<PAGE>
MBL VARIABLE CONTRACT ACCOUNT -- 7
To Contract Holders and Participants:
PERFORMANCE
For the six months ending June 30, 1998, MBL Variable Contract Account-7
("VCA-7") returned 2.5% after expenses. VCA-7 continues to provide competitive
returns to its shareholders. As of June 30, 1998, the Fund's 7-day and 30-day
yields were 4.68% and 4.75%, respectively.
IMPORTANT ORGANIZATIONAL DEVELOPMENTS
Recently, you received a "sticker" supplement to your VCA-7 prospectus dated
August 6. This notice announced the proposed sale of most of the life insurance
and annuity businesses of VCA-7's sponsor, MBL Life Assurance Corporation ("MBL
Life"), to Anchor National Life Insurance Company, a subsidiary of SunAmerica,
Inc.
As an MBL Life group annuity contract holder or participant, you will also
receive additional detailed information about the proposed sale. In this letter,
however, we want to tell you how the sale will affect VCA-7, and also note that
you may have, among other options, the opportunity at a future date to exchange
your VCA-7 account tax-free for a product offered by one of the SunAmerica life
companies.
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,
VCA-7 will be dissolved; MBL Life, along with First Priority Investment
Corporation (the Adviser and Distributor for the Account), will then begin the
process of terminating all business operations.
Before this happens, you will receive detailed information and adequate time to
decide to exchange, transfer or redeem your account. There is nothing that you
need to do now.
In the meantime, we appreciate your continued support and welcome your comments
and observations. If you have any questions, please call your Customer Service
Representative at 1-800-435-3191.
Sincerely,
<TABLE>
<S> <C>
/s/ William G. Clark /s/ David A. James
William G. Clark David A. James
Senior Vice President Senior Vice President, Securities
Pension and Investment Products MBL Life Assurance Corporation
MBL Life Assurance Corporation FOR FIRST PRIORITY INVESTMENT
CORPORATION
</TABLE>
August 10, 1998
<PAGE>
MBL VARIABLE CONTRACT ACCOUNT -- 7
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments (95.1%):
U.S. Treasury Bill, principal amount $1,850,000, 4.84%, due July 23,
1998................................................................... $1,844,528
Cash....................................................................... 95,005
----------
Total assets............................................................... 1,939,533
LIABILITIES -- NOTE E...................................................... --
----------
NET ASSETS................................................................. $1,939,533
----------
----------
NET ASSETS ATTRIBUTABLE TO VARIABLE ANNUITY CONTRACT HOLDERS
96,235 accumulation units at $20.154 per unit............................ $1,939,533
----------
----------
</TABLE>
See notes to financial statements.
2
<PAGE>
MBL VARIABLE CONTRACT ACCOUNT -- 7
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
<TABLE>
<S> <C> <C>
Investment income:
Interest................................................... $ 48,047
Expenses -- Notes B and E:
Investment advisory fee.................................... $ 3,863
Expense and expense risk charge............................ 3,571
-----------
7,434
Less expenses waived and assumed by MBL Life............... (7,434) --
----------- -----------
Net investment income...................................... 48,047
Net realized gain from investment transactions............. 25
-----------
Net increase in net assets resulting from operations..... $ 48,072
-----------
-----------
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
(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...................................................... $ 48,047 $ 96,251
Net realized gain (loss) from investment transactions...................... 25 (15)
------------ --------------
Net increase in net assets resulting from operations..................... 48,072 96,236
FROM CONTRACT HOLDERS' TRANSACTIONS -- NOTES C AND F
Accumulation units surrendered............................................. (26,771) (177,865)
------------ --------------
Decrease in net assets resulting from Contract Holders' transactions..... (26,771) (177,865)
------------ --------------
Net increase (decrease) in net assets.................................... 21,301 (81,629)
NET ASSETS
Beginning of period........................................................ 1,918,232 1,999,861
------------ --------------
End of period.............................................................. $ 1,939,533 $ 1,918,232
------------ --------------
------------ --------------
</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 Notes C
and D). 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 trade date. Interest is recorded as earned on an accrual basis.
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 -- 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 E).
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 E. 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, 1998 to the
Account's "disinterested" members amounted to $3,000.
4
<PAGE>
NOTE C -- 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 (the
"Court"), 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.
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 52% of the Accounts outstanding units are owned by four separate
Contract Holders.
NOTE D -- SALE OF MBL LIFE ASSETS
On July 15, 1998, MBL Life entered into an agreement with Anchor National Life
Insurance Company ("Anchor National"), a subsidiary of SunAmerica, Inc.,
pursuant to which Anchor National will purchase the individual life and
individual and group annuity businesses of MBL Life (the "Acquisition"). In
accordance with the Plan of Rehabilitation of Mutual Benefit 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.
As part of the resolution of the proceedings associated with the Plan, MBL Life
has indicated that it intends to seek a court order to terminate the Account.
Pursuant to the proposed court order, group annuity contract holders and
participants will be provided with adequate notice and disclosure regarding the
termination of the Account. MBL Life has indicated to the Account that it will
maintain the waiver of expenses described in Note E through the period ending
six months after the Closing.
Under the terms of the Acquisition, MBL Life's interest in FPIC will not be
included in the assets 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 some point in time after the Closing.
NOTE E -- 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 B). 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 (see Note
D).
5
<PAGE>
NOTE F -- 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,
1998 1997
----------- --------------
<S> <C> <C>
Balance at beginning of period.................................. 97,578 106,910
Accumulation units surrendered.................................. (1,343) (9,332)
----------- -------
Balance at end of period........................................ 96,235 97,578
----------- -------
----------- -------
</TABLE>
- --------------------------------------------------------------------------------
6
<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, ------------------------------------------
1998 1997 1996 1995 1994
----------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Accumulation Unit Value, Beginning of
Period..................................... $ 19.658 $ 18.706 $ 17.799 $ 16.864 $ 16.238
----------- --------- --------- --------- ---------
Net investment income........................ 0.496 0.952 0.907 0.935 0.626
Net gain from investment transactions........ -- -- -- -- --
----------- --------- --------- --------- ---------
Net increase in net assets resulting from
operations................................. 0.496 0.952 0.907 0.935 0.626
----------- --------- --------- --------- ---------
Accumulation Unit Value, End of Period....... $ 20.154 $ 19.658 $ 18.706 $ 17.799 $ 16.864
----------- --------- --------- --------- ---------
----------- --------- --------- --------- ---------
Total Return................................. 2.52% 5.09% 5.10% 5.54% 3.86%
----------- --------- --------- --------- ---------
----------- --------- --------- --------- ---------
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (thousands)........ $ 1,940 $ 1,918 $ 2,000 $ 2,050 $ 2,221
----------- --------- --------- --------- ---------
----------- --------- --------- --------- ---------
Ratio of Expenses(1) to Average Net Assets... 0.00% 0.00% 0.00% 0.00% 0.00%
----------- --------- --------- --------- ---------
----------- --------- --------- --------- ---------
Ratio of Net Investment Income(1) to Average
Net Assets................................. 2.5% 5.0 % 5.0 % 5.4 % 3.8 %
----------- --------- --------- --------- ---------
----------- --------- --------- --------- ---------
</TABLE>
- --------------------------------
(1)Without waiver and assumption of expenses by MBL Life, the ratio of expenses
to average net assets would have been 0.39% for the period ended June 30,
1998, and 0.77% for each year ended December 31, 1997 through 1994, and the
ratio of net investment income to average net assets would have been 2.1% for
the period June 30, 1998 and 4.2%, 4.2%, 4.6%, and 3.0% for each year ended
December 31, 1997 through 1994, respectively. (See Note E 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 (8-98)
Semiannual Report
June 30, 1998
MBL VARIABLE
CONTRACT ACCOUNT -- 7
Group Variable Annuity Contracts
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