<PAGE>
MBL VARIABLE CONTRACT ACCOUNT -- 7
To Contract Holders and Participants
The value of each Variable Accumulation Unit of MBL Variable Contract
Account -- 7 (the "Account") as of June 30, 1997 was $19.166, versus a value of
$18.706 on December 31, 1996. This represents a 2.46% increase for the six-month
period.
During the first quarter, the Federal Reserve Board, in anticipation of
inflationary pressure and citing "persistent strength in demand," raised the
Federal Funds rate 25 basis points to 5.50%. The pace of economic growth
lessened somewhat in the second quarter as the Federal Reserve Board left the
Federal Funds rates and the Federal Discount rate unchanged at 5.50% and 5.00%,
respectively.
We appear to be in a period of moderate economic growth and low inflation -- the
best of both worlds for financial markets. Unemployment was as low as 4.8%
during the quarter. In May, new home sales were up 7.11%, and existing home
sales were up 4.4%. It should be noted, however, that low unemployment coupled
with higher product demand could create inflationary pressure. If, however, this
current environment continues, we do not expect any significant change for the
forseeable future in the level of short-term interest rates and we believe that
the Account is positioned to provide an optimal rate of return.
We thank you for your continued confidence in MBL Variable Contract
Account -- 7. We remain committed to providing you with quality investment
management and superior customer service.
Following are the unaudited financial statements of the Account as of, and for
the period ended, June 30, 1997.
Sincerely,
[SIG]
William G. Clark
Senior Vice President
Pension and Investment Products
MBL Life Assurance Corporation
<PAGE>
MBL VARIABLE CONTRACT ACCOUNT -- 7
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments (98.3%):
U.S. Treasury Bills, principal amount $1,000,000 and $900,000, 4.72% and
4.73%, due July 24, 1997 and July 31, 1997, respectively............... $1,893,437
Cash....................................................................... 32,050
----------
Total assets............................................................... 1,925,487
LIABILITIES -- NOTE C...................................................... --
----------
NET ASSETS................................................................. $1,925,487
----------
----------
Net assets attributable to variable annuity Contract Holders -- 100,463
accumulation units at $19.166 per unit................................... $1,925,487
----------
----------
</TABLE>
See notes to financial statements.
2
<PAGE>
MBL VARIABLE CONTRACT ACCOUNT -- 7
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
<TABLE>
<S> <C> <C>
Investment income:
Interest................................................... $ 47,517
Expenses -- Notes C and D:
Investment advisory fee.................................... $ 3,901
Expense and expense risk charge............................ 3,615
-----------
7,516
Less expenses waived and assumed by MBL Life -- Note C..... (7,516) --
----------- -----------
Net investment income...................................... 47,517
Net realized loss from investment transactions............. (15)
-----------
Net increase in net assets resulting from investment
activity............................................... $ 47,502
-----------
-----------
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED JUNE DECEMBER 31,
30, 1997 1996
------------ --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS
Investment income.......................................................... $ 47,517 $ 101,352
Net realized gain (loss) from investment transactions...................... (15) 70
------------ --------------
Net increase in net assets resulting from investment activity............ 47,502 101,422
FROM CONTRACT HOLDERS' TRANSACTIONS -- NOTES B AND E
Accumulation units surrendered............................................. (121,876) (151,330)
------------ --------------
Decrease in net assets resulting from Contract Holders' transactions..... (121,876) (151,330)
------------ --------------
Net decrease in net assets............................................... (74,374) (49,908)
NET ASSETS
Beginning of period........................................................ 1,999,861 2,049,769
------------ --------------
End of period.............................................................. $ 1,925,487 $ 1,999,861
------------ --------------
------------ --------------
</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 (see Note B).
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 disclosures in the
financial statements. Actual results could differ from these estimates.
NOTE B -- REHABILITATION
On April 29, 1994, the Third Amended Plan of Rehabilitation (the "Plan") of
Mutual Benefit Life Insurance Company in Rehabilitation ("Mutual Benefit Life")
was implemented. The Plan, as confirmed by the Superior Court of New Jersey,
reaffirmed the status of the Account as a separate account. Pursuant to the
terms of the Plan, 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 New Jersey Commissioner of Banking and
Insurance is the sole Trustee. Pursuant to the terms of a Settlement Agreement
between MBL Life and the Class Four Creditors, as identified in the Plan, Class
Four Creditors and eligible Policyholders/Contract Holders who remain with MBL
Life after the end of the rehabilitation period (December 31, 1999) will share
in the future value of MBL Life. The sharing will be based on a ratio of 70% to
the Class Four Creditors and 30% to eligible Policyholders/Contract Holders. If
MBL Life does not meet its capital growth projections, the Policyholder/Contract
Holder share may be reduced below 30%.
4
<PAGE>
NOTE B -- REHABILITATION -- (CONTINUED)
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. 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. While
deposits may be made to the Account by participants under existing contracts,
applications for new contracts are not being accepted. The terms of the Plan
currently prohibit or limit redemptions from the Companion Contract and
transfers between the Account and the Companion Contract.
Approximately 51% of the Accounts outstanding units are owned by four 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. MBL Life has 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). This waiver of
charges to the Account is for one year periods ending on May 1. 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, 1997 to the
Account's "disinterested" members amounted to $3,800.
NOTE E -- ACCUMULATION UNIT TRANSACTIONS
The change in the number of accumulation units outstanding was as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1997 1996
----------- --------------
<S> <C> <C>
Balance at beginning of period.................................. 106,910 115,163
Accumulation units surrendered.................................. (6,447) (8,253)
----------- -------
Balance at end of period........................................ 100,463 106,910
----------- -------
----------- -------
</TABLE>
5
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for each accumulation unit outstanding throughout the periods
indicated:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ----------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
---------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation Unit Value,
Beginning of Period....... $18.706 $ 17.799 $ 16.864 $ 16.238 $ 15.772 $ 15.232 $ 14.415 $ 13.345 $ 12.328 $ 11.588
---------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net investment income....... 0.460 0.907 0.935 0.626 0.466 0.540 0.812 1.070 1.017 0.740
Net gain from investment
transactions.............. -- -- -- -- -- -- 0.005 -- -- --
---------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net increase in net assets
resulting from
operations................ 0.460 0.907 0.935 0.626 0.466 0.540 0.817 1.070 1.017 0.740
---------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Accumulation Unit Value, End
of Period................. $19.166 $ 18.706 $ 17.799 $ 16.864 $ 16.238 $ 15.772 $ 15.232 $ 14.415 $ 13.345 $ 12.328
---------- -------- -------- -------- -------- -------- -------- -------- -------- --------
---------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total Return................ 2.46% 5.10% 5.54% 3.86% 2.95% 3.55% 5.67% 8.02% 8.25% 6.39%
---------- -------- -------- -------- -------- -------- -------- -------- -------- --------
---------- -------- -------- -------- -------- -------- -------- -------- -------- --------
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period
(thousands)............... $ 1,925 $ 2,000 $ 2,050 $ 2,221 $ 2,519 $ 3,266 $ 5,448 $ 3,960 $ 2,033 $ 1,141
---------- -------- -------- -------- -------- -------- -------- -------- -------- --------
---------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Ratio of Expenses(1) to
Average Net Assets........ 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.03%
---------- -------- -------- -------- -------- -------- -------- -------- -------- --------
---------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Ratio of Net Investment
Income(1) to Average Net
Assets.................... 2.4% 5.0% 5.4% 3.8% 2.9% 3.5% 6.2% 7.6% 7.9% 6.6%
---------- -------- -------- -------- -------- -------- -------- -------- -------- --------
---------- -------- -------- -------- -------- -------- -------- -------- -------- --------
</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 2.0%. (See Note C of the Notes
to Financial Statements.)
6
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
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 (8-97)
Semiannual Report
June 30, 1997
MBL VARIABLE
CONTRACT ACCOUNT -- 7
Group Variable Annuity Contracts
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