<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 December 31, 1995 was $17.799, an increase of 5.54% from
the value of $16.864 on December 31, 1994.
Short-term money market rates moved in a relatively narrow band with a downward
bias during 1995 while long-term rates (10 to 30 year bonds) declined
dramatically. The movement of interest rates was a result of a fall in economic
growth from 4.1% in 1994 to about 2.6% in 1995 and the efforts of the Federal
Reserve Board to control inflation while keeping the economy expanding at an
acceptable rate. In December the Federal Reserve Board lowered the federal funds
rate for the second time in 1995 in order to prod economic activity. Economic
statistics, however, indicate we are still experiencing a low level of expansion
and that additional reductions of interest rates will occur early in 1996.
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 audited financial statements of the Account as of, and for the
year ended, December 31, 1995.
Sincerely,
MBL Life Assurance Corporation
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Management Committee and Contract Holders
MBL Variable Contract Account -- 7
We have audited the accompanying statement of assets and liabilities of MBL
Variable Contract Account -- 7 (the "Account") as of December 31, 1995, the
related statement of operations for the year then ended and the statements of
changes in net assets and the financial highlights for each of the two years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Account's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits. The financial highlights for each of the eight years in the period ended
December 31, 1993 (with the exception of Total Return for each of the six years
in the period ended December 31, 1991) were audited by other auditors whose
reports dated February 7, 1994 and February 21, 1992 expressed unqualified
opinions on those statements, with an explanatory paragraph relating to Mutual
Benefit Life Insurance Company in Rehabilitation.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of MBL
Variable Contract Account -- 7 as of December 31, 1995, the results of its
operations for the year then ended, and the changes in its net assets and the
financial highlights for each of the two years in the period then ended in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Parsippany, New Jersey
February 16, 1996
2
<PAGE>
MBL VARIABLE CONTRACT ACCOUNT -- 7
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS
Investments (98.4%):
U.S. Treasury Bills, principal amount $1,225,000 and $800,000, 4.85% and
5.31%, respectively, due February 1, 1996............................... $2,016,230
Cash....................................................................... 33,539
----------
Total assets............................................................... 2,049,769
LIABILITIES -- NOTE C...................................................... --
----------
NET ASSETS................................................................. $2,049,769
----------
----------
Net assets attributable to variable annuity Contract Holders -- 115,163
accumulation units at $17.799 per unit................................... $2,049,769
----------
----------
</TABLE>
See notes to financial statements.
3
<PAGE>
MBL VARIABLE CONTRACT ACCOUNT -- 7
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
Investment income:
Interest................................................... $ 114,541
Expenses -- Notes C and D:
Investment advisory fee.................................... $ 8,536
Expense and expense risk charge............................ 7,882
-----------
16,418
Less expenses waived and assumed by MBL Life -- Note C..... (16,418) --
----------- -----------
Net increase in net assets resulting from investment
activity................................................ $ 114,541
-----------
-----------
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1995 1994
-------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS
Investment income......................................................... $ 114,541 $ 85,800
Net realized loss from investment transactions............................ -- (1)
-------------- --------------
Net increase in net assets resulting from investment activity........... 114,541 85,799
FROM CONTRACT HOLDERS' TRANSACTIONS -- NOTES B AND E
Accumulation units surrendered............................................ (286,220) (383,665)
-------------- --------------
Decrease in net assets resulting from Contract Holders' transactions.... (286,220) (383,665)
-------------- --------------
Net decrease in net assets.............................................. (171,679) (297,866)
NET ASSETS
Beginning of year......................................................... 2,221,448 2,519,314
-------------- --------------
End of year............................................................... $ 2,049,769 $ 2,221,448
-------------- --------------
-------------- --------------
</TABLE>
See notes to financial statements.
4
<PAGE>
MBL VARIABLE CONTRACT ACCOUNT -- 7
NOTES TO FINANCIAL STATEMENTS
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.
5
<PAGE>
NOTE B -- REHABILITATION -- (CONTINUED)
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 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.
In view of the above, applications for new contracts and additional purchase
payments under existing contracts are currently not being accepted. In addition,
requests for transfer of amounts to the Companion Contract from the Account are
currently not being accepted.
Approximately 56% of the Accounts outstanding units are owned by five separate
Contract Holders.
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 year ended December 31, 1995 to the
Account's "disinterested" members amounted to $8,000.
NOTE E -- ACCUMULATION UNIT TRANSACTIONS
The change in the number of accumulation units outstanding was as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1995 1994
-------------- --------------
<S> <C> <C>
Balance at beginning of year................................. 131,726 155,149
Accumulation units surrendered............................... (16,563) (23,423)
------- -------
Balance at end of year....................................... 115,163 131,726
------- -------
------- -------
</TABLE>
6
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for each accumulation unit outstanding throughout the years
indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation Unit Value, Beginning of Year......... $ 16.864 $ 16.238 $ 15.772 $ 15.232 $ 14.415 $ 13.345 $ 12.328
Net investment income.............................. 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....................................... 0.935 0.626 0.466 0.540 0.817 1.070 1.017
--------- --------- --------- --------- --------- --------- ---------
Accumulation Unit Value, End of Year............... $ 17.799 $ 16.864 $ 16.238 $ 15.772 $ 15.232 $ 14.415 $ 13.345
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Total Return....................................... 5.54% 3.86% 2.95% 3.55% 5.67% 8.02% 8.25%
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (thousands)................ $ 2,050 $ 2,221 $ 2,519 $ 3,266 $ 5,448 $ 3,960 $ 2,033
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Ratio of Expenses(1) to Average Net Assets......... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Ratio of Net Investment Income(1) to Average Net
Assets........................................... 5.4 % 3.8 % 2.9 % 3.5 % 6.2 % 7.6 % 7.9 %
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
<CAPTION>
1988 1987 1986
--------- --------- ---------
<S> <C> <C> <C>
Accumulation Unit Value, Beginning of Year......... $ 11.588 $ 11.043 $ 10.638
Net investment income.............................. 0.740 0.545 0.405
Net gain from investment transactions.............. -- -- --
--------- --------- ---------
Net increase in net assets resulting from
operations....................................... 0.740 0.545 0.405
--------- --------- ---------
Accumulation Unit Value, End of Year............... $ 12.328 $ 11.588 $ 11.043
--------- --------- ---------
--------- --------- ---------
Total Return....................................... 6.39% 4.94% 3.81%
--------- --------- ---------
--------- --------- ---------
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (thousands)................ $ 1,141 $ 773 $ 490
--------- --------- ---------
--------- --------- ---------
Ratio of Expenses(1) to Average Net Assets......... 0.03% 0.02% 0.76%
--------- --------- ---------
--------- --------- ---------
Ratio of Net Investment Income(1) to Average Net
Assets........................................... 6.6 % 4.9 % 3.6 %
--------- --------- ---------
--------- --------- ---------
</TABLE>
- --------------------------------
(1)Without waiver and assumption of expenses by MBL Life, the ratio of expenses
to average net assets would have been 0.77%, and the ratio of net investment
income to average net assets would have been 4.6%. (See Note C of the Notes
to Financial Statements.)
7
<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 (2-96)
Audited Financial Statements
December 31, 1995
MBL VARIABLE
CONTRACT ACCOUNT -- 7
Group Variable Annuity Contracts
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