABLE>
4
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
MBL GROWTH FUND, INC.
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS
Net investment income........................... $ 349,089 $ 549,147
Net realized gain from security transactions.... 4,424,589 8,153,532
Increase in unrealized appreciation of
investments................................... 2,744,588 5,261,720
------------ ------------
Net Increase in Net Assets Resulting from
Operations.................................. 7,518,266 13,964,399
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income............ 0 (540,838)
Distributions from net realized gain from
security transactions......................... 0 (6,913,083)
------------ ------------
Total Distributions to Shareholders........... 0 (7,453,921)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS
Net increase (decrease) in net assets from
capital share transactions.................... (2,771,271) 4,919,413
------------ ------------
Net Increase in Net Assets.................... 4,746,995 11,429,891
NET ASSETS
Beginning of period............................. 57,421,434 45,991,543
------------ ------------
End of period (including undistributed net
investment income of $391,924 and $42,835,
respectively)................................. $62,168,429 $57,421,434
------------ ------------
------------ ------------
</TABLE>
See notes to financial statements.
5
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS
MBL GROWTH FUND, INC.
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER
OF MARKET
SHARES VALUE
- ---------- -----------
<C> <S> <C>
COMMON STOCKS (87.93%)
COMPUTER SOFTWARE (0.02%)
1,100 Cirrus Logic, Inc.*.................................... $ 12,237
-----------
CONSUMER NON-DURABLES (4.83%)
52,495 Archer Daniels Midland Co.............................. 1,017,091
6,400 Coca-Cola Co........................................... 547,200
20,100 National Service Industries, Inc....................... 1,022,588
7,600 Quaker Oats Co......................................... 417,525
-----------
3,004,404
-----------
ENERGY (2.67%)
12,000 Amoco Corp............................................. 499,500
1,314 Apache Corp............................................ 41,391
17,800 Pennzoil Co............................................ 901,125
2,700 Petroleum Helicopters, Inc., voting.................... 54,000
8,100 Petroleum Helicopters, Inc., non-voting................ 162,000
-----------
1,658,016
-----------
FINANCIAL SERVICES (9.76%)
46,667 Allmerica Financial Corp............................... 3,033,355
6,600 American Express Co.................................... 752,400
9,300 Argonaut Group, Inc.................................... 294,112
17,168 First Union Real Estate Equity & Mortgage
Investments.......................................... 158,804
13,900 Health Care Property Investors, Inc.................... 501,269
37,016 IRT Property Co........................................ 407,176
8,000 Northern Trust Corp.................................... 609,500
13,100 Reliance Group Holdings, Inc........................... 229,250
1,974 St. Paul Companies, Inc................................ 83,031
-----------
6,068,897
-----------
HEALTH CARE (12.69%)
54,500 Access Health, Inc.*................................... 1,389,750
9,100 Biogen, Inc.*.......................................... 444,762
4,600 Cooper Companies, Inc.*................................ 167,612
15,600 Humana, Inc.*.......................................... 486,525
7,000 Johnson & Johnson...................................... 516,250
79,100 Pharmacia & Upjohn, Inc................................ 3,648,488
13,500 Schering-Plough Corp................................... 1,236,938
-----------
7,890,325
-----------
<CAPTION>
NUMBER
OF MARKET
SHARES VALUE
- ---------- -----------
<C> <S> <C>
INDUSTRIAL (14.12%)
7,600 Commscope, Inc......................................... $ 123,025
3,700 Cummins Engine, Inc.................................... 189,625
8,300 Dravo Corp.*........................................... 76,256
7,700 IMC Global, Inc........................................ 231,963
10,900 Lone Star Industries, Inc.............................. 839,981
31,700 Minnesota Mining & Manufacturing Co.................... 2,605,344
21,600 Morgan Products Ltd.*.................................. 98,550
34,500 Ogden Corp............................................. 955,219
14,800 Valspar Corp........................................... 586,450
28,800 Vulcan Materials Co.................................... 3,072,600
-----------
8,779,013
-----------
MEDIA/ENTERTAINMENT/LEISURE (12.48%)
63,000 ACNielsen Corp.*....................................... 1,590,750
22,800 Eastman Kodak Co....................................... 1,665,825
102,000 Harte-Hanks Communications............................. 2,632,875
1,050 Hasbro, Inc............................................ 41,278
5,100 Information Resources, Inc.*........................... 94,350
6,500 Mattel, Inc............................................ 275,031
20,800 Nelson, Thomas Inc..................................... 278,200
3,900 Time Warner, Inc....................................... 333,206
13,500 Times Mirror Co., Series A............................. 848,813
-----------
7,760,328
-----------
MISCELLANEOUS (1.14%)
12,200 Catalina Marketing Corp.*.............................. 633,637
6,100 Reading Entertainment, Inc.*........................... 73,200
-----------
706,837
-----------
RETAIL (10.71%)
58,580 Burlington Coat Factory Warehouse Corp................. 1,318,050
79,642 CVS Corp............................................... 3,101,060
29,556 Cash America International, Inc........................ 450,729
42,500 Charming Shoppes, Inc.*................................ 200,547
6,800 Hartmarx Corp.*........................................ 51,425
4,200 Meyer, Fred, Inc.*..................................... 178,500
15,100 Oshkosh B'Gosh, Inc., Class A.......................... 671,950
44,400 Vicorp Restaurants, Inc.*.............................. 682,650
-----------
6,654,911
-----------
</TABLE>
6
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS -- CONTINUED
MBL GROWTH FUND, INC.
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER
OF MARKET
SHARES VALUE
- ---------- -----------
<C> <S> <C>
TECHNOLOGY (13.41%)
11,300 3-D Systems, Inc.*..................................... $ 110,881
26,600 Avid Technology, Inc.*................................. 889,437
8,800 Bay Networks, Inc.*.................................... 283,800
4,800 Calcomp Technology, Inc.*.............................. 11,400
37,100 Checkpoint Systems, Inc.*.............................. 524,037
10,500 Electronic Data Systems Corp........................... 420,000
12,500 Glenayre Technologies, Inc.*........................... 134,375
61,900 Global Directmail Corp.*............................... 781,488
2,500 Motorola, Inc.......................................... 131,406
154,100 National Computer Systems, Inc......................... 3,679,138
17,000 Shared Medical System Corp............................. 1,248,438
2,600 Triquint Semiconductor, Inc.*.......................... 49,400
4,500 Xircom, Inc.*.......................................... 69,750
-----------
8,333,550
-----------
UTILITIES (6.10%)
19,500 Cinergy Corp........................................... 682,500
4,080 Duke Power Co.......................................... 241,740
4,800 Eastern Utilities Assoc................................ 126,000
52,743 Houston Industries, Inc................................ 1,628,440
12,000 Northwest Natural Gas Co............................... 335,250
7,000 Piedmont Natural Gas, Inc.............................. 235,375
7,401 Sprint Corp............................................ 521,771
1,500 UniSource Energy Corp.*................................ 23,625
-----------
3,794,701
-----------
TOTAL COMMON STOCKS.................................... 54,663,219
-----------
<CAPTION>
NUMBER
OF MARKET
SHARES VALUE
- ---------- -----------
<C> <S> <C>
PREFERRED STOCKS (0.80%)
MEDIA/ENTERTAINMENT/LEISURE (0.71%)
15,622 News Corp. Ltd., limited voting*....................... $ 441,322
-----------
MISCELLANEOUS (0.09%)
5,200 Craig Corp., Class A*.................................. 58,175
-----------
TOTAL PREFERRED STOCKS................................. 499,497
-----------
<CAPTION>
PRINCIPAL
AMOUNT
- ----------
<C> <S> <C>
SHORT-TERM INVESTMENTS (11.29%)
$7,045,000 U.S. Treasury Bills, 4.59% to 4.95%, due July 9 to
August 20, 1998...................................... 7,019,290
-----------
TOTAL INVESTMENTS (100.02%)............................ 62,182,006
Liabilities in excess of other assets (0.02%).......... (13,577)
-----------
NET ASSETS (100.00%)................................... $62,168,429
-----------
-----------
</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.
7
<PAGE>
NOTES TO FINANCIAL STATEMENTS
MBL GROWTH FUND, INC. (UNAUDITED)
NOTE A -- SIGNIFICANT 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 annuity
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. Income dividends and capital gain distributions are
determined in accordance with Federal income tax regulations which may differ
from generally accepted accounting principles. Dividends and distributions which
exceed net investment income and net realized capital gains for financial
reporting purposes, but not for tax purposes, are reported as distributions in
excess of net investment income and distributions in excess of net realized
capital gains.
DIVIDENDS AND INTEREST INCOME: Dividends from investment securities and
dividends to shareholders are recorded on the ex-dividend date and interest is
accrued as earned. Discounts or premiums on debt securities purchased are
accreted or amortized to interest income over the lives of the respective
securities.
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
8
<PAGE>
NOTE B -- INVESTMENT ADVISORY AND SERVICE AGREEMENTS -- CONTINUED
that of the Index. The maximum adjustment is .30%. The fee is computed and
accrued daily and paid quarterly. For the period ended June 30, 1998, the basic
advisory fee amounted to $152,067. The actual fee amounted to $144,986 which
reflected a downward performance adjustment of $7,081.
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 $1,200. Aggregate fees
paid during the period to the Fund's disinterested directors amounted to $2,600.
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 June 30,1998, MBL Life owned 94,781, or 2% of the outstanding shares of the
Fund. In addition, 4,418,178, or 98% of the outstanding Fund shares are held by
MBL Life's Separate Accounts for the benefit of variable annuity contract
holders.
On July 15, 1998, MBL Life entered into an agreement with Anchor National Life
Insurance Company, a subsidiary of SunAmerica, Inc. ("SunAmerica"), for the
purchase of the individual life and individual and group annuity businesses of
MBL Life (the "Acquisition"). In accordance with the Plan of Rehabilitation of
The Mutual Benefit Life Insurance Company (the predecessor in interest to MBL
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 "Closing").
The Acquisition will effect a resolution to the proceedings associated with the
Plan of Rehabilitation.
As part of the resolution of the proceedings associated with the Plan of
Rehabilitation, MBL Life has indicated that it intends to seek a court order to
terminate the Separate Accounts that invest in the Fund. In connection with the
Acquisition, MBL Life and the Separate Accounts will no longer retain their
respective interests in the Fund. Redemptions of Fund shares by MBL Life and the
Separate Accounts will cause the Fund's ratio of expenses to average net assets
to increase. However, FPIC has agreed to assume the operating expenses of the
Fund (excluding taxes, interest, brokerage commissions and extraordinary
expenses) to the extent such daily expenses exceed 1.00% on an annualized basis
of the Fund's daily net assets through the period ending six months after the
Closing.
At present, MBL Life's interest in Adviser will not be included in the
Acquisition. However, SunAmerica and MBL Life have agreed to negotiate for a
sale of MBL Life's interest in Adviser during the sixty day period beginning on
July 15, 1998. Also, under the terms of the Acquisition, MBL Life's interest in
FPIC will not be included in the assets of MBL Life that are transferred to
Anchor National. At the present time, it is anticipated that FPIC will begin the
process of terminating all business operations at the end of the six month
period after the Closing.
The Board of Directors of the Fund is considering alternatives with regard to
the Fund, including the possible liquidation and dissolution of the Fund. Among
factors being taken into account is whether, as a result of the planned
redemption of Fund shares by MBL Life and the Separate Accounts, the Fund can
continue to operate in an economically viable manner, or whether the Fund will
have any business purpose once the redemptions have been completed.
9
<PAGE>
NOTE D -- CAPITAL STOCK
A summary of capital share transactions follows:
<TABLE>
<CAPTION>
Six Months Ended June 30, Year Ended December 31,
1998 1997
---------------------------- -------------------------
Shares Amount Shares Amount
------------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Shares sold................................... 12,937 $ 174,486 41,036 $ 518,989
Shares issued in reinvestment of income
dividends and capital gain distributions..... 0 0 618,566 7,453,921
------------- ------------- ---------- -------------
12,937 174,486 659,602 7,972,910
Less shares repurchased....................... (219,264) (2,945,757) (247,466) (3,053,497)
------------- ------------- ---------- -------------
Net increase (decrease) in number of shares
outstanding and net assets resulting from
capital share transactions................... (206,327) $ (2,771,271) 412,136 $ 4,919,413
------------- ------------- ---------- -------------
------------- ------------- ---------- -------------
</TABLE>
NOTE E -- PURCHASES AND SALES OF INVESTMENTS
Purchases and proceeds from sales of investments during the period ended June
30, 1998, other than short-term investments, aggregated $6,137,475 and
$11,493,492, respectively.
The identified cost of investments owned at June 30, 1998 for federal income tax
purposes was $44,749,809. At June 30, 1998, gross unrealized appreciation of
investments was $18,840,105, and gross unrealized depreciation of investments
was $1,407,908 resulting in net unrealized appreciation of $17,432,197, for
federal income tax purposes.
NOTE F -- DISTRIBUTIONS AND DIVIDENDS
A capital gain distribution and income dividend of $0.31 and $0.08 per share,
respectively, was declared by the Board of Directors on August 20, 1998 and paid
on August 21, 1998 to shareholders of record on August 20, 1998.
- -------------------------------------------------------------------------------
10
<PAGE>
FINANCIAL HIGHLIGHTS
MBL GROWTH FUND, INC.
(UNAUDITED)
Selected data for each share of capital stock outstanding throughout the periods
indicated:
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ------------------------------------------
1998 1997 1996 1995 1994
---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.............. $ 12.17 $ 10.68 $ 10.27 $ 8.36 $ 9.55
---------- --------- --------- --------- ---------
Net investment income............................. 0.08 0.13 0.23 0.26 0.21
Net realized and unrealized gain (loss) on
investments..................................... 1.53 3.16 2.24 2.59 (0.01)
---------- --------- --------- --------- ---------
Net increase in net assets from operations........ 1.61 3.29 2.47 2.85 0.20
---------- --------- --------- --------- ---------
Dividends from net investment income.............. -- (0.13) (0.24) (0.26) (0.21)
Distributions from net realized gain from security
transactions.................................... -- (1.67) (1.82) (0.68) (1.18)
---------- --------- --------- --------- ---------
Total distributions............................... -- (1.80) (2.06) (0.94) (1.39)
---------- --------- --------- --------- ---------
Net Asset Value, End of Period.................... $ 13.78 $ 12.17 $ 10.68 $ 10.27 $ 8.36
---------- --------- --------- --------- ---------
---------- --------- --------- --------- ---------
Total Return...................................... 13.15% 31.12% 24.57% 34.75% 2.13%
---------- --------- --------- --------- ---------
---------- --------- --------- --------- ---------
Ratios/Supplemental Data:
Net Assets, End of Period (thousands)............. $ 62,168 $ 57,421 $ 45,992 $ 40,151 $ 32,000
---------- --------- --------- --------- ---------
---------- --------- --------- --------- ---------
Ratio of Expenses to Average Net Assets........... 0.37% 0.92% 0.83% 0.86% 1.13%
---------- --------- --------- --------- ---------
---------- --------- --------- --------- ---------
Ratio of Net Investment Income to Average Net
Assets.......................................... 0.57% 1.05% 2.07% 2.73% 2.15%
---------- --------- --------- --------- ---------
---------- --------- --------- --------- ---------
Portfolio Turnover Rate........................... 10.84% 60.47% 65.37% 47.49% 78.29%
---------- --------- --------- --------- ---------
---------- --------- --------- --------- ---------
Average Commission Rate Paid...................... $ 0.0218 $ 0.0228 $ 0.0250 -- --
---------- --------- --------- --------- ---------
---------- --------- --------- --------- ---------
</TABLE>
See notes to financial statements.
11
<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
Period 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
December 31,
1997 12.17 .13 1.67
June 30, 1998 13.78 -- --
- ---------------------------------------------------------
</TABLE>
PORTFOLIO CHANGES (UNAUDITED)
For the period ended June 30, 1998:
INVESTMENTS ADDED
Cirrus Logic, Inc.
Commscope, Inc.
Information Resources, Inc.
Johnson & Johnson
Meyer, Fred, Inc.
Pennzoil Co.
St. Paul Companies, Inc.
Triquint Semiconductor, Inc.
INVESTMENTS ELIMINATED
Adobe Systems, Inc.
CII Financial, Inc. (bonds)
Imation Corp.
Integrated Systems, Inc.
Intel Corp.
Lubrizol Corp.
Mazel Stores, Inc.
National Education Corp. (bonds)
Olsten Corp.
Pete's Brewing Co.
USF&G Corp.
12
<PAGE>
MBL GROWTH FUND, INC.
520 Broad Street
Newark, New Jersey 07102-3111
1-800-559-5535
FUND DIRECTORS
William G. Clark
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
PricewaterhouseCoopers 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 (8-98)
15152
Semiannual Report
June 30, 1998
MBL GROWTH FUND, INC.
Distributed by
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