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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: December 31, 1999    Commission file number: 811-6268


                             SBM CERTIFICATE COMPANY
             (Exact name of registrant as specified in its charter)

              MINNESOTA                                     41-1671595
   (State or other jurisdiction of                       (I.R.S. Employer
   incorporation or organization)                       Identification No.)

    C/O ARM FINANCIAL GROUP, INC.
       515 WEST MARKET STREET
        LOUISVILLE, KENTUCKY                                   40202
     (Address of principal executive offices)                (Zip Code)

Registrant's telephone number, including area code:  (502) 582-7900

Securities registered pursuant to Section 12(b) of the Act:  None
Securities registered pursuant to Section 12(g) of the Act:  None

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
                                                      |X| Yes     | | No

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.                                                                  | |

     As of February 28, 2000, 250,000 shares of the registrant's common stock
were outstanding. The registrant is a wholly owned subsidiary and its common
stock is not traded on a public market.

                       DOCUMENTS INCORPORATED BY REFERENCE
                                      None

     The registrant meets the conditions set forth in General Instruction I (1)
(a) and (b) of Form 10-K and is therefore filing this Form with the reduced
disclosure format.
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                                 TABLE OF CONTENTS


<TABLE>
<CAPTION>
ITEM                                                                                                        PAGE
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<S>                                                                                                         <C>
                                     PART I

     1.  Business.............................................................................................3
     2.  Properties...........................................................................................5
     3.  Legal Proceedings....................................................................................5
     4.  Submission of Matters to a Vote of Security Holders..................................................5


                                     PART II

     5.  Market for Registrant's Common Equity
           and Related Stockholder Matters....................................................................6
     6.  Selected Financial Data..............................................................................6
     7.  Management's Discussion and Analysis of
           Financial Condition and Results of Operations......................................................6
     8.  Financial Statements and Supplementary Data.........................................................12
     9.  Changes in and Disagreements with Accountants
           on Accounting and Financial Disclosure............................................................12


                                    PART III

     10. Directors and Executive Officers of the Registrant..................................................13
     11. Executive Compensation..............................................................................13
     12. Security Ownership of Certain Beneficial Owners and Management......................................13
     13. Certain Relationships and Related Transactions......................................................13


                                     PART IV

     14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K....................................14
         Signatures..........................................................................................16
         Index to Financial Statements......................................................................F-1
</TABLE>



                                       2
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                                     PART I

ITEM 1.  BUSINESS

(a)  GENERAL DEVELOPMENT OF BUSINESS

         SBM Certificate Company (the "Company") was incorporated in Minnesota
     in June of 1990, to assume the face-amount certificate business of SBM
     Company ("SBM"). Effective December 31, 1993, SBM transferred all of the
     Company's shares of common stock to its wholly owned subsidiary, State Bond
     and Mortgage Life Insurance Company ("SBM Life"). On June 14, 1995, the
     Company became a wholly owned subsidiary of ARM Financial Group, Inc.
     ("ARM") pursuant to ARM's purchase of substantially all of the assets and
     business operations of SBM (the "Acquisition").

         On December 20,1999 ARM filed a voluntary petition for relief under the
     provisions of chapter 11 of the U.S. Bankruptcy Code (the "Code") in the
     United States Bankruptcy Court for the District of Delaware. ARM is as a
     debtor in possession under the Code. ARM provided retirement savings and
     investment products through its insurance company subsidiaries. On March 3,
     2000 ARM completed the sale of its insurance subsidiaries to Western and
     Southern Life Insurance Company ("Western and Southern") ("the Insurance
     Transaction") (see Item 7 below). On March 28, 2000 ARM entered into a
     definitive agreement to sell the Company to 1st Atlantic Guaranty
     Corporation ("1st Atlantic") for a purchase price of $650,000. Of the
     purchase price, $250,000 will be paid directly to ARM and $400,000 will be
     placed in escrow for 18 months. The escrowed proceeds shall be used to fund
     certain indemnifications of ARM. Immediately prior to the closing of the
     sale of the Company, the Company shall (subject to obtaining appropriate
     regulatory approvals) dividend to ARM an amount equal to the Company's
     shareholder's equity less (i) $250,000 and (ii) estimated deferred
     acquisition costs net of income taxes. The dividend will be in the form of
     a transfer of certain securities, in kind, and the balance, if any, in cash
     or cash equivalents. The closing of this transaction is subject to various
     approvals, including that of the Bankruptcy Court, and is expected to close
     in the second quarter of 2000.

         Pursuant to a continuing hardship exemption from the electronic filing
     requirements of the Securities Exchange Act of 1934 (the "1934 Act"), ARM
     now makes all of its public filings in paper format. Accordingly, copies
     of ARM's public filings filed after March 1, 2000, may be obtained from the
     Public Reference Department of the Securities Exchange Commission, 450
     Fifth Street, NW, Washington, DC 20549. The 1999 Form 10-K for ARM will not
     be filed within the period prescribed by the requirements for such
     filings in the 1934 Act.

(b)  FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS.

     The Company has one business segment.

(c)  NARRATIVE DESCRIPTION OF BUSINESS

         The Company is an issuer of fixed-rate face-amount certificates
     registered under the Investment Company Act of 1940, as amended (the "1940
     Act"). A face-amount certificate is an obligation of the Company requiring
     the Company to pay certificate holders the original invested amount of the
     certificate, plus a three-year fixed-rate return, at a given maturity date.
     The Company selects the interest rate offered on the face-amount
     certificates based on the short to intermediate term sections of the yield
     curve. Face-amount certificates, which are similar to bank certificates of
     deposit, generally compete with various types of individual savings
     products offered by banks and insurance companies that provide a fixed rate
     of return on investors' money. The Company's face-amount certificates are
     sold primarily in the Midwest.


                                       3
<PAGE>

         The Company's face-amount certificates are distributed by ARM
     Securities Corporation ("ARM Securities"), a wholly owned subsidiary of
     ARM, pursuant to an Underwriting Agreement. ARM Securities currently uses a
     network of independent agents to sell and service the face-amount
     certificates. ARM Securities is registered with the Securities and Exchange
     Commission (the "SEC") as a broker-dealer under the provisions of the
     Securities Exchange Act of 1934, as amended. On April 4, 2000, ARM entered
     into a Stock Purchase Agreement to sell ARM Securities to ND Holdings, Inc.
     The sale of ARM Securities is subject to Bankruptcy Court and other
     regulatory approvals, and is expected to close during the second quarter.
     Upon the consummation of the sale of the Company it will likely need to
     enter into an underwriting agreement with a different broker-dealer.

         The Company's gross margin is derived primarily from the margin between
     earnings on investments and amounts paid or credited on its fixed-rate
     certificate deposits ("net investment spread"). The Company's net income is
     determined by deducting investment and other expenses and federal income
     taxes from gross margin. The net investment spread is affected by general
     economic conditions, government monetary policy, the policies of regulatory
     authorities that influence market interest rates, and the Company's ability
     to respond to changes in such rates. Changes in market interest rates may
     have a negative impact on the Company's earnings.

         The Company's face-amount certificate business generally competes with
     various types of individual savings products that offer a fixed rate of
     return on investors' money, especially insurance and bank products. Some of
     these other products are insured by governmental agencies or funds or
     independent third parties. The certificates offered by the Company are not
     guaranteed or insured by any governmental agency or fund or independent
     third party. The Company's business is highly competitive and the Company
     competes with many other companies having greater financial resources,
     larger sales forces, and greater access to customers. The Company's ability
     to offer competitive interest rates, attractive terms, and efficient
     service are the Company's primary basis for meeting competition.

         The Company has no employees. Pursuant to an Investment Services
     Agreement and an Administrative Services Agreement, the Company's
     operations have been administered and managed by ARM. As a result of the
     consummation of the Insurance Transaction, the vast majority of ARM's
     employees, including the employees who support the Company, became
     employees of Integrity Life Insurance Company ("Integrity") (see Item 7
     below). Employees of Integrity are assisting ARM in winding up ARM's
     affairs, including the administration of the Company, pursuant to a
     Transition Services Agreement dated March 3, 2000 (the "Transition Services
     Agreement"). The Transition Services Agreement has a term of eighteen
     months, but may be terminated by Western and Southern after six months,
     upon 90 days notice.

         Pursuant to a Letter Agreement dated February 17, 2000 (as amended on
     March 1, 2000, the "WTR&A Agreement"), ARM retained Walker, Truesdell,
     Radick & Associates ("WTR&A") as its Restructuring Agent, to provide
     consulting and management services to ARM, including services related to
     the sale of the Company to 1st Atlantic. On March 2, 2000, WTR&A's
     retention was approved by the Bankruptcy Court. WTR&A is a consulting firm
     that specializes in crisis management, bankruptcy administration and asset
     liquidation services.


                                       4
<PAGE>

         Like many financial services companies, which offer investment
     opportunities to the public, the Company is subject to regulation and
     supervision by federal and state regulators. The 1940 Act and rules issued
     by the SEC thereunder specify certain terms for face-amount certificates,
     the method for calculating reserve liabilities on outstanding certificates,
     the minimum amounts and types of investments to be deposited with a
     qualified custodian to support such reserve liabilities, and a variety of
     other restrictions on the operation and governance of a face-amount
     certificate company. Pursuant to statutory authority, the Minnesota
     Department of Commerce ("MDC") and the Illinois Secretary of State exercise
     supervisory powers over the Company's face-amount certificate business
     similar to those under the 1940 Act. In addition, the MDC conducts
     examinations of the Company on a periodic basis. The offer and sale of the
     Company's face-amount certificates also are subject to federal and state
     securities laws.

(d)  FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT
     SALES

     The Company has no foreign operations.


ITEM 2.  PROPERTIES

     The Company's and ARM's corporate executive offices (the "Corporate
Offices") are located at 515 West Market Street, Louisville, Kentucky. The
Corporate Offices are the location of the Company's executive officers and the
primary location for ARM's accounting, legal and marketing activities and
various other support personnel.

     The Company's administrative offices are located in New Ulm, Minnesota, at
100 North Minnesota Street.


ITEM 3.  LEGAL PROCEEDINGS

     The Company is not a party to, nor is any of the Company's property the
subject of, any material pending legal proceedings, other than ordinary
litigation routine to the Company's business.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     This information is omitted in accordance with Instruction (I)(2)(c) to
Form 10-K.


                                       5
<PAGE>



                                     PART II

ITEM 5.   MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
            MATTERS

     There is currently no public market or trading in the common stock of the
Company. All of the Company's 250,000 outstanding shares of common stock are
held by ARM as of December 31, 1999. The Company has never paid cash dividends
on its common stock.

     The Company is subject to two principal restrictions on its ability to pay
dividends in addition to the generally applicable restrictions and requirements
of Minnesota corporate law. First, pursuant to Section 28(b) of the 1940 Act,
the Company is required to establish and maintain qualified assets having a
value not less than the aggregate of certificate reserves plus $250,000. Second,
the MDC has determined that face-amount certificate companies such as the
Company should maintain a ratio of shareholder's equity to total assets of a
minimum of 5%. For purposes of determining compliance with both requirements,
assets are based upon a valuation of available-for-sale securities reflected at
amortized cost. The Company could not pay dividends if it did not meet both of
these two requirements or if payment of a dividend would cause it not to meet
such requirements. As of December 31, 1999, the Company had qualified assets in
excess of certificate reserves plus $250,000 of $4.6 million and total assets in
excess of the 5% ratio of $3.2 million.

ITEM 6.  SELECTED FINANCIAL DATA

     This information is omitted in accordance with Instruction (I)(2)(a) to
Form 10-K.

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS

RELATIONSHIP WITH ARM FINANCIAL GROUP, INC.

     The Company is a wholly owned subsidiary of ARM. Pursuant to an Investment
Services Agreement and an Administrative Services Agreement, the Company's
operations are administered and managed by ARM.

     On July 29, 1999, ARM announced that it was restructuring its institutional
business and positioning its retail business and technology operations for the
sale of ARM or its businesses or its assets. Following the July 29, 1999
announcement, the ratings of ARM and Integrity were significantly lowered
several times by four major rating agencies, materially and adversely affecting
Integrity's ability to market and maintain persistency of retail products. As a
result, ARM sought protection with respect to its insurance subsidiary,
Integrity, from the Ohio Department of Insurance. Integrity is domiciled in
Ohio. On August 20, 1999, Integrity consented to a Supervision Order issued by
the Ohio Department of Insurance. The supervision order was terminated on March
3, 2000 as a result of the consummation of the Insurance Transaction.

     On December 17, 1999 ARM announced that it had signed a definitive
agreement whereby Western and Southern would acquire ARM's insurance
subsidiaries, Integrity and National Integrity


                                       6
<PAGE>

Life Insurance Company. The acquisition of the insurance companies by Western
and Southern was implemented in a voluntary petition for relief under chapter 11
of the Bankruptcy Code filed on December 20, 1999 in the United States
Bankruptcy Court for the District of Delaware. In re: ARM Financial Group, Inc.,
Case No.: 99-4430(Judge Walsh). The transaction was approved by the Bankruptcy
Court on March 2, 2000 and closed on March 3, 2000.

     Western and Southern did not acquire the Company or ARM Securities. As a
result of the consummation of the Insurance Transaction, the vast majority of
ARM's employees, including the employees who support the Company, became
employees of Integrity Life Insurance Company ("Integrity"). (see Item 7 below).
Employees of Integrity are assisting ARM in winding up ARM's affairs, including
the administration of the Company, pursuant to a Transition Services Agreement
dated March 3, 2000 ("the Transition Services Agreement"). The Transition
Services Agreement has a term of eighteen months, but may be terminated by
Western and Southern after six months, upon 90 days notice.

     During the fourth quarter of 1999, the Company entered into discussions
with several companies to evaluate the possibility of a sale of the Company to
one of these companies. As described in Part I, Item 1(a) above, on March 28,
2000 ARM and the Company entered into a definitive agreement to sell the Company
to 1st Atlantic. 1st Atlantic is a Maryland corporation currently engaged in the
sale of face-amount certificates. There can be no assurance that a transaction
will be consummated, or that the required approvals of the Bankruptcy Court and
various other regulatory bodies will be received. If a closing cannot be
consummated with 1st Atlantic, ARM may seek to sell the Company to another
party, or to avail itself of other options that may be available to it,
including the possible refund of currently held certificates and the dissolution
of the Company (subject to regulatory approval).

     Pursuant to the WTR&A Agreement, ARM retained WTR&A as its Restructuring
Agent, to provide consulting and management services to ARM, including services
related to the sale of the Company to 1st Atlantic. On March 2, 2000, WTR&A's
retention was approved by the Bankruptcy Court. WTR&A is a consulting firm that
specializes in crisis management, bankruptcy administration and asset
liquidation services.

RESULTS OF OPERATIONS

1999 COMPARED WITH 1998

     Net investment income (net income excluding net realized investment gains
and losses) was $408,673 and $133,733 for 1999 and 1998, respectively. The
increase in net investment income was primarily attributable to a decrease in
real estate expenses (due to the sale of real estate in 1998), and lower
investment and other expenses.

     Net investment spread, which is the difference between investment income
and interest credited on certificate reserves, decreased to $0.7 million during
1999 from $0.8 million in 1998. These amounts reflect net investment spread of
1.20% and 1.12% during 1999 and 1998, respectively, between the Company's
investment yield on average cash and investments and the average rate


                                       7
<PAGE>

credited on certificate reserves. The Company's investment income decreased to
$2.3 million from $2.8 million for 1999 and 1998, respectively. These amounts
represent investment yields of 6.20% and 6.46% on average cash and investments
of $36.9 million and $43.8 million for 1999 and 1998, respectively. This
decrease in annualized investment yield on cash and investments was primarily
attributable to the Company investing in lower yielding securities during 1999
compared to 1998.

     Interest credited on certificate reserves was $1.6 million and $2.1 million
for 1999 and 1998, respectively. These amounts represent average rates of
interest credited of 5.00% and 5.34% on average certificate reserves of $32.3
million and $38.7 million for 1999 and 1998, respectively. The majority of the
Company's outstanding face-amount certificates are fixed-rate three year
contracts. The Company monitors credited interest rates for new and renewal
issues against competitive products, mainly bank certificates of deposit.
Credited interest rate adjustments (up or down) on new certificates are made as
the Company deems necessary. New and renewal contracts issued during 1999 have
crediting rates that are generally lower than contracts that matured during that
period, resulting in the overall decrease in the average crediting rate.

     Investment and other expenses were $369,825 and $575,823 for 1999 and 1998,
respectively. The decrease in investment and other expenses is primarily
attributable to a decrease in management and investment advisory fees, deferred
acquisition cost amortization and renewal commissions, and real estate expenses
in 1999 of $53,093, $85,316 and $87,813, respectively, compared to 1998.

     Realized investment losses (net of gains) were $470,507 and $152,977 for
1999 and 1998, respectively. Realized investment losses for 1998 include a loss
of $178,795 related to the write-down to fair value and subsequent sale of the
Company's real estate investment. Other realized investment gains and losses
were primarily interest-rate related and attributable to the asset/liability
management strategies of the Company. Fixed maturities and equity securities
(i.e., non-redeemable preferred stock) classified as available-for-sale are sold
during rising and falling interest rate environments which can result in
period-to-period swings in interest-rate related realized investment gains and
losses.

     In the event that the Company experiences higher than historical levels of
certificate surrenders, the Company might need to liquidate investments other
than in accordance with its normal asset/liability management strategy and, as a
result, the Company could experience substantial realized investment losses. If
the Company requires additional capital, it is unlikely that such capital would
be available from ARM. (SEE "-RELATIONSHIP WITH ARM FINANCIAL GROUP, INC.")

     During 1999, net income was $36,143 compared to $30,643 in 1998. The
increase was primarily attributable to an increase in net investment income
partially offset by an increase in net realized investment losses.

     Certificate reserves decreased $4.0 million or 11.6% during 1999, as
maturities and surrenders exceeded sales and renewals. The Company believes a
factor leading to the decrease was the modest increase in intermediate-term
market interest rates in 1999, which enhanced the attractiveness of competing
products, such as money market funds and bank certificates of deposit. For
certificates reaching their maturity date during 1999 and 1998, 66% and 61%,
respectively, were renewed.


                                       8
<PAGE>

1998 COMPARED WITH 1997

     Net investment income was $133,733 and $258,205 for 1998 and 1997,
respectively. The decrease in net investment income was primarily attributable
to a decrease in net investment spread, partially offset by lower investment and
other expenses.

     Net investment spread decreased to $0.8 million during 1998 from $1.1
million in 1997. These amounts reflect net investment spread of 1.12% and 1.63%
during 1998 and 1997, respectively, between the Company's investment yield on
average cash and investments and the average rate credited on certificate
reserves. The Company's investment income decreased to $2.7 million from $3.9
million for 1998 and 1997, respectively. These amounts represent investment
yields of 6.46% and 7.43% on average cash and investments of $43.8 million and
$52.9 million for 1998 and 1997, respectively. This decrease in investment yield
on cash and investments was primarily attributable to the Company investing in
more corporate and plain vanilla mortgage-backed securities during 1998 compared
to 1997. As a result of this trading activity, above normal average cash
balances were held, further depressing the investment yield.

     Interest credited on certificate reserves was $2.1 million and $2.8 million
for 1998 and 1997, respectively. These amounts represent average rates of
interest credited of 5.34% and 5.80% on average certificate reserves of $38.7
million and $48.2 million for 1998 and 1997, respectively. New and renewal
contracts issued during 1998 had crediting rates that were generally lower than
contracts that matured during 1998, resulting in the overall decrease in the
average crediting rate.

     Investment and other expenses were $575,823 and $755,256 for 1998 and 1997,
respectively. The decrease in investment and other expenses was primarily
attributable to a decrease in management and investment advisory fees and real
estate expenses in 1998 of $39,333 and $76,247, respectively, compared to 1997.
In addition, there was no goodwill amortization during the year ended December
31, 1998 compared to the $23,833 for the year ended December 31, 1997. The
goodwill asset became fully amortized during the second quarter of 1997.

     Realized investment losses were $152,977 and $268,002 for 1998 and 1997,
respectively. Realized investment losses for 1998 included loss of $178,795
related to the write-down to fair value and subsequent sale of the Company's
real estate investment. Other realized investment gains and losses were
primarily interest-rate related and attributable to the asset/liability
management strategies of the Company. Fixed maturities and equity securities
(i.e., non-redeemable preferred stock) classified as available-for-sale are sold
during rising and falling interest rate environments which can result in
period-to-period swings in interest-rate related realized investment gains and
losses.

     During 1998, net income was $30,643 compared to $94,688 in 1997. The
decrease was primarily attributable to a decrease in net investment income.

     Certificate reserves decreased $11.1 million or 24.5% during 1998, as
maturities and surrenders exceeded sales and renewals. The Company believes a
significant factor leading to the decrease was that the certificate of deposit
marketplace was very competitive, as many financial institutions


                                       9
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offered special high rates to induce customers to open new accounts. For
face-amount certificates reaching their maturity date during 1998 and 1997, 61%
and 64%, respectively, were renewed.


ASSET PORTFOLIO REVIEW

     The Company primarily invests in securities with fixed maturities with the
objective of providing reasonable returns while limiting liquidity and credit
risks. The Company's investments in fixed maturities were 100% and 97%
investment grade as of December 31, 1999 and 1998, respectively. Investment
grade securities are those classified as 1 or 2 by the National Association of
Insurance Commissioners, or where such classifications are not available,
securities are classified by a nationally recognized statistical rating
organization (i.e., Standard & Poor Corporation's rating of BBB- or above).
Additionally, the Company's investment portfolio has no exposure to real estate,
mortgage loans and common equity securities. As of December 31, 1999, the
Company held no securities that had defaulted on principal or interest payments.

     Fixed maturities include mortgage-backed and asset-backed securities,
corporate securities, U.S. Treasury securities and other government obligations.
Mortgage-backed securities ("MBSs"), which include pass-through securities and
collateralized mortgage obligations ("CMOs"), totaled $10.3 million at December
31, 1999, representing 30.1% of total qualified assets (48.0% at December 31,
1998). The Company's investments in CMOs represented 29.2% and 46.7% of the
Company's qualified assets as of December 31, 1999 and 1998, respectively. MBSs,
including CMOs, are subject to risks associated with prepayments of the
underlying mortgage loans. Prepayments cause these securities to have actual
maturities different from those expected at the time of purchase. The degree to
which a security is susceptible to either an increase or decrease in yield due
to prepayment speed adjustments is influenced by the difference between its
amortized cost and par, the relative sensitivity of the underlying mortgages
backing the assets to prepayments in a changing interest rate environment and
the repayment priority of the securities in the overall securitization
structure. Prepayment sensitivity is evaluated and monitored, giving full
consideration to the collateral characteristics, such as weighted average coupon
rate, weighted average maturity and the prepayment history of the specific loan
pool. Additionally, the Company routinely projects three-year liability and
asset cash flows to monitor the level of liquidity for maturing face-amount
certificates.

     Based on the provisions of Statement of Financial Accounting Standards
("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," the Company currently classifies its fixed maturity and equity
securities as available-for-sale. Such securities are carried at fair value and
changes in fair value, net of related deferred income taxes, are charged or
credited directly to shareholder's equity. Fluctuations in interest rates during
1999 resulted in unrealized losses of $825,522 at December 31, 1999 compared to
unrealized gains of $70,448 (net of $37,942 in deferred income taxes) at
December 31, 1998. Volatility in reported shareholder's equity occurs as a
result of the application of SFAS No. 115, which requires some assets to be
carried at fair value while other assets and all liabilities are carried at
historical values. As a result, adjusting the shareholder's equity for changes
in the fair value of the Company's fixed maturities and equity securities
without reflecting offsetting changes in the value of the Company's liabilities
or other

                                       10
<PAGE>

assets creates volatility in reported shareholder's equity but does not
reflect the underlying economics of the Company's business.

LIQUIDITY AND FINANCIAL RESOURCES

     As of December 31, 1999, the Company had $4.6 million of qualified assets
in excess of the minimum amount required by the 1940 Act and the rules and
regulations promulgated thereunder by the SEC, as computed in accordance with
Section 28(b) of the 1940 Act. In addition, the MDC has historically recommended
to the Company that face-amount certificate companies should maintain a ratio of
shareholder's equity to total assets of a minimum of 5% based upon a valuation
of available-for-sale securities reflected at amortized cost for purposes of
this calculation. Under this formula, the Company's capital ratio was 14.0% at
December 31, 1999. The Company has never paid cash dividends on its common stock
in order to maintain and increase capital resources.

     The primary liquidity requirement of the Company relates to its payment of
certificate maturities and surrenders. The principal sources of cash to meet
such liquidity requirements are investment income and proceeds from maturities
and redemptions of investments.

     At December 31, 1999, cash and cash equivalents totaled $14.4 million, an
increase of $11.1 million from December 31, 1998. Due to the uncertainty
surrounding ARM and the ownership of the Company significantly higher levels of
cash and cash equivalents were maintained in 1999. The Company's aim is to
manage its cash and cash equivalents position so as to satisfy short-term
liquidity needs. In connection with this management of cash and cash
equivalents, the Company may invest idle cash in short duration fixed maturities
to capture additional yield when short-term liquidity requirements permit.

     Cash flows of $2.1 million, $2.2 million and $4.0 million were generated
from operating activities in 1999, 1998 and 1997, respectively. These cash flows
resulted principally from investment income, less management and investment
advisory fees and commissions paid. Proceeds from sales, redemptions and
maturities of investments generated $37.0 million, $50.1 million and $93.1
million in cash flows during 1999, 1998 and 1997, respectively, which were
offset by purchases of investments of $22.5 million, $49.3 million and $79.5
million, respectively.

YEAR 2000

     ARM completed its Year 2000 compliance project as it relates to the Company
prior to December 31, 1999. The costs of ARM's Year 2000 initiatives were not
material to ARM's results of operations or financial condition. Likewise, costs
to the Company that related to Year 2000 compliance were not material to the
Company's results of operations or financial condition.

     To date, the Company has experienced no major interruption of business
activities. Even though ARM has assessed and continues to assess third party
issues, it has no direct ability to influence the compliance actions of such
parties. Accordingly, while ARM believes its actions in this regard should have
the effect of reducing Year 2000 risks, it is unable to eliminate them or to
estimate the ultimate effect Year 2000 risks will have on ARM's operations.


                                       11
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The Company's financial statements begin on page F-3. Reference is made to
the Index to Financial Statements on page F-1 herein. There is no additional
supplementary data filed herein.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
           FINANCIAL DISCLOSURE

     There have been no changes in or disagreements with independent accountants
on accounting, auditing, or financial reporting matters.





                                       12
<PAGE>

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     This information is omitted in accordance with Instruction (I)(2)(c) to
Form 10-K.

ITEM 11. EXECUTIVE COMPENSATION

     This information is omitted in accordance with Instruction (I)(2)(c) to
Form 10-K.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     This information is omitted in accordance with Instruction (I)(2)(c) to
Form 10-K.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     This information is omitted in accordance with Instruction (I)(2)(c) to
Form 10-K.





                                       13
<PAGE>


                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)  DOCUMENTS FILED AS PART OF THIS REPORT

     1.   FINANCIAL STATEMENTS.

              See financial statements index on page F-1 of this document for a
         listing of financial statements and related report of independent
         auditors included in this report.


     2.  FINANCIAL STATEMENT SCHEDULES

              The following financial statement schedules of the Company and the
         related Report of Independent Auditors are incorporated herein as
         follows:

              Report of Independent Auditors

              Schedule I   Investments in Securities of Unaffiliated
                           Issuers-December 31, 1999
              Schedule V   Qualified Assets on Deposit-December 31, 1999
              Schedule VI  Certificate Reserves-Year Ended December 31, 1999
              Schedule XII Valuation and Qualifying Accounts-December 31, 1999

              Schedules required by Article 6 of Regulation S-X for face-amount
         certificate investment companies other than those listed are omitted
         because they are not required, are not applicable, or equivalent
         information has been included in the financial statements and notes
         thereto, or elsewhere herein.

     3.  EXHIBITS

              See Exhibit Index on page 15 of this report.

(b)  REPORTS ON FORM 8-K

         No reports on Form 8-K were filed by the Company during the fourth
quarter of 1999.


                                       14
<PAGE>


                             SBM CERTIFICATE COMPANY
                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
EXHIBIT
NUMBER                               DESCRIPTION
--------------------------------------------------------------------------------
<C>       <S>
3.1       Articles of Incorporation-filed as Exhibit 3(a) to Registration
          Statement No. 33-38066 dated December 4, 1990.*

3.2       By-laws-filed as Exhibit 3(b) to Registration Statement No. 33-38066
          dated December 4, 1990.*

  4       Instruments defining the rights of security holders-Form of Series 503
          Certificate filed as Exhibit 4 to Registration Statement on Form
          N-8B-4, File No. 811-6268, filed April 1, 1991.*

10.1      Underwriting Agreement by and between the Company and SBM Financial
          Services, Inc. dated June 14, 1995, filed as Exhibit 10(b) to
          Amendment No. 7 to Registration Statement No. 33-38066 of the Company
          dated March 5, 1996.*

10.2      Administrative Services Agreement by and between the Company and ARM
          Financial Group, Inc. dated as of June 14, 1995, filed as Exhibit
          10(c) to Amendment No. 7 to Registration Statement No. 33-38066 of the
          Company dated March 5, 1996.*

10.3      Investment Services Agreement by and between the Company and ARM
          Financial Group, Inc. dated as of June 14, 1995, filed as Exhibit
          10(d) to Amendment No. 7 to Registration Statement No. 33-38066 of the
          Company dated March 5, 1996.*

10.4      Custody Agreement, as amended and supplemented, between the Company
          and First Trust National Association dated December 20, 1990, filed as
          Exhibit 10(b) to Amendment No. 1 to Registration Statement No.
          33-38066 of the Company dated January 2, 1991.*

10.5      Form of Tax Allocation Agreement by and among the Company, ARM
          Financial Group, Inc. and certain ARM subsidiaries dated March 21,
          1996, filed as Exhibit 10.1 to Form 10-Q of the Company, File No.
          811-6268, filed May 14, 1996.*

10.6      Policies on Asset/Liability Risk Management and Investment Management
          of the Company, adopted as of March 19, 1997, filed as Exhibit 10(g)
          to Form S-1 Registration Statement of the Company File No. 33-38066,
          filed March 2, 1998.*

10.7      Indemnification Agreement by and between the Company and ARM Financial
          Group, Inc. dated June 26, 1997, filed as Exhibit 10(h) to Form S-1
          Registration Statement of the Company File No. 33-38066, filed March
          2, 1998.*

10.8      Definitive Agreement

  27      Not applicable.
</TABLE>
          * Previously filed as indicated and incorporated herein by reference.


                                       15
<PAGE>


                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned; thereunto duly authorized, on April 11, 2000.

                                  SBM Certificate Company
                                  Walker, Truesdell, Radick and Associates, Inc.
                                  Restructuring Agent

                                  By:  /s/ Hobart G. Truesdell
                                     -------------------------------------------

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant in the capacities indicated on the 11th day of April 2000.



                     NAME                                                  TITLE
                     ----                                                  -----

            /s/ PAUL J. HOUK                                    Director
------------------------------------------------------
Paul J. Houk


           /s/ ROBERT J. MARSHALL, JR.                          Director
------------------------------------------------------
Robert J. Marshall, Jr.


         /s/ WALTER L. SALES                                    Director
------------------------------------------------------
Walter L. Sales



                                       16
<PAGE>



                                            SBM CERTIFICATE COMPANY

                                         INDEX TO FINANCIAL STATEMENTS


<TABLE>
<S>                                                                                                             <C>
Report of Independent Auditors..................................................................................F-2
Balance Sheets as of December 31, 1999 and 1998.................................................................F-3
Statements of Operations for the Years Ended December 31, 1999, 1998, and 1997..................................F-5
Statements of Shareholder's Equity for the Years Ended December 31, 1999, 1998 and 1997.........................F-6
Statements of Cash Flows for the Years Ended December 31, 1999, 1998 and 1997...................................F-7
Notes to Financial Statements...................................................................................F-8
</TABLE>






                                      F-1
<PAGE>



                         REPORT OF INDEPENDENT AUDITORS

Board of Directors
SBM Certificate Company

We have audited the accompanying balance sheets of SBM Certificate Company as of
December 31, 1999 and 1998, and the related statements of operations,
shareholder's equity, and cash flows for each of the three years in the period
ended December 31, 1999. Our audits also included the financial statement
schedules listed in the Index at Item 14(a). These financial statements and
schedules are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedules based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of SBM Certificate Company at
December 31, 1999 and 1998, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1999, in conformity
with accounting principles generally accepted in the United States. Also, in our
opinion, the related financial statement schedules, when considered in relation
to the basic financial statements taken as a whole, present fairly in all
material respects the information set forth therein.

The accompanying financial statements have been prepared assuming that SBM
Certificate Company will continue as a going concern. As more fully described in
Note 2, SBM Certificate Company is a wholly owned subsidiary of ARM Financial
Group, Inc. On a consolidated basis, ARM Financial Group, Inc. reported a net
loss of $271 million for 1999 and has a capital deficiency. These conditions
raise substantial doubt about ARM Financial Group Inc.'s ability to continue as
a going concern. Because of the aforementioned conditions relating to ARM
Financial Group Inc., and the uncertainties surrounding its plans to address its
liquidity problems, the parent company's actions could have a substantial effect
on the Company's operations, therefore, there is also substantial doubt about
whether SBM Certificate Company will continue as a going concern. (Management's
plans in regard to these matters are also described in Note 2.) The financial
statements do not include any adjustments to reflect the possible future effects
on the recoverability and classification of assets or the amounts and
classification of liabilities that may result from the outcome of this
uncertainty.



Louisville, Kentucky
March 31, 2000


                                      F-2
<PAGE>


                                               SBM CERTIFICATE COMPANY
                                                   BALANCE SHEETS

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
                                                                                             DECEMBER 31,
                                                                                       1999                1998
                                                                                ---------------------------------------
<S>                                                                               <C>                <C>
ASSETS
Qualified assets:
   Cash and investments:
     Investments in securities of unaffiliated issuers:
       Fixed maturities, available-for-sale, at fair value (amortized cost:
         1999-$19,886,594; 1998-$34,136,751)                                      $ 18,998,215        $ 34,149,196
       Equity securities, at fair value (cost: 1999-1998 - $290,688)                   353,545             390,776
     Certificate loans                                                                 124,933             164,209
     Cash and cash equivalents                                                      14,407,479           3,279,970
                                                                                ---------------------------------------
   Cash and investments                                                             33,884,172          37,984,151

   Receivables:
     Dividends and interest                                                            180,962             296,013
     Receivable for investment securities sold                                          53,997              22,249
                                                                                ---------------------------------------
   Total receivables                                                                   234,959             318,262
                                                                                ---------------------------------------
Total qualified assets                                                              34,119,131          38,302,413

Other fixed maturities, available-for-sale, at fair value (amortized
    cost: 1998-$851,978) (unaffiliated issuer)                                               -             847,835
Deferred acquisition costs                                                             150,400             204,228
Other assets                                                                            15,368                   -
                                                                                ---------------------------------------

Total assets                                                                      $ 34,284,899        $ 39,354,476
                                                                                =======================================
</TABLE>


                                      F-3
<PAGE>



                                              SBM CERTIFICATE COMPANY
                                             BALANCE SHEETS (CONTINUED)

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
                                                                                           DECEMBER 31,
                                                                                      1999               1998
                                                                                ------------------------------------
<S>                                                                                <C>               <C>
LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities:
   Certificate reserves                                                            $ 30,116,686      $ 34,067,826
   Deferred federal income taxes                                                              -            27,265
   Accounts payable and other liabilities                                                     -           231,345
                                                                                ------------------------------------
Total liabilities                                                                    30,116,686        34,326,436

Shareholder's equity:
   Common stock, $1 par value; 1,000,000 shares authorized;
     250,000 shares issued and outstanding                                              250,000           250,000
   Additional paid-in capital                                                         3,050,000         3,050,000
   Accumulated other comprehensive income (loss) from net unrealized
    gains and losses on available-for-sale securities                                  (825,522)           70,448
   Retained earnings                                                                  1,693,735         1,657,592
                                                                                ------------------------------------
Total shareholder's equity                                                            4,168,213         5,028,040
                                                                                ------------------------------------

Total liabilities and shareholder's equity                                         $ 34,284,899      $ 39,354,476
                                                                                ====================================
</TABLE>

SEE ACCOMPANYING NOTES.


                                      F-4
<PAGE>

                                            SBM CERTIFICATE COMPANY
                                            STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
                                                                              YEAR ENDED DECEMBER 31,
                                                                ----------------------------------------------------
                                                                      1999             1998              1997
                                                                ----------------------------------------------------
<S>                                                               <C>              <C>               <C>
Investment income:
   Interest income from securities                                $ 2,261,957      $ 2,699,491       $ 3,729,295
   Other investment income                                             29,602          127,006           203,810
                                                                ----------------------------------------------------
Total investment income                                             2,291,559        2,826,497         3,933,105

Investment and other expenses:
   Management and investment advisory fees                            154,042          207,135           246,468
   Deferred acquisition cost amortization and renewal
     commissions                                                      193,973          279,289           288,974
   Real estate expenses                                                 2,610           90,423           166,670
   Amortization of goodwill                                                 -                -            23,833
   Other expenses (income)                                            19,200           (1,024)            29,311
                                                                ----------------------------------------------------
Total investment and other expenses                                   369,825          575,823           755,256

Interest credited on certificate reserves                           1,615,074        2,063,311         2,795,360
                                                                ----------------------------------------------------
Net investment income before
  income taxes                                                        306,660          187,363           382,489
Income tax benefit (expense)                                          102,013          (53,630)         (124,284)
                                                                ----------------------------------------------------
Net investment income                                                 408,673          133,733           258,205

Realized investment losses                                           (470,507)        (152,977)         (268,002)
Income tax benefit on realized
  investment losses                                                    97,977           49,887           104,485
                                                                ----------------------------------------------------
Net realized investment losses                                       (372,530)        (103,090)         (163,517)
                                                                ----------------------------------------------------

Net income                                                          $  36,143        $  30,643         $  94,688
                                                                ====================================================
</TABLE>


SEE ACCOMPANYING NOTES.


                                      F-5
<PAGE>


                                            SBM CERTIFICATE COMPANY
                                       STATEMENTS OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
                                                                           ACCUMULATED
                                                          ADDITIONAL          OTHER                               TOTAL
                                           COMMON           PAID-IN       COMPREHENSIVE       RETAINED         SHAREHOLDER'S
                                            STOCK           CAPITAL       INCOME (LOSS)       EARNINGS            EQUITY
                                       ---------------------------------------------------------------------------------------
<S>                                     <C>              <C>              <C>               <C>                <C>
Balance, January 1, 1997                $ 250,000        $3,050,000        $ 231,541        $1,532,261         $5,063,802

  Net income                                                                                    94,688             94,688
  Change in net unrealized
   gains on available-for-sale
   securities, net of tax                                                   (176,818)                            (176,818)
                                                                                                            ------------------
  Comprehensive loss                                                                                              (82,130)
                                       ---------------------------------------------------------------------------------------
Balance, December 31, 1997                250,000         3,050,000           54,723         1,626,949          4,981,672


  Net income
                                                                                                30,643             30,643
  Change in net unrealized
   gains on available-for-sale
   securities, net of tax                                                     15,725                               15,725
                                                                                                            ------------------
  Comprehensive income                                                                                             46,368
                                       ---------------------------------------------------------------------------------------
Balance, December 31, 1998                250,000         3,050,000           70,448         1,657,592          5,028,040


  Net income                                                                                    36,143             36,143
  Change in net unrealized
   gains (losses) on available-
   for-sale securities, net of tax                                          (895,970)                            (895,970)
                                                                                                            ------------------
  Comprehensive loss                                                                                             (859,827)
                                       ---------------------------------------------------------------------------------------
Balance, December 31, 1999              $ 250,000        $3,050,000        $(825,522)       $1,693,735         $4,168,213
                                       =======================================================================================
</TABLE>


SEE ACCOMPANYING NOTES.


                                      F-6
<PAGE>

                                            SBM CERTIFICATE COMPANY
                                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
                                                                                 YEAR ENDED DECEMBER 31,
                                                                ----------------------------------------------------------
                                                                       1999               1998                1997
                                                                ----------------------------------------------------------
<S>                                                                <C>                <C>                 <C>
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income                                                         $     36,143       $     30,643        $     94,688
   Adjustments to reconcile net income to cash flows
    provided by operating activities:
     Provision for certificate reserves                               1,615,074          2,063,311           2,795,360
     Realized investment losses                                         470,507            152,977             268,002
     Deferral of acquisition costs                                     (140,145)          (325,523)           (314,805)
     Amortization of deferred acquisition costs and
      renewal commissions                                               193,973            279,289             288,974
     Other amortization and depreciation                                 23,711            110,043             465,553
     Deferred tax expense (benefit)                                      11,513            (79,525)           (162,627)
     Decrease in dividends and interest receivable                      115,051             32,503             205,442
     Changes in other assets and liabilities                           (247,085)           (57,214)            323,092
                                                                ----------------------------------------------------------
Cash flows provided by operating activities                           2,078,742          2,206,504           3,963,679

CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Fixed maturity investments:
   Purchases                                                        (22,469,407)       (49,260,045)        (79,455,679)
   Maturities and redemptions                                        26,873,872         24,117,893          10,812,744
   Sales                                                             10,171,240         26,000,513          82,250,553
Sales, maturities and redemptions-mortgage loans and real
  estate                                                                     -             260,296               3,091
Repayment of certificate loans, net                                      39,276             22,083              87,076
                                                                ----------------------------------------------------------
Cash flows provided by investing activities                          14,614,981          1,140,740          13,697,785

CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Amounts paid to face-amount certificate holders                      (5,737,826)       (13,423,346)         (8,179,248)
Amounts received from face-amount certificate holders                   171,612            301,208             325,456
                                                                ----------------------------------------------------------
Cash flows used in financing activities                              (5,566,214)       (13,122,138)         (7,853,792)
                                                                ----------------------------------------------------------

Net change in cash and cash equivalents                              11,127,509        (9,774,894)           9,807,672
Cash and cash equivalents at beginning of year                        3,279,970         13,054,864           3,247,192
                                                                ----------------------------------------------------------

Cash and cash equivalents at end of year                           $ 14,407,479       $  3,279,970        $ 13,054,864
                                                                ==========================================================
</TABLE>


SEE ACCOMPANYING NOTES.


                                      F-7
<PAGE>


                             SBM CERTIFICATE COMPANY

                          NOTES TO FINANCIAL STATEMENTS


1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

     SBM Certificate Company (the "Company") has been a wholly owned subsidiary
of ARM Financial Group, Inc. ("ARM") since June 14, 1995.

NATURE OF OPERATIONS

     The Company is an issuer of face-amount certificates and is registered
under the Investment Company Act of 1940 (the "1940 Act"). A face-amount
certificate is an obligation of the Company requiring the Company to pay
certificate holders the original invested amount of the certificate, plus a
three-year fixed-rate return, at a given maturity date. The Company's
face-amount certificates are sold primarily in the Midwest. Face-amount
certificates, which are similar to bank certificates of deposit, generally
compete with various types of individual savings products offered by banks and
insurance companies that provide a fixed rate of return on investors' money.

BASIS OF PRESENTATION

     The financial statements are prepared in accordance with accounting
principles generally accepted in the United States.

INVESTMENTS

     Fixed maturities and equity securities are classified as
available-for-sale. Available-for-sale securities are stated at fair value, with
the unrealized gains and losses, net of taxes, reported as a separate component
of shareholder's equity in accordance with Statement of Financial Accounting
Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and
Equity Securities." The amortized cost of fixed maturities classified as
available-for-sale is adjusted for amortization of premiums and accretion of
discounts to maturity, or in the case of mortgage-backed securities, over the
estimated life of the security. Such amortization or accretion is computed using
the interest method and is included in investment income. Anticipated
prepayments on mortgage-backed securities are considered in determining the
effective yield on such securities. If a difference arises between anticipated
and actual prepayments, the carrying value of the investment is adjusted with a
corresponding charge or credit to investment income. Interest and dividends are
included in investment income. Certificate loans are carried at their unpaid
principal balances. Cash and cash equivalents consist of highly liquid
investments with maturities of three months or less from the time of purchase.
Security transactions are accounted for on the date the order to buy or sell is
executed. Realized gains and losses on the sale of investments are determined
based upon the specific identification method.


                                      F-8
<PAGE>


DEFERRED ACQUISITION COSTS

     Costs of issuing new face-amount certificates, principally commissions,
have been deferred. These costs are amortized on a straight-line basis over the
initial maturity period of the certificates which is three years.

FACE-AMOUNT CERTIFICATE RESERVES

     Face-amount certificates issued by the Company entitle certificate holders,
who have made either single or installment payments, to receive a definite sum
of money at maturity. Certificate reserves accrue interest, and cash surrender
values are less than accumulated certificate reserves prior to maturity dates.
The reserve accumulation rates, cash surrender values, and certificate reserves,
among other matters, are governed by the 1940 Act.

INCOME TAXES

     The Company uses the liability method of accounting for income taxes. The
Company files a consolidated federal income tax return with ARM and ARM's other
non-life insurance subsidiaries. Pursuant to a tax sharing agreement, the
consolidated income tax due is allocated among the companies based on each
company's proportionate share of taxable income. When tax benefits are
recognized for losses, (capital and operating) to the extent they can be used in
the consolidated return, the company that originally generated the loss is
reimbursed by the benefited company. However, in the event that no consolidated
tax is owed, the tax sharing agreement does not require ARM to reimburse its
subsidiaries for the use of a subsidiary's losses to offset ARM income.

USE OF ESTIMATES

     The preparation of financial statements requires management of the Company
to make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ from
those estimates.

2.   MATERIAL EVENTS OF PARENT COMPANY

     As discussed in Note 1, the Company is a wholly owned subsidiary of ARM,
and pursuant to an Investment Services Agreement and an Administrative
Services Agreement, the Company's operations are administered and managed by
ARM. On July 29, 1999, ARM announced that it was restructuring its
institutional business and positioning its retail business and technology
operations for the sale of ARM or its businesses or its assets. Following the
July 29, 1999 announcement, the ratings of ARM and Integrity were
significantly lowered several times by four major rating agencies, materially
and adversely affecting Integrity's ability to market and maintain
persistency of retail products. As a result, ARM sought protection with
respect to its insurance subsidiary, Integrity, from the Ohio Department of
Insurance. Integrity is domiciled in Ohio. On August 20, 1999, Integrity
consented to a Supervision Order issued by the Ohio Department of Insurance.
The supervision order was terminated on March 3, 2000 as a result of the
consummation of the Insurance Transaction.

     On December 17, 1999 ARM announced that it had signed a definitive
agreement whereby Western and Southern Life Insurance Company ("Western and
Southern") would acquire ARM's


                                      F-9
<PAGE>

insurance subsidiaries, Integrity Life Insurance Company ("Integrity") and
National Integrity Life Insurance Company. The acquisition of the insurance
companies by Western and Southern was implemented in a voluntary petition for
relief under chapter 11 of the Bankruptcy Code filed on December 20, 1999 in the
United States Bankruptcy Court for the District of Delaware. In re: ARM
Financial Group, Inc., Case No.: 99-4430(Judge Walsh). On March 3, 2000 ARM
completed the sale of its insurance subsidiaries to Western and Southern ("the
Insurance Transaction").

     Western and Southern did not acquire the Company or ARM Securities. As a
result of the consummation of the Insurance Transaction, the vast majority of
ARM's employees, including the employees who support the Company, became
employees of Integrity (see Item 7 below). Employees of Integrity are assisting
ARM in winding up ARM's affairs, including the administration of the Company,
pursuant to a Transition Services Agreement dated March 3, 2000 ("the Transition
Services Agreement"). The Transition Services Agreement has a term of eighteen
months, but may be terminated by Western and Southern after six months, upon 90
days notice.

     During the fourth quarter of 1999, the Company entered into discussions
with several companies to evaluate the possibility of a sale of the Company to
one of these companies. On March 28, 2000 ARM entered into a definitive
agreement to sell the Company to 1st Atlantic Guaranty Corporation ("1st
Atlantic") for a purchase price of $650,000. Of the purchase price, $250,000
will be paid directly to ARM and $400,000 will be placed in escrow for 18
months. The escrowed proceeds shall be used to fund certain indemnifications of
ARM. Immediately prior to the closing of the sale of the Company, the Company
shall (subject to obtaining appropriate regulatory approvals) dividend to ARM an
amount equal to the Company's shareholder's equity less (i) $250,000 and (ii)
estimated deferred acquisition costs net of income taxes. The dividend will be
in the form of a transfer of certain securities, in kind, and the balance, if
any, in cash or cash equivalents. The closing of this transaction is subject to
various approvals, including that of the Bankruptcy Court, and is expected to
close in the second quarter of 2000.

   Pursuant to a Letter Agreement dated February 17, 2000 (as amended on March
1, 2000, the "WTR&A Agreement"), ARM retained Walker, Truesdell, Radick &
Associates ("WTR&A") as its Restructuring Agent, to provide consulting and
management services to ARM, including services related to the sale of the
Company to 1st Atlantic. On March 2, 2000, WTR&A's retention was approved by the
Bankruptcy Court. WTR&A is a consulting firm that specializes in crisis
management, bankruptcy administration and asset liquidation services.


                                      F-10
<PAGE>

3. INVESTMENTS

   The amortized cost and estimated fair values of available-for-sale
securities were as follows:

<TABLE>
<CAPTION>
                                             ------------------------------------------------------------------------
                                                                     GROSS             GROSS
                                                                   UNREALIZED       UNREALIZED         ESTIMATED
                                                   COST              GAINS            LOSSES          FAIR VALUE
                                             ------------------------------------------------------------------------
<S>                                            <C>                 <C>              <C>              <C>
DECEMBER 31, 1999:
   Fixed maturities:
     Mortgage-backed securities                $ 10,558,001           $    28        $ 282,218       $ 10,275,811
     Corporate securities                         8,161,388             7,405          569,999          7,598,794
     U.S. Treasury securities and
       obligations of U.S. government
       agencies                                     414,246               205           31,388            383,063
     Foreign governments                            450,602                 -           13,220            437,382
     Asset-backed securities                        139,908                 -            2,583            137,325
     Obligations of state and political
       subdivisions                                 162,449             3,435               44            165,840
                                             ------------------------------------------------------------------------
   Total fixed maturities                        19,886,594            11,073          899,452         18,998,215
   Equity securities                                290,688            62,857                -            353,545
                                             ------------------------------------------------------------------------
       Total available-for-sale securities     $ 20,177,282         $  73,930        $ 899,452       $ 19,351,760
                                             ========================================================================

DECEMBER 31, 1998:
   Fixed maturities:
     Mortgage-backed securities                $ 18,342,358          $ 74,953        $  45,435       $ 18,371,876
     Corporate securities                         9,637,558            75,980          115,474          9,598,064
     U.S. Treasury securities and
       obligations of U.S. government
       agencies                                   6,062,081            58,793            7,162          6,113,712
     Foreign governments                            450,787                 -           42,056            408,731
     Asset-backed securities                        334,340                 -            2,643            331,697
     Obligations of state and political
       subdivisions                                 161,605            11,346                -            172,951
                                             ------------------------------------------------------------------------
   Total fixed maturities                        34,988,729           221,072          212,770         34,997,031
   Equity securities                                290,688           100,088                -            390,776
                                             ------------------------------------------------------------------------
       Total available-for-sale securities     $ 35,279,417         $ 321,160        $ 212,770       $ 35,387,807
                                             ========================================================================
</TABLE>


                                      F-11
<PAGE>



     The amortized cost and estimated fair value of fixed maturity securities by
contractual maturity are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or repay
obligations with or without call or prepayment penalties and because
mortgage-backed and asset-backed securities provide for periodic payments
throughout their life.

<TABLE>
<CAPTION>
                                                           DECEMBER 31, 1999
                                                   ----------------------------------
                                                                       ESTIMATED
                                                                          FAIR
                                                        COST             VALUE
                                                   ----------------------------------
<S>                                                 <C>               <C>
FIXED MATURITIES:
   Due in one year or less                          $    194,735      $    194,940
   Due after one year through five years                 473,531           460,734
   Due after five years through ten years              2,780,967         2,579,918
   Due after ten years                                 5,739,452         5,349,487
   Asset-backed securities                               139,908           137,325
   Mortgage-backed securities                         10,558,001        10,275,811
                                                   ----------------------------------
     Total fixed maturities                         $ 19,886,594      $ 18,998,215
                                                   ==================================
</TABLE>

     Gross gains of $101,621, $123,867 and $765,664 and gross losses of
$572,128, $95,449 and $1,082,809 were realized on sales of fixed maturities
classified as available-for-sale for the year ended December 31, 1999, 1998, and
1997, respectively.

     Gross gains of $23,459 and $49,143 were recognized on equity securities
sold during 1998 and 1997, respectively. Gross losses of $1,062, were recognized
on equity securities sold for the year ended December 31, 1998. There were no
gross losses recognized on equity securities sold for the year ended December
31, 1997. There were no gross gains or losses recognized on equity securities
sold for the year ended December 31, 1999.

     During 1998, the Company sold its sole investment in real estate and
realized a loss of $178,795 associated with the transaction.


4.   COMPREHENSIVE INCOME

     Comprehensive income is the change in equity of a business enterprise
during a period from transactions and other events and circumstances from
non-owner sources, including net income and the change in unrealized gains or
losses on the Company's available-for-sale securities.


                                      F-12
<PAGE>

     The following table shows, for available-for-sale securities, a
reconciliation of the net unrealized gain (loss) arising during the period and
the change in net unrealized gains (losses) as reported on the accompanying
statements of shareholder's equity. Amounts are reported net of related tax at
the 35% statutory rate.

<TABLE>
<CAPTION>
                                                                          YEAR ENDED DECEMBER 31,
                                                          ---------------------------------------------------------
                                                                 1999                1998               1997
-------------------------------------------------------------------------------------------------------------------
<S>                                                           <C>                  <C>               <C>
  Net unrealized gain (loss) arising
    During period on available-for-sale securities            $ (1,162,300)        $    99,925       $  (235,975)

  Reclassification adjustment for net realized
    (gains) losses included in net income                          266,330             (84,200)           59,157
                                                          --------------------------------------------------------

  Change in net unrealized gains (losses) on
    available-for-sale securities                             $   (895,970)        $    15,725       $  (176,818)
                                                          =========================================================
</TABLE>

5.   CERTIFICATE RESERVES

     Total certificate reserves at December 31 are summarized as follows:

<TABLE>
<CAPTION>
                                                                                    MINIMUM            ADDITIONAL
                                                   1999             1998           INTEREST             INTEREST
                                              -------------------------------------------------------------------------
     <S>                                        <C>             <C>              <C>                  <C>
     Fully-paid certificates:

        Single-payment series 503               $ 27,085,547    $ 30,754,255          2.50%           2.10% to 4.60%
        Installment                                1,958,776       2,084,595     2.50% to 3.50%       1.50% to 2.75%
        Optional settlement                          534,582         594,300     2.50% to 3.00%       2.00% to 2.75%
        Due to unlocated certificate
          holders                                      3,191           3,126          None
                                              --------------------------------
                                                  29,582,096      33,436,276

     Installment certificates:
        Reserves to mature, by series:
          120, and 220                               256,219         302,400          3.25%           1.75% to 2.00%
          315                                        120,540         135,104          3.50%           1.50% to 1.75%
        Advance payments                             157,831         194,046            *                   *
                                              --------------------------------
                                                     534,590         631,550
                                              --------------------------------
             Total certificate reserves         $ 30,116,686    $ 34,067,826
                                              ================================
</TABLE>

     * Minimum interest rates on advance payments are generally the same as the
       rates on scheduled installment payments. Interest credited on advance
       payments, however, is accruing at 5.00% and will continue at that rate
       through 2000.


                                      F-13
<PAGE>


6.   FAIR VALUES OF FINANCIAL INSTRUMENTS

     The following disclosure of the estimated fair values of financial
instruments is made in accordance with the requirements of SFAS No. 107,
"Disclosures About Fair Value of Financial Instruments." The estimated fair
value amounts have been determined using available market information and
appropriate valuation methodologies. However, considerable judgement was
required to develop these estimates. Accordingly, the estimates are not
necessarily indicative of the amounts which could be realized in a current
market exchange. The use of different market assumptions or estimation
methodologies may have a material effect on the estimated fair value amounts.

<TABLE>
<CAPTION>
                                                           DECEMBER 31, 1999                  DECEMBER 31, 1998
                                                   ---------------------------------------------------------------------
                                                       CARRYING         ESTIMATED          CARRYING        ESTIMATED
                                                        VALUE           FAIR VALUE          VALUE          FAIR VALUE
------------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>               <C>             <C>               <C>
Assets:
    Fixed maturities                                  $18,998,215       $18,998,215     $ 34,997,031      $ 34,997,031
    Equity securities                                     353,545           353,545          390,776           390,776
    Certificate loans                                     124,933           124,933          164,209           164,209
    Cash and cash equivalents                          14,407,479        14,407,479        3,279,970         3,279,970
Liabilities:
    Certificate reserves                               30,116,686        30,223,837       34,067,826        34,251,701
    Accounts payable and other liabilities                      -                 -          231,345           231,345
</TABLE>

     The following methods and assumptions were used in estimating fair values:

FIXED MATURITIES AND EQUITY SECURITIES
     Fair values for investments in securities are based on quoted market
prices, where available. For fixed maturities and equity securities for which a
quoted market price is not available, fair values are estimated using internally
calculated estimates or quoted market prices of comparable instruments.

CERTIFICATE LOANS

     The carrying value of certificate loans approximates their fair value.

CASH AND CASH EQUIVALENTS

     The carrying amounts of cash and cash equivalents approximate their fair
value given the short-term nature of these assets.

CERTIFICATE RESERVES

     The fair value of certificate reserves is based on a discounted cash flow
analysis, using the current interest rate offered on new certificates of 5.00%
at December 31, 1999 and 1998.


                                      F-14
<PAGE>

OTHER INVESTED ASSETS, OTHER ASSETS, ACCOUNTS PAYABLE AND OTHER LIABILITIES

     The financial statement carrying amounts of other invested assets, other
assets, accounts payable and other liabilities are deemed to be a reasonable
approximation of their fair value.


7.   FEDERAL INCOME TAXES

     Deferred federal income taxes reflect the net tax effects of (i) temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes, and (ii)
operating and capital losses. Significant components of the deferred tax
liabilities and assets as of December 31, 1999 and December 31, 1998 were:

<TABLE>
<CAPTION>
                                                                                            DECEMBER 31,
                                                                                  ----------------------------------
                                                                                       1999              1998
                                                                                  ----------------------------------
<S>                                                                                   <C>              <C>
Deferred tax liabilities:
   Net unrealized gains on available-for-sale securities                              $       -        $   37,936
   Other                                                                                  1,617             1,616
                                                                                  ----------------------------------
       Total deferred tax liabilities                                                     1,617            39,552

Deferred tax assets:
   Net unrealized losses on available for sale securities                               288,933                 -
   Investments                                                                           96,145            73,867
   Capital loss carryover                                                               138,683                 -
    Net operating loss carryforward                                                           -            58,420
                                                                                  ----------------------------------
       Total deferred tax assets                                                        523,761           132,287
   Valuation allowance for deferred tax assets                                         (522,144)         (120,000)
                                                                                  ----------------------------------
       Net deferred tax assets                                                            1,617            12,287
                                                                                  ----------------------------------
   Deferred tax liabilities shown on the accompanying balance sheets                  $     -          $   27,265
                                                                                  ==================================
</TABLE>

     The Company's net operating loss carryforward of $166,915 at December 31,
1998 was fully utilized in 1999.

   The components of the provision for federal income tax expense consist of
the following:

<TABLE>
<CAPTION>
                                                                              YEAR ENDED DECEMBER 31,
                                                                 ---------------------------------------------------
                                                                      1999              1998             1997
                                                                 ---------------------------------------------------
<S>                                                                 <C>               <C>              <C>
Current                                                             $ (211,503)       $  83,268        $  182,426
Deferred                                                                11,513          (79,525)         (162,627)
                                                                 ---------------------------------------------------
Total federal income tax expense (benefit)                          $ (199,990)       $   3,743        $   19,799
                                                                 ===================================================
</TABLE>

     In the event that future tax assets are recognized on deductible temporary
differences for which a valuation allowance was provided at the Acquisition
date, such benefits are applied to first reduce the balance of goodwill. During
1997, goodwill was reduced by $89,262 as a result of realizing such


                                      F-15
<PAGE>

benefits. No such benefits were realized in 1999 and 1998. The 1997 reduction in
the valuation allowance of $314,521 reduced the goodwill balance to zero.

Federal income tax expense differs from that computed by using the federal
income tax rate of 35% as shown below.

<TABLE>
<CAPTION>
                                                                             YEAR ENDED DECEMBER 31,
                                                              ------------------------------------------------------

                                                                    1999              1998               1997
                                                              ------------------------------------------------------
<S>                                                               <C>                <C>                <C>
Income tax expense (benefit) at statutory rate                    $  (57,346)        $   12,035         $  40,070
Unreimbursed capital loss carryover used by ARM                            -            281,842                 -
Increase (decrease) in valuation allowance related to
    capital loss carryover                                            66,700           (280,000)                -
Decrease in contingent tax liability                                (200,000)                 -                 -
Dividend received deduction                                           (7,211)            (7,749)          (12,457)
Tax-exempt interest                                                   (2,612)            (4,194)           (5,677)

Goodwill amortization                                                      -                  -             8,342
Other                                                                    479              1,809           (10,479)
                                                              ------------------------------------------------------
Total federal income tax expense (benefit)                        $ (199,990)        $    3,743         $  19,799
                                                              ======================================================
</TABLE>

     The Company files a consolidated federal income tax return with ARM and
ARM's other non-life insurance subsidiaries. At December 31, 1999 and 1998,
($28,282) and $103,373 were due to/(from) ARM, respectively, pursuant to the tax
sharing agreement, related to ordinary losses.

8.   RELATED PARTY TRANSACTIONS

     Management and investment advisory fee expenses reflected in the
accompanying financial statements represent allocations of expenses from ARM.
These allocations include amounts for administrative and investment services,
including use of property, equipment and facilities. The allocations are
currently based on the proportion which such business and assets managed
represents of all of ARM's and its subsidiaries' business activities. The
allocations were $154,042, $207,135, and $246,468 for the years ended December
31, 1999, 1998, and 1997, respectively. Management believes that the methods
used to allocate such expenses are reasonable.

     The Company has paid ARM Securities Corporation, an affiliate, $140,145,
$325,523 and $314,805 for the years ended 1999, 1998 and 1997, respectively, for
sales commissions and other issuance, underwriting and sales expenses.

9.   SHAREHOLDER'S EQUITY AND REGULATORY MATTERS

     The Company is subject to two principal restrictions relating to its
regulatory capital requirements. First, under the 1940 Act, the Company is
required to establish and maintain qualified


                                      F-16
<PAGE>

assets (as defined in Section 28(b) of the 1940 Act) having a value not less
than the aggregate of certificate reserves plus $250,000 ($30.4 million and
$34.3 million at December 31, 1999 and 1998, respectively). The Company had
qualified assets (at amortized cost) of $34.9 million and $38.2 million at those
respective dates.

     For purposes of determining compliance with the foregoing provisions,
qualified assets are valued in accordance with District of Columbia Insurance
Laws (the "D.C. Laws") as required by the 1940 Act. Qualified assets for which
no provision for valuation is made in the D.C. Laws are valued in accordance
with rules, regulations, or orders prescribed by the SEC. These values are the
same as the financial statement carrying values, except that for financial
statement purposes, fixed maturities and equity securities classified as
available-for-sale are carried at fair value. For qualified asset purposes,
fixed maturities classified as available-for-sale are valued at amortized cost
and equity securities are valued at cost.

     Second, the Minnesota Department of Commerce ("MDC") has historically
recommended to the Company that face-amount certificate companies should
maintain a ratio of shareholder's equity to total assets of a minimum of 5%
based upon a valuation of available-for-sale securities at amortized cost for
purposes of this calculation. Under this formula, the Company's capital ratio
was 14.0% and 12.6% at December 31, 1999 and 1998, respectively.

     Pursuant to the required calculations of various states, the provisions of
the certificates, depository agreements, and the 1940 Act, qualified assets of
the Company were deposited with independent custodians to meet certificate
liability requirements as of December 31, 1999 and 1998, as shown in the
following table. Certificate loans, secured by applicable certificate reserves,
are deducted from certificate reserves in computing deposit requirements.

<TABLE>
<CAPTION>
                                                                                      1999                1998
                                                                               ---------------------------------------
<S>                                                                              <C>                 <C>
Qualified assets on deposit with:
   Central depositary                                                            $ 34,214,584        $ 37,534,866
   State governmental authorities                                                     197,021             196,143
                                                                               ---------------------------------------
     Total qualified assets on deposit                                             34,411,605        $ 37,731,009
                                                                               =======================================

     Required deposits (certificate reserves less certificate loans
        plus $250,000)                                                           $ 30,241,753        $ 34,153,617
                                                                               =======================================
</TABLE>

   Qualified assets on deposit consisted of investment securities, at cost plus
accrued interest at December 31, 1999 and 1998.


                                      F-17
<PAGE>

                                              SBM CERTIFICATE COMPANY

                                      INDEX TO FINANCIAL STATEMENT SCHEDULES

                                                 DECEMBER 31, 1999


<TABLE>
<CAPTION>
                                                                                                           Page
                                                                                                           ----
<S>                                                                                                        <C>
Schedule I    Investments in Securities of Unaffiliated Issuers.............................................S-2
Schedule V    Qualified Assets on Deposit...................................................................S-5
Schedule VI   Certificate Reserves..........................................................................S-6
Schedule XII  Valuation and Qualifying Accounts............................................................S-12
</TABLE>


Schedules required by Article 6 of Regulation S-X other than those listed are
omitted because they are not required, are not applicable, or equivalent
information has been included in the financial statements and notes thereto, or
elsewhere herein.


                                      S-1
<PAGE>


                                  SBM CERTIFICATE COMPANY

                 SCHEDULE I--INVESTMENTS IN SECURITIES OF UNAFFILIATED ISSUERS

                                     DECEMBER 31, 1999

<TABLE>
<CAPTION>
                                                                           PRINCIPAL
NAME OF ISSUER AND TITLE OF ISSUE                                            AMOUNT      COST (a)(b)      VALUE (a)
---------------------------------------------------------------------------------------------------------------------
<S>                                                                       <C>          <C>               <C>
FIXED MATURITIES AVAILABLE-FOR-SALE:

  U.S. TREASURY SECURITIES:
      U.S. Treasury Note, 5.625%, due 5/15/2008                           $  200,000   $    219,512      $   188,124
      U.S. Treasury Note, 5.50%, due 4/15/2000                               195,000        194,734          194,939
                                                                                     --------------------------------
                                                                                            414,246          383,063


  OBLIGATIONS OF STATE AND POLITICAL SUBDIVISIONS:
      Belmont County, Ohio, Sanitary Sewer District #3 Waterworks
        Revenue Bonds, 4.25%, due 4/01/2004                                   24,000         22,930           23,353
      Douglas County, Washington, Public Utilities District #1, Wells
        Hydroelectric Revenue Bonds, 4%, due 9/01/2018                        55,000         46,646           49,161
      North Marshall, Kentucky, Water District, 5%, due 5/01/2006             25,000         24,076           24,573
      Yuba County, California, Water Agency Bonds, 4%, due 3/01/2016          75,000         68,797           68,753
                                                                                     --------------------------------
                                                                                            162,449          165,840

  FOREIGN GOVERNMENT:
      Korea Development Bank, 6.5%, due 11/15/2002                           450,000        450,602          437,382


  CORPORATE SECURITIES:
    FINANCIAL INSTITUTIONS:
      Bankboston Cap. Trust III, 6.87%, due 6/15/2027                      1,000,000        996,713          975,437
      Central Fidelity Cap. I, Series A, 7.18%, due 4/15/2027                950,000        977,574          930,844
      Citigroup Inc., 7%, due 12/01/2025                                     300,000        316,906          272,160
      First Union Corp., 6.4%, due 4/1/2008                                  960,000        974,711          887,789
      Mercantile Bankcorp, 7.06%, due 2/01/2027                              980,000        984,205          946,309
      Travelers Capital, 7.75%, due 12/01/2036                               308,000        323,958          280,643
                                                                                     --------------------------------
                                                                                          4,574,067        4,293,182

    PUBLIC UTILITIES:
      Laclede Gas Co., Ser B, 5%, due 3/31/2011 (c)                            3,000         55,595           63,000
      MCI Communications Corp., 7.75%, due 3/15/2024                         900,000        970,715          849,060
      Nicor Inc., 5%, due 5/01/2009 (c)                                          800         32,842           32,000
                                                                                     --------------------------------
                                                                                          1,059,152          944,060

    INDUSTRIAL:
      TXU Gas Capital, 7.43%, due 7/1/2028                                   985,000        998,343          914,119
      CBS Corp., 7.15%, due 5/20/2005                                        750,000        781,677          735,848
      USX Corp., 6.65%, due 2/1/2006                                         750,000        748,149          711,585
                                                                                     --------------------------------
                                                                                          2,528,169        2,361,552
                                                                                     --------------------------------

  TOTAL CORPORATE SECURITIES                                                           $  8,161,388      $ 7,598,794
</TABLE>


                                                                             S-2
<PAGE>


                               SBM CERTIFICATE COMPANY

       SCHEDULE I--INVESTMENTS IN SECURITIES OF UNAFFILIATED ISSUERS (CONTINUED)

                                  DECEMBER 31, 1999

<TABLE>
<CAPTION>
                                                                              PRINCIPAL
NAME OF ISSUER AND TITLE OF ISSUE                                               AMOUNT       COST (a)(b)      VALUE (a)
--------------------------------------------------------------------------------------------------------------------------
<S>                                                                           <C>            <C>            <C>
FIXED MATURITIES AVAILABLE-FOR-SALE (CONTINUED):


  ASSET-BACKED SECURITIES:
    Auto Receivable, 96-C A, 7.3%, due 5/10/2002                               $ 140,128     $    139,908   $     137,325


  MORTGAGE-BACKED SECURITIES:
    Blackrock Capital Finance BCF 97-R1 WAC, 6.38446%, due 3/25/2037             638,953          633,755         595,724
    Countrywide Home Loans RAST, 1998-A8 , A6, 6.2124%, due 8/25/2028            900,000          905,653         867,087

    Federal Home Loan Mortgage Corporation:
       6.5%, due 5/15/2028                                                     1,000,000          947,366         909,060
       6.0%, due 1/15/2018                                                     3,530,930        3,533,790       3,491,208
    Federal National Mortgage Association, 9%, due 4/01/2021                      13,478           14,056          14,081

    Government National Mortgage Association:
       11.5%, due 3/15/2015                                                          387              428             430
       11.5%, due 4/15/2013                                                          668              738             739
       11.5%, due 5/15/2015                                                          316              351             352
       11.5%, due 8/15/2013                                                          870              963             962
       6.38%, due 1/20/2026                                                      274,828          279,651         278,906
    Headlands Mortgage Sec. Inc., 1997-5 A17, 7.25%, due 11/25/2027            1,800,000        1,797,822       1,789,308
    PNC Mortgage Securities Corp., 1998-7 1A13, 6.75%, due 9/25/2028             486,522          480,533         448,602
    PNC Mortgage Securities Corp., 1998-7 1A24, 7.25%, due 9/25/2028             956,868          963,037         887,792
    Residential Accredit Loans, 1997-QS8 A9, 7.375%, due 8/25/2027             1,000,000          999,858         991,560
                                                                                          --------------------------------
                                                                                               10,558,001      10,275,811
                                                                                          --------------------------------

TOTAL FIXED MATURITIES AVAILABLE-FOR-SALE                                                    $ 19,886,594   $ 18,998,215
</TABLE>


                                                                             S-3
<PAGE>


                              SBM CERTIFICATE COMPANY

      SCHEDULE I--INVESTMENTS IN SECURITIES OF UNAFFILIATED ISSUERS (CONTINUED)

                                DECEMBER 31, 1999

<TABLE>
<CAPTION>
                                                                            NUMBER OF
NAME OF ISSUER AND TITLE OF ISSUE                                            SHARES       COST (a)(b)      VALUE (a)
-----------------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>           <C>             <C>
EQUITY SECURITIES (d):
  INDUSTRIAL:
       Aluminum Company of America                                                200     $     11,200    $     11,200

EQUITY SECURITIES (CONTINUED) (d):
  PUBLIC UTILITIES:
       Carolina Power & Light                                                     500           31,782          36,750
       Duquesne Light Co.                                                         400           10,800          11,525
       GTE Florida, Inc.                                                        1,500           25,875          28,500
       Entergy Louisiana, Inc.                                                    500           31,851          41,870
       Entergy New Orleans, Inc.                                                  600           31,902          42,012
       Illinois Power                                                             600           16,050          19,350
       Kansas City Power & Light Company                                          200           11,586          13,574
       Midamerican Energy Co.                                                     600           34,200          47,292
       Pacificorp                                                                 500           30,604          38,170
       Pennsylvania Power Co.                                                     200            8,838          14,302
       San Diego Gas & Electric Co.                                             4,000           46,000          49,000
                                                                                       --------------------------------
                                                                                               279,488         342,345
                                                                                       --------------------------------

TOTAL EQUITY SECURITIES                                                                        290,688         353,545
                                                                                       --------------------------------

TOTAL INVESTMENTS IN SECURITIES OF UNAFFILIATED ISSUERS                                   $ 20,177,282    $ 19,351,760
                                                                                       ================================
</TABLE>


(a) See Note 1 to the financial statements regarding the determination of cost
    and fair value.
(b) The aggregate cost of investments in securities of unaffiliated issuers for
    federal income tax purposes was $20,502,683 at December 31, 1999.
(c) These securities are redeemable preferred stocks.
(d) These securities are non-redeemable preferred stock.


                                                                             S-4
<PAGE>



                                              SBM CERTIFICATE COMPANY

                                     SCHEDULE V--QUALIFIED ASSETS ON DEPOSIT

                                                DECEMBER 31, 1999

<TABLE>
<CAPTION>
                                                                               FIRST
                                                                              MORTGAGES
                                                                              AND OTHER
                                                                             FIRST LIENS
                                                           INVESTMENTS           ON
NAME OF DEPOSITARY                             CASH       IN SECURITIES      REAL ESTATE         OTHER         TOTAL
--------------------------------------------------------------------------------------------------------------------------
<S>                                       <C>             <C>                <C>               <C>           <C>
State governmental authorities:
     Securities Department
       of Illinois                        $        -        $    197,021     $        -        $     -       $   197,021
Central depositary:
   First Trust, National Association                          34,214,584                                       34,214,584
                                          --------------------------------------------------------------------------------

Total qualified assets on deposit         $        -        $ 34,411,605     $        -        $     -       $ 34,411,605
                                          ================================================================================

</TABLE>


                                                                             S-5
<PAGE>

                                              SBM CERTIFICATE COMPANY

                                        SCHEDULE VI--CERTIFICATE RESERVES
                                             PART I - SUMMARY OF CHANGES

                                           YEAR ENDED DECEMBER 31, 1999

<TABLE>
<CAPTION>
                                                  BALANCE AT BEGINNING OF YEAR                           ADDITIONS
                                             ---------------------------------------------------------------------------------------
                                                                             RESERVES
                                                NUMBER OF                   (INCLUDING
                                                ACCOUNTS                      ADVANCE                       RESERVE
                                                  WITH         AMOUNT OF      PAYMENTS)                   PAYMENTS BY     CHARGED
                                   YIELD        SECURITY       MATURITY     WITH ACCRUED      CHARGED     CERTIFICATE     TO OTHER
DESCRIPTION                       PERCENT       HOLDERS         VALUE         INTEREST       TO INCOME      HOLDERS     ACCOUNTS (a)
------------------------------------------------------------------------------------------------------------------------------------
<S>                               <C>           <C>        <C>              <C>            <C>            <C>           <C>
Reserves to mature,
  Installment certificates:
    Series 120                     2.75             13     $     77,000     $   274,118    $     9,509     $   1,533     $        -
    Series 220                     2.75             15           80,000         193,385          9,840         2,967              -
    Series 315                     2.66             34          125,400         164,047          5,520         5,020              -


Single payment certificates:
    Series 503                     2.50          2,721       31,099,099      30,754,255      1,514,191       162,027              -

Fully paid installment
 Certificates                      2.50            473        2,391,179       2,084,595         82,952             -         88,905

Optional settlement
certificates:
    Paid-up certificates           2.50             12            4,473           4,362            104             -              -
    Annuities                      3.00             55          575,011         589,938         19,677             -        137,593

Due to unlocated certificate
  Holders                          None             25            3,126           3,126              -            65              -
                                          ---------------------------------------------- -------------------------------------------
  Total                                          3,348     $ 34,355,288    $ 34,067,826    $ 1,641,793     $ 171,612     $  226,498
                                          ============================================== ===========================================

Total charged to income, per above                                                         $ 1,641,793
Less reserve recoveries from terminations
    Prior to maturity                                                                          (26,719)
                                                                                          --------------
Interest credited on certificate reserves, per
    statement of operations                                                                $ 1,615,074
                                                                                          ==============
</TABLE>


NOTES TO PART I
(a)   Transfer to/from other certificate reserves upon conversion.
(b)   Direct interest payment to certificate holders.


                                                                             S-6
<PAGE>

                                              SBM CERTIFICATE COMPANY

                                 SCHEDULE VI--CERTIFICATE RESERVES (CONTINUED)
                                     PART I - SUMMARY OF CHANGES (CONTINUED)

                                           YEAR ENDED DECEMBER 31, 1999

<TABLE>
<CAPTION>
                                                      DEDUCTIONS                            BALANCE AT END OF YEAR
                                       ------------------------------------------ -------------------------------------------
                                                                                                                 RESERVES
                                                                                     NUMBER OF                   (INCLUDING
                                                          CASH                       ACCOUNTS                      ADVANCE
                                                       SURRENDERS                      WITH        AMOUNT OF      PAYMENTS)
                                                        PRIOR TO                     SECURITY       MATURITY    WITH ACCRUED
DESCRIPTION                             MATURITIES      MATURITY     OTHER (a)(b)     HOLDERS        VALUE        INTEREST
-------------------------------------- ------------------------------------------ -------------------------------------------
<S>                                     <C>           <C>            <C>             <C>         <C>            <C>
 Reserves to mature, installment
  certificates:
    Series 120                          $         -   $    22,930     $  83,738              9   $    54,000    $   178,492
    Series 220                                    -             -             -             15        80,000        206,192
    Series 315                               16,973         6,883           825             26       102,300        149,906

Single payment certificates:
    Series 503                            2,460,428     2,727,692       156,806          2,281    28,800,914     27,085,547

Fully paid installment certificates               -       156,766       140,910            461     2,270,391      1,958,776

Optional settlement certificates:
    Paid-up certificates                      1,641           175         1,655              4         1,161            995
    Annuities                               213,621             -             -             50       519,876        533,587

Due to unlocated certificate holders              -             -             -             28         3,191          3,191
                                       ------------------------------------------ -------------------------------------------
    Total                               $ 2,692,663   $ 2,914,446     $ 383,934          2,874   $31,831,833    $30,116,686
                                       ========================================== ===========================================
</TABLE>


                                                                             S-7
<PAGE>

                                         SBM CERTIFICATE COMPANY

                             SCHEDULE VI--CERTIFICATE RESERVES (CONTINUED)
                        PART II - INFORMATION REGARDING INSTALLMENT CERTIFICATES
                                     CLASSIFIED BY AGE GROUPINGS

                                     YEAR ENDED DECEMBER 31, 1999

<TABLE>
<CAPTION>
                                                               BALANCE AT BEGINNING OF YEAR
                                     --------------------- ----------------------------------------------------------
                                                                 NUMBER OF
                                          AGE GROUPING IN      ACCOUNTS WITH       AMOUNT OF            AMOUNT OF
                                               YEARS         SECURITY HOLDERS    MATURITY VALUE          RESERVES
                                     --------------------- ----------------------------------------------------------
<S>                                       <C>                <C>                 <C>                  <C>
Series:
    120                                          23                  2               $   14,000       $    21,636
                                                 24                  -                        -                 -
                                                 31                  1                    5,000            13,509
                                                 33                  1                    6,000            16,617
                                                 34                  1                    6,000            17,789
                                                 35                  1                    3,000             9,659
                                                 36                  1                    6,000            21,208
                                                 37                  1                   10,000            41,739
                                                 38                  1                    5,000            21,727
                                                 39                  1                   10,000            46,118
                                                 40                  3                   12,000            57,742


Interest reserve                                                                                              303

Accrued interest payable                                                                                    6,071
                                                            ---------------------------------------------------------
   Total                                                            13               $   77,000       $   274,118
                                                            =========================================================
</TABLE>


                                                                             S-8
<PAGE>

                                      SBM CERTIFICATE COMPANY

                             SCHEDULE VI--CERTIFICATE RESERVES (CONTINUED)
                        PART II - INFORMATION REGARDING INSTALLMENT CERTIFICATES
                                  CLASSIFIED BY AGE GROUPINGS (CONTINUED)

                                         YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
                                    DEDUCTIONS                           BALANCE AT END OF YEAR
                            ---------------------------- --------------------------------------------------------
                                                                          NUMBER OF
                                  CASH                                    ACCOUNTS
                               SURRENDERS                     AGE           WITH        AMOUNT OF
                                PRIOR TO                    GROUPING      SECURITY      MATURITY      AMOUNT OF
                                MATURITY       OTHER        IN YEARS      HOLDERS        VALUE       RESERVES
                            ---------------------------- --------------------------------------------------------
<S>                            <C>          <C>             <C>          <C>           <C>            <C>
Series:
   120                         $      -     $       -        23                1         $  6,000     $  12,426
                                      -             -        24                1            8,000        10,807
                                      -             -        31                1            5,000        13,509
                                      -             -        33                -                -             -
                                      -             -        34                1            6,000        17,720
                                      -             -        35                1            6,000        18,904
                                      -        43,304        36                1            3,000        10,268
                                      -             -        37                -                -             -
                                      -             -        38                1            6,000        22,511
                                 22,930             -        39                -                -             -
                                      -        40,434        40                2           14,000        68,775

   Interest reserve                                                                                           -
   Accrued interest payable                                                                               3,572
                            ----------------------------              -------------------------------------------
       Total                   $ 22,930     $  83,738                          9        $  54,000     $ 178,492
                            ============================              ===========================================
</TABLE>


                                                                             S-9
<PAGE>

                                         SBM CERTIFICATE COMPANY

                              SCHEDULE VI--CERTIFICATE RESERVES (CONTINUED)
                        PART II - INFORMATION REGARDING INSTALLMENT CERTIFICATES
                                  CLASSIFIED BY AGE GROUPINGS (CONTINUED)

                                       YEAR ENDED DECEMBER 31, 1999

<TABLE>
<CAPTION>
                                                               BALANCE AT BEGINNING OF YEAR
                                         -------------------------------------------------------------------------

                                                               NUMBER OF
                                           AGE GROUPING      ACCOUNTS WITH        AMOUNT OF         AMOUNT OF
                                             IN YEARS       SECURITY HOLDERS   MATURITY VALUE        RESERVES
                                         -------------------------------------------------------------------------
<S>                                        <C>              <C>                <C>                  <C>
Series:
   220                                          22                 1               $   12,000         $  14,787
                                                23                 -                        -                 -
                                                27                 1                    4,000             7,688
                                                29                 -                        -                 -
                                                30                 1                    6,000            13,743
                                                31                 7                   35,000            87,423
                                                32                 3                   15,000            42,166
                                                33                 2                    8,000            23,169
                                                34                 -                        -                 -
                                                                                                              -
     Interest reserve
     Accrued interest payable                                                                             4,409
                                                            ------------------------------------------------------
       Total                                                      15               $   80,000         $ 193,385
                                                            ======================================================

Series:
   315                                           7                 1               $    2,200         $     836
                                                10                 1                    2,200             1,273
                                                11                 1                    5,500             3,536
                                                12                 -                        -                 -
                                                13                 4                   22,000            17,228
                                                14                 3                    8,800             7,673
                                                15                 8                   22,000            21,989
                                                16                 6                   23,100            28,212
                                                17                 1                    2,200             2,978
                                                18                 3                   13,200            19,873
                                                19                 6                   24,200            49,314
                                                20                 -                        -                 -


     Interest reserve                                                                                     7,195
     Accrued interest payable                                                                             3,940
                                                            ------------------------------------------------------
       Total                                                      34               $  125,400         $ 164,047
                                                            ======================================================
</TABLE>


                                                                            S-10
<PAGE>

                                       SBM CERTIFICATE COMPANY

                            SCHEDULE VI--CERTIFICATE RESERVES (CONTINUED)
                       PART II - INFORMATION REGARDING INSTALLMENT CERTIFICATES
                                CLASSIFIED BY AGE GROUPINGS (CONTINUED)

                                    YEAR ENDED DECEMBER 31, 1999

<TABLE>
<CAPTION>
                                        DEDUCTIONS                            BALANCE AT END OF YEAR
                               ----------------------------  ---------------------------------------------------------
                                                                              NUMBER OF
                                   CASH                                       ACCOUNTS
                                SURRENDERS                        AGE           WITH        AMOUNT OF
                                 PRIOR TO                       GROUPING      SECURITY      MATURITY      AMOUNT OF
                                 MATURITY        OTHER          IN YEARS      HOLDERS         VALUE       RESERVES
                               ----------------------------  ---------------------------------------------------------
<S>                             <C>              <C>            <C>           <C>           <C>           <C>
Series:
   220                              $     -       $      -        22              -          $       -     $       -
                                          -              -        23              1             12,000        16,086
                                          -              -        27              -                  -             -
                                          -              -        29              1              4,000         8,524
                                          -              -        30              -                  -             -
                                          -              -        31              1              6,000        14,659
                                          -              -        32              7             35,000        93,039
                                          -              -        33              3             15,000        46,069
                                          -              -        34              2              8,000        24,717

   Interest reserve
   Accrued interest payable                                                                                    3,098
                               ----------------------------                -------------------------------------------
     Total                          $     -       $      -                       15          $  80,000     $ 206,192
                               ============================                ===========================================

Series:
   315                              $     -       $    836         7              -          $       -     $       -
                                          -              -        10              -                  -             -
                                          -              -        11              -                  -             -
                                          -              -        12              2              7,700         5,363
                                          -              -        13              -                  -             -
                                      2,267              -        14              4             22,000        19,018
                                      4,616              -        15              1              2,200         2,098
                                          -              -        16              3              7,700         9,223
                                          -              -        17              7             25,300        33,771
                                          -              -        18              -                  -             -
                                          -              -        19              3             22,000        44,932
                                          -              -        20              6             15,400        27,380

   Interest reserve                                                                                            3,382
   Accrued interest payable                                                                                    4,739
                               ----------------------------                -------------------------------------------
     Total                          $ 6,883       $    836                       26          $ 102,300     $ 149,906
                               ============================                 ==========================================
</TABLE>


                                                                            S-11
<PAGE>



                                SCHEDULE XII-VALUATION AND QUALIFYING ACCOUNTS


<TABLE>
<CAPTION>
                                                             Additions
                                                      ---------------------------
                                                                    Charged to
                                          Beginning    Charged to      Other
              Description                  of Year      Expense      Accounts       Deductions      End of Year
-------------------------------------------------------------------------------------------------------------------
<S>                                      <C>           <C>          <C>             <C>             <C>
(IN THOUSANDS)

 Valuation allowance on deferred tax
  assets:
    Year ended December 31:
      1999                               $    120,000    $ 140,981    $ 261,163(1)            -       $    522,144
      1998                               $    400,000            -            -     $  (280,000)(2)   $    120,000
      1997                               $    714,521            -            -     $  (314,521)(3)   $    400,000
</TABLE>

(1)  The valuation allowance was increased as a result of establishing a full
     valuation allowance on deferred tax assets for unrealized losses on assets
     available-for-sale. The increase in valuation allowance resulted in a
     reduction of shareholders' equity.

(2)  The capital loss carryover was utilized during 1998, and therefore the
     related valuation allowance was released.

(3)  In the event that deferred tax assets are recognized on deductible
     temporary differences for which a valuation allowance was provided at the
     date of an acquisition, such benefits are applied to first reduce the
     balance of intangible assets related to the acquisition, and then income
     tax expense. As such, the Company reduced its valuation allowance with an
     offsetting reduction to goodwill. After goodwill was reduced to zero during
     1997, the reduction in valuation allowance resulted in a reduction of
     income taxes.


                                                                            S-12