##### 





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, DC
    20549
  Form 10-K
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 30 OF THE INVESTMENT
    COMPANY ACT OF 1940 AND SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For fiscal year ended December 31, 2006o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934   Commission file number:
    811-6268
  SBM CERTIFICATE
    COMPANY
 (Exact name of registrant as
    specified in its charter)
  Maryland

52 -2250397(State or other Jurisdiction
    of
    Incorporation or Organization)

(I.R.S. Employer
    Identification No.)7315 Wisconsin Avenue, Suite 1250 WestBethesda, Maryland

20814(Zip Code)(Address of principal executive
    offices)   (Registrants telephone number, including area code)
 301-656-4200
  Securities registered pursuant to Section 12 (b) of
    the Act:
    None
 Securities registered pursuant to Section 12 (g) of
    the Act:
    None
  o þ
  o þ
  o þ
  Form 10-K Form 10-K. þ
  Rule 12b-2
  Rule 12b-2
  Large
    accelerated
    filer o
    Accelerated
    filer o
    Non-accelerated
    filer þ
    Smaller
    reporting
    company o (Do not check if a smaller
    reporting
    company)
  Rule 12b-2). Yes o þ
    Documents Incorporated By Reference




---



##### 





TABLE OF
    CONTENTS
   
 Item



PageNo.

Description

No.PART I1.


BUSINESS


21A.


RISK FACTORS


151B.


UNRESOLVED STAFF COMMENTS


192.


PROPERTIES


193.


LEGAL PROCEEDINGS


194.


SUBMISSION OF MATTERS TO A VOTE OF SECURITY
    HOLDERS


21PART II5.


MARKET FOR REGISTRANTS COMMON EQUITY,
    RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
    SECURITIES


226.


SELECTED FINANCIAL DATA


227.


MANAGEMENTS DISCUSSION AND ANALYSIS OF
    FINANCIAL CONDITION AND RESULTS OF OPERATIONS


227A.


QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
    MARKET RISK


318.


FINANCIAL STATEMENTS AND SUPPLEMENTARY
    DATA


339.


CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
    ON ACCOUNTING AND FINANCIAL DISCLOSURE


819A.


CONTROLS AND PROCEDURES


819B.


OTHER INFORMATION


82PART III10.


DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
    GOVERNANCE


8211.


EXECUTIVE COMPENSATION


8412.


SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
    OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS


8513.


CERTAIN RELATIONSHIPS AND RELATED
    TRANSACTIONS, AND DIRECTOR INDEPENDENCE


8514.


PRINCIPAL ACCOUNTANT FEES AND SERVICES


86PART IV15.


EXHIBITS AND FINANCIAL STATEMENT
    SCHEDULES


86SIGNATURES


88   1




---



##### 



PART I
  Item 1.
    Business  Unless the context otherwise requires or indicates,
    references in this Annual Report on
    Form 10-K
    to SBM, we, the Company,
    our, and us, refer to SBM Certificate
    Company, a Maryland based Investment Certificate Company,
    together with its consolidated subsidiaries
  Overview
  face-amount 301-656-4200.
    face-amount
    face-amount
  Key
    Dates
  1914:
    State Bond and Mortgage Companyof Minnesota is founded
    and begins issuing fixed-rate installment certificates with
    various durations to retail investors.1940:
    State Bond and Mortgage Companyregisters with the
    Securities and Exchange Commission (the SEC) as a
    face-amount
    certificate company under the 1940 Act.1991:
    SBM Certificate Companyis created by SBM Company
    (formerly known as State Bond and Mortgage) to assume its
    face-amount
    certificate business.1995:
    ARM Financial Groupof Louisville, KY, acquires the
    financial businesses of SBM Company, including SBM
    Certificate Company.1998:
    1st Atlantic Guaranty Corporationis established by
    a group of entrepreneurs and becomes the first new
    face-amount
    certificate company to issue certificates in more than a decade.2000:
    1st Atlanticforms a new operating company that
    would become known as SBM Financial, LLC, to acquire SBM
    Certificate Company from ARM. 2




---



##### 



2002:
    SBM Mortgage Companys(SBM Mortgage)
    operation, originally known as Atlantic Capital Funding
    Corporation, expands to seven states in the mid-Atlantic.
    Between 2000 and 2004, the mortgage operation originated more
    than $431.6 million in loans.2003:
    Geneva Capital Partners, LLCa Maryland-based investment
    holding company owned and controlled by SBM President and CEO
    Eric M. Westbury, acquires the controlling shareholder interest
    in 1st Atlantic, including SBM Financial and its
    face-amount
    certificate and mortgage businesses (the 2003
    Acquisition).2005:
    SBM Financial Group, LLCis established and becomes the
    sole parent company of SBM Financial, LLC. The SBM organization
    becomes certified as a minority-owned business. SBM Capital
    Management, LLC, established in July 2003 becomes the
    organizations institutional asset manager. SBM Capital
    Management, LLCand SBM Financial, LLCare registered
    with the SEC as investment advisers.2005:
    SBM Capital Management, LLClaunches a managed account
    program and begins managing outside institutional assets.2008:
    SBM Financial, LLClaunches and begins managing two new
    mutual funds, the SBM Strategic Income Fundand the
    SBM Value Fund.  Face-Amount
    Certificate Company
  face-amount face-amount face-amount face-amount
  face-amount
  face-amount Form 10-K
     3




---



##### 



SBM 
    Business Strategy
  face-amount
  
    Create operational and financial economies of scale;
    Substantially improve profit margins for SBM by consolidating
    overhead, which will benefit from revenues from other business
    lines, and establishing an expense cap for SBM;
    Enhance SBMs ability to cross-sell financial products and
    services to a growing customer base;
    Promote customer loyalty; and
    Enhance the internal rate of return to shareholders.  Investment
    Advisory Agreement
           4




---



##### 



Administrative
    Services Agreement
    Issuance
    of Certificates
  face-amount
  face-amount
  Regulation
  General
  face-amount
  Rule 17j-1
 5




---



##### 



Form 10-K
  face-amount face-amount face-amount
      Calculation
    of Required Reserve Amount
  face-amount face-amount
  AssumptionsFace amount:

$
1,000Interest rate


8.0%Interest paid:


AnnuallyGuarantee period:


2 yearsSurrender charge:


5.0%   Surrender ValuePurchase Date


6 Months


12 Months


18 Months


24 MonthsFace amount:

$
1,000


$
1,000


$
1,000


$
1,000


$
1,000Interest earned and paid:









$
80






$
80Surrender charge:

$
(50
)

$
(50
)

$
(50
)

$
(50
)


Surrender value:

$
950


$
950


$
950


$
950


$
1,000  6




---



##### 



30-year 30-year
  AssumptionsFace amount:

$
1,000Interest rate:


8.00%Interest paid:


AnnuallyGuarantee period:


2 yearsDiscount rate:


8.25%   Reserve AmountPurchase Date


6 Months


12 Months


18 Months


24 MonthsFace amount:

$
1,000


$
1,000


$
1,000


$
1,000


$
1,000Interest earned and paid:









$
80






$
80Account value:

$
1,000


$
1,000


$
1,000


$
1,000


$
1,000Applicable discount:

$
147


$
112


$
76


$
39



Reserve amount:

$
853


$
888


$
924


$
961


$
1,000   Qualified
    Investment Determination
       7




---



##### 



Section 31-1371.03, Section 31-1372.02,
  1940
    Act Compliance Review
  Form 10-K,
  Competition
    SEC
    Examination and Subsequent Enforcement Actions
  face-amount face-amount
   8




---



##### 



face-amount
  No. 06-866-DKC
  
    SBMs year-end financials for 2002, 2003, and 2004 showed
    losses of approximately $1.6 million, $1.8 million,
    and $3.3 million, respectively.
    Delinquent mortgage loans in SBMs portfolio represented a
    significant portion of SBMs total qualified assets.
    Geneva contributed cash and securities to SBM in an attempt to
    help SBM comply with applicable reserve requirements and,
    without these contributions, SBM would not have had the
    necessary assets to continue as a viable investment company.
    The majority of SBMs total investments were unqualified.    SEC v. SBM Investment Certificates, Inc
 9




---



##### 



face-amount
  Mortgage
    Services
          Specific
    Characteristics of Various Mortgage Loans
       10




---



##### 



Year Ended


Year Ended


Year Ended


Year Ended


Year EndedDecember 31,


December 31,


December 31,


December 31,


December 31,2006


2005


2004


2003


2002Total Loans:Volume

$
17,404,4966


$
33,355,4318


$
29,555,574,0


$
167,503,4402


$
425,414,0790Number of loans


72



171



141



780



1,961Average loan size

$
241,729


$
195,061


$
209,614


$
214,748


$
216,937   Marketing
      Growth
    Strategy
    Competition
        Information
    Systems
    Private
    Placement Notes
   11




---



##### 



Re-Emergence
    Plan
      1.
    To pay all interest payments due to certificate holders.2.
    To pay all requests for redemption by certificate holders who
    choose not to maintain their certificates after the resolution
    of the Current SEC Proceeding3.
    To pay all commissions owed to our broker-dealers.4.
    To re-establish an effective Registration Statement to enable
    SBM to effect the sale of
    face-amount
    certificates.5.
    To rebuild SBMs reputation as a provider of fixed income
    investments, mortgages and asset management.6.
    To effect the successful implementation of SBMs business
    plan that was curtailed by the matters of the post 2003
    acquisition and the Current SEC Proceeding.      SBM
    Certificate Company
  Demands for Early


Ordinary Course ofRedemption of


Business  Principal and


Ordinary Course ofPrincipal and Interest


Interest


Business  InterestTotal(as of 3/31/2008)

$
6,065,825


$
9,117,903


$
666,217     SBM
    Investment Certificates
  Demands for Early


Ordinary Course ofRedemption of


Business  Principal and


Ordinary Course ofPrincipal and Interest


Interest


Business  InterestTotal(as of 3/31/2008)

$
11,320


$
166,875


$
11,956   Face-amount
  12




---



##### 



SBM Certificate Company


SBM Investment CertificatesOrdinary Course of




Ordinary Course ofBusiness Guaranty




Business GuarantyYear

Period End


Year

Period End2008

$
8,161,982


2008

$
128,1472009

$
1,122,054


2009

$
2,516,8942010

$
144,526


2010

$
113,9562011

$
5,237,971


2011

$
2012

$
3,292,888


2012

$
2013

$
12,371


2013

$
2014

$
291,752


2014

$
2015

$
167,682


2015

$
2016

$
96,742


2016

$
Total

$
18,527,968


Total

$
2,758,997           and/or
       13




---



##### 



1940 ACT
    COMPLIANCE
    Reserve
    Requirement/Qualified Asset Chart
    FY 2004 thru FY 2006
  FY 2004


FY 2005


FY 2006Account ValuesCompounded 500 Series

$
25,302,760


$
23,363,177


$
23,995,335Annual 500 Series

$
3,545,447


$
3,237,591


$
3,362,588Quarterly 500 Series

$
3,187,235


$
2,941,057


$
3,030,802Paid-Up
    Bonds

$
1,662,548


$
1,664,700


$
1,656,884Installment Certificates

$
339,353


$
305,209


$
284,180Income Coupons

$
303,997


$
306,823


$
330,394Unlocated Certificates

$
2,218


$
2,218


$
2,149Total Account Value

$
34,343,558


$
31,820,776


$
32,662,332Calculated Reserve Amounts(1)Compounded 500 Series

$
19,014,250


$
17,376,739


$
18,233,905Annual 500 Series

$
2,714,784


$
2,489,708


$
2,695,159Quarterly 500 Series

$
2,361,741


$
2,221,450


$
2,369,724Paid-Up
    Bonds

$
1,662,548


$
1,664,700


$
1,656,884Installment Certificates

$
339,353


$
305,209


$
284,180Income Coupons

$
303,997


$
306,823


$
330,394Unlocated Certificates

$
2,218


$
2,218


$
2,149Total Calculated Reserve Requirement

$
26,398,891


$
24,366,847


$
25,572,395Surrender ValueCompounded 500 Series

$
21,630,830


$
19,813,611


$
19,650,253Annual 500 Series

$
3,266,824


$
2,982,007


$
3,038,173Quarterly 500 Series

$
2,814,510


$
2,755,407


$
2,758,725Paid-Up
    Bonds

$
1,662,548


$
1,664,700


$
1,656,884Installment Certificates

$
339,353


$
305,209


$
284,180Income Coupons

$
303,997


$
306,823


$
330,522Unlocated Certificates

$
2,218


$
2,218


$
2,149Total Surrender Value

$
30,020,279


$
27,829,975


$
27,720,886Total Qualified Assets(2)

$
36,568,971


$
29,476,656


$
29,657,540Excess Reserves using Surrender Value

$
6,548,692


$
1,646,681


$
1,936,654     (1)
    
    Calculated Reserve Amounts were calculated using a proposed
    revised discount rate for purposes of calculating our required
    reserve amounts under Section 28 of the 1940 Act. The
    proposed revised discount rate is equal to the rolling average
    of the initial yields of each issuance of
    30-year U.S.
    Treasury Bonds during the prior
    30-year
    period, which rolling average would be updated annually as of
    December 31 of each fiscal year. As of December 31, 2007,
    this revised discount rate would have been equal to 8.25%. See
    Regulation.(2)
    
    Qualified Assets are based on fair value, calculated in
    accordance with SFAS 107, as permitted by Section 28
    of the 1940 Act. See Note 11 to the Notes to
    Consolidated Financial Statements.  Corporate
    Information
  (301) 656-4200.
 14




---



##### 



www.sbmfinancial.com Form 10-K, Form 10-Q, Form 8-K, Form 10-K. www.sec.gov
  Employees
    ITEM 1A.
    Risk
    Factors  The risks described below are not the only ones facing us.
    Our business is also subject to the risks that affect many other
    companies, such as competition, technological obsolescence,
    labor relations, general economic conditions and geopolitical
    events. Additional risks not currently known to us or that we
    currently believe are immaterial also may impair our business
    operations and our liquidity.
  Risks
    Relating to Current Litigation
  Continued scrutiny resulting from ongoing governmental
    investigations may have an adverse effect on our
    business.
  The Current SEC Proceeding may require us to further amend or
    restate our public disclosures.
  Material adverse legal judgments, fines, penalties or
    settlements could adversely affect our financial health and
    prevent us from fulfilling our obligations under our outstanding
    indebtedness.
 15




---



##### 




    require us to dedicate a substantial portion of our cash flow
    from operations to payments on our indebtedness, thereby
    reducing the availability of our cash flow to fund working
    capital, and other general corporate purposes;
    increase our vulnerability to general adverse economic and
    industry conditions;
    limit our flexibility in planning for, or reacting to, changes
    in our businesses and the industries in which we operate;
    restrict our ability to retain current certificate holders;
    make it more difficult for us to satisfy our payment obligations
    with respect to our outstanding indebtedness; and
    increase the difficulty
    and/or cost
    to us of refinancing our indebtedness.  Additional negative publicity may adversely affect our
    business.
  Our Senior Corporate Management team is required to devote
    significant attention to matters arising from the Current SEC
    Proceeding.
  Risks
    Relating to Our Businesses
  We may not have cash available to fully satisfy our
    obligations to make payments of principal and interest on each
    Payment Date.
  We may be required to liquidate assets in order to pay
    amounts due on the
    face-amount
    certificates currently outstanding. face-amount face-amount
  We may issue additional debt. face-amount
  Our investments in real estate and real estate partnerships
    are subject to risks.
 16




---



##### 




    adverse changes in general or local economic conditions;
    adverse changes in local conditions, such as excessive building
    resulting in an oversupply;
    reduction in the appeal of particular types of properties;
    reduction in the cost of operating competing properties or
    decreases in employment that reduce the demand for properties in
    the area;
    the possible need for unanticipated design changes;
    adverse changes in surrounding land values;
    adverse changes in zoning laws, other laws and regulations and
    real property tax rates;
    damage from earthquakes or other natural disasters (which may
    result in uninsured losses);
    acts of God (which may result in uninsured losses);
    acts of terrorism (which may result in uninsured losses);
    the availability and expense of liability insurance; and
    our ability to adequately maintain our property pending sale.        Our financial condition and results of operations may be
    adversely affected by market fluctuations and other economic
    factors.
 17




---



##### 



Some of our investments are relatively
    illiquid.
      We could be adversely affected by operating and originating
    loans with in a specific geographic region.
  We rely on SBM Group to provide us with administrative
    services.
  We are dependent upon SBM Financials key management
    personnel for our future success. and/or
  Our business and growth strategies could be harmed if key
    personnel terminate their employment with us.
  Our investments may not perform as well as past funds managed
    by SBM Financial.
  Conflicts of interest may arise in connection with our
    relationship with SBM Financial.
 18




---



##### 



ITEM 1B.
    Unresolved
    Staff Comments    ITEM 2.
    Properties    ITEM 3.
    Legal
    Proceedings  face-amount face-amount
       19




---



##### 



(a) (b)
   20




---



##### 



face-amount
    follow-up
  Form 8-K Form 8-K  http://www.sec.gov/Archives/edgar/data/870398/000115752307006458/a5437117.txt.
  Form 8-K http://www.sec.gov/Archives/edgar/data/870398/000115752307006926/a5449810.txt.
    face-amount
  ITEM 4.
    Submission
    of Matters to a Vote of Security Holders   21




---



##### 



PART II
  ITEM 5.
    Market
    for the Registrants Common Equity, Related Stockholder
    Matters And Issuer Purchases of Equity Securities      ITEM 6.
    Selected
    Financial Data      *
    
    Earnings (loss) per share based on 250,000 shares issued
    and outstanding.  Year Ended December 312006


2005


2004


2003


2002(In thousands, except per share data)STATEMENT OF OPERATIONS DATATotal investment income


5,852



583



1,198



2,705



2,439Interest credited on certificate reserves


(1,714
)


(1,845
)


(2,037
)


(2,424
)


(1,349
)Net investment spread


4,138



(1,262
)


(839
)


280



1,090Total investment and other expenses


(2,030
)


(3,083
)


(3,212
)


(2,160
)


(2,951
)Net investment income (loss) before taxes and gains


2,108



(4,345
)


(4,051
)


(1,879
)


(1,861
)Net realized investment gains (losses)


(13
)


(428
)


237



150



473Net investment income (loss) before taxes


2,095



(4,773
)


(3,814
)


(1,729
)


(1,388
)Net other operating income (loss)


143



(185
)


(326
)


(281
)


118Net investment and other operating income (losses)


2,238



(4,958
)


(4,140
)


(2,011
)


(1,270
)Federal income tax (expense) benefit










1



(15
)


Net operating income (loss)


2,238



(4,958
)


(4,140
)


(2,026
)


(1,270
)Non-operating expense


(896
)


(846
)


(1,103
)


(461
)


(406
)Net income (loss)


1,341



(5,805
)


(5,243
)


(2,487
)


(1,676
)Earnings (loss) per share*


5.36



(23.22
)


(20.97
)


(9.95
)


(6.70
)BALANCE SHEET DATA (END OF PERIOD)Total assets


37,822



37,493



44,280



50,594



35,115Total liabilities


35,445



36,631



37,815



42,844



38,696Shareholders equity (deficit)


2,376



863



6,464



7,749



(3,581
)     *
    
    Earnings (loss) per share based on 250,000 shares issued
    and outstanding.  ITEM 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Forward-Looking
    Statements
  Form 10-K
 22




---



##### 




    an economic downturn could impair our customers ability to
    repay their loans and increase our non-performing assets,
    a contraction of available credit
    and/or an
    inability to access the equity markets could impair our lending
    and investment activities,
    interest rate volatility could adversely affect our
    results, and
    the risks, uncertainties and other factors we identify in
    Risk Factors and elsewhere in this
    Form 10-K
    and in our filings with the SEC.    Form 10-K.
  Overview
  face-amount face-amount
  face-amount
  face-amount Form 10-K
     23




---



##### 



Portfolio
    Review
  face-amount face-amount
  face-amount
    Accounting for Certain Investments in Debt and Equity
    Securities
 24




---



##### 



Results
    of Operations
    Comparison
    of years ended December 31, 2006 and December 31,
    2005
  Investment
    Income
     25




---



##### 



Realized
    Gains (Losses) on Investments
    Operating
    Expenses
      Net
    Income/(Loss) From Operations
    Comparison
    of years ended December 31, 2005 and December 31,
    2004
  Investment
    Income
      Realized
    Gains (Losses) on Investments
   26




---



##### 



Operating
    Expenses
      Net/(Loss)
    From Operations
    Liquidity
    and Capital Resources
        Off-Balance
    Sheet Arrangements
    Contractual
    Obligations
    Payments Due by Period(In thousands)Less than


1-3


3-5


More thanContractual Obligations

Total


1 year


years


years


5 yearsFace-amount
    certificates(1)

$
32,662,333


$
13,478,961


$
9,543,074


$
7,273,613


$
2,366,685  27




---



##### 



(1)
    
    Reflects the respective maturity dates of our
    face-amount
    certificates outstanding as of December 31, 2006.
    Face-amount
    certificates may be redeemed prior to maturity at the end of
    specified periodic guarantee periods without penalty by the
    holders thereof, or at any time prior to maturity subject to
    payment of the surrender charge applicable to such certificate.
    Amounts listed under Less than 1 year include
    face-amount
    certificates that have matured or been redeemed prior to
    December 31, 2006, but which SBM has been prohibited from
    making payments on as a result of the ongoing SEC legal
    proceeding.    Borrowings
        1.
    To pay all interest payments due to certificate holders.2.
    To pay all requests for redemption by certificate holders who
    choose not to maintain their certificates after the resolution
    of the Current SEC Proceeding3.
    To pay all commissions owed to our broker-dealers.4.
    To re-establish an effective Registration Statement to enable
    SBM to effect the sale of
    face-amount
    certificates.5.
    To rebuild SBMs reputation as a provider of fixed income
    investments, mortgages and asset management.6.
    To effect the successful implementation of SBMs business
    plan that was curtailed by the matters of the post 2003
    acquisition and the Current SEC Proceeding.      SBM
    Certificate Company
  Demands for EarlyRedemption of


Ordinary Course ofPrincipal and


Business  Principal and


Ordinary Course ofInterest


Interest


Business  InterestTotal (as of 3/31/2008)

$
6,065,825


$
9,117,903


$
666,217  28




---



##### 



SBM
    Investment Certificates
  Demands for EarlyRedemption of


Ordinary Course ofPrincipal and


Business  Principal and


Ordinary Course ofInterest


Interest


Business  InterestTotal (as of 3/31/2008)

$
11,320


$
166,875


$
11,956   Face-amount
  SBM
    Certificate Company
  Ordinary Course ofBusiness GuarantyYear

Period End2008

$
8,161,9822009

$
1,122,0542010

$
144,5262011

$
5,237,9712012

$
3,292,8882013

$
12,3712014

$
291,7522015

$
167,6822016

$
96,742Total

$
18,527,968   SBM
    Investment Certificates
  Ordinary Course ofBusiness GuarantyYear

Period End2008

$
128,1472009

$
2,516,8942010

$
113,9562011

$
2012

$
2013

$
2014

$
2015

$
2016

$
Total

$
2,758,997           and/or
 29




---



##### 



1940 Act
    Compliance
   30




---



##### 



Reserve
    Requirement/Qualified Asset Chart
    FY 2004 thru FY 2006
  FY 2004


FY 2005


FY 2006Account ValuesCompounded 500 Series

$
25,302,760


$
23,363,177


$
23,995,335Annual 500 Series

$
3,545,447


$
3,237,591


$
3,362,588Quarterly 500 Series

$
3,187,235


$
2,941,057


$
3,030,802Paid-Up
    Bonds

$
1,662,548


$
1,664,700


$
1,656,884Installment Certificates

$
339,353


$
305,209


$
284,180Income Coupons

$
303,997


$
306,823


$
330,394Unlocated Certificates

$
2,218


$
2,218


$
2,149Total Account Value

$
34,343,558


$
31,820,776


$
32,662,332Calculated Reserve Amounts(1)Compounded 500 Series

$
19,014,250


$
17,376,739


$
18,233,905Annual 500 Series

$
2,714,784


$
2,489,708


$
2,695,159Quarterly 500 Series

$
2,361,741


$
2,221,450


$
2,369,724Paid-Up
    Bonds

$
1,662,548


$
1,664,700


$
1,656,884Installment Certificates

$
339,353


$
305,209


$
284,180Income Coupons

$
303,997


$
306,823


$
330,394Unlocated Certificates

$
2,218


$
2,218


$
2,149Total Calculated Reserve Amount

$
26,398,891


$
24,366,847


$
25,572,395Surrender ValueCompounded 500 Series

$
21,630,830


$
19,813,611


$
19,650,253Annual 500 Series

$
3,266,824


$
2,982,007


$
3,038,173Quarterly 500 Series

$
2,814,510


$
2,755,407


$
2,758,725Paid-Up
    Bonds

$
1,662,548


$
1,664,700


$
1,656,884Installment Certificates

$
339,353


$
305,209


$
284,180Income Coupons

$
303,997


$
306,823


$
330,522Unlocated Certificates

$
2,218


$
2,218


$
2,149Total Surrender Value

$
30,020,279


$
27,829,975


$
27,720,886Total Qualified Assets(2)

$
36,568,971


$
29,476,656


$
29,657,540Excess Reserves using Surrender Value

$
6,548,692


$
1,646,681


$
1,936,654     (1)
    
    Calculated reserve amounts were calculated using a proposed
    revised discount rate for purposes of calculating our required
    reserve amounts under Section 28 of the 1940 Act. The
    proposed revised discount rate is equal to the rolling average
    of the initial yields of each issuance of
    30-year U.S.
    Treasury Bonds during the prior
    30-year
    period, which rolling average would be updated annually as of
    December 31 of each fiscal year. As of December 31, 2007,
    this revised discount rate would have been equal to 8.25%. See
    Business  Regulation.(2)
    
    Qualified Assets are based on fair value, calculated in
    accordance with SFAS 107, as permitted by Section 28
    of the 1940 Act. See Note 11 to the Notes to
    Consolidated Financial Statements.  ITEM 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk  face-amount
 31




---



##### 



32




---



##### 



Item 8.
    Financial
    Statements and Supplementary Data  Report of Independent Registered Public
    Accounting Firm


34Financial StatementsConsolidated Balance Sheets of SBM as of
    December 31, 2006, 2005 and 2004


35Consolidated Statements of Operations of SBM for
    the years ended December 31, 2006, 2005 and 2004


38Consolidated Statements of Shareholders
    Equity for SBM for the years ended December 31, 2006, 2005
    and 2004


41Consolidated Statements of Cash Flows of SBM for
    the years ended December 31, 2006, 2005 and 2004


42Notes to Consolidated Financial Statements


45Supplemental SchedulesSchedule I  Investments in Securities
    of Unaffiliated Issuers


67Schedule II  Investments in Advances
    to Affiliates and Income Thereon


68Schedule III  Mortgage Loans on Real
    Estate and Interest Earned on Mortgages


69Schedule IV  Real Estate Owned and
    Rental Income


70Schedule V  Qualified Assets on
    Deposit


71Schedule VI  Certificate Reserves


73Schedule VII  Valuation and Qualifying
    Accounts   Regulation S-X
 33




---



##### 



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                 34




---



##### 



SBM
    Certificate Company and Subsidiaries
  CONSOLIDATING BALANCE SHEETS
 December 31, 2006
  SBM CertificateCompany and


SBM Mortgage


EliminatingSBMS I


Corporation


Entries


TotalsQualified assetsCash and investmentsAvailable-for-sale securities

$
59,342


$



$



$
59,342Mortgage notes held for sale


(0
)


291,509







291,509Mortgage notes held for investment


9,450,000











9,450,000Investments in real estate limited liability companies


10,200,000











10,200,000Real estate tax lien certificates


291,283











291,283Real estate owned


883,407











883,407Residual mortgage certificate


1,267,516











1,267,516Certificate loans


73,441











73,441Cash and cash equivalents


281,116



160,549







441,664Cash in Trust


4,570,861











4,570,861Restricted cash


51,364











51,364Total cash and investments


27,128,329



452,058







27,580,387Dividends and interest receivable


581,387



22,635







604,022Total qualified assets


27,709,716



474,693







28,184,409Other assetsRelated party receivable


2,798,024



46,256



(52,786
)


2,791,494Fixed assets, net of accumulated depreciation of $12,095 &
    $21,450


269,349



22,290







291,639Investment in subsidiary


(1,502,062
)






1,502,062



Goodwill


5,689,715











5,689,715Intangible asset  client list


625,309











625,309Deferred acquisition costs, net


161,524











161,524Other assets


71,664



5,987







77,651Total assets

$
35,823,239


$
549,227


$
1,449,275


$
37,821,741LiabilitiesCertificate liability

$
32,662,333


$



$



$
32,662,333Accounts payable and other liabilities


598,066



820







598,866Related party payable


186,579



2,050,468



(52,786
)


2,184,260Total liabilities


33,446,978



2,051,288



(52,786
)


35,445,480Shareholders equityCommon stock, $1 par value; 10,000,000 shares
    authorized; 250,000 shares issued and outstanding


250,000











250,000Common stock, $2 par value; 10,000 shares authorized;
    10,000 shares issued and outstanding






20,000



(20,000
)


Additional paid-in capital


13,066,581



2,324,973



(2,324,973
)


13,066,581Accumulated comprehensive income, net of taxes


168,554











168,554Accumulated deficit


(11,108,873
)


(3,847,035
)


3,847,035



(11,108,873
)Total shareholders equity


2,376,262



(1,502,062
)


1,502,062



2,376,262Total liabilities and shareholders equity

$
35,823,239


$
549,227


$
1,449,275


$
37,821,741    35




---



##### 



SBM
    Certificate Company and Subsidiaries
  CONSOLIDATING BALANCE SHEETS
 December 31, 2005
  SBM CertificateCompany and


SBM Mortgage


EliminatingSBMS I


Corporation


Entries


TotalsQualified assetsCash and investmentsAvailable-for-sale securities

$
115,670


$



$



$
115,670Mortgage notes held for sale


0



291,509







291,509Mortgage notes held for investment


11,341,341











11,341,341Investments in real estate limited liability companies


12,083,000











12,083,000Real estate tax lien certificates


315,690











315,690Real estate owned


2,822,194











2,822,194Residual mortgage certificate


1,292,997











1,292,997Certificate loans


73,441











73,441Cash and cash equivalents


4,328



161,037







165,365Restricted cash


51,364











51,364Total cash and investments


28,100,025



452,547







28,552,572Dividends and interest receivable


842,959



22,635







865,594Total qualified assets


28,942,984



475,181







29,418,166Other assetsRelated party receivable


1,140,168



724







1,140,892Fixed assets, net of accumulated depreciation of $8,194 &
    $16,918


273,249



28,522







301,771Investment in subsidiary


(1,223,119
)






1,223,119



Goodwill


5,689,715











5,689,715Intangible asset  client list


714,639











714,639Deferred acquisition costs, net


135,351











135,351Other assets


86,676



6,166







92,842Total assets

$
35,759,662


$
510,593


$
1,223,119


$
37,493,375LiabilitiesCertificate liability

$
31,820,781


$



$



$
31,820,781Accounts payable and other liabilities


1,059,239



218







1,059,457Related party payable


133,942



1,733,495







1,867,437Total liabilities


34,896,962



1,733,713







36,630,675Shareholders equityCommon stock, $1 par value; 10,000,000 shares
    authorized; 250,000 shares issued and outstanding


250,000











250,000Common stock, $2 par value; 10,000 shares authorized;
    10,000 shares issued and outstanding






20,000



(20,000
)


Additional paid-in capital


13,066,581



2,324,973



(2,324,973
)


13,066,581Accumulated comprehensive income, net of taxes


(3,804
)










(3,804
)Accumulated deficit


(12,450,077
)


(3,568,092
)


3,568,092



(12,450,077
)Total shareholders equity


862,700



(1,223,119
)


1,223,119



862,700Total liabilities and shareholders equity

$
35,759,662


$
510,593


$
1,223,119


$
37,493,375    36




---



##### 



SBM
    Certificate Company and Subsidiaries
    CONSOLIDATING BALANCE SHEETS
    December 31, 2004
  SBM CertificateCompany and


SBM Mortgage


EliminatingSBMS I


Corporation


Entries


TotalsQualified assetsCash and investmentsAvailable-for-sale securities

$
359,756


$



$



$
359,756Mortgage notes held for sale


2,609,280



422,952







3,032,232Mortgage notes held for investment


13,215,114











13,215,114Investments in real estate partnerships


1,500,000











1,500,000Investments in real estate limited liability companies


12,083,000











12,083,000Real estate tax lien certificates


355,263











355,263Real estate owned


2,649,101



525,329







3,174,431Residual mortgage certificate


1,607,034











1,607,034Certificate loans


72,604











72,604Cash and cash equivalents


141,987



140,883







282,869Restricted cash


53,625











53,625Total cash and investments


34,646,764



1,089,164







35,735,927Dividends and interest receivable


803,831



29,213







833,044Total qualified assets


35,450,594



1,118,377







36,568,971Other assetsRelated party receivable


589,645



784







590,429Fixed assets, net of accumulated depreciation of $4,254 &
    $10,090


277,189



46,248







323,438Investment in subsidiary


431,298







(431,298
)


Goodwill


5,689,715











5,689,715Intangible asset  client list


803,969











803,969Deferred acquisition costs, net


96,802











96,802Other assets


196,231



10,000







206,232Total assets

$
43,535,444


$
1,175,409


$
(431,298
)

$
44,279,555LiabilitiesCertificate liability

$
34,343,579


$



$



$
34,343,579Subscription and note payable


1,883,000











1,883,000Accounts payable and other liabilities


802,322



3,530







805,852Related party payable


42,366



740,581







782,946Total liabilities


37,071,266



744,111







37,815,377Shareholders equityCommon stock, $1 par value; 10,000,000 shares
    authorized; 250,000 shares issued and outstanding


250,000











250,000Common stock, $2 par value; 10,000 shares authorized;
    10,000 shares issued and outstanding






20,000



(20,000
)


Additional paid-in capital


12,880,081



2,105,173



(2,105,173
)


12,880,081Accumulated comprehensive income, net of taxes


(20,391
)










(20,391
)Accumulated deficit


(6,645,512
)


(1,693,875
)


1,693,875



(6,645,512
)Total shareholders equity


6,464,178



431,298



(431,298
)


6,464,178Total liabilities and shareholders equity

$
43,535,444


$
1,175,409


$
(431,298
)

$
44,279,555    37




---



##### 



SBM
    Certificate Company and Subsidiaries
    CONSOLIDATING STATEMENTS OF OPERATIONS
    Year ended December 31, 2006
  SBM CertificateCompany and


SBM Mortgage


EliminatingSBMS I


Corporation


Entries


TotalsInvestment incomeInterest and dividend income

$
5,458,296


$



$



$
5,458,296Other investment income


4,715











4,715Loss from investment in subsidiary


(278,942
)






278,942



Mortgage interest income


388,835











388,835Total investment income


5,572,904







278,942



5,851,846Investment and other expensesAdministrative services fee


1,130,849



600,882







1,731,731Legal and accounting fees


195,381



2,440







197,821Client list amortization


89,330











89,330Depreciation expense


3,900



6,831







10,731Total investment and other expenses


1,419,460



610,153







2,029,613Interest credited on certificate liability


1,713,911











1,713,911Net investment income (loss) before income taxes and realized
    investment gains


2,439,533



(610,153
)


278,942



2,108,322Realized investment gains (losses)


(13,457
)










(13,457
)Net investment income(loss) before income taxes


2,426,076



(610,153
)


278,942



2,094,865Other operating incomeOrigination fee income


11,000



284,094







295,094Other loan fee income


10,202



52,351







62,553Total other operating income


21,202



336,445







357,648Other operating expensesOther expenses  operating


209,762



5,234







214,996Warehouse interest expense and charges














Total other operating expenses


209,762



5,234







214,996Net other operating loss before income taxes


(188,560
)


331,211







142,651Net investment and other operating loss before income taxes


2,237,516



(278,942
)


278,942



2,237,516Income tax expense














Net investment and other operating loss


2,237,516



(278,942
)


278,942



2,237,516Non operating expense:Reserve for losses


(896,312
)










(896,312
)Net income (loss)

$
1,341,203


$
(278,942
)

$
278,942


$
1,341,203    38




---



##### 



SBM
    Certificate Company and Subsidiaries
    CONSOLIDATING STATEMENTS OF OPERATIONS
    Year ended December 31, 2005
  SBM CertificateCompany and


SBM Mortgage


EliminatingSBMS I


Corporation


Entries


TotalsInvestment incomeInterest and dividend income

$
255,312


$
3,096


$



$
258,408Other investment income


(8,282
)


10,637







2,354Loss from investment in subsidiary


(1,285,757
)






1,285,757



Mortgage interest income


248,049



73,820







321,869Total investment income


(790,679
)


87,553



1,285,757



582,632Investment and other expensesAdministrative services fee


793,862



1,337,352







2,131,214Investor advisory fees


124,009











124,009Legal and accounting fees


658,576



20,822







679,398Deferred acquisition cost amortization and renewal commissions


36,345











36,345Client list amortization


89,330











89,330Depreciation expense


3,940



18,341







22,282Total investment and other expenses


1,706,062



1,376,516







3,082,578Interest credited on certificate liability


1,844,686











1,844,686Net investment income (loss) before income taxes and realized
    investment gains


(4,341,427
)


(1,288,963
)


1,285,757



(4,344,633
)Realized investment gains (losses)


(417,564
)


(10,768
)






(428,331
)Net investment income(loss) before income taxes


(4,758,991
)


(1,299,730
)


1,285,757



(4,772,964
)Other operating incomeOrigination fee income






573,683







573,683Other loan fee income


12,843



75,866







88,708Total other operating income


12,843



649,549







662,391Other operating expensesSalaries and commissions






584,115







584,115Other expenses  operating


212,105



51,460







263,565Total other operating expenses


212,105



635,576







847,680Net other operating loss before income taxes


(199,262
)


13,973







(185,289
)Net investment and other operating loss before income taxes


(4,958,253
)


(1,285,757
)


1,285,757



(4,958,253
)Income tax expense














Net investment and other operating loss


(4,958,253
)


(1,285,757
)


1,285,757



(4,958,253
)Non operating expense:Reserve for losses


(846,312
)










(846,312
)Net income (loss)

$
(5,804,565
)

$
(1,285,757
)

$
1,285,757


$
(5,804,565
)    39




---



##### 



SBM
    Certificate Company and Subsidiaries
    CONSOLIDATING STATEMENTS OF OPERATIONS
    Year ended December 31, 2004
  SBM CertificateCompany and


SBM Mortgage


EliminatingSBMS I


Corporation


Entries


TotalsInvestment incomeInterest and dividend income

$
418,957


$
682


$



$
419,639Other investment income


81,787



42







81,829Loss from investment in subsidiary


(1,526,400
)






1,526,400



Mortgage interest income


678,144



18,357







696,501Total investment income


(347,513
)


19,081



1,526,400



1,197,969Investment and other expensesAdministrative services fee


828,000



1,338,325







2,166,326Investor Advisory Fees


69,742











69,742Legal and accounting fees


836,100



12,871







848,971Deferred acquisition cost amortization and renewal commissions


23,955











23,955Client list amortization


89,330











89,330Depreciation expense


4,507



9,347







13,854Total investment and other expenses


1,851,634



1,360,543







3,212,178Interest credited on certificate liability


2,036,908











2,036,908Net investment income (loss) before income taxes and realized
    investment gains


(4,236,055
)


(1,341,462
)


1,526,400



(4,051,117
)Realized investment gains (losses)


236,818











236,818Net investment income(loss) before income taxes


(3,999,237
)


(1,341,462
)


1,526,400



(3,814,299
)Other operating incomeOrigination fee income


90,000



221,674







311,674Gain on sale to investor


949



110,866







111,815Other loan fee income


27,449



277,537







304,986Total other operating income


118,397



610,077







728,474Other operating expensesSalaries and commissions






580,742







580,742Other expenses  operating


278,314



161,040







439,353Warehouse interest expense and charges






34,364







34,364Total other operating expenses


278,314



776,145







1,054,459Net other operating loss before income taxes


(159,916
)


(166,068
)






(325,984
)Net investment and other operating loss before income taxes


(4,159,153
)


(1,507,530
)


1,526,400



(4,140,283
)Income tax expense






569







569Net investment and other operating loss


(4,159,153
)


(1,506,962
)


1,526,400



(4,139,715
)Non operating expense:Reserve for losses


(1,083,441
)


(19,439
)






(1,102,879
)Net income (loss)

$
(5,242,594
)

$
(1,526,400
)

$
1,526,400


$
(5,242,594
)    40




---



##### 





SBM
    Certificate Company and Subsidiaries
    CONSOLIDATING STATEMENTS OF SHAREHOLDERS EQUITY
    FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
  SBM CERTIFICATE COMPANY AND SBMS-1


SBM MORTGAGE CORPORATIONAccumulated


























TotalAdditional


Other Com-





Total


Common





Additional





Total





ConsolidatingPaid-in


prehensive


Accumulated


Shareholders


Stock





Paid-in


Accumulated


Shareholders


Eliminating


ShareholdersAmount


Capital


Income (Loss)


Deficit


Equity


Shares


Amount


Capital


Deficit


Equity


Entries


EquityBalance at December 31, 2003 (See Note 2)


250,000



8,615,080



194,902



(1,310,560
)


7,749,422



10,000



20,000



1,082,548



(112,345
)


990,203



(990,203
)


7,749,422Additional paid-in capital-cash






3,257,755











3,257,755











1,022,625







1,022,625



(1,022,625
)


3,257,755Additional paid-in capital-noncash






1,007,247











1,007,247



























1,007,247on available-for-sale securities, net of tax










(215,293
)






(215,293
)


























(215,293
)Net loss














(5,242,594
)


(5,242,594
)














(1,526,400
)


(1,526,400
)


1,526,400



(5,242,594
)Comprehensive loss


















(5,457,886
)


















(1,526,400
)


1,526,400



(5,457,886
)Dividends paid














(92,358
)


(92,358
)














(55,130
)


(55,130
)


55,130



(92,358
)Balance at December 31, 2004


250,000



12,880,081



(20,391
)


(6,645,512
)


6,464,178



10,000



20,000



2,105,173



(1,693,875
)


431,298



(431,298
)


6,464,178Additional paid-in capital-cash






186,500











186,500











219,800







219,800



(219,800
)


186,500on available-for-sale securities, net of tax










16,587







16,587



























16,587Net loss














(5,804,565
)


(5,804,565
)














(1,285,757
)


(1,285,757
)


1,285,757



(5,804,565
)Comprehensive loss


















(5,787,978
)


























(5,787,978
)Dividends paid


































(588,460
)


(588,460
)


588,460



Balance at December 31, 2005


250,000



13,066,581



(3,804
)


(12,450,077
)


862,700



10,000



20,000



2,324,973



(3,568,092
)


(1,223,119
)


1,223,119



862,700on available-for-sale securities, net of tax










172,358







172,358



























172,358Net income














1,341,203



1,341,203















(278,942
)


(278,942
)


278,942



1,341,203Comprehensive loss


















1,513,562



























1,513,562Dividends paid














































Balance at December 31, 2006

$
250,000


$
13,066,581


$
168,554


$
(11,108,873
)

$
2,376,262



10,000


$
20,000


$
2,324,973


$
(3,847,035
)

$
(1,502,062
)

$
1,502,062


$
2,376,262    41




---



##### 



SBM
    Certificate Company and Subsidiaries
    CONSOLIDATING STATEMENT OF CASH FLOWS
    Year ended December 31, 2006
  SBM CertificateCompany and


SBM Mortgage


EliminatingSBMS I


Corporation


Entries


TotalsCash flows from operating activitiesNet income (loss)

$
1,341,203


$
(278,942
)

$
278,942


$
1,341,203Adjustments to reconcile net loss to net cash provided by
    operating activitiesLoss from investment in subsidiary


278,942







(278,942
)


Interest credited on certificate liability


1,713,911











1,713,911Realized investment gains/losses


13,457











13,457Deferral of unrealized gains/losses


158,901











158,901Deferral of acquisition costs


(26,174
)










(26,174
)Amortization of deferred acquisition costs and renewal
    commissions














Amortization of client list


89,330











89,330Depreciation


3,900



6,831







10,731Decrease (increase) in dividends and interest receivable


261,572











261,572Changes in related party receivables


(6,228,717
)


(45,532
)






(6,274,249
)Changes in related party liabilities


52,636



316,973







369,610Changes in other assets


15,012



179







15,191Changes in other liabilities


(2,344,172
)


602







(2,343,570
)Net cash provided by operating activities


(4,670,197
)


111







(4,670,086
)Cash flows from investing activitiesSales and redemptions of available-for-sale securities


56,328











56,328Increase in mortgages held for investment


1,891,341











1,891,341Cash invested in real estate and real estate partnership
    interests


3,821,786











3,821,786Principal payments received on residual mortgage certificate


25,481











25,481Proceeds from real estate tax lien certificates


24,408











24,408Purchase of fixed assets


(0
)


(600
)






(600
)Net cash provided by (used in) investing activities


5,819,344



(600
)






5,818,744Cash flows from financing activitiesAmounts paid to
    face-amount
    certificate holders


(872,360
)










(872,360
)Net cash used in financing activities


(872,360
)










(872,360
)NET DECREASE IN CASH AND CASH EQUIVALENTS


276,788



(489
)






276,299Cash and cash equivalents, beginning


4,328



161,037







165,365Cash and cash equivalents, end

$
281,116


$
160,549


$



$
441,664Cash paid for interest

$



$



$



$
Cash paid for income taxes

$



$



$



$
Supplemental disclosure of significant noncash investing and
    financing activitiesContribution of assets

$



$



$



$
    42




---



##### 



SBM
    Certificate Company and Subsidiaries
    CONSOLIDATING STATEMENT OF CASH FLOWS
    Year ended December 31, 2005
  SBM CertificateCompany and


SBM Mortgage


EliminatingSBMS I


Corporation


Entries


TotalsCash flows from operating activitiesNet income (loss)

$
(5,804,565
)

$
(1,285,757
)

$
1,285,757


$
(5,804,565
)Adjustments to reconcile net loss to net cash provided by
    operating activitiesLoss from investment in subsidiary


1,285,757







(1,285,757
)


Interest credited on certificate liability


1,844,686











1,844,686Realized investment gains/losses


417,564



10,768







428,331Deferral of unrealized gains/losses


(398,715
)


(10,768
)






(409,483
)Deferral of acquisition costs


(74,894
)










(74,894
)Amortization of deferred acquisition costs and renewal
    commissions


36,345











36,345Amortization of client list


89,330











89,330Depreciation


3,940



18,341







22,282Decrease in mortgage notes held for sale


2,609,280



131,442







2,740,722Decrease (increase) in dividends and interest receivable


(39,129
)


6,579







(32,550
)Changes in related party receivables


(550,522
)


60







(550,463
)Changes in related party liabilities


91,577



992,914







1,084,491Changes in other assets


109,556



3,834







113,390Changes in other liabilities


256,917



(3,312
)






253,605Net cash provided by operating activities


(122,874
)


(135,899
)






(258,773
)Cash flows from investing activitiesSales and redemptions of available-for-sale securities


244,086











244,086Increase in mortgages held for investment


1,873,773











1,873,773Cash invested in real estate and real estate partnership
    interests


1,326,908



525,329







1,852,237Principal payments received on residual mortgage certificate


314,037











314,037Proceeds from real estate tax lien certificates


39,573











39,573Dividends from subsidiary


588,460







(588,460
)


Contributions to subsidiary


(219,800
)






219,800



Purchase of fixed assets


0



(615
)






(615
)Funding of certificate loans, net


(837
)










(837
)Net cash provided by (used in) investing activities


4,166,199



524,714



(368,660
)


4,322,253Cash flows from financing activitiesAmounts paid to
    face-amount
    certificate holders


(4,367,483
)










(4,367,483
)Capital contributed to company


186,500



219,800



(219,800
)


186,500Dividends paid






(588,460
)


588,460



Net cash used in financing activities


(4,180,983
)


(368,660
)


368,660



(4,180,983
)NET DECREASE IN CASH AND CASH EQUIVALENTS


(137,658
)


20,155







(117,504
)Cash and cash equivalents, beginning


141,987



140,883







282,869Cash and cash equivalents, end

$
4,328


$
161,037


$



$
165,365Cash paid for interest

$



$



$



$
Cash paid for income taxes

$



$



$



$
Supplemental disclosure of significant noncash investing and
    financing activitiesContribution of assets

$



$



$



$
    43




---



##### 



SBM
    Certificate Company and Subsidiaries
    CONSOLIDATING STATEMENT OF CASH FLOWS
    Year ended December 31, 2004
  SBM CertificateCompany and


SBM Mortgage


EliminatingSBMS I


Corporation


Entries


TotalsCash flows from operating activitiesNet income (loss)

$
(5,242,594
)

$
(1,526,400
)

$
1,526,400


$
(5,242,594
)Adjustments to reconcile net loss to net cash provided by
    operating activitiesLoss from investment in subsidiary


1,526,400







(1,526,400
)


Interest credited on certificate liability


2,036,908











2,036,908Realized investment gains/losses


(236,818
)










(236,818
)Deferral of unrealized gains/losses


31,417











31,417Deferral of acquisition costs


(119,955
)










(119,955
)Amortization of deferred acquisition costs and renewal
    commissions


23,955











23,955Amortization of client list


89,330











89,330Depreciation


4,507



9,347







13,854Decrease in mortgage notes held for sale


3,044,118



2,119,454







5,163,572Decrease (increase) in dividends and interest receivable


(478,571
)


272







(478,299
)Cash proceeds from maturity of US Treasury note


200,000











200,000Changes in related party receivables


(356,388
)


21,535







(334,853
)Changes in related party liabilities


13,734



703,546







717,280Changes in other assets


(55,632
)


(16,586
)






(72,218
)Changes in other liabilities


172,536



(3,758
)






168,777Net cash provided by operating activities


652,947



1,307,408







1,960,355Cash flows from investing activitiesSales and redemptions of available-for-sale securities


6,276,955











6,276,955Warehouse line of credit fundings and repayments, net


934,750







(934,750
)


Increase in mortgages held for investment


(6,422,489
)










(6,422,489
)Cash invested in real estate and real estate partnership
    interests


(581,784
)


(24,366
)






(606,150
)Principal payments received on residual mortgage certificate


1,078,146











1,078,146Proceeds from real estate tax lien certificates


510,284











510,284Dividends from subsidiary


55,130







(55,130
)


Contributions to subsidiary


(1,022,625
)






1,022,625



Purchase of fixed assets


(94,386
)


(12,578
)






(106,965
)Funding of certificate loans, net


(2,866
)










(2,866
)Net cash provided by (used in) investing activities


731,114



(36,944
)


32,745



726,916Cash flows from financing activitiesAmounts paid to
    face-amount
    certificate holders


(3,747,159
)










(3,747,159
)Capital contributed to company


4,265,001



1,022,625



(1,022,625
)


4,265,001Warehouse line of credit repayments, net






(2,156,750
)


934,750



(1,222,000
)Subscriptions and notes payable repayments


(3,000,000
)










(3,000,000
)Dividends paid


(92,358
)


(55,130
)


55,130



(92,358
)Net cash used in financing activities


(2,574,516
)


(1,189,255
)


(32,745
)


(3,796,516
)NET DECREASE IN CASH AND CASH EQUIVALENTS


(1,190,455
)


81,210



(0
)


(1,109,245
)Cash and cash equivalents, beginning, (See Note 2)


1,332,442



59,673







1,392,115Cash and cash equivalents, end

$
141,987


$
140,883


$
(0
)

$
282,870Cash paid for interest

$



$



$



$
Cash paid for income taxes

$



$



$



$
Supplemental disclosure of significant noncash investing and
    financing activitiesContribution of assets

$
1,007,247


$



$



$
1,007,247    44




---



##### 



SBM
    Certificate Company
  Notes to
    Consolidated Financial Statements
   1 
    Organization
    and Description of Business  face-amount
      face-amount
  Nature of
    Operations
  face-amount face-amount face-amount
  face-amount face-amount
    2 
    Narrative
    Discussion of Adjustments and Reclassifications    Increase in
    Face-Amount
    Certificate Liability.
 45




---



##### 



SBM
    Certificate Company
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Form S-1, face-amount
    Increase/(Decrease) in:

As of January 1, 2004Goodwill

$
101,904Certificate Liability

$
101,904   Decrease in Intangible Assets relating to the
    Registration Statement Related Costs reflected as a
    purchase price allocation subsequent to the
    Acquisition.
    Increase/(Decrease) in:

As of January 1, 2004Intangible Asset

$
(755.202
)Goodwill

$
755,202   Reclass Mortgage Notes Held for Investment (Salem
    Property).
  Increase/(Decrease) in:

As of January 1, 2004Mortgage Notes Held for Investment

$
(1,002,580
)Real Estate Tax Lien Certificates

$
405,294Real Estate Owned

$
282,772Accounts Receivable

$
16,281Retained Earnings

$
(298,238
)   Reclass Cash and Cash Equivalents to Restricted
    Cash. face-amount
  Increase/(Decrease) in:

As of January 1, 2004Cash and Cash Equivalents

$
(263,516
)Restricted Cash

$
263,516    46




---



##### 



SBM
    Certificate Company
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Increase/(Decrease) in:

As of January 1, 2004Investment in real estate partnership

$
(320,000
)Retained Earnings

$
320,000   Increase in 1800 Harlem Park Investment in Real Estate
    Limited Liability Corporations (LLC) due to Brownfield
    Credit Valuation. Accounting for
    Business Combinations.
  Increase/(Decrease) in:

As of January 1, 2004Investment in Real Estate LLC

$
4,200,000Goodwill

$
(4,200,000
)   3 
    Summary
    of Significant Accounting Policies  Basis of Presentation
  Principles of Consolidation
  Use of Estimates
  Cash and Available-for-Sale Securities Accounting for
    Certain Investments in Debt and Equity Securities
  Cash and cash equivalents
  Cash Held in Trust 
  Concentrations of Credit Risks
 47




---



##### 



SBM
    Certificate Company
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Restricted Cash face-amount
  Mortgage Notes Available for Sale
  Mortgage Notes Held for Investment
    Investment in Real Estate Partnership
  Investment in Real Estate Limited Liability Corporations
  Loan Loss Provisions 
  Real Estate Tax Lien Certificates
 48




---



##### 



SBM
    Certificate Company
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Residual Mortgage Certificate
      
    first, to cover any losses on the mortgage loans in the related
    mortgage pool;
    second, to reimburse the insurer, if any, of the related series
    of pass-through certificates for amounts paid by or otherwise
    owing to that insurer;
    third, to build or maintain the over collateralization for that
    securitization trust at the required level by being applied as
    an accelerated payment of principal to the holders of the
    pass-through certificates of the related series;
    fourth, to reimburse holders of the subordinated certificates of
    the related series of pass-through certificates for unpaid
    interest and for any losses previously allocated to those
    certificates;
    fifth, to the related residual mortgage certificate.    Fixed Assets
  Real Estate Owned (REO)
 49




---



##### 



SBM
    Certificate Company
  Notes to
    Consolidated Financial
    Statements  (Continued)
        Deferred Acquisition Costs face-amount
  Certificate Liability Face-amount
  Income Taxes
  Goodwill and Other Intangibles
   50




---



##### 



SBM
    Certificate Company
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Revenue Recognition
      Advertising Expenses
  Comprehensive Income (Loss)
  Legal Contingencies
  Recent Accounting Pronouncements
  Accounting for Certain Hybrid Financial
    Instruments Accounting for Derivative Instruments and Hedging
    Activities Accounting for Transfers and Servicing of Financial
    Assets and Extinguishments of Liabilities
 51




---



##### 



SBM
    Certificate Company
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Accounting for Servicing of Financial Assets. Accounting for Transfers and Servicing of Financial
    Assets and Extinguishments of Liabilities
  Fair Value Measurements
  Employers Accounting for Defined Benefit Pension
    and Other Postretirement Plans  An Amendment of FASB
    No. 87, 88, 106 and 132(R)
  Accounting for Uncertainty in Income
    Taxes  an interpretation of FASB Statement No.
    109
  Considering the Effects of Prior
    Year Misstatements When Quantifying Misstatements in Current
    Year Financial Statements
 52




---



##### 



SBM
    Certificate Company
  Notes to
    Consolidated Financial
    Statements  (Continued)
  The Fair Value Option for Financial Assets and
    Financial Liabilities  Including an Amendment of FASB
    Statement No. 115
  4 
    AVAILABLE-FOR-SALE
    SECURITIES    SBM
    Certificate Company and Subsidiaries
    SUPPLEMENTAL SCHEDULES
    SCHEDULE I  INVESTMENTS IN SECURITIES OF
    UNAFFILIATED ISSUERS
    December 31, 2006
  PRINCIPALNAME OF ISSUER AND TITLE OF ISSUE

AMOUNT


COST


VALUEU.S. TREASURY SECURITIES
    GNMA II 4.375% due 1/20/26

$
18,832


$
18,832


$
18,832DOMESTIC COMMON STOCKS
    IR Biosciences Holdings Inc.


40,510



40,510



40,510TOTAL





$
59,342


$
59,342   SBM
    Certificate Company and Subsidiaries
    SUPPLEMENTAL SCHEDULES
    SCHEDULE I  INVESTMENTS IN SECURITIES OF
    UNAFFILIATED ISSUERS
    December 31, 2005
  PRINCIPALNAME OF ISSUER AND TITLE OF ISSUE

AMOUNT


COST


VALUEU.S. TREASURY SECURITIES
    GNMA II 4.375% due 1/20/26

$
25,670


$
25,670


$
25,670DOMESTIC COMMON STOCKS
    IR Biosciences Holdings Inc.


150,000



150,000



90,000TOTAL





$
175,670


$
115,670  53




---



##### 



SBM
    Certificate Company
  Notes to
    Consolidated Financial
    Statements  (Continued)
  SUPPLEMENTAL
    SCHEDULES
    SCHEDULE I  INVESTMENTS IN SECURITIES OF
    UNAFFILIATED ISSUERS
 December 31, 2004
  PRINCIPALNAME OF ISSUER AND TITLE OF ISSUE

AMOUNT


COST


VALUEU.S. TREASURY SECURITIES
    GNMA II 3.375%% due 1/20/26

$
38,506


$
38,506


$
38,506DOMESTIC COMMON STOCKS
    IR Biosciences Holdings Inc.


150,000



150,000



90,000FOREIGN STOCKS
    Celerity CLO Limited Preferred Shares


250,000



250,000



231,250TOTAL





$
438,506


$
359,756     December 31, 2006


December 31, 2005


December 31, 2004Cost


Fair Value


Cost


Fair Value


Cost


Fair ValueFixed MaturitiesDue in one year or less

$



$



$



$



$
250,000


$
231,250Due after one year through five years


















38,506



38,506Due after five years through ten years






















Due after ten years


59,342



59,342



175,670



115,670



150,000



90,000Total fixed maturities

$
59,342


$
59,342


$
175,670


$
115,670


$
438,506


$
359,756     5 
    CASH HELD
    IN TRUST    6 
    FIXED
    ASSETS    2006


2005


2004Land and building

$
121,933


$
121,933


$
125,236Furniture and fixtures


22,085



22,085



22,085Computer equipment


181,166



182,865



190,461Total cost


325,184



326,883



337,782Less accumulated depreciation


(33,545
)


(25,112
)


(14,344
)Total net fixed assets

$
291,639


$
301,771


$
323,438  54




---



##### 



SBM
    Certificate Company
  Notes to
    Consolidated Financial
    Statements  (Continued)
  7 
    MORTGAGE
    NOTES AVAILABLE FOR SALE    8 
    MORTGAGE NOTES HELD FOR INVESTMENT
  12/31/06
  Loans
    for Charter Schools at
    12/31/06
    Loans
    to MRS Ventures Inc. at
    12/31/06
      9 
    WAREHOUSE FACILITIES
   55




---



##### 



SBM
    Certificate Company
  Notes to
    Consolidated Financial
    Statements  (Continued)
      Provident Bank 30-day (30-day
  10 
    CERTIFICATE LIABILITY
    Average2006


2005


2004


Interest RateFully-paid certificates:Single-payment 500 series

$
30,388,725


$
29,541,825


$
32,035,442



5.56
%Installment


1,656,884



1,664,700



1,662,548



5.00
%Optional settlement


330,394



306,825



303,997



5.00
%32,376,003



31,513,350



34,001,987Installment certificates:Reserves to mature, by series120 and 220


260,475



283,020



318,751



5.00
%315


23,705



22,189



20,602



5.00
%284,180



305,209



339,353Unlocated certificates:


2,149



2,218



2,218Total certificate liability

$
32,662,332


$
31,820,776


$
34,343,558   11 
    FAIR VALUE OF FINANCIAL INSTRUMENTS
   56




---



##### 



SBM
    Certificate Company
  Notes to
    Consolidated Financial
    Statements  (Continued)
  12/31/06, 12/31/05 12/31/04.
  SBM
    Certificate Company and Subsidiaries
  Carrying
    Value and Fair Value of Financial Instruments
  for the
    years ended December 31, 2006, 2005 and 2004
  December 31, 2006


December 31, 2005


December 31, 2004Carrying Value


Fair Value


Carrying Value


Fair Value


Carrying Value


Fair ValueQualified Assets

$
28,184,409


$
29,657,540


$
29,418,166


$
29,476,656


$
36,568,971



36,568,971Reserve RequirementCertificate






27,720,886







27,829,975







30,020,279Liability - Surrender ValueExcess Reserves(Qualified Assets less Surrender Value)





$
1,936,654






$
1,646,681






$
6,548,692   The
    following methods and assumptions were used in estimating fair
    values:
  Available-for-sale Securities
  Mortgage Notes Available for Sale loan-by-loan
  Mortgage Notes Held for Investment
  Investment in Real Estate Partnerships
  Investment in Real Estate Limited Liability Corporations
    (LLC)
  Real Estate Tax Lien Certificates
 57




---



##### 



SBM
    Certificate Company
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Real Estate Owned
  Residual Mortgage Certificate
  Certificate Loans
  Cash and Cash Equivalents
  Cash in Trust
  Certificate Liability
  12 
    INCOME TAXES
     58




---



##### 



SBM
    Certificate Company
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Year Ended


Year Ended


Year EndedDecember 31, 2006


December 31, 2005


December 31, 2004CurrentUS

$



$



$
State










State










State










Local










Total current tax expense (benefit)










DeferredUS


(3,888,105
)


(4,357,527
)


(2,325,928
)State


(555,444
)


(622,504
)


(332,276
)Total deferred tax expense (benefit)


(4,443,549
)


(4,980,031
)


(2,658,204
)Less valuation allowance


4,443,549



4,980,031



2,658,204Total deferred tax expense (benefit)

$



$



$
Total tax provision

$



$



$
   Year Ended


Year Ended


Year EndedDecember 31,


December 31,


December 31,2006


%


2005


%


2004


%Computed at US statutory rate

$
(3,888,105
)


−35
%

$
(4,357,527
)


−35
%

$
(2,325,929
)


−35
%State


(555,444
)


−5
%


(622,504
)


−5
%


(332,276
)


−5
%Less valuation allowance


4,443,549



40
%


4,980,031



40
%


2,658,204



40
%Total tax provision

$




0
%

$




0
%

$




0
%     Year Ended


Year Ended


Year EndedDecember 31, 2006


December 31, 2005


December 31, 2004Deferred tax assetsReserves

$
1,130,426


$
771,901


$
433,376Net operating loss carryforward


5,393,123



4,208,130



2,224,828Total gross deferred tax assets


6,523,549



4,980,031



2,658,204Deferred tax liabilitiesInvestments

$
2,080,000


$



$
State and local taxes










Total gross deferred tax liabilities


2,080,000







Less valuation allowance


(4,443,549
)


(4,980,031
)


(2,658,204
)Net deferred tax assets

$



$



$
  59




---



##### 



SBM
    Certificate Company
  Notes to
    Consolidated Financial
    Statements  (Continued)
  13 
    RESIDUAL MORTGAGE CERTIFICATE
    14 
    REAL ESTATE OWNED (REO)
    15 
    INVESTMENT IN REAL ESTATE PARTNERSHIPS
    16 
    INVESTMENT IN REAL ESTATE LIMITED LIABILITY COMPANY
  clean-up).
 60




---



##### 



SBM
    Certificate Company
  Notes to
    Consolidated Financial
    Statements  (Continued)
        17 
    RELATED PARTY TRANSACTIONS
       61




---



##### 



SBM
    Certificate Company
  Notes to
    Consolidated Financial
    Statements  (Continued)
  18 
    SHAREHOLDERS EQUITY AND REGULATORY MATTERS
        SUPPLEMENTAL
    SCHEDULES  CONTINUED
  SCHEDULE V 
    QUALIFIED ASSETS ON DEPOSIT
  Ending
    December 31,
  NAME OF DEPOSITORY

2006


2005


2004State governmental authoritiesSecurities Department of Illinois

$
51,364


$
51,364


$
53,625Central depositoriesUS Bank


23,121,460



29,202,960



36,235,601Provident Bank










Bank of America


4,997,042



161,323



277,436Wells Fargo


14,544



2,520



2,309Total qualified assets on deposit

$
28,184,409


$
29,418,166


$
36,568,971     (a)
    
    Represents amortized cost of bonds and securities.(b)
    
    Represents dividend and interest receivable on qualified assets
    and investments in real estate partnerships. 62




---



##### 



SBM
    Certificate Company
  Notes to
    Consolidated Financial
    Statements  (Continued)
   19 
    COMMITMENTS AND CONTINGENCIES
  Lease
    Commitments
    Year Ended December 31,2006


2005


2004Rent expense

$
137,685


$
82,806


$
80,346     2007

$
253,8342008


261,4602009


269,3052010


277,3902011


285,739Thereafter


673,766Total

$
2,021,494   Morningside
    Litigation.
       63




---



##### 



SBM
    Certificate Company
  Notes to
    Consolidated Financial
    Statements  (Continued)
        SEC
    Litigation
  face-amount face-amount
         64




---



##### 



SBM
    Certificate Company
  Notes to
    Consolidated Financial
    Statements  (Continued)
  face-amount
  No. 06-866-DKC
  
    SBMs year-end financials for 2002, 2003, and 2004 showed
    losses of approximately $1.6 million, $1.8 million,
    and $3.3 million, respectively.
    Delinquent mortgage loans in SBMs portfolio represented a
    significant portion of SBMs total qualified assets.
    Geneva contributed cash and securities to SBM in an attempt to
    help SBM comply with applicable reserve requirements and,
    without these contributions, SBM would not have had the
    necessary assets to continue as a viable investment company.
    The majority of SBMs total investments were unqualified.    SEC v. SBM Investment Certificates, Inc
    face-amount
  Possible
    Violations of Federal and State Securities Laws
   65




---



##### 



SBM
    Certificate Company
  Notes to
    Consolidated Financial
    Statements  (Continued)
      Capital
    Contributed
   66




---



##### 



SBM
    Certificate Company and Subsidiaries
  SUPPLEMENTAL
    SCHEDULES
  SCHEDULE I 
    INVESTMENTS IN SECURITIES OF UNAFFILIATED ISSUERS
   December 31,
    2006
   PrincipalName of Issuer and Title of Issue

Amount


Cost


ValueU.S. TREASURY SECURITIES
    GNMA II 4.375% due 1/20/26

$
18,832


$
18,832


$
18,832DOMESTIC COMMON STOCKS
    IR Biosciences Holdings Inc.


40,510



40,510



40,510TOTAL





$
59,342


$
59,342   December 31,
    2005
  PrincipalName of Issuer and Title of Issue

Amount


Cost


ValueU.S. TREASURY SECURITIES
    GNMA II 4.375% due 1/20/26

$
25,670


$
25,670


$
25,670DOMESTIC COMMON STOCKS
    IR Biosciences Holdings Inc.


150,000



150,000



90,000TOTAL





$
175,670


$
115,670   December 31,
    2004
  PrincipalName of Issuer and Title of Issue

Amount


Cost


ValueU.S. TREASURY SECURITIES
    GNMA II 3.375% due 1/20/26

$
38,506


$
38,506


$
38,506DOMESTIC COMMON STOCKS
    IR Biosciences Holdings Inc.


150,000



150,000



90,000FOREIGN STOCKS
    Celerity CLO Limited Preferred Shares


250,000



250,000



231,250TOTAL





$
438,506


$
359,756  67




---



##### 



SBM
    Certificate Company and Subsidiaries
  SUPPLEMENTAL
    SCHEDULES  (Continued)
  SCHEDULE II 
    INVESTMENTS IN AND ADVANCES TO AFFILIATES AND INCOME THEREON
 Year
    ended December 31, 2006
  Amount of Dividends or InterestCarrying








Income fromNumber of


Par Value


Value of








Investment inName of Investment in

Shares


of Shares


Investment


Credited





Subsidiary forSubsidiary

Held


Held


in Subsidiary


to Income


Other


PeriodSBM Mortgage Corporation


10,000


$
20,000


$
(1,502,062
)

$



$



$
(278,942
)SBM Securities I, LLC


100
%






(149,102
)










(452
)   Year
    ended December 31, 2005
  Amount of Dividends or InterestCarrying








Income fromNumber of


Par Value


Value of








Investment inName of Investment in

Shares


of Shares


Investment


Credited





Subsidiary forSubsidiary

Held


Held


in Subsidiary


to Income


Other


PeriodSBM Mortgage Corporation


10,000


$
20,000


$
(1,223,119
)

$



$
588,460


$
(1,285,757
)SBM Securities I, LLC


100
%






(148,650
)










(9,021
)   Year
    ended December 31, 2004
  Amount of Dividends or InterestCarrying








Income fromNumber of


Par Value


Value of








Investment inName of Investment in

Shares


of Shares


Investment


Credited





Subsidiary forSubsidiary

Held


Held


in Subsidiary


to Income


Other


PeriodSBM Mortgage Corporation


10,000


$
20,000


$
431,298


$



$
55,130


$
(1,526,400
)SBM Securities I, LLC


100
%






(210,213
)










(211,936
)  68




---



##### 



SBM
    Certificate Company and Subsidiaries
    SUPPLEMENTAL SCHEDULES  (Continued)
    SCHEDULE III  MORTGAGE LOANS ON REAL ESTATE
    AND INTEREST EARNED ON MORTGAGES
 
 Year
    ended December 31, 2006
  Amount of Principal Unpaid atClose of Period


Amount of


Interest Due


Interest IncomeCarrying





Subject to


Morrgages


and Accrued


EarnedPrior


Amount of





Delinquent


being


at End of


Applicable toDescription

Liens


Asset


Total


Interest


Foreclosed


Period


PeriodLiens on:Residential


NONE







Commercial


NONE



9,741,509



9,741,509



9,741,509



291,509


$
498,587



285,396Residual MortgageCertificate


NONE



1,267,516



1,267,516















103,440TOTAL

$



$
11,009,026


$
11,009,026


$
9,741,509


$
291,509


$
498,587


$
388,835   Year
    ended December 31, 2005
  Amount of Principal Unpaid atClose of Period


Amount of


Interest Due


Interest IncomeCarrying





Subject to


Morrgages


and Accrued


EarnedPrior


Amount of





Delinquent


being


at End of


Applicable toDescription

Liens


Asset


Total


Interest


Foreclosed


Period


PeriodLiens on:Residential


NONE


$




Commercial


NONE



11,632,850



11,632,850



11,632,850



291,509


$
1,656,096



72,192Residual MortgageCertificate


NONE



1,292,997



1,292,997















131,708TOTAL

$



$
12,925,847


$
12,925,847


$
11,632,850


$
291,509


$
1,656,096


$
203,900   Year
    ended December 31, 2004
  Amount of Principal Unpaid atClose of Period


Amount of


Interest Due


Interest IncomeCarrying





Subject to


Mortgages


and Accrued


EarnedPrior


Amount of





Delinquent


being


at End of


Applicable toDescription

Liens


Asset


Total


Interest


Foreclosed


Period


PeriodLiens on:Residential


NONE


$
1,723,567



1,723,567


$
1,354,916


$



$
48,186


$
485,699Commercial


NONE



14,523,779



14,523,779



7,001,290






$
405,262



777,837Residual MortgageCertificate


NONE



2,685,180



2,685,180















310,112TOTAL

$



$
18,932,525


$
18,932,525


$
8,356,206


$



$
453,448


$
1,573,648  69




---



##### 



SBM
    Certificate Company and Subsidiaries
  SUPPLEMENTAL
    SCHEDULES  (Continued)
  SCHEDULE IV 
    REAL ESTATE OWNED AND RENTAL INCOME
 December 31,
    2006
  Cost of


Carrying


Reserve for





Total RentalProperty Type

Encumbrances


Initial Cost


Improvements


Value


Losses


Rents Due


IncomeFarms

$



$



$



$



$



$



$
Residential


























Apartments and business






105,000



16,933



121,933











Unimproved






392,000



491,407



883,407











Total

$



$
497,000


$
508,340


$
1,005,340


$



$



$
Rent from properties sold during period

$



$



$



$



$



$



$
Total

$



$



$



$



$



$



$
   SBM
    Certificate Company and Subsidiaries
  SUPPLEMENTAL
    SCHEDULES  (Continued)
  SCHEDULE IV 
    REAL ESTATE OWNED AND RENTAL INCOME
 December 31,
    2005
  Cost of


Carrying


Reserve for





Total RentalProperty Type

Encumbrances


Initial Cost


Improvements


Value


Losses


Rents Due


IncomeFarms

$



$



$



$



$



$



$
Residential


























Apartments and business






105,000



16,933



121,933











Unimproved






392,000



2,430,194



2,822,194











Total

$



$
497,000


$
2,447,127


$
2,944,127


$



$



$
Rent from properties sold during period

$



$



$



$



$



$



$
Total

$



$



$



$



$



$



$
  70




---



##### 



SBM
    Certificate Company and Subsidiaries
  SUPPLEMENTAL
    SCHEDULES  (Continued)
  SCHEDULE IV 
    REAL ESTATE OWNED AND RENTAL INCOME
 December 31,
    2004
  Cost of


Carrying


Reserve for





Total RentalProperty Type

Encumbrances


Initial Cost


Improvements


Value


Losses


Rents Due


IncomeFarms

$



$



$



$



$



$



$
Residential


























Apartments and business






500,964







500,964











Unimproved






2,176,545



(109,228
)


2,067,317











Total

$



$
2,677,509


$
(109,228
)

$
2,568,281


$



$



$
Rent from properties sold during period

$



$



$



$



$



$



$
Total

$



$



$



$



$



$



$
   SBM
    Certificate Company and Subsidiaries
  SUPPLEMENTAL
    SCHEDULES  (Continued)
  SCHEDULE V 
    QUALIFIED ASSETS ON DEPOSIT
 December 31,
    2006
  FirstMortgagesand OtherInvestments


First Liensin Securities


on Real


OtherName of Depository

Cash


(a)


Estate


(b)


TotalState governmental authoritiesSecurities Department of Illinois

$
51,364














$
51,364Central depositoriesUS Bank


939



59,342



12,257,157



10,804,022



23,121,460Provident Bank


















Bank of America


4,997,042















4,997,042Wells Fargo


14,544















14,544Total qualified assets on deposit

$
5,063,889


$
59,342


$
12,257,157


$
10,804,022


$
28,184,409     (a)
    
    Represents amortized cost of bonds and securities.(b)
    
    Represents dividend and interest receivable on qualified assets
    and investments in real estate partnerships. 71




---



##### 



SBM
    Certificate Company and Subsidiaries
  SUPPLEMENTAL
    SCHEDULES  (Continued)
  SCHEDULE V 
    QUALIFIED ASSETS ON DEPOSIT
 December 31,
    2005
  FirstMortgagesand OtherInvestments


First Liensin Securities


on Real


OtherName of Depository

Cash


(a)


Estate


(b)


TotalState governmental authoritiesSecurities Department of Illinois

$
51,364














$
51,364Central depositoriesUS Bank


1,523



115,670



16,137,172



12,948,594



29,202,960Provident Bank


















Bank of America


161,323















161,323Wells Fargo


2,520















2,520Total qualified assets on deposit

$
216,729


$
115,670


$
16,137,172


$
12,948,594


$
29,418,166     (a)
    
    Represents amortized cost of bonds and securities.(b)
    
    Represents dividend and interest receivable on qualified assets
    and investments in real estate partnerships.  SBM
    Certificate Company and Subsidiaries
  SUPPLEMENTAL
    SCHEDULES   (Continued)
  SCHEDULE V 
    QUALIFIED ASSETS ON DEPOSIT
 December 31,
    2004
  FirstMortgagesand OtherInvestments


First Liensin Securities


on Real


OtherName of Depository

Cash


(a)


Estate


(b)


TotalState governmental authoritiesSecurities Department of Illinois

$
53,625














$
53,625Central depositoriesUS Bank


3,124



359,756



21,456,677



14,416,044



36,235,601Provident Bank


















Bank of America


277,436















277,436Wells Fargo


2,309















2,309Total qualified assets on deposit

$
336,494


$
359,756


$
21,456,677


$
14,416,044


$
36,568,971     (a)
    
    Represents amortized cost of bonds and securities.(b)
    
    Represents dividend and interest receivable on qualified assets
    and investments in real estate partnerships. 72




---



##### 



SBM
    Certificate Company and Subsidiary
    SUPPLEMENTAL SCHEDULES  (Continued)
    SCHEDULE VI  CERTIFICATE RESERVES
    PART I  SUMMARY OF CHANGES
  Year
    ended December 31, 2006
  Balance at Beginning of YearReserves(IncludingNumber of





Advance


AdditionsAccounts





Payments





ReserveWith


Amount of


With





Payments by


Charged toYield


Security


Maturity


Accrued


Charged to


Certificate


OtherDescription

Percent


Holders


Value


Interest)


Income


Holders


Accounts(a)


RollupsReserves to mature, installment certificatesSeries 120


5.00



2


$
11,000


$
41,824


$
2,140


$



$



$
Series 220


5.00



12



59,000



241,197



12,278



1,383







Series 315


5.00



4



13,200



22,189



1,126



390







Single payment certificatesSeries 503


5.56



1,211



18,410,787



17,270,719



801,093











128,545Series 505


5.56



294



4,882,066



4,623,790



259,790











116,143Series 507


5.56



104



1,596,139



1,360,429



95,714











24,018Series 510


5.56



314



8,348,410



6,286,888



455,081











52,713Fully paid installment certificates  
    (Paid Up Bonds)


5.00



334



1,898,392



1,664,700



79,072







192



Optional settlement certificatesAnnuities


5.00



37



306,823



306,823



14,074











65,811Due to unlocated certificate holders


0.00



21



2,218



2,218















Total






2,333


$
35,528,035


$
31,820,777


$
1,720,369


$
1,773


$
192


$
387,230Total charged to income, per above

















$
1,720,369Less reserve recoveries from terminations prior to maturityInterest credited on certificate reserves per statement of
    operations and comprehensive income (loss)

















$
1,720,369      73




---



##### 



SBM
    Certificate Company and Subsidiary
    SUPPLEMENTAL SCHEDULES  (Continued)
    SCHEDULE VI  CERTIFICATE RESERVES
    PART I  SUMMARY OF CHANGES
  Year
    ended December 31, 2006, 2005 and 2004
   Deductions


Balance at End of YearReserves(IncludingNumber of





AdvanceCash











Accounts





Payments)Surrenders











With


Amount of


WithDecember 31, 2006




Prior to


Other Note





Other Note -


Security


Maturity


AccruedDescription

Maturities


Maturity


(a)


Other Note(b)


C


Holders


Value


InterestReserves to mature, installment certificatesSeries 120

$



$



$



$








2


$
11,000


$
43,963Series 220










38,331







16



10



51,000


$
216,511Series 315






















4



13,200


$
23,705Single payment certificatesSeries 503


382,663



124,000



110,728



42,516



12,190



1,192



18,048,427


$
17,528,260Series 505


121,464



3,060



134,960



15,257



900



273



4,882,066


$
4,724,083Series 507










24,018



3,931







105



1,596,139


$
1,452,213Series 510






11,000



51,713



47,741



56



317



8,348,410


$
6,684,171Paid-up bonds


2,108



57,492



27,480











322



1,908,669


$
1,656,884Optional settlement certificates Annuities


56,009















178



36



330,522


$
330,522Due to unlocated certificate holders






69















20



2,149



2,149Total

$
562,244


$
195,621


$
387,230


$
109,445


$
13,340



2,281


$
35,191,582


$
32,662,460          74




---



##### 



SBM
    Certificate Company and Subsidiary
    SUPPLEMENTAL SCHEDULES  (Continued)
    SCHEDULE VI  CERTIFICATE RESERVES
    PART I  SUMMARY OF CHANGES
  Year
    ended December 31, 2006, 2005 and 2004
  Deductions


Balance at End of YearReserves(IncludingNumber of





AdvanceCash











Accounts





Payments)Surrenders











with


Amount of


withDecember 31, 2006




Prior to


Other Note





Other Note -


Security


Maturity


AccruedDescription

Maturities


Maturity


(a)


Other Note(b)


C


Holders


Value


InterestReserves to mature, installment certificatesSeries 120

$



$



$



$








2


$
11,000


$
43,963Series 220










38,331







16



10



51,000


$
216,511Series 315






















4



13,200


$
23,705Single payment certificatesSeries 503


382,663



124,000



110,728



42,516



12,190



1,192



18,048,427


$
17,528,260Series 505


121,464



3,060



134,960



15,257



900



273



4,882,066


$
4,724,083Series 507










24,018



3,931







105



1,596,139


$
1,452,213Series 510






11,000



51,713



47,741



56



317



8,348,410


$
6,684,171Paid-up bonds


2,108



57,492



27,480











322



1,908,669


$
1,656,884Optional settlement certificatesAnnuities


56,009















178



36



330,522


$
330,522Due to unlocated certificate holders






69















20



2,149



2,149Total

$
562,244


$
195,621


$
387,230


$
109,445


$
13,340



2,281


$
35,191,582


$
32,662,460          75




---



##### 



SBM
    Certificate Company and Subsidiary
    SUPPLEMENTAL SCHEDULES  (Continued)
    SCHEDULE VI  CERTIFICATE RESERVES
    PART I  SUMMARY OF CHANGES
  Year
    ended December 31, 2006, 2005 and 2004
  Balance at End of YearDeductions


Number ofCash











AccountsSurrenders











With


Amount ofDecember 31, 2005




Prior to


Other Note





Other Note


Security


MaturityDescription

Maturities


Maturity


(a)


Other Note(b)


(c)


Holders


ValueReserves to mature, installment certificatesSeries 120

$



$



$
53,676


$








2


$
11,000Series 220






















12



59,000Series 315






















4



13,200Single payment certificatesSeries 503


3,046,243



623,291



337,927



141,126



14053



1,211



18,410,787Series 505






93,178



11,509



63,920



369



294



4,882,066Series 507










3,806



14,433







104



1,596,139Series 510






69,643



26,128



165,777



168



314



8,348,410Paid-up bonds


34,420



11,027



59,256



770



194



334



1,898,392Optional settlement certificatesPaid-up
    certificate


























Annuities


97,999















87



37



306,823Due to unlocated certificate holders


























2,218Total

$
3,178,662


$
797,139


$
492,302


$
386,026


$
14,871



2,312


$
35,528,035          76




---



##### 



SBM
    Certificate Company and Subsidiary
    SUPPLEMENTAL SCHEDULES  (Continued)
    SCHEDULE VI  CERTIFICATE RESERVES
    PART I  SUMMARY OF CHANGES
  Year
    ended December 31, 2006, 2005 and 2004
  Deductions


Balance at End of YearReserves(IncludingNumber of





AdvanceCash








Accounts





Payments)Surrenders








With


Amount of


WithDecember 31, 2004




Prior to


Other Note





Security


Maturity


AccruedDescription

Maturities


Maturity


(a)


Other Note(b)


Holders


Value


InterestReserves to mature, installment certificatesSeries 120

$



$



$
13,755


$




4


$
23,000


$
90,797Series 220


















12



59,000


$
227,954Series 315










13,845







4



13,200


$
20,603Single payment certificatesSeries 503


2,403,292



633,731



756,515



172,788



1,422



21,503,630


$
20,245,757Series 505






35,144



12,036



64,529



295



4,903,426


$
4,447,665Series 507






53,376







16,280



102



1,592,194


$
1,278,429Series 510






90,391



207,784



165,869



317



8,400,016


$
6,063,591Paid-up bonds


43,902



13,720



18,719



770



347



1,896,409


$
1,662,548Optional settlement certificatesPaid-up
    certificate






















Annuities


80,733















36



303,997


$
303,997Due to unlocated certificate holders


















21



2,218



2,218Total

$
2,527,927


$
826,362


$
1,022,654


$
420,236



2,560


$
38,697,090


$
34,343,559        77




---



##### 



SBM
    Certificate Company and Subsidiary
    SUPPLEMENTAL SCHEDULES  (Continued)
    SCHEDULE VI  CERTIFICATE RESERVES 
    (Continued)
 PART II 
    INFORMATION REGARDING INSTALLMENT CERTIFICATES
 CLASSIFIED BY AGE GROUPINGS
 Year ended December 31, 2006
  Balance at Beginning of YearNumber ofAge Grouping

Accounts with


Amount of


Amount ofin Years

Security Holders


Maturity Value


ReservesSeries 120


26



1


$
6,000


$
21,28327



0







28



0







28



0







30



0







31



0







32



1







33



0







34



0







35



2







36



1







37



1



5,000



20,54038



1







Total






7


$
11,000


$
41,823Series 220


32



0


$



$
33



0







34



1



4,000



12,29735



0







36



2



10,000



36,68637



3



17,000



67,84538



2



9,000



41,30339



3



14,000



62,74340



0







41



1



5,000



20,32142



0







43



0







44



0







Total






12


$
59,000


$
241,195  78




---



##### 



SBM
    Certificate Company and Subsidiary
    SUPPLEMENTAL SCHEDULES  (Continued)
    SCHEDULE VI  CERTIFICATE RESERVES 
    (Continued)
 PART II 
    INFORMATION REGARDING INSTALLMENT CERTIFICATES
 CLASSIFIED BY
    AGE GROUPINGS  (Continued)
 Year ended December 31, 2006
  Deductions




Balance at End of YearCash


Transfer




Number ofSurrenders


or Roll to


Age

Accounts


Amount ofPrior to


Other Product in


Grouping

with Security


Maturity


Amount ofMaturity


Company


in Years

Holders


Value


ReservesSeries 120

$



$




26



0


$



$








27



1



6,000



22,372







28



0















28



0















30



0















31



0















32



0















33



0















34



0















35



0















36



0















37



0















38



1



5,000



21,591Total

$



$








2


$
11,000


$
43,963Series 220

$



$




32


$



$



$








33



















34



















35



1



4,000



12,830







36



















37



2



16,000



38,806







38



3



17,000



71,8842



38,331



39



2



9,000



43,619







40



1



6,000



28,011







41



















42



1



5,000



21,361







43



















44











Total

$
2


$
38,331







10


$
57,000


$
216,511  79




---



##### 



SBM
    Certificate Company and Subsidiary
    SUPPLEMENTAL SCHEDULES  (Continued)
    SCHEDULE VI  CERTIFICATE RESERVES 
    (Continued)
 PART II 
    INFORMATION REGARDING INSTALLMENT CERTIFICATES
 CLASSIFIED BY
    AGE GROUPINGS  (Continued)
 Year ended December 31, 2006
  Balance at Beginning of YearNumber ofAge Grouping

Accounts with


Amount of


Amount ofin Years

Security Holders


Maturity Value


ReservesSeries 315


15



0


$



$
16



1



2,200



3,12517



0







18



0







19



2



8,800



14,96220



1



2,200



4,10221



0







22



0







23



0







Total






4


$
13,200


$
22,189   Deductions




Balance at End of YearCash


Transfer or




Number ofSurrenders


Roll to Other


Age

AccountsPrior to


Product in


Grouping

with Security


Amount of


Amount ofMaturity


Company


in Years

Holders


Maturity Value


ReservesSeries 315

$



$




15






$



$








16










$








17



1



2,200


$
3,408







18










$








19










$








20



2



8,800


$
15,976







21



1



2,200


$
4,254







22










$








23










$
Total

$



$








4


$
13,200


$
23,638  80




---



##### 



ITEM 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Regulation S-K,
    Regulation S-K.
  ITEM 9A.
    Controls
    and Procedures    Evaluation of Disclosure Controls and
    Procedures. Form 10-K,
  Internal Control Over Financial
    Reporting. Rules 13-15(f)
 81




---



##### 



ITEM 9B.
    Other
    Information   PART III  ITEM 10.
    Directors,
    Executive Officers and Corporate Governance      Principal OccupationsName and Age

Positions with SBM

During the Past Five YearsEric M. Westbury (45)*

Chairman of the Board and President, Chief Executive Officer

Chairman of the Board of Directors of SBM and 1st Atlantic
    (since January 28, 2004); President and Chief Executive Officer
    of SBM Group (since 2005), SBM (since August 2002) and SBM
    Financial and 1st Atlantic (since August 2000).Kumar Barve (49)

Director

Director of SBM and 1st Atlantic (since May 2000); Majority
    Leader (since January 2003) and Delegate to the Maryland House
    of Delegates (since January 1991); Accountant/Chief Financial
    Officer, Environmental Management Services, Inc. (Hazardous
    Waste Disposal and Environmental Consulting).Nancy Hopkinson (66)

Director

Director of SBM (since May 2000) and 1st Atlantic (since
    November 1998);
    Retired (since 1996).Brian Murphy (64)

Director

Director of SBM (since May 2000) and 1st Atlantic (since
    November 1998); Partner, Griffin, Farmer & Murphy LLP (law
    firm) and predecessor law firms.Marialice B. Williams (62)

Director

Director of SBM and 1st Atlantic (since May 2000); Attorney in
    private practice. 82




---



##### 



Principal OccupationsName and Age

Positions with SBM

During the Past Five YearsWilliam M. Baker (57)

Chief Financial Officer

Chief Financial Officer of SBM Group (since September 2007);
    Prior to joining SBM, Mr. Baker was the Chief Financial Officer
    of K,B&A, Inc., where he provided independent business and
    financial consulting services to both private and publicly-held
    companies, including a five-month engagement as Chief Financial
    Officer of KH Funding Company, a public reporting investment
    company.Sherry Keenan (52)

Chief Accounting Officer

Chief Accounting Officer of SBM Group (Since May 2008);
    Prior to joining SBM, Ms. Keenan provided accounting and
    financial consulting services to several public and private
    companies, including Marriott International GTSI, and Cable
    & Wireless.Phillip B. Hayden (35)

Chief Compliance Officer

Chief Compliance Officer of SBM and 1st Atlantic (since
    September 2004) and of SBM Financial and SBM Capital Management,
    LLC (since May 2004); Vice President of SBM Group (since 2005)
    and SBM Financial (since 2003). Prior to that, Senior Risk
    Manager, FleetBoston Financial Corp. (2001-2003).Dia H. Snowden (46)

Secretary

Secretary of SBM and 1st Atlantic (since March 2002).  Senior
    Vice President and Chief Administrative Officer of SBM Group
    (since 2005) and SBM Financial (since January 2004); Prior to
    that, Director of Administrative Services of SBM Financial (from
    July 2000).   Board of
    Directors
    Audit
    Committee
  Regulation S-K
 83




---



##### 



Investment
    Committee
  face-amount
  Nominating
    Committee
    Compensation
    Committee
    Code of
    Ethics
  Form 8-K. 301-656-4200
  ITEM 11.
    Executive
    Compensation  Compensation
    of Executive Officers
      Director
    Compensation
    Fees Earned or


All OtherName

Paid in Cash


Compensation


TotalInterested DirectorsEric M. Westbury


0



0



0Independent DirectorsKumar Barve


2,000



0



2,000Nancy Hopkinson


2,000



0



2,000Brian Murphy


1,250



0



1,250Marialice B. Williams


2,000



0



2,000  84




---



##### 



ITEM 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters    ITEM 13.
    Certain
    Relationships and Related Transactions           85




---



##### 



ITEM 14.
    Principal
    Accounting Fees and Services  2004-2006 2004-2006.
  Policy on
    Audit Committee Pre-Approval of Services Performed by the
    Independent Auditors.
  case-by-case
  ITEM 15.
    Exhibits,
    Financial Statement Schedules  a.
    Documents
    Filed as Part of this Report    Financial Statement Schedules.
  b.
    Exhibits    Number

Description(3)(a)

Articles of Incorporation of the Registrant (incorporated by
    reference to Exhibit(3)(a) of Post-effective Amendment
    No. 11 to Registration Statement
    No. 33-38066
    filed on September 28, 2000).(3)(a)(i)

Certificate of Correction of Articles of Incorporation of the
    Registrant (incorporated by reference to Exhibit(3)(a) of
    Post-effective Amendment No. 13 to Registration Statement
    No. 33-38066
    filed on January 2, 2001).(3)(b)

By-Laws of the Registrant (incorporated by reference to
    Exhibit(3)(b) of Post-effective Amendment No. 11 to
    Registration Statement
    No. 33-38066
    filed on September 28, 2000).(4)(a)

Form of Application(4)(b)

Form of Account Statement(10)(a)

Administrative Services Agreement by and between the Registrant
    and SBM Financial Group, LLC. 86




---



##### 



Number

Description(10)(b)

Custody Agreement, as amended and supplemented, by and between
    the Registrant (as successor to SBM Certificate Company
    (Minnesota)) and First Trust National Association (now U.S.
    Bank Trust N.A.) (incorporated by reference to
    Exhibit 10(b) to
    Form S-1
    Registration Statement
    No. 33-38066
    filed on January 2, 1991).10(c)

Investment Advisory Agreement by and between the Registrant and
    SBM Financial, LLC.(21)

Subsidiaries(31.1)

Certification of Chief Executive Officer pursuant to
    Rule 13a-14
    of the Securities Exchange Act of 1934, as amended.(31.2)

Certification of Chief Financial Officer pursuant to
    Rule 13a-14
    of the Securities Exchange Act of 1934, as amended.(32.1)

Certification of Chief Executive Officer pursuant to
    Section 906 of The Sarbanes-Oxley Act of 2002.(32.2)

Certification of Chief Financial Officer pursuant to
    Section 906 of The Sarbanes-Oxley Act of 2002.     *
    
    Filed Herewith. 87




---



##### 



SIGNATURES    Date: ­
    ­
  SBM Certificate Company
  By:
    /s/   Chief Executive Officer
  Form 10-K
  Date:
      Principal Executive Officer
  Date:
     Chief Financial Officer
  Date:
     Director
  Date:
     Director
  Date:
     Director
  Date:
     Director
 88