File No. 333-41361
As filed with the Securities and Exchange Commission on November 25, 1998.
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
1st ATLANTIC GUARANTY CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
Maryland
(State or other Jurisdiction of Incorporation or Organization)
6726
(Primary Standard Industrial Classification Code Number)
52-2064471
(I.R.S. Employer Identification Number)
4847 Cordell Avenue, Suite 200
Bethesda, MD 20814
(301) 215-7515
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
John J. Lawbaugh
4847 Cordell Avenue, Suite 200
Bethesda, MD 20814
(301) 215-7515
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
COPIES TO:
Richard T. Choi, Esq.
Freedman, Levy, Kroll & Simonds
1050 Connecticut Avenue, Suite 825
Washington, D.C. 20036
(202) 457-5142
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Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Registration Statement.
Registrant hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
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1ST ATLANTIC GUARANTY CORPORATION
Prospectus
November -, 1998
This Prospectus describes four types of face-amount certificates
("Certificates") currently offered by 1st Atlantic Guaranty Corporation ("1st
Atlantic Guaranty" or "Company"):
* Growth Certificates
* Reserve Certificates
* Premier Certificates
* Cornerstone Certificates
You can use the Certificates to lock-in competitive interest rates, guaranteed
by the Company, for one or more renewable terms of varying length to suit your
needs. SEE "The Certificates." Like any securities investment, the
Certificates involve certain risks that you should consider. SEE "Special Risk
Considerations."
Please read this Prospectus carefully before you invest and keep it for future
reference. No one has the authority to change the terms and conditions of the
Certificate as described in this Prospectus, or to bind the Company by any
statement not in it.
NEITHER THE SEC NOR ANY STATE REGULATOR HAS APPROVED OR DISAPPROVED THE
SECURITIES DESCRIBED IN THIS PROSPECTUS OR PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE CERTIFICATES ARE BACKED BY THE ASSETS OF THE COMPANY. THEY ARE NOT INSURED
OR GUARANTEED BY THE FEDERAL GOVERNMENT OR ANY GOVERNMENT AGENCY.
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TABLE OF CONTENTS
<TABLE>
<S> <C>
GLOSSARY. ...................................................................4
QUESTIONS AND ANSWERS........................................................6
SPECIAL RISK CONSIDERATIONS..................................................7
THE CERTIFICATES.............................................................8
At A Glance................................................................8
Growth Certificates........................................................9
Reserve Certificates......................................................10
Premier Certificates......................................................10
Cornerstone Certificates..................................................11
GENERAL TERMS AND CONDITIONS................................................11
Face-Amount...............................................................11
Account Value.............................................................11
Principal Investments.....................................................11
Additional Investments....................................................12
Interest Rates............................................................12
Guarantee Periods.........................................................13
Maturity Date.............................................................14
Fees and Charges..........................................................14
Other Terms and Conditions................................................14
PERFORMANCE.................................................................15
HOW TO BUY CERTIFICATES.....................................................15
Through the Company.......................................................15
Through Authorized Sellers................................................15
Affinity Groups...........................................................15
Investment Amounts........................................................16
Canceling Your Order......................................................16
Application Acceptance....................................................16
ACCESSING YOUR ACCOUNT VALUE................................................16
Interest Withdrawals......................................................16
Principal Withdrawals and Loans...........................................17
Withdrawal Amounts........................................................17
Penalty for Early Withdrawal..............................................17
Effect on Interest Rates..................................................18
Requesting a Withdrawal...................................................18
ACCOUNT TRANSACTIONS........................................................18
Transferring Ownership....................................................18
TAX MATTERS.................................................................19
THE COMPANY.................................................................19
Organization and Operations...............................................19
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Directors and Officers....................................................20
MANAGEMENT..................................................................21
Board of Directors........................................................21
Committees of the Board of Directors......................................22
Investment Adviser........................................................22
Atlantic Capital Funding Corporation......................................23
Related Party Transactions................................................23
RESERVES....................................................................23
INVESTMENTS.................................................................24
Types of Investments......................................................24
Investment Policies.......................................................26
INVESTOR SERVICES...........................................................27
Automatic Investments.....................................................27
Direct Deposits...........................................................27
Inquiries.................................................................27
Reports...................................................................27
INDEPENDENT AUDITORS........................................................27
FINANCIAL STATEMENTS........................................................28
EXPERTS.....................................................................28
THE COMPANY AND ITS SERVICE PROVIDERS........................[back cover page]
</TABLE>
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GLOSSARY
The following is a glossary of terms frequently used in this Prospectus:
ACCOUNT VALUE - your principal investments(s), plus accrued interest, less
withdrawals and applicable fees, charges, and penalties.
CERTIFICATE - one of the four different Certificates currently offered by this
Prospectus, namely, the Cornerstone, Growth, Reserve, and Premier
Certificates.
CERTIFICATE ANNIVERSARY - each 12-month period following the Effective Date of
your Certificate.
CLIENT CARE DEPARTMENT - the department of 1st Atlantic Guaranty Corporation
responsible for administering and servicing the Certificates. The address and
telephone numbers of our Client Care Department are 4847 Cordell Avenue, Suite
200, Bethesda, MD 20814 (1-888-74-YIELD or 301-215-7515).
COMPANY - 1st Atlantic Guaranty Corporation.
EFFECTIVE DATE - generally the first or fifteenth day of any given month,
depending on when we accept your application to purchase a Certificate.
Applications accepted after the first day of the month will have an Effective
Date of the fifteenth day of that month; applications accepted after the
fifteenth day of the month will have an Effective Date of the first day of the
following month.
FACE-AMOUNT - the amount that you invest at the time you purchase your
Certificate. You select the face-amount subject to certain minimum and maximum
limitations.
GUARANTEE PERIOD - a time period that you select to lock in the interest rate
applicable to your principal investment for that period.
INTEREST RATE - the rate of interest that you earn on your Certificate. We
guarantee the interest rate for the Guarantee Periods that you select.
Interest compounds monthly, based on a 30-day month and a 360-day year.
INTEREST RATE DATE - the date on which we set the interest rate available
under the Certificates, generally, the first and fifteenth day of each month.
MATURITY DATE - the date on which the Certificate matures. Each Certificate
matures 20 years after its Effective Date.
MINIMUM INTEREST RATE - the minimum annual rate of interest you will earn on
your principal investment during any Guarantee Period, currently 3.5% for each
Certificate.
OUR, US, WE - 1st Atlantic Guaranty Corporation.
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PRINCIPAL, PRINCIPAL INVESTMENT - the amount of your initial investment and
any subsequent investment (Growth Certificates only). For purposes of these
definitions, we treat interest that has accrued during a Guarantee Period as
principal for the next Guarantee Period to which it is applied.
SURRENDER VALUE - the amount of your Account Value immediately prior to
surrender, less any applicable fees, withdrawal charge and early withdrawal
penalty assessable at the time of surrender.
YOU, YOUR -- a current or prospective Certificate owner.
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QUESTIONS AND ANSWERS
WHO IS 1ST ATLANTIC GUARANTY? 1st Atlantic Guaranty is a Maryland corporation
registered with the SEC as a face-amount certificate company, which is a type
of investment company. Like other investment companies, 1st Atlantic Guaranty
invests the monies that it receives from investors in a portfolio of
securities issued by other companies. It also invests in other types of
assets, including, for example, real estate and real estate loans. SEE "The
Company" and "Investments."
WHAT ARE THE CERTIFICATES? The Certificates are basically guaranteed
fixed-income securities. When you buy a Certificate, you are buying a
guarantee by the Company, backed solely by its assets, to pay you the amount
of your principal investment (known as the "face-amount"), plus accrued
interest (less any withdrawals and applicable fees and charges), when your
Certificate matures. Each Certificate matures 20 years after its Effective
Date. We currently offer four different Certificates that you can select from
to suit your needs. SEE "The Certificates" and "General Terms and Conditions."
WHAT ASSETS BACK THE COMPANY'S GUARANTEES? The Company maintains reserves to
meet its guarantees under the Certificates. These reserves consist primarily
of income-producing instruments such as government and corporate bonds,
preferred stock, and real estate mortgages. SEE "Reserves" and "Other Terms
and Conditions" under "General Terms and Conditions."
WHY BUY A CERTIFICATE? We offer Certificate interest rates that are generally
higher than those available through bank certificates of deposits ("CDs") or
U.S. Treasury obligations ("Treasuries"). SEE "Interest Rates" under "General
Terms and Conditions." The Certificates also have several features that can
give you more investment flexibility than are available through CDs and
Treasuries. SEE "The Certificates" and "General Terms and Conditions." SEE
ALSO "Special Risk Considerations." Unlike CDs or Treasuries, our Certificates
are backed by our assets and are not insured or guaranteed by the federal
government or any government agency.
HOW IS INTEREST PAID? You can elect to withdraw the interest earned on your
Certificate on a monthly, quarterly, or annual basis during the life of your
Certificate. You can also allow your interest to accumulate up to the Maturity
Date of your Certificate. Interest compounds monthly. SEE "Interest
Withdrawals" under "Accessing Your Account Value."
WHAT FACTORS AFFECT THE INTEREST I CAN EARN? The amount of interest you can
earn will depend on the type of Certificate you select, the amount you invest,
the available interest rates, and the length of time you decide to lock in the
interest rate. You can lock in interest rates for Guarantee Periods of 1, 3,
5, and 10 years (5 or 10 years in the case of the Cornerstone Certificates).
You will always earn at least the Minimum Interest Rate for each Certificate,
subject to the terms and conditions described herein. SEE "The Certificates"
and "General Terms and Conditions."
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WHO MANAGES THE COMPANY? The Board of Directors ("Board") of the Company is
primarily responsible for the management of the Company. The Board has
established an Investments Committee, which oversees the investment activities
of the Company. Key Asset Management, Inc. ("Adviser" or "Key Asset
Management"), manages the Company's securities portfolio. As of December 31,
1997, the Adviser managed over $60 billion in assets, including $20 billion in
investment company assets. The Company's wholly-owned subsidiary, Atlantic
Capital Funding Corporation ("Atlantic Capital" or "ACFC"), manages the
Company's real estate loan portfolio. SEE "Management."
HOW DO I BUY OR REDEEM CERTIFICATES? You can purchase and redeem Certificates
by contacting our Client Care Department. SEE "How to Buy Certificates,"
"Accessing Your Account Value," and "Account Transactions." Certain minimum
and maximum investment requirements apply to each Certificate. SEE "At A
Glance" under "The Certificates." For a description of fees and charges that
may apply, SEE "Fees and Charges" under "General Terms and Conditions" and
"Penalty for Early Withdrawal" under "Accessing Your Account Value."
ARE THERE ANY FEES AND PENALTIES UNDER THE CERTIFICATES? We assess a service
fee to process payments of accrued interest. We also assess a maximum
withdrawal charge of 5% on any Account Values withdrawn prior to your 5th
Certificate Anniversary. This charge does not apply to scheduled withdrawals
of interest or to systematic withdrawals under the Reserve Certificate. In
addition, we impose an early withdrawal penalty equal to 12 months accrued
interest on principal amounts withdrawn prior to your 5th Certificate
Anniversary or prior to the end of a Guarantee Period. After your 5th
Certificate Anniversary, the early withdrawal penalty applies only if you
withdraw principal prior to the end of a Guarantee Period. SEE "Fees and
Charges" and "Penalty for Early Withdrawal" under "Accessing Your Account
Value" for details.
SHOULD I BUY A CERTIFICATE? Before purchasing a Certificate, you should
consider whether the Certificate suits your financial objectives, particularly
in light of the amount of your purchase and the long-term nature of the
Certificates. You should not rely on the Certificates for short-term financial
needs. The Certificates are intended to be part of a well-balanced,
comprehensive investment program. SEE "Special Risk Considerations,"
immediately below.
SPECIAL RISK CONSIDERATIONS
As with any security that you buy, you bear certain risks when you invest in a
Certificate. We highlight below certain risks that you may find prudent to
consider before investing in a Certificate.
OPERATING HISTORY. The Company is newly formed, which means it has no
operating history or "track record." This fact is common to all new investment
companies.
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PORTFOLIO INVESTMENTS. We expect to meet our obligations under the
Certificates through earnings on our portfolio investments. Because our
guarantees under the Certificates are backed only by our assets, you bear a
number of portfolio investment risks.
These risks include, for example, (i) market risk (I.E., the risk that the
market value of one or all of our investments might decline), (ii) credit risk
(I.E., the risk that an issuer of a security that we purchased might default),
(iii) liquidity risk (I.E., the risk that one or more of our investments might
not be liquid at the time necessary to meet our payment obligations), (iv)
interest rate risk (I.E., the risk that interest rates might move in a
direction that causes an adverse effect on our investments), and (v) valuation
risk (I.E., the risk that one or more of our investments might be overvalued).
We will try to minimize these risks by adhering to certain reserve
requirements and investment guidelines established by federal law. SEE
"Reserves" and Investments." However, a failure of the Company's portfolio
investments to generate adequate earnings may limit our ability to pay
competitive interest rates and could conceivably prevent the Company from
meeting its obligations (I.E., default) under the Certificates, including the
payment of principal and interest.
YEAR 2000 CONSIDERATIONS. Like other companies, the Company is taking steps to
address the so-called "Year 2000 problem." The problem exists because many
computer programs use only the last two digits to refer to a year and may not
properly recognize a year that begins with a "20" instead of a "19." The
Company believes that its computer systems are Year 2000 compliant. In
addition, the Company has sought assurances from its third party service
providers regarding the steps they are taking to address the Year 2000 problem
so as to enable them to continue to provide uninterrupted services to the
Company. Nevertheless, as a practical matter, the Company cannot predict with
certainty what effect the Year 2000 problem may have on its operations.
COMPETITIVE FACTORS. There are but a handful of face-amount certificate
companies in existence today. One company, IDS Certificate Company, dominates
the face-amount certificate industry. In addition, there exist a number of
financial products, such as CDs and insurance products, which offer investors
a guaranteed fixed rate of return. Our principal means of competing is by
offering attractive interest rates on our Certificates and responsive customer
service.
THE CERTIFICATES
AT A GLANCE
The chart below provides an overview of the four different types of
Certificates we offer. For more detailed information, please refer to the
remainder of this section. SEE ALSO "General Terms and Conditions" for
additional information about common features of the Certificates.
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<TABLE>
<CAPTION>
NAME OF CERTIFICATE
Growth Reserve Premier Cornerstone
<S> <C> <C> <C> <C>
CERTIFICATE TYPE Fully Paid Fully Paid Fully Paid Fully Paid
MINIMUM INVESTMENT $2,500 $25,000 $250,000 $1,000
MINIMUM ADDITIONAL $250* None None None
INVESTMENT Permitted Permitted Permitted
MAXIMUM $250,000 $2.5 million $2.5 million $2.5
INVESTMENT million
GUARANTEE PERIODS 1, 3, 5 or 10 years 5 or 10 years
MATURITY DATE 20 years from Effective Date
BENCHMARKS FOR 1, 3, 5 YEAR GUARANTEE PERIODS: the HIGHER of (i) the average rate
for CDs of comparable maturities as quoted on the Bank Rate
Monitor National Index plus 1.75% and (ii) the yield on Treasuries of
comparable maturities, on a given Interest Rate Date.
FOR 10 YEAR GUARANTEE PERIODS: the yield on 10-year Treasury bonds
plus 3% on a given Interest Rate Date.
FOR THE CORNERSTONE CERTIFICATES: the rate for the 11TH District Cost of
Funds Index plus 3%.
SEE "Interest Rates" under "General Terms and Conditions."
INTEREST RATE 0.5% below to 0.5% above the benchmark**
TARGET
MINIMUM INTEREST 3.5% for all Certificates
RATE
</TABLE>
* You may make additional contributions to your Growth Certificate in an
aggregate amount up to 15% of your initial investment, subject to the
maximum of $37,500.
** Interest rates generally will be higher for larger investments.
GROWTH CERTIFICATES
WHO SHOULD INVEST? Growth Certificates are designed for investors seeking
competitive interest rates on a single lump-sum investment, but who do not
have the amount necessary to purchase a Premier Certificate, which normally
offers a higher rate of interest.
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INVESTMENT AMOUNTS. You can purchase Growth Certificates with a single
principal investment or "lump sum," subject to the limits described above.
Because these Certificates do not require any additional payments, they are
sometimes referred to as "fully paid" Certificates. You have the option,
however, of making one or more additional principal investments in amounts
ranging from $250 up to an aggregate maximum of 15% of your initial
investment, subject to a maximum of $37,500. SEE "Additional Investments"
under "General Terms and Conditions."
RESERVE CERTIFICATES
WHO SHOULD INVEST? Reserve Certificates are designed for investors seeking a
high rate of current income. Because of the Reserve Certificate's unique
systematic withdrawal feature, the Certificate may be ideal for retired
persons who need to receive disbursements from their retirement accounts
either to meet IRS requirements for minimum disbursements from their
tax-qualified plan or to fund retirement living.
INVESTMENT AMOUNTS. You can purchase Reserve Certificates with a single
principal investment ranging from $25,000 to $2.5 million. Like the Growth
Certificates, Reserve Certificates are sometimes referred to as "fully paid"
Certificates. We do not accept additional principal investments under the
Reserve Certificates.
SYSTEMATIC WITHDRAWAL. Reserve Certificates allow you to make systematic
withdrawals of both principal and accrued interest, without incurring any
withdrawal charge or early withdrawal penalty. To take advantage of the
systematic withdrawal feature, you must maintain, at all times, a minimum
Account Value equal to 50% of your original principal investment. You can
choose to make systematic withdrawals either monthly or quarterly. The minimum
amount you may withdraw at any time is $150. We will treat withdrawals as
coming first from accrued interest earned on your principal investment, and
then from principal. Systematic withdrawals will reduce the amount of your
Account Value, and may result in the application of a lower interest rate. SEE
"Effect on Interest Rates" under "Accessing Your Account Value."
PREMIER CERTIFICATES
WHO SHOULD INVEST? Premier Certificates are designed for investors seeking
competitive interest rates on large investments. Interest rates on Premier
Certificates normally will be the most favorable of all of the Certificates
offered by this Prospectus.
INVESTMENT AMOUNTS. You can purchase Premier Certificates with a single
principal investment, subject to the limits described above. Like the Growth
Certificates, Premier Certificates are sometimes referred to as "fully paid"
Certificates. We do not accept additional principal investments under the
Premier Certificates.
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CORNERSTONE CERTIFICATES
WHO SHOULD INVEST? Cornerstone Certificates are designed for investors seeking
competitive interest rates on a single lump-sum investment, who also have an
interest in providing much needed capital to the religious community.
WHAT MAKES THIS CERTIFICATE DIFFERENT? 1st Atlantic Guaranty will invest at
least 35% of the proceeds it receives from the sale of the Cornerstone
Certificates in loans used to purchase, construct, or renovate places of
worship and related educational facilities. 1st Atlantic Guaranty will apply
the balance of the proceeds to other types of investments, such as government
and corporate bonds, preferred stock, and real estate loans.
INVESTMENT AMOUNTS. You can purchase Cornerstone Certificates with a single
principal investment or "lump-sum," subject to the limits described above.
Like the Growth Certificates, these Certificates are sometimes referred to as
"fully paid" Certificates. We do not accept additional principal investments
under the Cornerstone Certificate.
GENERAL TERMS AND CONDITIONS
The following terms and conditions apply to each type of Certificate described
in this Prospectus, unless otherwise specifically noted. We reserve the right
to issue other Certificates with different terms and conditions. The terms and
conditions of your Certificate may not be changed except by mutual agreement.
FACE-AMOUNT
The face-amount of your Certificate equals the amount you invest when you
purchase your Certificate. The face-amount will remain the same during the
life of your Certificate.
ACCOUNT VALUE
Your Account Value initially will equal the face-amount of your Certificate.
Periodically, we will adjust your Account Value to reflect increases due to
additional principal investments (Growth Certificates only) and accrued
interest, and decreases due to withdrawals and fees and charges or penalties.
SEE "Reports" under "Shareholder Services" for information on the types of
reports we will provide to you.
PRINCIPAL INVESTMENTS
The amount that you invest in your Certificate constitutes your principal
investment. We also treat interest that has accrued on your Certificate during
a Guarantee Period and that you apply to another Guarantee Period as principal
for that period. We will credit your principal investment and issue your
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Certificate on its Effective Date, which generally will be either the first or
fifteenth day of a given month, depending on the date we accept your
application.
ADDITIONAL INVESTMENTS
Growth Certificate owners may make additional unscheduled principal
investments during the life of their Certificates, subject to the minimum and
maximum limits described above. Please note that we will credit additional
principal investments only on the first day of each month coinciding with or
following the date we receive your payment. We will not accept additional
principal investments for any Cornerstone, Premier, or Reserve Certificate.
However, you can purchase more than one Certificate of the same type, in which
case we will aggregate your principal investments under all Certificates for
purposes of determining the applicable interest rate on the additional
Certificates you purchase. SEE "Applicable Interest Rate."
INTEREST RATES
WHEN WE CALCULATE INTEREST RATES. We calculate the Certificate interest rates
for each Guarantee Period generally at the beginning and middle of each month
(each an "Interest Rate Date"). We may calculate the interest rates more
frequently or at different times, in our sole discretion, and, from time to
time, we may offer special promotional rates on the Certificates. SEE
"Applicable Interest Rate" below for a discussion of the interest rate that
will apply to your Guarantee Period.
HOW WE CALCULATE INTEREST RATES. We set the interest rates in our sole
discretion, primarily in response to changes in market conditions, as
generally reflected in the benchmarks that we use. On any given Interest Rate
Date, the interest rates available for each Guarantee Period will be the
HIGHER of (i) the Minimum Interest Rate and (ii) our Interest Rate Target for
that Guarantee Period. The Minimum Interest Rate for each Certificate is 3.5%.
The Interest Rate Target for each Guarantee Period will equal the benchmark
for that Period, plus a margin ranging from -0.5% to +0.5%.
When determining the Interest Rate Target for the one, three, and five year
Guarantee Periods under each Certificate (other than the Cornerstone
Certificate), the benchmark will be the HIGHER of: (i) the average rate for
CDs of comparable maturity quoted on the Bank Rate Monitor National Index
("Index") plus 1.75%, and (ii) the yield for Treasuries of comparable
maturity, on a given Interest Rate Date. The average rates set out in the BRM
Index are based on a weekly survey of the 50 largest banks and the 50 largest
thrift institutions in the 10 largest metropolitan areas in the United States.
The BRM Index is a publication of the Bank Rate Monitor, an organization that
collects and disseminates information about bank rates and the banking
industry. The BRM Index does not include an average rate for 10 year CDs.
Accordingly, we use the yield on 10 year Treasury bonds plus 3% as the
benchmark for the 10 year Guarantee Period.
The benchmark for the 5 and 10 year Guarantee Periods under the Cornerstone
Certificates is the 11th District Cost of Funds Index plus 3%. This Index is a
weighted average of the costs of borrowing by member banking institutions of
the Federal Home Loan Bank of San Francisco (the 11th District). The Index
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rate tends to lag market interest rate adjustments and tends to be relatively
stable because institutions borrow money for varying terms and do not pay
market rates for all of their borrowings. The Index is reported monthly, but
generally lags behind two months (e.g. January's index is reported in March,
February's index is reported in April, etc.)
We reserve the right to use, in our sole discretion, an index other than the
BRM Index or 11th District Cost of Funds Index should such indexes cease to be
published.
APPLICABLE INTEREST RATE. The applicable interest rate for your initial
Guarantee Period will be the rate in effect on the date we accept your
application and receive your principal investment at our offices. We will send
you a confirmation of the interest rate that applies to your Certificate. For
subsequent principal investments made under the Growth Certificate, we will
apply the interest rate in effect for the current Guarantee Period in which
you are invested. You will begin earning interest on the Effective Date of
your Certificate or, in the case of any subsequent principal investment
permitted under the Growth Certificates, on the first day of the month
following the date we receive the payment. Prior to the end of each Guarantee
Period, we will notify you in writing or by telephone of the interest rates
available under your Certificate for the subsequent Guarantee Periods. The
interest rate that applies to your Guarantee Period will remain the same
throughout that Guarantee Period and will not be affected by changes in
Certificate interest rates that may occur after you lock in your interest rate
for that Period.
If you already own a Certificate and purchase another of the same type, we
will calculate the interest rate on the new Certificate based on the aggregate
Account Values that you maintain in each Certificate of that type.
INFORMATION ON INTEREST RATES. We will publish quotations of the available
interest rates from time to time. Also, you can find out what the available
interest rates are on any given day by calling us at 1-888-74-YIELD or
301-215-7515. Interest rates for future Guarantee Periods may be greater or
less than the interest rates for the current Guarantee Period that you select.
GUARANTEE PERIODS
You can lock in the interest rates available under your Certificate for
Guarantee Periods of 1, 3, 5 and 10 years (5 and 10 years only in the case of
the Cornerstone Certificates). Your initial Guarantee Period begins on the
Effective Date. Generally, the longer the Guarantee Period you select, the
higher the interest rate you will earn. At the end of each Guarantee Period,
you can select another Guarantee Period of the same or different length. We
will notify you in writing or by telephone at least 15 days prior to the
expiration of each Guarantee Period. For convenience, unless you specify
otherwise prior to the end of your current Guarantee Period, we will
automatically apply your Account Value to another Guarantee Period of equal
length, using the then applicable interest rate.
You may continue to select successive Guarantee Periods up until the
Certificate's Maturity Date. SEE "Maturity Date," immediately below. You may
not select a Guarantee Period that would carry the Certificate past its
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Maturity Date. If you select a Guarantee Period that would end after your
Certificate's Maturity Date, we will instead apply your Account Value to the
next shortest Guarantee Period that ends at or prior to your Certificate's
Maturity Date, using that Period's then applicable interest rate
MATURITY DATE
The Maturity Date for all 1st Atlantic Guaranty Certificates is 20 years from
the Effective Date. On the Maturity Date, we will pay you your Account Value,
which equals the face-amount of your Certificate, plus any subsequent
principal investments, plus all accrued interest, less any withdrawals
previously taken and less applicable fees, charges, and penalties previously
assessed.
FEES AND CHARGES
SERVICE FEES. We charge a per payment fee of $5.00 to process regular monthly,
quarterly, or annual payments of accrued interest that you have elected to
withdraw and $25.00 to process any unscheduled interest payment requests. We
will deduct the fee from each payment you receive. This charge does not apply
to systematic withdrawals under the Reserve Certificates.
WITHDRAWAL CHARGE. If you withdraw some or all of your Account Value
(including any unscheduled withdrawals of accrued interest) prior to your
fifth Certificate Anniversary, we will assess a withdrawal charge from your
remaining Account Value or, in the case of a complete surrender, the amount
withdrawn, according to the following schedule:
AS A % OF AMOUNT WITHDRAWN: 5% 4% 3% 2% 1% 0%
# OF CERTIFICATE ANNIVERSARIES: 1 2 3 4 5 Over 5
This charge does not apply to scheduled withdrawals of interest or to
systematic withdrawals under the Reserve Certificates. In addition to a
withdrawal charge, you may be subject to an early withdrawal penalty. SEE
"Penalty for Early Withdrawal" under "Accessing Your Account Value."
OTHER TERMS AND CONDITIONS
The Certificates carry no voting rights and are not entitled to participate in
any dividends that may be declared by the Board of Directors. The Certificates
are not secured by any particular asset of the Company; however, as required
by federal law, the Company maintains reserves with its custodian to support
its obligations under the Certificates. SEE "Reserves."
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PERFORMANCE
From time to time, we may quote current and historical yields on our
Certificates in advertisements and in sales literature. The availability of
the current yields quoted will depend on when you purchase your Certificate
and how much you invest. Quotations of historical yields are not indicative of
future yields. We also may compare our yields to those offered by competing
products, such as CDs and Treasuries, as well as other fixed-income
securities.
HOW TO BUY CERTIFICATES
You can buy Certificates through one of the methods described below. You must
complete an application and submit it, along with payment, at the time of
purchase. WE RESERVE THE RIGHT TO ACCEPT OR REJECT ANY APPLICATION IN OUR SOLE
DISCRETION.
THROUGH THE COMPANY
BY MAIL. You can buy Certificates directly from the Company by sending a
completed application, along with a check, to 1st Atlantic Guaranty
Corporation, 4847 Cordell Avenue, Suite 200, Bethesda, MD 20814.
BY WIRE. You may also wire payments for Certificates to the Company's wire
bank account. Before wiring funds, please call us at 1-888-74-YIELD or
301-215-7515 to advise us of your investment and to receive instructions as to
how and where to wire your investment. The minimum amount you may wire is
$1,000. Please remember to return your completed application to us at the
address above.
THROUGH AUTHORIZED SELLERS
You can buy Certificates through broker-dealers that have selling group
agreements with our principal underwriter, CI Investments, Inc.
("Underwriter"). The Underwriter has agreed to use its best efforts to promote
the sale of Certificates. For its services, the Underwriter receives
compensation that will not exceed 5% of the amount of the initial purchase
payments under the Certificates. The Underwriter may re-allow a portion of its
compensation to broker-dealers with whom it has a selling group agreement.
Please call us at 1-888-74-YIELD or 301-215-7515 to find out whether your
broker-dealer is on our list of authorized sellers. We will pay any
compensation to authorized sellers out of our general funds, so that all of
your money will be invested in your Certificate.
AFFINITY GROUPS
From time to time, we may seek to introduce our Certificates to members of
affinity groups, including service organizations, non-profit associations, and
other types of membership organizations (collectively, "affinity groups").
Although affinity groups are not permitted to sell Certificates, they may
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<PAGE>
provide us with mailing lists and other information to enable us to market
Certificates to their members. For their cooperation, we may compensate
affinity groups an amount that we mutually agreed upon. Please call us at
1-888-74-YIELD or 301-215-7515 for the current list of affinity groups with
whom we have arrangements.
INVESTMENT AMOUNTS
For an explanation of the minimum and maximum investments in each type of
Certificate, SEE "The Certificates." Certain additional restrictions may apply
under if you use the Certificates to fund your Individual Retirement Account
("IRA") or other qualified retirement plan account.
CANCELING YOUR ORDER
You can, without penalty or withdrawal charge, cancel your investment in a
Certificate within 10 days after we receive your application. Simply call us
at the same telephone number or write to us. You will not earn any interest on
Certificates that you cancel under this provision. We will process your
cancellation request on the business day we receive it and, if applicable,
will send out a check to you generally within 10 business days.
APPLICATION ACCEPTANCE
All applications to purchase Certificates are subject to acceptance or
rejection by us in our sole discretion. If we accept your application to
purchase a Certificate, you will receive a confirmation of such acceptance.
You will also receive a quarterly statement reflecting all account activity.
SEE "Reports." We do not issue paper certificates to evidence the purchase of
Certificates. Instead, we will register your purchase on our books, thereby
relieving you of the responsibility for the safekeeping of paper certificates
and the need to deliver them to us upon redemption. Please refer to the
Certificate Terms and Conditions attached to your application for detailed
information about your Certificate.
ACCESSING YOUR ACCOUNT VALUE
You can access all or any part of your Certificate's Account Value at any
time, subject to the terms and conditions described below.
INTEREST WITHDRAWALS
You can schedule regular withdrawals of interest that has accrued under your
Certificate on a monthly, quarterly, or annual basis. Each accrued interest
withdrawal will be subject to a small service fee of $5. Unscheduled interest
withdrawals are subject to a higher fee of $25 and may be subject to a
withdrawal charge. SEE "Fees and Charges" under "General Terms and
Conditions."
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<PAGE>
PRINCIPAL WITHDRAWALS AND LOANS
You can also withdraw some or all of your principal investments in your
Certificate prior to maturity. However, a withdrawal charge and an early
withdrawal penalty may apply upon withdrawal, other than for systematic
withdrawals under the Reserve Certificates. SEE "Withdrawal Charge" under
"Fees and Charges," and "Penalty for Early Withdrawal," below.
To avoid incurring a withdrawal charge and the penalty for early withdrawal,
you may request a temporary principal withdrawal or "loan" of up to 50% of
your Account Value for a term not to exceed the earlier of five years or the
Maturity Date of your Certificate. You will not earn interest on the amount
you withdraw from your Certificate. Loans are subject to an annual interest
charge not to exceed 6% of the amount withdrawn. If you decide not to reinvest
your temporary principal withdrawal, we will treat it as a permanent
withdrawal and will assess against your remaining Account Value the penalty
for early withdrawal that would have applied at the time of the withdrawal.
Withdrawals of principal may cause your Certificate to fall into a lower
interest rate category. SEE "Effect on Interest Rates," below.
WITHDRAWAL AMOUNTS
The minimum amount that you may withdraw at any time from your Certificate is
$100 ($150 in the case of the Reserve Certificates), provided, however, that
the remaining Account Value under your Certificate (other than Reserve
Certificate) does not fall below the stated minimum investment amounts. We
will notify you and seek additional instructions from you if the amount of
your withdrawal request would cause your Account Value to fall below that
minimum. If you fail to respond and your withdrawal would cause your Account
Value to fall below that minimum, we will treat your request as one for a
complete surrender of your Certificate.
PENALTY FOR EARLY WITHDRAWAL
If you withdraw some or all of your principal investments on or before your
fifth Certificate Anniversary or prior to the end of a Guarantee Period, we
will deduct a penalty from your remaining Account Value, or, in the case of a
complete surrender, from the amount withdrawn, equal to 12 months interest
payable on the amount withdrawn. After your fifth Certificate Anniversary, the
penalty will apply only if you withdraw prior to the end of a Guarantee
Period. In no event will the penalty applicable during Certificate years 16
through 20 exceed 5%, 4%, 3%, 2% and 2%, respecively, of the amount withdrawn.
The foregoing penalty does not apply to systematic withdrawals under the
Reserve Certificate. In addition, the penalty does not apply if the withdrawal
is due to the need to meet unexpected expenses from your death, disability, or
hospitalization.
We assess the foregoing penalty largely because of the negative impact that
early withdrawals of principal investments may have on our reserves and our
ability to offer competitive interest rates to our customers. You may be
subject to additional penalties if you withdraw amounts held in a Certificate
from an IRA or other tax-qualified plan. Please consult your tax adviser.
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<PAGE>
EFFECT ON INTEREST RATES
A withdrawal will cause a reduction in the Account Value under your
Certificate. If the reduction puts your Account Value in a lower category of
applicable interest rates, we will apply the lower interest rate from the date
of the withdrawal, even if it occurs prior to the end of a Guarantee Period.
REQUESTING A WITHDRAWAL
You may submit written requests for a withdrawal to the Company at our Client
Care Department. We will treat withdrawal requests as coming first from
accrued interest, and then from your principal investment. We will process
withdrawal requests on the business day that we receive them, and will send
out a check to you generally within 10 business days.
We may take longer to process your request if you recently purchased or, in
the case of Growth Certificates, added to a Certificate with a check that has
not yet cleared. In addition, we reserve the right to defer payments for up to
30 days, in which case we will pay interest on the deferred payment at the
Minimum Interest Rate. For our mutual protection, we may require a signature
guarantee if:
* you seek to withdraw an amount in excess of $50,000,
* you ask us to pay redemption proceeds to someone other than the
registered owners,
* you ask us to send redemption proceeds to an address other than
the address of record, a preauthorized bank account, or a
preauthorized brokerage firm account,
* we receive instructions from an agent, not the registered owners,
or
* we believe a signature guarantee would protect us against
potential claims based on the instructions received.
A signature guarantee verifies the authenticity of your signature. You can
obtain a signature guarantee from certain banks, brokers or other eligible
guarantors. YOU SHOULD VERIFY THAT THE INSTITUTION IS AN ELIGIBLE GUARANTOR
PRIOR TO SIGNING. A NOTARIZED SIGNATURE IS NOT SUFFICIENT.
ACCOUNT TRANSACTIONS
TRANSFERRING OWNERSHIP
You may transfer ownership of your Certificate by submitting a completed
transfer request form to our Client Care Department. Please note that
transfers of ownership from a tax-qualified plan may have adverse tax
consequences. Please consult your tax adviser.
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<PAGE>
TAX MATTERS
All interest that you earn on your Certificate is taxable to you in the year
in which it accrues, regardless of whether you elect to receive it during that
year. We will send you a report showing all reportable income under your
Certificate.
If you are using your Certificate to fund an IRA or other tax-qualified plan,
you generally will pay no federal income taxes on your interest until you
begin taking withdrawals. However, withdrawals from IRAs and qualified plans
generally are subject to a federal income tax penalty of 10% if made before
age 59 1/2.
We are required to withhold federal income taxes on IRA withdrawals unless you
tell us not to. We are also required to withhold 20% on most other
distributions from tax-qualified plans, unless the distribution is directly
rolled over to another tax-qualified plan or IRA.
If you are using your Certificate to fund a Roth IRA, your contributions will
not be tax deductible; however, the distributions from your Roth IRA may be
tax free depending on how and when you withdraw your money from the account.
Subject to certain income limitations, you may make a rollover contribution
from a non-Roth IRA to a Roth IRA. The rollover will be taxable currently, but
future distributions from the Roth IRA may be tax free as in the preceding
sentence. The maximum contribution to a Roth IRA is $2,000, not counting
rollover contributions, and contributions may be made beyond age 70 1/2. The
maximum yearly contribution to all IRA's combined is still $2,000.
The foregoing is only a brief summary of certain federal income tax matters
relevant to an investment in a Certificate. It is not intended as tax advice.
Please consult a qualified tax adviser for information about any tax
consequences with regard to your individual circumstances.
THE COMPANY
ORGANIZATION AND OPERATIONS
The Company was organized as a Maryland corporation on October 1, 1997. It is
registered with the SEC as a face-amount certificate company, which is a type
of investment company. The Company's capitalization consists solely of
14,500,000 shares of authorized common stock, par value $0.01 per share
("common stock"). On August 27, 1998, John J. Lawbaugh, the Company's
Chairman, President and Treasurer, and Brian P. Smith, the Company's
Secretary, contributed the initial capitalization of the Company, and as of
that date, owned all of the issued and outstanding shares of the Company's
common stock. As of the date of this Prospectus, the Company has capital in
excess of the minimum amount required by the rules and regulations of the SEC
and the Investment Company Act of 1940 ("1940 Act"). The Company believes that
its capital is adequate for its business activities.
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<PAGE>
The Company's business activities currently consist entirely of the issuance
and servicing of Certificates and the investment of the proceeds received from
the sale of its Certificates in securities and other assets. The profitability
of the Company's operations is determined by the difference between (1) the
amount of the Company's earnings on its investment portfolio and (2) the
expenses the Company incurs (E.G., the interest it agrees to pay, taxes, and
its investment and operating expenses, such as investment advisory fees,
brokerage costs, custodial expenses, disinterested director fees, and
distribution fees). The Company, through it wholly-owned subsidiary, Atlantic
Capital, manages its real estate loan portfolio, which supports its
obligations under the Certificates. SEE "Atlantic Capital" under "Management."
DIRECTORS AND OFFICERS
Certain information about the Company's directors and officers, including
their principal occupations for the past five years, is set out below. Members
of the Board who are considered "interested persons" of the Company under the
1940 Act are indicated by an asterisk (*). The Company has no employees, and
all of the directors and officers, other than directors who are not interested
persons of the Company, serve in such capacities without compensation.
Officers are appointed annually at the annual meeting of the Company's Board
of Directors.
<TABLE>
<CAPTION>
Positions with Principal Occupations
Name and Age the Company During the Past Five Years
<S> <C> <C>
Donald N. Briggs Director President, Briggs Associates, Inc. (brokerage and
(54) appraisals); President, Don Briggs & Co. (commercial
leasing)
James F. Cole Director General Treasurer of the International Association of
(59) Bridge, Structural, Ornamental & Reinforcing Iron
Workers Union
J. Donald Elam Director President of Trinity Financial Group (fund raising and
(65) planned giving consultants)
Nancy Hopkinson Director Currently Retired (since 1996); prior to that, Teacher
(56) and Administrator, Montgomery County Public
Schools
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Positions with Principal Occupations
Name and Age the Company During the Past Five Years
<S> <C> <C>
John J. Lawbaugh Chairman of the President, Atlantic Pension & Trust (private pension
(29)*+ Board, fund management); President, Atlantic Capital Funding
President and Corporation; President, Commercial Finance Group
Treasurer (commercial and residential mortgage banking)
Brian Murphy (54) Director Partner, Berenson & Murphy (law firm) (formerly,
Griffin, Berenson & Murphy)
Greg Nichols (45)+ Director Principal, Nichols & Associates (wholesale retail
business development); Principal, U.S. Estate Group
(estate and financial planning)
Brian P. Smith Director and Operations Manager, Atlantic Pension & Trust (private
(44)* Secretary pension fund management); Operations Manager,
Atlantic Capital Funding Corporation (commercial and
residential mortgage banking) since 1996; prior to that
Operations Manager, Enterprise Network Applications
(computer software company)
Willard R. Stinson Director Chief Financial Officer, Shepherd Group of Companies
(62) (financial planning firm since 1996); prior to that,
Financial Planner, Shepherd Group of Companies, and
Financial Planner, First Financial Planners, Inc. (since
1995); prior to that, Vice President and Comptroller,
General Public Utilities (electric utility company)
<FN>
--------------
+ Messrs. Lawbaugh and Nichols are brothers-in-law.
</FN>
</TABLE>
MANAGEMENT
BOARD OF DIRECTORS
The Board of Directors ("Board") is responsible for managing the Company's
business affairs. Directors are elected annually at the Company's annual
meeting of shareholders. Each Director who is not an interested person of the
Company receives an annual retainer of $500, plus a $750 fee for each regular
or special Board meeting he or she attends. The Directors also receive
reimbursement for their expenses incurred in attending any meeting of the
Board. The Board generally meets quarterly.
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<PAGE>
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has an Audit Committee and an Executive Committee. The duties of
each Committee and its present membership are as follows:
AUDIT COMMITTEE: The members of the Audit Committee consult with the Company's
independent auditors if the auditors deem it desirable, and meet with the
Company's independent auditors at least once annually to discuss the scope and
results of the annual audit of the Company and such other matters as the
Committee members deem appropriate or desirable. Directors Briggs, Cole, Elam,
Hopkinson, Murphy, Nichols, and Stinson are members of the Audit Committee.
EXECUTIVE COMMITTEE: During intervals between meetings of the Board, the
Executive Committee possesses and may exercise all of the powers of the Board
in the management of the Company except as to those matters that specifically
require action by the Board. Directors Hopkinson, Lawbaugh, and Murphy are
members of the Executive Committee.
INVESTMENTS COMMITTEE: The members of the Investments Committee oversee the
investment activities of the Adviser, which manages the Company's securities
portfolio, and the activities of the Company's wholly-owned subsidiary,
Atlantic Capital, which manages the Company's real estate loan portfolio.
Directors Briggs, Cole, and Lawbaugh are members of the Investments Committee.
INVESTMENT ADVISER
Key Asset Management serves as the Company's investment adviser pursuant to an
investment advisory agreement ("Advisory Agreement"). Subject to the
supervision of the Board, the Adviser is responsible under the Advisory
Agreement for selecting and managing the Company's securities investments to
ensure that the Company has, in cash or qualified investments, as that term is
defined in Section 28(b) of the 1940 Act, assets having an aggregate value not
less than that required by applicable law. The Adviser also is responsible for
placing orders for the purchase and sale of the Company's securities
investments with brokers and dealers that the Adviser selects.
In addition, pursuant to the Advisory Agreement, the Adviser has agreed to
render regular reports to the Board regarding its investment decisions and
brokerage allocation practices for the Company, to assist the Company's
custodian in valuing portfolio securities and computing the Company's
reserves, and to furnish the Company with the assistance, cooperation, and
information necessary for it to meet various legal requirements regarding
registration and reporting. The Adviser also has agreed to furnish to the
Company adequate facilities and personnel necessary for the Directors and
officers of the Company to manage the affairs and conduct of the Company's
business. The Adviser, located at 127 Public Square, Cleveland, Ohio,
44114-1306, is a registered investment adviser with over $60 billion of assets
under management as of the date of this Prospectus. For its services, the
Adviser receives a quarterly fee payable in arrears based on the annual
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<PAGE>
percentage, set forth below, of the average daily net asset value of the
Company's assets that it manages:
Large Cap Equities and Convertible Securities:
<TABLE>
<CAPTION>
Assets Annual Fee
------ ----------
<S> <C>
Up to $25,000,000 0.45%
Next $25,000,000 0.40%
Above $50,000,000 0.35%
</TABLE>
Small Cap and Mid Cap Equities:
<TABLE>
<CAPTION>
Assets Annual Fee
------ ----------
<S> <C>
Up to $10,000,000 0.90%
Next $15,000,000 0.70%
Next $25,000,000 0.55%
Above $50,000,000 0.45%
</TABLE>
ATLANTIC CAPITAL FUNDING CORPORATION
Atlantic Capital is a Maryland corporation newly created by the Company for
the purpose of managing its real estate loan portfolio. ACFC, which is a
wholly-owned by the Company, performs all of the underwriting, closing and
servicing of mortgage investments for 1st Atlantic. ACFC may originate and
process loans directly as well as offer its loan programs to outside mortgage
brokers on a wholesale basis. In the latter case, outside brokers will
originate and process loans and ACFC will underwrite and close the loans that
meet its investment requirements. ACFC may enter into agreements with select
outside mortgage brokers to service certain types of mortgages that may
require special servicing treatment because of various factors, such as the
unique features of the underlying real estate or the credit quality of the
borrowers.
RELATED PARTY TRANSACTIONS
On September 16, 1998, Messrs. Lawbaugh and Smith contributed the common stock
of ACFC to 1st Atlantic Guaranty for no consideration.
RESERVES
Federal law requires us to maintain a portion of the payments that we receive
under the Certificates as reserves. The purpose of these reserves is to ensure
that we have enough assets to meet our obligations under the Certificates.
Federal law also requires that we invest our reserves in "qualified
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<PAGE>
investments," which are investments of a kind that life insurance companies
can invest in or hold under the provisions of the laws of the District of
Columbia or those otherwise approved for investment by the SEC. SEE "Types of
Investments" and "Investment Policies" under "Investments." In addition,
federal law prohibits us from declaring or paying dividends to our
shareholders in excess of certain limits unless we meet our reserve
requirements.
We maintain our reserves with our custodian, Key Trust Company of Ohio, 127
Public Square, Cleveland, Ohio, 44114 ("Custodian"). Pursuant to its Custody
Agreement with us, the Custodian is responsible for the safekeeping of our
assets, and, among other things, is authorized to take certain remedial steps
should we fail to make a payment when due or otherwise default on any of our
obligations under the Certificates. The Custodian is an affiliate of the
Adviser.
INVESTMENTS
As noted above, we are permitted to invest our reserves only in assets that
constitute "qualified investments" under the laws of the District of Columbia
and such other assets as the SEC may permit. Set out below is a summary of the
types of investments in which we expect to invest as well as a description of
certain investment policies established by our Board of Directors.
TYPES OF INVESTMENTS
We expect to invest our reserves, as well as the amount that we hold in excess
of the reserves, primarily in the types of securities and other investments
described below. Except as specifically noted, we may invest our reserves in
such investments without limitation. In addition, except as specifically
noted, the limitations described below apply only at the time of investment.
The assets that we hold in excess of reserves are not subject to the
limitations described below.
BANK OBLIGATIONS. We may invest in CDs, bankers' acceptances, and other
short-term debt obligations of banks. CDs are short-term obligations that
commercial banks issue for a specified period of time and at a specified
interest rate. Banker's acceptances are time drafts drawn on a commercial bank
by a borrower, usually in connection with international commercial
transactions.
COMMERCIAL PAPER AND OTHER CORPORATE DEBT. We may invest in commercial paper
issued by companies that meet the criteria for investment by life insurance
companies under the laws of the District of Columbia ("qualified
corporations"). Commercial paper consists of short-term unsecured promissory
notes that qualified corporations issue to finance short-term credit needs. We
also may invest in longer-term debt obligations of qualified corporations. We
will not invest more than two percent of our reserves in any one issue of such
obligations of any one qualified corporation. In addition, we do not intend to
invest in any debt securities rated below investment grade by any nationally
recognized statistical rating organization.
EQUIPMENT RELATED INSTRUMENTS. We may invest in equipment trust certificates
and similar instruments (collectively, "equipment related instruments") that
are secured by transportation equipment (e.g., railroad cars, trucks, and
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<PAGE>
airplanes) that has been sold or leased to a common carrier. Equipment related
instruments are a means of financing the acquisition of equipment. A trustee,
such as a bank, holds the title to the equipment, collects purchase or lease
payments from the purchaser, and, in turn, makes principal and interest
payments to the instrument holders for a specified term. In case of default,
the trustee is authorized to sell the equipment to protect the instrument
holders. We will not invest more than two percent of our reserves in any one
issue of an equipment-related instrument by any one qualified corporation.
MUNICIPAL SECURITIES. We may invest in various types of municipal securities,
which are debt securities issued by a state, its political subdivisions,
agencies, authorities, school districts, and other governmental
instrumentalities for various public purposes, including, for example, the
construction of public facilities, hospitals, highways, and schools. We will
only invest in municipal securities that (i) represent direct and general
obligations of the issuing governmental entity, or (ii) are payable from
designated revenues pledged to the payment of the principal and interest on
such securities.
PREFERRED AND COMMON STOCK. We may invest in preferred and common stock of
qualified corporations. Preferred stock has priority over common stock as to
income and generally as to the assets of an issuer, but usually has limited
voting rights. We may invest in the common stocks of qualified corporations
whose debt and preferred stock, if any, also meet our criteria for investment.
We will not invest more than one percent of our reserves in the preferred or
common stock of any single qualified corporation.
REAL ESTATE AND REAL ESTATE LOANS. We may invest directly in real estate or in
real estate loans. We generally will only purchase or hold real estate if it
is income producing. We may, however, also receive real estate in satisfaction
of debts owed to us, and may improve or develop any real estate that we
acquire. We will not invest or agree to invest in real estate if such
investment would cause us to: (i) invest more than two percent of our reserves
in real estate or improvements thereon during any period of 12 consecutive
months; (ii) invest or hold more than five percent of our reserves in real
estate or improvements thereon for the purpose of producing income; or (iii)
hold more than 10% of our reserves in real estate. We also may invest in real
estate loans secured by a first lien on the real estate, PROVIDED such loan is
worth at least 33 1/3% more than the amount loaned.
U.S. GOVERNMENT SECURITIES. We may invest in direct obligations of the U.S.
Government ("U.S. Government securities"). These include bills (which have
maturities of one year or less), notes (which have maturities of between 2 and
10 years), and bonds (which have maturities greater than 10 years) issued by
the U.S. Treasury ("Treasury"). The market value of U.S. Government securities
will fluctuate with changes in interest rate levels. Thus, if interest rates
increase from the time the security was purchased, the market value of the
security will decrease. Conversely, if interest rates decrease, the market
value of the security will increase.
U.S. GOVERNMENT AGENCY SECURITIES. We may invest in securities issued by
certain federal agencies that are (i) backed by the full faith and credit of
the United States, (ii) guaranteed by the Treasury, (iii) or are supported by
the agency's right to borrow from the Treasury. Issuing agencies may include,
25
<PAGE>
for example, the Government National Mortgage Association ("GNMA" or Ginnie
Mae"), Federal National Mortgage Association ("FNMA" or "Fannie Mae"), or
Federal Home Loan Mortgage Corporation ("FHLMC" or " Freddie Mac"). Although
their close relationship with the U.S. Government is believed to make them
high-quality securities with minimal credit risks, the U.S. Government is not
obligated by law to support either FNMA or FHLMC.
INVESTMENT POLICIES
The Company's Board has established the investment policies set out below.
Subject to the approval of the Company's shareholders, the Board may change
these policies at any time without Certificate owner approval.
BORROWING. We may borrow money to a limited extent from banks (including the
Company's custodian bank) as we deem necessary or appropriate to our business.
We currently do not intend to borrow amounts equal to more than 25% of our
total assets (including the amount borrowed). We will not buy securities on
margin or sell securities short.
COMMODITIES. We do not currently intend to engage in the purchase or sale of
commodities.
CONCENTRATION. Except as noted below, we will not invest more than 25% of our
assets in the securities of issuers in any one industry. The foregoing
limitation does not apply to investments in U.S. Government and U.S.
Government agency securities, nor to real estate and real estate loans.
LOANS. In addition to real estate loans, described above, we may make loans of
varying terms to broker-dealers and other financial institutions in amounts up
to 85% of the value of the securities pledged as collateral for the loans at
the time we make the loans. The securities pledged as collateral must be of a
type in which we can invest.
PORTFOLIO TURNOVER. We will buy, sell, or hold our assets in the manner that
we deem prudent, without regard to the impact on the turnover rate of our
portfolio.
SENIOR SECURITIES. We are restricted by law from issuing any securities other
than face-amount certificates, common stock, and promissory notes or other
paper related to our borrowings.
UNDERWRITING SECURITIES. We do not intend to act as an underwriter of
securities issued by other persons. We may, however, be deemed to be an
underwriter when we purchase and later sell unregistered securities.
26
<PAGE>
INVESTOR SERVICES
AUTOMATIC INVESTMENTS
You can automatically make periodic investments in your Growth Certificates
subject to applicable limits. SEE "At A Glance" under "The Certificates." To
establish your automatic investment plan, please call 1-888-74-YIELD or
1-301-215-7515.
DIRECT DEPOSITS
You can arrange for your investment in your Certificates to be deposited
directly out of your payroll or government check. To establish your direct
deposit arrangement, please call 1-888-74-YIELD or 301-215-7515.
INQUIRIES
1st Atlantic Guaranty has a dedicated staff of individuals that are available
each business day to assist you with questions you may have about the
Certificates or your account. Please call 1-888-74-YIELD between the hours of
9:00 and 5:00 on any business day.
REPORTS
Each quarter we will send you an account statement showing your Certificate's
Account Value, your Certificate's Surrender Value, and all account activity
for the preceding quarter, including the amount and rate of interest you
earned, the amount of any principal investments you made, and the amount of
any fees and charges assessed. In addition, we will send you annual reports
that include audited financial statements for the Company's fiscal year ending
September 30.
We file quarterly and annual reports with the SEC. You may read and copy, at
prescribed rates, these reports and any other materials that we file with the
SEC at the SEC's Public Reference Room, located at 450 Fifth Street, N.W.,
Washington, D.C. 20549. You may obtain information about the SEC's Public
Reference Room by calling the SEC at 1-800-SEC-0330. You also may obtain
reports and other information about us by visiting the SEC's Internet site
(www.sec.gov).
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, located at 2300 Clarendon Blvd, Suite 200, Arlington,
VA 22201, serve as the independent auditors of the Company. Their auditing
services include rendering an opinion on the financial statements of the
Company.
27
<PAGE>
FINANCIAL STATEMENTS
We had no material operations prior to the date of this Prospectus. An audited
balance sheet for the Company, as of August 27, 1998, and the report of the
Company's independent auditors thereon, appears on the next page.
EXPERTS
The Company has included the audited balance sheet in this Prospectus in
reliance upon the report of KPMG Peat Marwick LLP, independent auditors, and
upon the authority of said firm as experts in accounting and auditing.
28
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
1st Atlantic Guaranty Corporation:
We have audited the accompanying balance sheet of 1st Atlantic Guaranty
Corporation as of August 27, 1998. This financial statement is the
responsibility of the Company's management. Our responsibility is to express
an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the balance sheet is free of
material misstatement. An audit of a balance sheet includes examining, on a
test basis, evidence supporting the amounts and disclosures in that balance
sheet. Our procedures included confirmation of the opening cash deposit on
August 27, 1998, by correspondence with the bank. An audit of a balance sheet
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall balance sheet
presentation. We believe that our audit of the balance sheet provides a
reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of 1st Atlantic Guaranty Corporation
as of August 27, 1998, in conformity with generally accepted accounting
principles.
/s/KPMG PEAT MARWICK LLP
Washington, D.C.
August 28, 1998
<PAGE>
1ST ATLANTIC GUARANTY CORPORATION
BALANCE SHEET
AUGUST 27, 1998
<TABLE>
<CAPTION>
ASSETS
CURRENT ASSETS:
<S> <C>
Cash $ 250,000
----------
TOTAL QUALIFIED ASSETS 250,000
----------
TOTAL ASSETS 250,000
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Total Liabilities -
----------
Stockholders' Equity:
Common Stock, $.01 par value, 14.5 million 100,000
shares authorized - 10 million shares
issued
Additional paid-in-capital 150,000
----------
Total Stockholders' Equity 250,000
----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 250,000
==========
</TABLE>
SEE NOTES TO BALANCE SHEET.
<PAGE>
1ST ATLANTIC GUARANTY CORPORATION
NOTES TO THE BALANCE SHEET
AUGUST 27, 1998
(1) NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
1st Atlantic Guaranty Corporation (the "Company") is a Maryland
corporation organized on October 1, 1997. The Company is registered with
the Securities and Exchange Commission as a face-amount certificate
company under the Investment Company Act of 1940. The Company is in the
business of issuing face-amount investment certificates. The
certificates offered by the Company are not insured. The Company's
certificates will be sold through the Company and authorized sellers.
The Company's management, together with Key Asset Management Inc., the
Company's selected investment adviser, will be responsible for managing
the Company's investments.
The Company currently offers five types of certificates each with a
specified maturity of twenty years. Within their specified maturity,
four certificates have interest rate terms of either one, three, five,
or ten years and one certificate has interest rate terms of either five
or ten years. The Company guarantees a fixed rate of return for each
interest rate term, subject to fees and penalties for early withdrawal.
The Company's gross income is derived primarily from the interest and
dividends generated by its investments. The Company's net income is
determined by deducting from such gross income its interest payments on
the certificates and other expenses, including, but not limited to,
taxes, the fees paid for investment advisory services, custodial
services, and distribution fees.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF BALANCE SHEET PRESENTATION
The accompanying balance sheet is presented in accordance with generally
accepted accounting principles.
The preparation of the balance sheet in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities during the period.
Actual results could differ from those estimates.
<PAGE>
THE COMPANY AND ITS SERVICE PROVIDERS
THE COMPANY:
1st Atlantic Guaranty Corporation
4847 Cordell Avenue, Suite 200
Bethesda, MD 20814
INVESTMENT ADVISER:
Key Asset Management, Inc.
127 Public Square
Cleveland, OH 44114
CUSTODIAN:
Key Trust Company of Ohio
127 Public Square
Cleveland, OH 44114
INDEPENDENT AUDITORS:
KPMG Peat Marwick LLP
2300 Clarendon Blvd
Suite 200
Arlington, VA 22201
LEGAL COUNSEL:
Freedman, Levy, Kroll & Simonds
1050 Connecticut Avenue, Suite 825
Washington, D.C. 20036
[back cover page]
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
SEC Registration Fee $ 0
State Fees 7,500
Printing Fees 10,000
Legal fees 150,000
Accounting Fees 15,000
Miscellaneous 7,500
Total: $190,000
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Section 2-418 of Maryland General Corporation Law, a corporation
may indemnify certain Directors, officers, employees, or agents. Consistent
with Maryland law, Article Seventh(E)(viii) of Registrant's Articles of
Incorporation ("Articles") permits it to indemnify its Directors and officers
to the fullest extent permitted by law. In addition, Article X of Registrant's
By-Laws permits it to insure and indemnify its Directors, officers, employees
and agents to the fullest extent permitted by law. The above-cited provisions
of Registrant's Articles and By-Laws, which have been filed as exhibits to
this Registration Statement, are incorporated by reference into this Item to
the extent necessary to respond to this item.
Various agreements that Registrant has entered or will enter into
contain provisions for the indemnification of Registrant's officers and
directors to the extent permitted by applicable law. These agreements have
been filed as exhibits to this Registration Statement, and are hereby
incorporated by reference into this Item to the extent necessary to respond to
this item.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The disclosure set forth under the heading "The Company - Organization
and Operations" in the Prospectus contained herein is hereby incorporated by
reference in response to this item. Registrant issued the shares described
therein in reliance upon the exemption set forth in Section 4(2) of the
Securities Act of 1933 for transactions not involving a public offering.
1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
Exhibit Description of Exhibits (filed herewith unless
No. otherwise indicated)
------- ------------------------------------------------------
(1) Form of Distribution Agreement by and between
Registrant and CI Investments, Inc. (previously
filed).
(2) Not applicable.
(3)(a)(i) Articles of Incorporation of 1st Atlantic Guaranty
Corporation (previously filed).
(a)(ii) Articles of Amendment (previously filed).
(3)(b) By-laws of 1st Atlantic Guaranty Corporation
(previously filed).
(4)(a) Form of Application.
(b) Form of Account Statement (previously filed).
(5) Opinion and Consent of Counsel (previously filed).
(6)-(9) Not applicable.
(10)(a) Form of Investment Advisory Agreement by and between
Registrant and Key Asset Management, Inc. (previously
filed).
(10)(b) Form of Custody Agreement by and between Registrant
and Key Trust Company of Ohio (previously filed).
(10)(c)(1) Subscription Agreement by and between Registrant and
John J. Lawbaugh (previously filed).
(c)(2) Subscription Agreement by and between Registrant and
Brian P. Smith (previously filed).
(11)-(20) Not applicable.
(21) Subsidiaries of 1st Atlantic Guaranty Corporation,
incorporated by reference to the disclosure under the
captions "The Company - Organization and Operations"
2
<PAGE>
and "Management - Atlantic Capital" in the Prospectus
contained herein.
(22) Not applicable.
(23) Consent of Independent Auditors (previously filed).
(24) Powers of attorney of Directors Briggs, Cole, Elam,
Hopkinson, Murphy, Nichols, and Stinson (previously
filed).
(25)-(26) Not applicable.
(27) Financial Data Schedule (previously filed).
(b) Financial Statement Schedules:
Not applicable.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under Securities Act
of 1933 (the "1933 Act") may be permitted to Directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions or
otherwise, the Registrant has been advised that, in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the 1933 Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a Director,
officer or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such Director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by a controlling precedent, submit to a court of appropriate
jurisdiction the question of whether indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
ITEM 18. FINANCIAL STATEMENTS AND SCHEDULES.
Not applicable.
3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this amended Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Bethesda and State
of Maryland, on the 25th day of November, 1998.
1st ATLANTIC GUARANTY COMPANY
By: /s/JOHN J. LAWBAUGH
---------------------------
John J. Lawbaugh, President
Pursuant to the requirements of the Securities Act of 1933, the following
persons have signed the Registration Statement in the capacities indicated as
of the 25th day of November, 1998.
Signature Capacity
/s/JOHN J. LAWBAUGH President, Treasurer, and Director
------------------- (Principal Executive, Financial, and
John J. Lawbaugh Accounting Officer)
/s/BRIAN P. SMITH Director and Secretary
-----------------
Brian P. Smith
/s/DONALD N. BRIGGS* Director
--------------------
Donald N. Briggs
/s/JAMES F. COLE* Director
-----------------
James F. Cole
/s/J. DONALD ELAM* Director
------------------
J. Donald Elam
/s/NANCY HOPKINSON* Director
-------------------
Nancy Hopkinson
/s/BRIAN MURPHY* Director
----------------
Brian Murphy
/s/GREG NICHOLS* Director
----------------
Greg Nichols
/s/WILLARD R. STINSON* Director
----------------------
Willard R. Stinson
4
<PAGE>
*By: /s/BRIAN P. SMITH
-----------------
Brian P. Smith
Attorney-in-fact pursuant to powers of attorney filed herewith.
5
EXHIBIT 4(a)
PRESS HARD ON APPLICATION TO ENSURE LEGIBILITY OF ALL COPIES
FORM OF
1st ATLANTIC GUARANTY CERTIFICATE APPLICATION
[Logo 1st Atlantic Guaranty]
Sales Representative _________________
Date _________________________________ Application Type [ ] New [ ] Amended
-----------------------------------------------------------------------------
Personal Profile
APPLICANT
Name ________________________________________________________________________
Address _____________________________________________________________________
_____________________________________________________________________________
E-Mail Address ______________________________________________________________
Marital Status ___________________ Tax ID # _________________________________
Date of Birth (m/d/y) _______________________________________________________
Citizenship [ ] U.S. Citizen [ ] Non-U.S. Citizen
Telephone Home (_____)__________________________________________
Numbers Business (_____)__________________________________________
Fax (_____)__________________________________________
Occupation __________________________________________________________________
Employer ____________________________________________________________________
Employer Address ____________________________________________________________
Spouse's Name _______________________________________________________________
Spouse's Employer
(if client unemployeed) _____________________________________________________
Primary Bank Address ________________________________________________________
-----------------------------------------------------------------------------
JOINT APPLICANT
Name ________________________________________________________________________
Address _____________________________________________________________________
_____________________________________________________________________________
E-Mail Address ______________________________________________________________
Marital Status ___________________ Tax ID # _________________________________
Date of Birth (m/d/y) _______________________________________________________
Relationship to Applicant ___________________________________________________
Citizenship [ ] U.S. Citizen [ ] Non-U.S. Citizen
Telephone Home (_____)__________________________________________
Numbers Business (_____)__________________________________________
Fax (_____)__________________________________________
Occupation __________________________________________________________________
Employer ____________________________________________________________________
Employer Address ____________________________________________________________
Spouse's Name _______________________________________________________________
Spouse's Employer
(if client unemployeed) _____________________________________________________
Primary Bank Address ________________________________________________________
-----------------------------------------------------------------------------
Ownership
Type of ownership (check one).
[ ] Individual
[ ] Joint Tenants with right of survivorship
[ ] Tenants by the entirety
(Available only in AR, DE, DC, FL, HI, MD, MA, MI, MO, PA, TN, VT, WY)
[ ] Other ___________________________________________________________________
(Trust Corporate, UGMA, UTMA)
[ ] Tenants in common. Complete the following for each participant:
NAME OF INTEREST IN
PARTICIPANT THE ACCOUNT
________________________________________________________________ __________%
________________________________________________________________ __________%
________________________________________________________________ __________%
-----------------------------------------------------------------------------
DEPENDENT(S):
FIRST NAME
__________________________________________________________________________(1)
__________________________________________________________________________(2)
__________________________________________________________________________(3)
__________________________________________________________________________(4)
DATE OF BIRTH (m/d/y)
__________________________________________________________________________(1)
__________________________________________________________________________(2)
__________________________________________________________________________(3)
__________________________________________________________________________(4)
Name of CPA _________________________________________________________________
Name of Attorney ____________________________________________________________
Do You Have A Will? [ ] yes [ ] no
CURRENT ASSETS
Savings $________________________________________________
Certificates of Deposit $________________________________________________
Money Market Funds $________________________________________________
Municipal Bonds $________________________________________________
Mutual Funds $________________________________________________
Stocks $________________________________________________
Real Estate $________________________________________________
Annuities $________________________________________________
Options $________________________________________________
Collectables $________________________________________________
Life Ins. (cash value) $________________________________________________
Qualified Retire. Plans $________________________________________________
RETIREMENT PLAN
[ ] IRA [ ] 403(b)
[ ] SEP/SARSEP [ ] __________________________________________
[ ] 401(k) [ ] __________________________________________
[ ] Profit Sharing [ ] __________________________________________
[ ] Qualified Pension Plan
[ ] Money Purchase Plan
-----------------------------------------------------------------------------
Objective
Investment Objective (Please select one):
[ ] Preservation of capital [ ] Income [ ] Income & Growth
[ ] Long-Term Growth
-----------------------------------------------------------------------------
Financial Profile
Approx. annual earnings (,000)
[ ]<$50 [ ]$50-$99 [ ]$100-$199 [ ]$200-$299 [ ]$300-$499 [ ]>$500
-----------------------------------------------------------------------------
Total annual income (all sources (,000)
[ ]<$50 [ ]$50-$99 [ ]$100-$199 [ ]$200-$299 [ ]$300-$499 [ ]>$500
-----------------------------------------------------------------------------
Approx. liquid net worth (,000)
[ ]<$100 [ ]$101-$499 [ ]$500-$999 [ ]$1,000-$5,000 [ ]$5,000-$9,999
[ ]>$10,000
-----------------------------------------------------------------------------
Approx. total net worth (,000)
[ ]<$100 [ ]$101-$499 [ ]$500-$999 [ ]$1,000-$5,000 [ ]$5,000-$9,999
[ ]>$10,000
-----------------------------------------------------------------------------
Certificates
GROWTH CERTIFICATE
Principal Investment $__________________________________
(Minimum $2,500, maximum $250,000)
Additional Investments $__________________
(Minimum $250)
Please indicate how interest income is to be disbursed:
[ ]Reinvest [ ]Paid Annually [ ]Paid Semi-Annually [ ]Paid Quarterly
[ ]Paid Monthly [ ]Partially Paid
$_________________________________
Amount
Initial Guarantee Period: Please Indicate Term [ ]1 [ ]3 [ ]5 [ ]10 years
-----------------------------------------------------------------------------
PREMIER CERTIFICATE
Principal Investment $________________________________________
(Minimum $250,000, maximum $2.5 million)
Please indicate how interest income is to be disbursed:
[ ]Reinvest [ ]Paid Annually [ ]Paid Semi-Annually [ ]Paid Quarterly
[ ]Paid Monthly [ ]Partially Paid
$_________________________________
Amount
Initial Guarantee Period: Please Indicate Term [ ]1 [ ]3 [ ]5 [ ]10 years
-----------------------------------------------------------------------------
RESERVE CERTIFICATE
Principal Investment $_______________________________________
(Minimum $25,000, maximum $2.5 million)
Desired Withdrawal Amount $__________________
[ ]Monthly [ ]Quarterly [ ]Semi-Annually [ ]Annually
Initial Guarantee Period: Please Indicate Term [ ]1 [ ]3 [ ]5 [ ]10 years
-----------------------------------------------------------------------------
CORNERSTONE CERTIFICATE
Principal Investment $______________________________________
(Minimum $1,000, maximum $2.5 million)
Please indicate how interest income is to be disbursed:
[ ]Reinvest [ ]Paid Annually [ ]Paid Semi-Annually [ ]Paid Quarterly
[ ]Paid Monthly [ ]Partially Paid
$_________________________________
Amount
Initial Guarantee Period: Please Indicate Term [ ]5 [ ]10 years
-----------------------------------------------------------------------------
RECEIPT OF PROSPECTUS; SUITABILITY
I have received, read, and agree to the terms of the current prospectus
for each Certificate for which I am applying. I have the authority and
legal capacity to purchase the Certificate(s), am of legal age in my
state, and believe each investment is suitable for me.
CANCELING MY ORDER
I understand that I may cancel, without penalty, my investment in a
Certificate within 10 days after the date of purchase. I understand that
I will not earn any interest on any canceled Certificate. I also
understand that it is 1ST Atlantic Guaranty Corporation's policy to
return my canceled investment within 30 days of my cancellation request.
ACCEPTANCE OF APPLICATION
I understand that acceptance of my application is at the sole discretion
of 1ST Atlantic Guaranty Corporation and that you may reject my
application for any reason.
TELEPHONE INSTRUCTIONS
I do __ do not ___ authorize 1ST Atlantic Guaranty Corporation, its
affiliates and agents to act on any telephone instructions believed to
be genuine. I understand that 1ST Atlantic Guaranty Corporation will
employ reasonable procedures to confirm that instructions communicated
by telephone are genuine, and agree that if it does, neither it nor its
affiliates and agents shall be liable for any claims, losses, or
expenses (including legal fees) for acting on any instructions believed
genuine. I acknowledge that all telephone instructions given pursuant to
this authorization are subject to the conditions set forth in the
prospectus for each Certificate.
--------------------------- ---------------------------
Applicant's Signature Joint Applicant's Signature
-----------------------------------------------------------------------------
W-9 Certification
Substitute W-9 Certification
Under penalties of perjury, I certify by signing below that:
(i) On this application, I provided you with my correct Taxpayer
Identification Number; and
(ii) I am not subject to backup withholding - because
(a) I have not been notified by the IRS that I am subject to backup
withholding due to under reporting of interest or dividents; or
(b) the IRS has notified me that I am no longer subject to backup
withholding
I certify that the information on this page is accurate and complete. I agree
to be bound by the terms and conditions on the reverse side of this page.
-----------------------------------------------------------------------------
RETURN TO 1ST ATLANTIC GUARANTY
REPRESENTATIVE CERTIFICATION
By signing below, the Registered Rep/ Agent certifies that:
(a) The questions contained in this application were asked of the
applicant and the answers duly recorded: that this application is
complete and true to the best of my knowledge and belief;
(b) and I am NASD registered and state licensed for Investment Company
Products where this application is written and delivered;
(c) Clients provided $____________________ as the initial purchase
payment.
--------------------------- ---------------------------
Representatives Name (Please Print) Name of Broker/ Dealer
--------------------------- ---------------------------
Representative's Signature Representative's Phone #
Application accepted by 1st Atlantic Guaranty Corporation: ____yes ____ no
By:___________________________________
Authorized Officer
<PAGE>
-----------------------------------------------------------------------------
1ST ATLANTIC GUARANTY CORPORATION
CERTIFICATE TERMS AND CONDITIONS
-----------------------------------------------------------------------------
If we accept your application, the following terms and conditions will
govern the face-amount certificate ("Certificate") that we issue to you.
1. DEFINITIONS
As used herein, the terms "you" and "your" refer to the owner of the
Certificate; the terms "we," "us", our" and the "Company" refer to 1st
Atlantic Guaranty Corporation.
2. FACE-AMOUNT
The face-amount of your Certificate equals the amount of your principal
investment.
3. EFFECTIVE DATE
We will credit your initial principal investment and issue your
Certificate on the date we accept your application ("Effective Date").
4. ADDITIONAL PRINCIPAL INVESTMENTS
Except for Growth Certificates, we do not accept additional principal
investments under your Certificate. SEE "Special Provisions," below.
5. MATURITY DATE
The maturity date ("Maturity Date") of your Certificate is 20 years from
its Effective Date. On the Maturity Date, we will pay you the account
value ("Account Value") of your Certificate. At any time, your Account
Value equals your principal investments, plus all accrued interest, less
any withdrawals previously taken and less applicable fees, charges and
penalties previously assessed.
6. GUARANTEE PERIODS
You may select successive guarantee periods ("Guarantee Periods") of 1,
3, 5 or 10 years (5 and 10 years only in the case of Cornerstone
Certificates) during which to lock in the interest rate applicable to
your principal investment for each Period. You may not select a
Guarantee Period that would carry your Certificate past its Maturity
Date. If you select a Guarantee Period that would end after your
Certificate's Maturity Date, we will instead apply your Account Value to
the next shortest Guarantee Period that ends at or prior to your
Certificate's Maturity Date, using that Period's then applicable
interest rate.
7. INTEREST
We will credit interest monthly on the amount of interest that accrues
on your Account Value. Accrued interest will compound monthly based on a
30-day month and a 360-day year. The minimum interest rate ("Minimum
Interest Rate") that we will credit to your Certificate is 3.5% per
year. The interest rate applicable to your Certificate will vary from
Guarantee Period to Guarantee Period. The applicable interest rate for
your initial Guarantee Period will be the rate in effect on the date we
accept your application and receive your principal investment at our
offices. For any subsequent principal investments made, we will apply
the interest rate in effect for the current Guarantee Period in which
you are invested. You will begin earning interest on the Effective Date
of your Certificate or, in the case of any subsequent principal
investment, on the first day of the month following the date we receive
your payment. Withdrawals that put your Account Value in a lower
category of applicable interest rates will result in the application of
the lower interest rate from the date of the withdrawal, even if it
occurs prior to the end of a Guarantee Period.
We will establish the interest rates applicable to your Certificate from
time to time in our sole discretion, provided, however, that the
interest rate for each Guarantee Period will always be the HIGHER of (I)
the Minimum Interest Rate and (ii) our interest rate target ("Interest
Rate Target") for that Guarantee Period. The Interest Rate Target for
each Guarantee Period will equal the benchmark for that Period, plus a
margin that we set in our sole discretion ranging from 0.5% below to
0.5% above the benchmark. When determining the Interest Rate Target for
the 1, 3, and 5 year Guarantee Periods under each Certificate, the
benchmark will be the HIGHER of: (i) the average rate for certificates
of deposits of comparable maturity quoted on the Bank Rate Monitor
National Index ("BRM Index") plus 1.75%, and (ii) the yield for U.S.
Treasury securities of comparable maturity, on any given date that we
establish interest rates (each, an "Interest Rate Date"). The BRM Index
does not include an average rate for 10 year CDs. Accordingly, we will
use the yield on 10 year Treasury bonds plus 3% as the benchmark for the
10 year Guarantee Period. We reserve the right to use, in our sole
discretion, an index other than the BRM Index should such index cease to
be published.
If you already own a Certificate and purchase another of the same type,
we will calculate the interest rate on the new Certificate based on the
aggregate Account Values that you maintain in each Certificate of that
type.
8. WITHDRAWALS AND SURRENDER
You can schedule regular withdrawals of accrued interest on a monthly,
quarterly, or annual basis, or such other intervals as we may, from time
to time, permit. We reserve the right to assess service fees for
scheduled and unscheduled withdrawals of accrued interest. In addition,
we will assess a withdrawal charge if you withdraw some or all of your
Account Value prior to your fifth certificate anniversary ("Certificate
Anniversary"). We will deduct the charge from your remaining Account
Value or, in the case of a complete surrender, the amount withdrawn,
according to the following schedule:
AS A % OF AMOUNT WITHDRAWN: 5% 4% 3% 2% 1% 0%
# OF CERTIFICATE ANNIVERSARIES: 1 2 3 4 5 Over 5
The withdrawal charge does not apply to scheduled withdrawals of
interest. You may also withdraw some or all of your principal
investments in your Certificate prior to maturity, provided, however,
that any withdrawals of principal that occur before your fifth
Certificate Anniversary or prior to the end of a Guarantee Period will
be subject to a penalty for early withdrawal equal to 12 months accrued
interest payable on the amount withdrawn. In no event will the penalty
applicable during Certificate years 16 through 20 exceed 5%, 4%, 3%, 2%
and 2%, respectively, of the amount withdrawn. We will deduct the
penalty from your remaining Account Value, or, in the case of a complete
surrender, from the amount withdrawn. We will waive the penalty if the
withdrawal is due to the need to meet unexpected expenses from your
death, disability, or hospitalization. Withdrawal amounts are subject to
the minimums shown on your application. We will treat withdrawal
requests as coming first from accrued interest, then from your principal
investments. We will treat withdrawals that cause your Account Value to
fall below the minimum investment amount as a request for a complete
surrender of your Certificate.
9. SURRENDER VALUE
Upon surrender of your Certificate prior to its maturity, we will pay
you your Certificate's surrender value ("Surrender Value"), which, at
any time, equals your Account Value immediately prior to surrender, less
any applicable fees and charges assessable at the time of surrender. In
no event will your Surrender Value be less than the minimum amount
prescribed by Section 28 of the Investment Company Act of 1940, as
amended (the "Act").
10. LOANS
You may borrow up to 50% of your Account Value for a term of up to 5
years or the Maturity Date of your Certificate, whichever is earlier.
Loans are subject to an annual interest charge of up to 6% of the amount
withdrawn, but are not subject to the withdrawal charge or early
withdrawal penalty. You will not earn interest on the amount borrowed.
We will treat a loan that you do not repay as a permanent withdrawal. We
will assess the penalty for early withdrawal that would have applied at
the time of withdrawal.
11. DEFERRED PAYMENT
We may, at our option, defer any payment to you for a period of not more
than 30 days and, in that event, interest shall accrue on any payment or
payments due to you for the period of such deferment at the Minimum
Interest Rate.
12. MAINTENANCE OF RESERVES
Your Certificate is not secured by any particular asset of the Company.
However, to support our obligations under your Certificate and all other
Certificates that we issue, we maintain reserves in the amount and in
assets of the type prescribed by the Act. For purposes of computing the
reserves under your Certificate, the minimum maturity amount of your
Certificate equals the face-amount of your Certificate, and no interest
is payable or deemed payable until actually earned and credited.
13. EXCHANGING CERTIFICATES
You may not exchange your Certificate for any other Certificate.
14. TRANSFERRING OWNERSHIP
To transfer ownership of your Certificate, you must submit a completed a
transfer request form to us.
15. MISCELLANEOUS
Your Certificate carries no voting rights and is not entitled to
participate in any dividends that our Board of Directors may declare.
The minimum and maximum amounts applicable to your principal
investment(s) and withdrawals appear on your Certificate application.
The minimum maturity or face-amount of your Certificate, your Account
Value, your Surrender Value and other relevant data will appear on the
periodic account statements that we will send to you. These account
statements are incorporated herein to the extent necessary to comply
with applicable law.
16. SPECIAL PROVISIONS
Notwithstanding the above, the following special provisions apply to the
Certificates noted below:
FOR GROWTH CERTIFICATES ONLY:
Growth Certificate owners may make additional principal investments up
to an aggregate amount equal to the lesser of 15% of your initial
principal investment or $37,500. We will credit any additional principal
investments only on the first day of the month coinciding with or
following the date we receive such investments.
FOR RESERVE CERTIFICATES ONLY:
You can schedule systematic withdrawals of both principal and accrued
interest, without incurring any withdrawal charge or penalty for early
withdrawal, provided you maintain, at all times, a minimum Account Value
equal to 50% of your original principal investment. You can schedule
systematic withdrawals on a monthly or quarterly basis, or such other
intervals as we may, from time to time, permit. The minimum amount you
may withdraw at any time is set out in your Certificate application. We
will treat withdrawals under this plan as coming first from accrued
interest and then from principal.
FOR CORNERSTONE CERTIFICATES ONLY: The benchmark for the 5 and 10 year
Guarantee Periods under Cornerstone Certificates is the 11th District
Cost of Funds Index plus 3%. This Index is a weighted average of the
costs of borrowing by member banking institutions of the Federal Home
Loan Bank of San Francisco (the 11th District). We reserve the right to
use, in our sole discretion, an index other than the 11th District Cost
of Funds Index should such Index cease to be published.
