<PAGE>
MBL GROWTH FUND, INC.
To Our Shareholders and Variable Annuity Participants:
The US equity markets continued an unprecedented run in 1997 due in large part
to sustained positive economic factors. These factors included strong economic
growth, low inflation, stable interest rates, and a very strong labor market.
The Standard & Poor's 500 Index, a generally accepted index of unmanaged equity
securities, increased by 33.4% in 1997. This impressive year follows returns of
23.0% and 37.5% in 1996 and 1995, respectively.
MBL GROWTH FUND PERFORMANCE
We are pleased to report that MBL Growth Fund appreciated 31.1% for the year
while maintaining a risk level of approximately 86% of the overall market.
Michael Mullarkey, Managing Director of Markston Investment Management and the
Fund's lead portfolio manager, discusses some of the major investments that
shaped the Fund's 1997 results in the letter that follows.
The Board of Directors invites your suggestions and comments, and appreciates
your continued support and confidence in the Fund.
Sincerely,
[SIG]
KATHLEEN M. KOERBER
PRESIDENT
January 31, 1998
<PAGE>
REPORT OF THE INVESTMENT ADVISER
Dear Shareholders and Variable Annuity Participants:
Under Markston's management, the MBL Growth Fund returned 31.1% after expenses,
versus 33.4% for the S&P 500. We estimate that the risk level in the Fund was
86.1% of the market during the year.
By the end of 1997, the US stock market as measured by the S&P 500 had
essentially doubled in the prior three years. Selling by corporate insiders has
recently been brisk. The employment rate has dropped to the point that wage
inflation is a risk in the domestic economy. All of this leads us to doubt that
the extraordinary gains we have enjoyed in the US equity markets are likely to
continue much longer.
As equity managers, we have always paid attention to risk. This is reflected in
the cash positions we have held and the diversification we have used while
pursuing capital appreciation. Given the backdrop of a robustly priced equity
market, the risks of domestic wage inflation and the dislocations in Southeast
Asia, we will continue to seek opportunities for appreciation, while limiting
the overall risk level of the portfolio, to the extent possible.
Looking back at 1997, some of our better performers for the year were Vulcan
Materials, Schering-Plough, American Express, CVS and National Computer Systems.
VULCAN appreciated 67% for the year. The company was helped by a continuing
profit recovery in its chemical operations as the price of caustic soda firmed.
Also helping was speculation that Vulcan would be able to use its
under-leveraged balance sheet to acquire additional quarry assets. Redlands,
PLC, a British company with substantial quarry holdings in the US, was the
subject of an unfriendly takeover attempt. For a short time it looked as though
Vulcan might have been able to buy a part of Redlands. This opportunity,
however, has passed.
SCHERING-PLOUGH rose 92% during 1997. During the year, the company took steps to
extend its Claritin patent protection, benefited from favorable studies on
Integrilin--a heart drug that it will license from Cor-- and, most importantly,
filed a New Drug Application for Intron A with Rebetol for hepatitis C patients.
An estimated 10 million individuals in major markets are infected with hepatitis
C.
AMERICAN EXPRESS'S superb performance, up 56% for the year, was based on several
factors. Early in the year, there were substantial stock repurchases by the
company. During the year, earnings modestly exceeded expectations while
restructuring and reserving continued. Finally, in the latter half of the year,
there was speculation American Express might merge with Citibank to further
widen their international leadership positions. Essentially, all the news was
positive.
CVS was another good performer, appreciating 52% during the year. After merging
with Revco, CVS emerged as one of the four leading national drug chains, with
the potential to materially improve profitability. Late in the year, CVS
benefited from a market move to higher quality, defensive securities, as the
extent of the Asian currency and debt crises unfolded.
NATIONAL COMPUTER SYSTEMS, another large holding, appreciated 38% during the
year and also materially contributed to performance. We believe that this was a
function of excellent earnings growth as well as the market's recognition that
Russ Gullotti, the new CEO, has improved the management infrastructure at the
company. The company's focus on education, with its reliable revenue stream,
also helped.
Our worst performer during the year was Eastman Kodak.
EASTMAN KODAK declined for a combination of reasons. Price competition from Fuji
became intense during the summer. Earnings were hurt by losses in the digital
photography area and excess staffing. Late in the
2
<PAGE>
year, the Board of Directors mandated a withdrawal from several digital
photography endeavors and a 20% reduction in staffing. We had materially reduced
our position prior to the full decline in Kodak. Since the staff reduction was
announced, we have partially rebuilt the position.
We thank you for the continuing opportunity to manage your assets.
Sincerely,
[SIG]
MICHAEL J. MULLARKEY
Managing Director
MARKSTON INVESTMENT MANAGEMENT
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, 1997
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
<S> <C> <C>
1 Year 5 Year 10 Year
31.12% 20.66% 18.77%
MBL Growth Fund S&P 500
1987 $10,000 $10,000
1988 $12,761 $11,660
1989 $16,400 $15,345
1990 $15,526 $14,869
1991 $19,051 $19,389
1992 $21,846 $20,863
1993 $24,854 $22,970
1994 $25,383 $23,271
1995 $34,204 $32,004
1996 $42,608 $39,352
1997 $55,865 $52,480
</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, 1997, 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 five 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, 1997 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
February 9, 1998
5
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
MBL GROWTH FUND, INC.
DECEMBER 31, 1997
<TABLE>
<S> <C>
ASSETS
Investments:
Common stocks (cost $38,324,541)................................. $52,735,240
Preferred stocks (cost $163,798)................................. 359,562
Corporate bonds (cost $173,728).................................. 254,874
Short-term investments (cost $5,494,560)......................... 5,494,560
-----------
58,844,236
Cash............................................................... 44,467
Dividends and interest receivable.................................. 56,363
Other assets....................................................... 5,681
-----------
Total Assets............................................... 58,950,747
-----------
LIABILITIES
Payable for investment securities purchased........................ 1,413,448
Accrued investment advisory fee.................................... 98,036
Accounts payable and accrued expenses.............................. 17,829
-----------
Total Liabilities.......................................... 1,529,313
-----------
Net Assets................................................. $57,421,434
-----------
-----------
NET ASSETS
Capital stock (4,719,286 shares of $1.00 par value capital stock
outstanding, 21,000,000 shares authorized)....................... $ 4,719,286
Paid-in capital.................................................... 36,638,876
Accumulated undistributed net investment income.................... 42,835
Accumulated undistributed net realized gain from security
transactions..................................................... 1,332,828
Net unrealized appreciation of investments......................... 14,687,609
-----------
Net Assets................................................. $57,421,434
-----------
-----------
Net asset value, offering price, and redemption price per share
($57,421,434 DIVIDED BY 4,719,286 shares of
capital stock outstanding)....................................... $12.17
-----------
-----------
</TABLE>
See notes to financial statements.
STATEMENT OF OPERATIONS
MBL GROWTH FUND, INC.
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
Investment Income:
Dividends......................................................... $ 642,880
Interest.......................................................... 388,328
----------
1,031,208
Expenses:
Investment advisory fee........................................... 317,043
Custodian......................................................... 70,922
Audit............................................................. 25,100
Legal............................................................. 20,809
Transfer agent.................................................... 19,317
Printing.......................................................... 8,848
Insurance expense................................................. 8,038
Directors' fees................................................... 7,500
Miscellaneous..................................................... 3,136
Filing Fees....................................................... 1,348
----------
482,061
----------
Net Investment Income....................................... 549,147
----------
Realized and Unrealized Gain on
Investments:
Net realized gain from security transactions...................... 8,153,532
Increase in unrealized appreciation of investments................ 5,261,720
----------
Net Gain on Investments......................................... 13,415,252
----------
Net Increase in Net Assets Resulting from Operations............ $13,964,399
----------
----------
</TABLE>
6
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
MBL GROWTH FUND, INC.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS
Net investment income........................... $ 549,147 $ 861,048
Net realized gain from security transactions.... 8,153,532 6,498,070
Increase in unrealized appreciation of
investments................................... 5,261,720 1,938,476
------------ ------------
Net Increase in Net Assets Resulting from
Operations.................................. 13,964,399 9,297,594
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income............ (540,838) (883,492)
Distributions from net realized gain from
security transactions......................... (6,913,083) (6,691,860)
------------ ------------
Total Distributions to Shareholders........... (7,453,921) (7,575,352)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS
Net increase in net assets from capital share
transactions.................................. 4,919,413 4,118,244
------------ ------------
Net Increase in Net Assets.................... 11,429,891 5,840,486
NET ASSETS
Beginning of year............................... 45,991,543 40,151,057
------------ ------------
End of year (including undistributed net
investment income of $42,835 and $34,526,
respectively)................................. $57,421,434 $45,991,543
------------ ------------
------------ ------------
</TABLE>
See notes to financial statements.
7
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS
MBL GROWTH FUND, INC.
DECEMBER 31, 1997
<TABLE>
<CAPTION>
NUMBER
OF MARKET
SHARES VALUE
- ---------- -----------
<C> <S> <C>
COMMON STOCKS (91.84%)
CONSUMER NON-DURABLES (6.35%)
92,295 Archer Daniels Midland Co.............................. $ 2,001,648
3,400 Coca-Cola Co........................................... 226,525
22,400 National Service Industries, Inc....................... 1,110,200
3,400 Pete's Brewing Co.*.................................... 13,813
5,600 Quaker Oats Co......................................... 295,400
-----------
3,647,586
-----------
ENERGY (1.38%)
6,000 Amoco Corp............................................. 510,750
914 Apache Corp............................................ 32,047
3,000 Petroleum Helicopters, Inc., voting.................... 66,750
8,100 Petroleum Helicopters, Inc., non-voting................ 182,250
-----------
791,797
-----------
FINANCIAL SERVICES (10.12%)
51,467 Allmerica Financial Corp............................... 2,570,133
6,600 American Express Co.................................... 589,050
9,900 Argonaut Group, Inc.................................... 335,362
17,168 First Union Real Estate Equity & Mortgage
Investments.......................................... 278,980
11,900 Health Care Property Investors, Inc.................... 449,969
37,016 IRT Property Co........................................ 437,251
6,000 Northern Trust Corp.................................... 418,500
46,200 Reliance Group Holdings, Inc........................... 652,575
3,500 USF&G Corp............................................. 77,219
-----------
5,809,039
-----------
HEALTH CARE (12.63%)
48,900 Access Health, Inc.*................................... 1,418,100
9,100 Biogen, Inc.*.......................................... 331,012
4,600 Cooper Companies, Inc.*................................ 188,025
14,800 Humana, Inc.*.......................................... 307,100
79,100 Pharmacia & Upjohn, Inc................................ 2,897,038
34,000 Schering-Plough Corp................................... 2,112,250
-----------
7,253,525
-----------
<CAPTION>
NUMBER
OF MARKET
SHARES VALUE
- ---------- -----------
<C> <S> <C>
INDUSTRIAL (13.57%)
2,000 Cummins Engine, Inc.................................... $ 118,125
8,300 Dravo Corp.*........................................... 91,300
7,700 IMC Global, Inc........................................ 252,175
10,900 Lone Star Industries, Inc.............................. 579,063
2,300 Lubrizol Corp.......................................... 84,813
26,900 Minnesota Mining & Manufacturing Co.................... 2,207,481
21,600 Morgan Products Ltd.*.................................. 114,750
35,300 Ogden Corp............................................. 995,019
12,800 Valspar Corp........................................... 408,000
28,800 Vulcan Materials Co.................................... 2,941,200
-----------
7,791,926
-----------
MEDIA/ENTERTAINMENT/LEISURE (12.42%)
62,200 ACNielsen Corp.*....................................... 1,516,125
31,100 Eastman Kodak Co....................................... 1,891,269
47,400 Harte-Hanks Communications............................. 1,759,725
6,650 Hasbro, Inc............................................ 209,475
8,500 Mattel, Inc............................................ 316,625
21,800 Nelson, Thomas Inc..................................... 252,063
3,900 Time Warner, Inc....................................... 241,800
15,400 Times Mirror Co., Series A............................. 947,100
-----------
7,134,182
-----------
MISCELLANEOUS (2.28%)
25,200 Catalina Marketing Corp.*.............................. 1,165,500
4,500 Olsten Corp............................................ 67,500
6,100 Reading Entertainment, Inc.*........................... 74,725
-----------
1,307,725
-----------
RETAIL (8.55%)
63,280 Burlington Coat Factory Warehouse Corp................. 1,040,165
32,021 CVS Corp............................................... 2,051,345
32,756 Cash America International, Inc........................ 423,781
42,500 Charming Shoppes, Inc.*................................ 196,562
6,800 Hartmarx Corp.*........................................ 51,850
3,600 Mazel Stores, Inc.*.................................... 52,650
15,100 Oshkosh B'Gosh, Inc., Class A.......................... 483,200
35,700 Vicorp Restaurants, Inc.*.............................. 606,900
-----------
4,906,453
-----------
</TABLE>
8
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS -- CONTINUED
MBL GROWTH FUND, INC.
DECEMBER 31, 1997
<TABLE>
<CAPTION>
NUMBER
OF MARKET
SHARES VALUE
- ---------- -----------
<C> <S> <C>
TECHNOLOGY (15.86%)
3,500 Adobe Systems, Inc..................................... $ 143,937
47,900 Avid Technology, Inc.*................................. 1,281,325
13,000 Bay Networks, Inc.*.................................... 332,312
4,800 Calcomp Technology, Inc.*.............................. 15,000
55,900 Checkpoint Systems, Inc.*.............................. 978,250
7,500 Electronic Data Systems Corp........................... 329,531
44,000 Glenayre Technologies, Inc.*........................... 434,500
60,000 Global Directmail Corp.*............................... 1,038,750
6,690 Imation Corp.*......................................... 107,040
4,200 Integrated Systems, Inc.*.............................. 57,750
1,400 Intel Corp............................................. 98,262
2,500 Motorola, Inc.......................................... 142,656
77,800 National Computer Systems, Inc......................... 2,742,450
17,000 Shared Medical System Corp............................. 1,122,000
31,100 3-D Systems Corp.*..................................... 186,600
9,500 Xircom, Inc.*.......................................... 95,594
-----------
9,105,957
-----------
UTILITIES (8.68%)
21,800 Cinergy Corp........................................... 835,212
36,480 Duke Power Co.......................................... 2,020,080
6,900 Eastern Utilities Assoc................................ 181,125
36,843 Houston Industries, Inc................................ 983,248
12,000 Northwest Natural Gas Co............................... 372,000
7,000 Piedmont Natural Gas, Inc.............................. 251,563
5,401 Sprint Corp............................................ 316,634
1,500 UniSource Energy Corp.*................................ 27,188
-----------
4,987,050
-----------
TOTAL COMMON STOCKS.................................... 52,735,240
-----------
<CAPTION>
NUMBER
OF MARKET
SHARES VALUE
- ---------- -----------
<C> <S> <C>
PREFERRED STOCKS (0.63%)
MEDIA/ENTERTAINMENT/LEISURE (0.54%)
15,622 News Corp. Ltd., limited voting*....................... $ 310,487
-----------
MISCELLANEOUS (0.09%)
2,600 Craig Corp., Class A*.................................. 49,075
-----------
TOTAL PREFERRED STOCKS................................. 359,562
-----------
<CAPTION>
PRINCIPAL
AMOUNT
- ----------
<C> <S> <C>
CORPORATE BONDS (0.44%)
$ 129,000 CII Financial, Inc., 7.50% conv. sub. deb., due
September 15, 2001................................... 120,454
143,000 National Education Corp., 6.50% conv. sub. deb., due
May 15, 2011......................................... 134,420
-----------
TOTAL CORPORATE BONDS.................................. 254,874
-----------
SHORT-TERM INVESTMENTS (9.57%)
5,510,000 U.S. Treasury Bills, 5.01% to 5.31%, due January 8 to
February 19, 1998.................................... 5,494,560
-----------
TOTAL INVESTMENTS (102.48%)............................ 58,844,236
Liabilities in excess of other assets (2.48%).......... (1,422,802)
-----------
NET ASSETS (100.00%)................................... $57,421,434
-----------
-----------
</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 -- 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 approximate 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
10
<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 year ended December 31, 1997, the
basic advisory fee amounted to $261,146. The actual fee amounted to $317,043
which reflected an upward performance adjustment of $55,897.
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 in 1997 was 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 $7,500. 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, 1997, MBL Life owned 92,161 Fund shares. In addition, 4,627,125
Fund shares are held by MBL Life Separate Accounts, for the benefit of variable
annuity contract holders.
NOTE D -- CAPITAL STOCK
A summary of capital share transactions follows:
<TABLE>
<CAPTION>
Year Ended December 31, Year Ended December 31,
1997 1996
------------------------- -------------------------
Shares Amount Shares Amount
---------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Shares sold...................................... 41,036 $ 518,989 46,710 $ 504,068
Shares issued in reinvestment of income dividends
and capital gain distributions.................. 618,566 7,453,921 713,719 7,575,352
---------- ------------- ---------- -------------
659,602 7,972,910 760,429 8,079,420
Less shares repurchased.......................... (247,466) (3,053,497) (361,268) (3,961,176)
---------- ------------- ---------- -------------
Net increase in number of shares outstanding and
net assets resulting from capital share
transactions.................................... 412,136 $ 4,919,413 399,161 $ 4,118,244
---------- ------------- ---------- -------------
---------- ------------- ---------- -------------
</TABLE>
NOTE E -- PURCHASES AND SALES OF INVESTMENTS
Purchases and proceeds from sales of investments during the year ended December
31, 1997, other than short-term investments, aggregated $28,755,971 and
$27,679,722, respectively.
The identified cost of investments owned at December 31, 1997 for federal income
tax purposes was $44,156,627. At December 31, 1997, gross unrealized
appreciation of investments was $15,694,068, and gross unrealized depreciation
of investments was $1,006,459 resulting in net unrealized appreciation of
$14,687,609, for federal income tax purposes.
- -------------------------------------------------------------------------------
11
<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,
------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year........................ $10.68 $10.27 $ 8.36 $ 9.55 $ 9.36
-------- -------- -------- -------- --------
Net investment income......... 0.13 0.23 0.26 0.21 0.17
Net realized and unrealized
gain (loss) on
investments................. 3.16 2.24 2.59 (0.01) 1.10
-------- -------- -------- -------- --------
Net increase in net assets
from operations............. 3.29 2.47 2.85 0.20 1.27
-------- -------- -------- -------- --------
Dividends from net investment
income...................... (0.13) (0.24) (0.26) (0.21) (0.17)
Distributions from net
realized gain from security
transactions................ (1.67) (1.82) (0.68) (1.18) (0.91)
-------- -------- -------- -------- --------
Total distributions........... (1.80) (2.06) (0.94) (1.39) (1.08)
-------- -------- -------- -------- --------
Net Asset Value, End of
Year........................ $12.17 $10.68 $10.27 $ 8.36 $ 9.55
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total Return.................. 31.12% 24.57% 34.75% 2.13% 13.77%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Ratios/Supplemental Data:
Net Assets, End of Year
(thousands)................... $57,421 $45,992 $40,151 $32,000 $35,864
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Ratio of Expenses to Average
Net Assets.................. 0.92% 0.83% 0.86% 1.13% 1.20%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Ratio of Net Investment Income
to Average Net Assets....... 1.05% 2.07% 2.73% 2.15% 1.67%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Portfolio Turnover Rate....... 60.47% 65.37% 47.49% 78.29% 47.46%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Average Commission Rate
Paid........................ $0.0228 $0.0250 -- -- --
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
See notes to financial statements.
12
<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
December 31,
1997 12.17 .13 1.67
- ---------------------------------------------------------
</TABLE>
PORTFOLIO CHANGES (UNAUDITED)
For the year ended December 31, 1997:
INVESTMENTS ADDED
Adobe Systems, Inc.
Access Health, Inc.
ACNielsen Corp.
Allmerica Financial Corp.
Archer Daniels Midland Co.
Avid Technology, Inc.
Bay Networks, Inc.
Biogen, Inc.
CVS Corp.
Catalina Marketing Corp.
Charming Shoppes, Inc.
Checkpoint Systems, Inc.
Cummins Engine, Inc.
Dravo Corp.
Duke Power Co.
INVESTMENTS ADDED (CONTINUED)
Glenayre Technologies, Inc.
Global Directmail Corp.
Harte-Hanks Communications
Hartmarx Corp.
Heritage Media Corp.
Houston Industries, Inc.
Humana, Inc.
Integrated Systems, Inc.
Mazel Stores, Inc.
News Corp. Ltd. (preferred)
Olsten Corp.
Pete's Brewing Co.
Pharmacia & Upjohn, Inc.
Reliance Group Holdings, Inc.
Schering-Plough Corp.
3-D Systems Corp.
Tupperware Corp.
UniSource Energy Corp.
Wang Laboratories, Inc. (warrants)
Xircom, Inc.
INVESTMENTS ELIMINATED
Allegheny Teledyne, Inc.
Allmerica Property & Casualty Companies, Inc.
American Greetings Corp., Class A
Avnet Inc.
Data General Corp.
Dean Witter Government Income Trust
Heritage Media Corp.
Medpartners, Inc.
National Education Corp.
Noram Energy Corp.
Novell, Inc.
PanEnergy Corp.
Quaker State Corp.
Quest for Value Dual Purpose Fund, Inc.
(income and capital shares)
Revco D.S., Inc.
Sequent Computer Systems, Inc.
Showbiz Pizza Time, Inc.
Storage Technology Corp.
Symantec Corp.
360 Communications Co.
Tupperware Corp.
Universal International, Inc.
Wang Laboratories, Inc. (warrants)
Wilmington Trust Corp.
13
<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
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 (2-98)
15152
Annual Report
December 31, 1997
MBL GROWTH FUND, INC.
Distributed by
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