<PAGE>
MBL VARIABLE CONTRACT ACCOUNT -- 7
To Contract Holders and Participants
The value of a Variable Accumulation Unit of MBL Variable Contract Account -- 7
(the "Account") as of June 30, 1996 was $18.241, an increase of 2.48% from the
value of $17.799 on December 31, 1995.
Short-term interest rates trended down during the first quarter of 1996 as the
Federal Reserve Board (the "Fed") felt comfortable providing a slight stimulus
to a sluggish economy. As economic growth accelerated in the second quarter to a
4.2% rate as measured by Gross Domestic Product expansion, the Fed became
concerned that inflation may make a come back and raised the federal funds rate
by a modest 25 basis points to 5.50%. As other measures of the economy were
reported as we entered the third quarter of the year, they presented a mixed
picture of economic activity. With no strong evidence of accelerating inflation
and major national elections scheduled for November, we believe the Federal
Reserve will not make a move to alter short-term rates until they can read the
pulse of the economy in the last quarter of the year.
We thank you for your continued confidence in MBL Variable Contract
Account -- 7. We remain committed to providing you with superior customer
service and quality investment management.
Following are the unaudited financial statements of the Account as of, and for
the period ended, June 30, 1996.
Sincerely,
MBL Life Assurance Corporation
<PAGE>
MBL VARIABLE CONTRACT ACCOUNT -- 7
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments (98.5%):
U.S. Treasury Bills, principal amount $1,050,000 and $1,000,000, 4.99%
and 5.05%, respectively, due August 15, 1996............................ $2,036,580
Cash....................................................................... 29,265
----------
Total assets............................................................... 2,065,845
LIABILITY -- NOTE C
Due to MBL Life............................................................ 5,233
----------
NET ASSETS................................................................. $2,060,612
----------
----------
Net assets attributable to variable annuity Contract Holders -- 112,969
accumulation units at $18.241 per unit................................... $2,060,612
----------
----------
</TABLE>
See notes to financial statements.
2
<PAGE>
MBL VARIABLE CONTRACT ACCOUNT -- 7
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
<TABLE>
<S> <C> <C>
Investment income:
Interest................................................... $ 50,378
Expenses -- Notes C and D:
Investment advisory fee.................................... $ 4,107
Expense and expense risk charges........................... 3,800
-----------
7,907
Less expenses waived and assumed by MBL Life -- Note C..... (7,907) --
----------- -----------
Net increase in net assets resulting from investment
activity................................................ $ 50,378
-----------
-----------
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 1996 1995
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS
Investment income........................................................ $ 50,378 $ 114,541
------------- -------------
Net increase in net assets resulting from investment activity.......... 50,378 114,541
FROM CONTRACT HOLDERS' TRANSACTIONS -- NOTES B AND E
Accumulation units surrendered........................................... (39,535) (286,220 )
------------- -------------
Decrease in net assets resulting from Contract Holders' transactions... (39,535) (286,220 )
------------- -------------
Net increase (decrease) in net assets.................................. 10,843 (171,679 )
NET ASSETS
Beginning of period...................................................... 2,049,769 2,221,448
------------- -------------
End of period............................................................ $ 2,060,612 $ 2,049,769
------------- -------------
------------- -------------
</TABLE>
See notes to financial statements.
3
<PAGE>
MBL VARIABLE CONTRACT ACCOUNT -- 7
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A -- ACCOUNTING POLICIES
MBL Variable Contract Account -- 7 (the "Account") is a diversified open-end
management investment company registered under the Investment Company Act of
1940, as amended, and a separate account of the MBL Life Assurance Corporation
("MBL Life") established under the Insurance Laws of New Jersey. MBL Life
provides for variable accumulation and benefits under the Account's contract by
crediting annuity considerations to the Account or fixed accumulation and
benefits to the Companion Contract, as elected by the Participant. Significant
accounting policies of the Account are as follows:
INVESTMENTS -- Investments in short-term securities which mature in 60 days or
less are valued at amortized cost, which approximates market value. Short-term
securities which mature in more than 60 days are valued at market values based
on quoted bid and asked prices or yield equivalent. Investment transactions are
recorded on the date of purchase or sale. Interest is recorded as earned.
FEDERAL INCOME TAXES -- The Account does not provide for Federal income taxes
since the operations of the Account form a part of, and are taxed with, those of
MBL Life which is taxed as a "life insurance company" under the Internal Revenue
Code. Income and capital gains, if any, of the Account attributable to the
Contract Holders are excluded in the determination of the Federal income tax
liability of MBL Life.
REALIZED GAINS -- The net realized gain (loss) on investment transactions is
determined on the basis of identified cost.
ESTIMATES -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts and disclosure in the financial
statements. Actual results could differ from these estimates.
NOTE B -- REHABILITATION
On July 16, 1991, the Superior Court of New Jersey (the "Court") entered an
Order appointing the New Jersey Insurance Commissioner as Rehabilitator of the
Mutual Benefit Life Insurance Company in Rehabilitation ("Mutual Benefit Life").
The Commissioner was granted immediate exclusive possession and control of, and
title to, the business and assets of Mutual Benefit Life, including the assets
and liabilities of the Account. As a separate account, the assets and
liabilities of the Account are maintained separate and apart from the sponsoring
insurance company's other assets and liabilities.
On November 10, 1993, the Court issued an Order of Confirmation which provided
for the implementation of the Third Amended Plan of Rehabilitation of Mutual
Benefit Life (the "Plan"). The Plan, as confirmed, reaffirmed the status of the
Account as a separate account.
On April 29, 1994, the Plan was implemented. Substantially all of the assets and
liabilities of Mutual Benefit Life were transferred to MBL Life. In addition,
the assets and liabilities of the Account were transferred to a new separate
account of MBL Life. Also, as of April 29, 1994, the ownership of the stock of
MBL Life was transferred to a Trust, of which the Commissioner is the sole
Trustee.
While the terms of the Plan currently prohibit or limit redemptions from the
Companion Contract and transfers from the Companion Contract to the Account,
annuity payments which commenced prior to
4
<PAGE>
NOTE B -- REHABILITATION -- (CONTINUED)
July 16, 1991 and any death benefits payable, both before and after July 16,
1991, are unaffected and will continue to be paid under the terms of the Plan.
In addition, the Plan permits redemptions of amounts from the Account to
continue, as requested, and transfers to MBL Variable Contract Account -- 2 for
the purchase of variable annuities.
NOTE C -- EXPENSE AND EXPENSE RISK CHARGES
The contracts offered by the Account provide that a charge, at the annual rate
of .37%, be made daily against Account assets for expenses and expense risks
assumed by MBL Life. In December, 1986, Mutual Benefit Life informed the Account
that it would not assess the expense and expense risk charges against the
Account's assets and would assume payment of the investment advisory fee (see
Note D) for the period December 15, 1986 through May 1, 1987. This waiver of
charges to the Account was extended for one year periods on May 1 of each
succeeding year. Each year hereafter the waiver may be extended for additional
one year periods. MBL Life reserves the right to reinstate the expense and
expense risk charges and to cease assumption of payment of the investment
advisory fee at the expiration of any waiver period.
NOTE D -- INVESTMENT ADVISORY AND SERVICE AGREEMENTS
The Account has an investment advisory, a service and a distribution agreement
with First Priority Investment Corporation ("FPIC"). FPIC is a wholly-owned
subsidiary of MBLLAC Holding Corporation, a wholly-owned subsidiary of MBL Life.
Under the investment advisory and service agreement, FPIC receives a periodic
fee at the annual rate of .40% of the first $300,000,000 of the Account's
average daily net assets, .35% of the next $400,000,000 of such value, and .30%
of all such value in excess of $700,000,000. (See Note C).
The compensation of each "disinterested" member of the Management Committee is
included in those expenses and expense risks assumed by MBL Life as described in
Note C. Such fees are paid at the rate of $400 per meeting attended plus an
annual retainer of $1,200. No remuneration has been paid to any other member or
officer. Aggregate fees paid during the period ended June 30, 1996 to the
Account's "disinterested" members amounted to $3,000.
NOTE E -- ACCUMULATION UNIT TRANSACTIONS
The change in the number of accumulation units outstanding was as follows:
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED JUNE DECEMBER 31,
30, 1996 1995
----------- --------------
<S> <C> <C>
Balance at beginning of period............................................. 115,163 131,726
Accumulation units surrendered............................................. (2,194) (16,563)
----------- -------
Balance at end of period................................................... 112,969 115,163
----------- -------
----------- -------
</TABLE>
Approximately 57% of the Account's outstanding units are owned by five separate
Contract Holders.
5
<PAGE>
FINANCIAL HIGHLIGHTS
(UNAUDITED)
Selected data for each accumulation unit outstanding throughout the periods
indicated:
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, --------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation Unit Value, Beginning of
Period................................ $17.799 $ 16.864 $ 16.238 $ 15.772 $ 15.232 $ 14.415 $ 13.345 $ 12.328
Net investment income................... 0.442 0.935 0.626 0.466 0.540 0.812 1.070 1.017
Net gain from investment transactions... -- -- -- -- -- 0.005 -- --
-------- -------- -------- -------- -------- -------- -------- --------
Net increase in net assets resulting
from operations....................... 0.442 0.935 0.626 0.466 0.540 0.817 1.070 1.017
-------- -------- -------- -------- -------- -------- -------- --------
Accumulation Unit Value, End of
Period................................ $18.241 $ 17.799 $ 16.864 $ 16.238 $ 15.772 $ 15.232 $ 14.415 $ 13.345
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
Total Return............................ 2.48% 5.54% 3.86% 2.95% 3.55% 5.67% 8.02% 8.25%
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (thousands)... $ 2,061 $ 2,050 $ 2,221 $ 2,519 $ 3,266 $ 5,448 $ 3,960 $ 2,033
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
Ratio of Expenses to Average Net
Assets................................ 0.00%(1) 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
Ratio of Net Investment Income to
Average Net Assets.................... 2.5%(1) 5.4% 3.8% 2.9% 3.5% 6.2% 7.6% 7.9%
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
<CAPTION>
1988 1987
-------- --------
<S> <C> <C>
Accumulation Unit Value, Beginning of
Period................................ $ 11.588 $ 11.043
Net investment income................... 0.740 0.545
Net gain from investment transactions... -- --
-------- --------
Net increase in net assets resulting
from operations....................... 0.740 0.545
-------- --------
Accumulation Unit Value, End of
Period................................ $ 12.328 $ 11.588
-------- --------
-------- --------
Total Return............................ 6.39% 4.94%
-------- --------
-------- --------
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (thousands)... $ 1,141 $ 773
-------- --------
-------- --------
Ratio of Expenses to Average Net
Assets................................ 0.03% 0.02%
-------- --------
-------- --------
Ratio of Net Investment Income to
Average Net Assets.................... 6.6% 4.9%
-------- --------
-------- --------
</TABLE>
- --------------------------------
(1) Without waiver and assumption of expenses by MBL Life, the ratio of expenses
to average net assets would have been 0.38%, and the ratio of net investment
income to average net assets would have been 2.07%. (See Note C of the Notes
to Financial Statements.)
6
<PAGE>
- ---------------------------------------------
MBL VARIABLE CONTRACT ACCOUNT -- 7
MBL Life Assurance Corporation
520 Broad Street - Newark, New Jersey 07102
- ---------------------------------------------
THIS REPORT HAS BEEN PREPARED FOR CONTRACT HOLDERS AND PARTICIPANTS IN MBL
VARIABLE CONTRACT ACCOUNT -- 7. IT IS NOT AUTHORIZED FOR OTHER DISTRIBUTION
UNLESS PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS WHICH INCLUDES
INFORMATION CONCERNING THE ACCOUNT AND THE APPLICABLE SALES COMMISSIONS.
FS-634 (8-96)
Semiannual Report
June 30, 1996
MBL VARIABLE
CONTRACT ACCOUNT -- 7
Group Variable Annuity Contracts
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