<PAGE>
MBL VARIABLE CONTRACT ACCOUNT -- 7
To Contract Holders and Participants:
For the twelve months ending December 31, 1998, MBL Variable Contract Account --
7 (the "Account") returned 4.8%. As of December 31, 1998, the Account's 7-day
and 30-day yields were 4.45% and 4.19%, respectively. MBL Life continues to
absorb all operating expenses for the Account.
UPDATE ON ORGANIZATIONAL DEVELOPMENTS
As we reported to you via a "sticker" supplement to your Account's prospectus
dated August 6, 1998, MBL Life Assurance Corporation ("MBL Life"), the Account's
sponsor, entered into a transaction to sell substantially all of its life
insurance and annuity businesses to Anchor National Life Insurance Company, a
subsidiary of SunAmerica Inc. (the "Transaction"). The Transaction received all
necessary regulatory approvals and became effective on December 31, 1998.
The Transaction did not include the Separate Accounts of MBL Life, including the
Account. As part of the wind-down of MBL Life's operations, the Separate
Accounts are to be terminated and dissolved on or about June 30, 1999.
Of course, you will receive further instructions from MBL Life in the coming
months concerning the ultimate dissolution of the Account and the procedures for
withdrawing your funds from the Account and/or transferring your funds tax-free
to another investment vehicle. In the meantime, please feel free to call your
Customer Service Representative at 1-800-435-3191 with any questions.
We thank you for your support of MBL Variable Contract Account -- 7 over the
years, and we wish you success in pursuing new financial relationships.
Following are the audited financial statements for the Account as of and for the
year ended December 31, 1998.
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>
February 19, 1999
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To Management Committee and Contract Holders
MBL Variable Contract Account -- 7
In our opinion, the accompanying statement of assets and liabilities 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 Variable Contract Account -- 7 (the "Account") at December 31, 1998 and 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 Account'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 include confirmation of securities owned as of December 31, 1998
by correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
As described in Note D of the notes to financial statements, the Account will
cease business operations by June 30, 1999.
PricewaterhouseCoopers LLP
Florham Park, New Jersey,
February 15, 1999
2
<PAGE>
MBL VARIABLE CONTRACT ACCOUNT -- 7
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
Investments (99.0%):
U.S. Treasury Bill, principal amount $1,950,000, 4.43%, due January 21,
1999................................................................... $1,945,206
Cash....................................................................... 20,154
----------
Total assets............................................................... 1,965,360
LIABILITIES -- NOTE E...................................................... --
----------
NET ASSETS................................................................. $1,965,360
----------
----------
NET ASSETS ATTRIBUTABLE TO VARIABLE ANNUITY CONTRACT HOLDERS
95,435 accumulation units at $20.594 per unit............................ $1,965,360
----------
----------
</TABLE>
See notes to financial statements.
3
<PAGE>
MBL VARIABLE CONTRACT ACCOUNT -- 7
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C> <C>
Investment income:
Interest................................................... $ 90,197
Expenses -- Notes B and E:
Investment advisory fee.................................... $ 7,772
Expense and expense risk charge............................ 7,187
-----------
14,959
Less expenses waived and assumed by MBL Life............... (14,959) --
----------- -----------
Net investment income...................................... 90,197
Net realized gain from investment transactions............. 25
-----------
Net increase in net assets resulting from operations..... $ 90,222
-----------
-----------
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------------------
1998 1997
------------ --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS
Net investment income...................................................... $ 90,197 $ 96,251
Net realized gain (loss) from investment transactions...................... 25 (15)
------------ --------------
Net increase in net assets resulting from operations..................... 90,222 96,236
FROM CONTRACT HOLDERS' TRANSACTIONS -- NOTES C AND F
Accumulation units surrendered............................................. (43,094) (177,865)
------------ --------------
Decrease in net assets resulting from Contract Holders' transactions..... (43,094) (177,865)
------------ --------------
Net increase (decrease) in net assets.................................... 47,128 (81,629)
NET ASSETS
Beginning of year.......................................................... 1,918,232 1,999,861
------------ --------------
End of year................................................................ $ 1,965,360 $ 1,918,232
------------ --------------
------------ --------------
</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 (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 year ended December 31, 1998 to the
Account's "disinterested" members amounted to $6,800.
5
<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 December 31, 1998, MBL Life sold substantially all of its general account
life insurance and annuity business to SunAmerica Inc. (the "Acquisition"). The
business sold did not include the Account. The Acquisition along with the Order
of the Superior Court of New Jersey (the "Order") approving the transaction
effected a resolution to the proceedings associated with the Plan. The
Rehabilitation Period will end June 30, 1999.
The Order provides for the termination of the Account at the end of the
Rehabilitation Period. In addition, the Order authorizes MBL Life to take any
and all actions necessary to facilitate the termination of the Account. During
the six month period prior to the end of the Rehabilitation Period,
contractholders will be given the opportunity to exchange their Account
contracts for contracts issued by other insurance companies. Any contracts
remaining with MBL Life at the end of the Rehabilitation Period (June 30, 1999)
will be terminated and MBL Life will pay out their account value.
Under the terms of the Acquisition, MBL Life's interest in FPIC was not included
in the assets transferred to SunAmerica. FPIC has begun the process of
terminating its business operations and it is currently anticipated that this
will be completed on or about June 30, 1999.
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). MBL Life has
indicated to the Account that it will maintain this waiver of expenses through
June 30, 1999.
6
<PAGE>
NOTE F -- ACCUMULATION UNIT TRANSACTIONS
The change in the number of accumulation units outstanding was as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------
1998 1997
--------- ---------
<S> <C> <C>
Balance at beginning of year.......................................... 97,578 106,910
Accumulation units surrendered........................................ (2,143) (9,332)
--------- ---------
Balance at end of year................................................ 95,435 97,578
--------- ---------
--------- ---------
</TABLE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected data for each accumulation unit outstanding throughout the years
indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Accumulation Unit Value, Beginning of Year....... $ 19.658 $ 18.706 $ 17.799 $ 16.864 $ 16.238
Net investment income............................ 0.936 0.952 0.907 0.935 0.626
--------- --------- --------- --------- ---------
Accumulation Unit Value, End of Year............. $ 20.594 $ 19.658 $ 18.706 $ 17.799 $ 16.864
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Total Return..................................... 4.76% 5.09% 5.10% 5.54% 3.86%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (thousands).............. $ 1,965 $ 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......................................... 4.6% 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 0.77% for each year ended December 31,
1998 through 1994, and the ratio of net investment income to average net
assets would have been 3.9%, 4.2%, 4.2%, 4.6%, and 3.0% for each year ended
December 31, 1998 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 (2-99)
Annual Report
December 31, 1998
MBL VARIABLE
CONTRACT ACCOUNT -- 7
Group Variable Annuity Contracts
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