<PAGE>
FILE NO. 2-63910
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
------------------
POST-EFFECTIVE AMENDMENT
NUMBER 22
To
FORM S-1
Registration Statement
Under
The Securities Act of 1933
-----------------
ASSOCIATION FOR INVESTMENT
IN UNITED STATES GUARANTEED ASSETS, INC.
(Exact name of Registrant as specified in charter)
101 Merritt 7 Corporate Park, Norwalk, CT 06851
(Address of principal executive office)
-----------------
WILLIAM C. GOW WILLIAM C. GOW
Association For Investment in United Gow Holdings, Inc.
States Guaranteed Assets, Inc. 101 Merritt 7 Corp. Park
101 Merritt 7 Corp. Park Norwalk, CT 06851
Norwalk, CT 06851
(Names and Addresses of agents for service)
FILING: POST-EFFECTIVE AMENDMENT
-----------------
CALCULATION OF ADDITIONAL REGISTRATION FEE
<TABLE>
<CAPTION>
Title of Each Class Proposed Maximum Amount of
of Securities Being Additional Amount Aggregate Offering Additional
Registration Being Registered Price Fee
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Series 28 Face Amount
Certificates $7,292,845 $32,579,610 $2,027.41
======================================================================================================
</TABLE>
<PAGE>
REQUEST FOR ACCELERATION
The undersigned issuer hereby requests that the effect date of this
post-effective amendment to the registration statement be accelerated so that it
may be made effective May 25, 2000.
UNDERTAKINGS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in this section.
The registrant and each person whose signature appears below hereby authorizes
any agent for service named in the registration statement to file one or more
amendments (including post-effective amendments) to the registration statement
which amendments may make such changes in the registration statement as such
agent for service deem appropriate and the registrant and each such person
hereby appoints any such agent for service as attorney-in-fact to execute in the
name and on behalf of the registrant and each such person, individually and in
each capacity stated below, any such amendments to the registration statement.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has
duly caused this post-effective amendment to the registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Darien in the State of Connecticut, on this 1st day of May 2000.
Association for Investment in
United States Guaranteed Assets, Inc.
By: WILLIAM G. GOW---CHAIRMAN
Pursuant to the requirements of the Securities Act of 1933, this
post-effective amendment has been signed below by the following persons in the
capacities and on the date indicated.
- --------------------------------------------------------------------------------
Signature Title Date
- ------------------ --------------------------- -------
William C. Gow Chairman--Board of Directors 5/01/00
Marcie Gow Pajolek Vice President/Director 5/01/00
Lucia Leone Secretary 5/01/00
Edward J. Martin Director 5/01/00
2
<PAGE>
ASSOCIATION FOR INVESTMENT IN
UNITED STATES GUARANTEED ASSETS, INC.
Prospectus/May 25, 2000
This prospectus describes the secondary offering of Series 28 face amount
certificates issued by the Association for Investment in United States
Guaranteed Assets (the Company). The certificates offered for sale are owned by
Gow Holdings, Inc. The aggregate face amount of the offering is $32,579,610
payable in single payments for an aggregate purchase price of $22,058,155 plus
accrued interest. The certificates mature in 2004 with an option at maturity to
extend the investment for an additional period of up to twenty (20) years. The
value at maturity will be equal to the purchase price (less the mark-up), plus
interest and additional earnings applied to the certificate. (See page 7 for
more details.)
The name Association for Investment in United States Guaranteed Assets, is not
intended to, and should not imply that the face amount certificates are
guaranteed by the United States Government or any other agency or
instrumentality thereof. However, the Company will invest in, or make loans
secured by, assets which are either guaranteed or insured by, or the direct
obligation of, the United States Government, its agencies, or instrumentalities.
(See page 8.)
You may purchase the certificate with a single investment of any amount from
$5,000 (face amount: $12,500) plus accrued interest and additional credits. The
total mark up is 8.5% of the purchase price net of accrued interest and
additional credits. (See page 2.)
TAX ADVICE
Counsel have advised that purchasers of these certificates should benefit from a
deferral of income taxes but cautions that the Internal Revenue Service has not
interpreted its regulations with respect to these certificates. Prospective
purchasers should consult their own tax advisers. (See page 4.)
BREAKEVEN POINT
Investors in these certificates who surrender their certificates at any time
before the end of the second year after purchase may suffer a maximum loss of 5%
of the total certificate cost.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE'S SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE'S SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
This prospectus gives you facts about the certificate and describes its terms
and conditions. You should read it to decide if this certificate is the right
investment for you, and keep it for future reference.
- --------------------------------------------------------------------------------
FIRST SENTINEL SECURITIES LTD.
3
<PAGE>
TABLE OF CONTENTS Page No.
- --------------------------------------------------------------------------------
CERTIFICATES OFFERED FOR SALE BY THE PROSPECTUS 1
- -----------------------------------------------
ABOUT THE CERTIFICATE 1
- ---------------------
Description of the Series 28 Certificate 1
Purchase Amounts 2
Buying Certificates 2
Certificate Earnings 3
o guaranteed minimum 3
o additional earnings 3
Tax Treatment of the Certificate 4
USING THE CERTIFICATE 5
- ---------------------
Borrowing 5
Receiving Cash Before Maturity 6
At Maturity 7
HOW YOUR INVESTMENT IS PROTECTED 7
- --------------------------------
Issuer of the Certificate 7
Government Regulation 7
Investments on Deposit 8
Investment Policies 8
ADDITIONAL INFORMATION ABOUT THE COMPANY 9
- ----------------------------------------
Directors, Management Staff and Affiliates 9
The Company's Auditors 10
The Company's Offices 10
FINANCIAL INFORMATION 10
- ---------------------
Summary of Selected Financial Information 10
Management's Discussion of Operations 11
4
<PAGE>
CERTIFICATES OFFERED FOR SALE BY THIS PROSPECTUS
Association for Investment in United States Guaranteed Assets, Inc. (the
Company) was incorporated under the laws of the State of Maryland on March 11,
1975. At that time, the Company was a wholly owned subsidiary of 44 Holding
Corporation, New York, New York and it began business as an issuer of face
amount certificates on June 3, 1975.
On March 29, 1979 USGI Holdings, Inc. purchased the Company from and
certificates owned by 44 Holding Corporation, formerly known as Huntoon, Paige
Holding Corporation. On June 30, 1995 Huntoon Hastings Capital Corp. (HHCC)
purchased the certificates owned by USGI Holdings, Inc. On January 1, 1997,
Huntoon Hastings Capital Corp. purchased the stock of the Company from USGI
Holdings, Inc. Effective January 1, 1998 the stock of the company and
certificates were transferred from HHCC to USGI Holdings, Inc. Effective July
23, 1998 the stock of the company and certificates were transferred to Gow
Holdings, Inc.
Some of the certificates purchased by Gow Holdings, Inc. are among those being
offered by this prospectus. Also offered by this prospectus are certificates
that were purchased by Gow Holdings, Inc. from investors who tendered them for
cash surrender. The fact that Gow Holdings, Inc. has in the past purchased
certificates tendered for cash is no assurance that it will continue such
purchases in the future, although it is its present intention to do so. These
purchases will be made at the cash surrender value as determined by the Company.
In the event that Gow Holdings, Inc. does not continue to effect such purchases,
the Company will redeem the certificates. (See page 6.)
ABOUT THE CERTIFICATE
Description of the Series 28 Face Amount Certificate
The Series 28 face amount certificate is a contractual obligation of the issuer,
the Company. The Company agrees to pay the investor at a fixed future maturity
date, a definite sum of money that is referred to as the "face amount". The face
amount is determined by deducting the commission from the initial purchase price
that is net of accumulations and compounding the balance at the guaranteed
annual rate of 3-1/2% from date of issue to maturity.
Certificates may receive additional earnings that will be calculated at the end
of each calendar year. (See page 4.)
The Series 28 certificates were issued on December 12, 1975 and mature on
February 16, 2004. Certificates purchased under this offering while issued and
outstanding in 1975, are purchased plus accrued interest from December 12, 1975
and have, in 1999, approximately four (4) years to maturity in 2004. At maturity
they may be extended for an additional period of up to twenty (20) years.
5
<PAGE>
Purchase Amounts
Certificates are purchased with a single investment in any amount from $5,000 to
$1 million.
An investment of approximately $40,000 would appear as follows:
Initial Purchase Price: $ 18,397
(includes markup of 8.5%
in the amount of $1,564)
Accrued Interest from
December 12, 1975 to January 1, 2000: $ 20,038
Total Certificate Value at Purchase: $ 38,435
Total Certificate cost is: $ 39,999
Guaranteed Face Amount at Maturity: $ 44,254
Buying Certificates
Applications for investment in these certificates are available through selected
broker-dealers who are members of the National Association of Security Dealers.
This selling group of firms will be managed by First Sentinel Securities, Ltd.
who will act as the Dealer-Manager in this offering. All applications and
investor funds will be delivered by the selected firms to Fleet Bank, Rochester,
New York who acts as agent for Gow Holdings, Inc. Once received and accepted by
Gow Holdings, Inc. applications are not subject to cancellation by the investor.
The initial purchase price includes a markup of 8.5% that is the commission paid
by the investor. Total certificate cost, however, includes initial purchase
price plus accrued interest and additional credits. The 8.5% markup is not
applied to the accrued interest and additional credit amounts. When the markup
of 8.5% is applied as a percentage of the total monies invested (i.e., initial
purchase price plus accrued interest and additional credits), the markup
translates to between 4.4% and 5.0% of total monies invested.
For example, using the illustration from the previous section "Purchase Amounts"
the markup on the Initial Purchase Price of $18,397 amounts to $1,564. When
applied as a percentage of the Total Certificate Value, $38,435, this translates
to 4.1% of total monies invested.
6
<PAGE>
The total markup provided in this offering is payable to First Sentinel
Securities, Ltd. from which 80% to 100% will be paid to the selected dealers
dependent upon their volume.
There will be no markup on purchases for their own accounts by employees,
officers and directors of Gow Holdings, Inc. and its affiliates or members of
their families.
Certificate Earnings
You are always guaranteed a minimum of 3-1/2% on your investment. To accumulate
the amount of the payment promised, the Company invests the purchase price, net
of the markup, and promises that the income from such investments will be a
minimum of 3-1/2% per year. This 3-1/2% is accumulated annually and reinvested
at the same 3-1/2% minimum rate. Amounts that you borrow from your certificate
reserves will continue to earn the 3-1/2% minimum rate.
In addition to the guaranteed rate, you may receive additional earnings that are
distributed to certificate holders of record on December 31st. These additional
earnings will only be applied to the unborrowed amounts on your certificate. The
Company will maintain a reserve to assure payment of any additional earnings
granted plus accumulations at the guaranteed minimum rate of 3-1/2% compounded
annually. The amount of such reserves shall be paid upon surrender or at
maturity unless a different settlement option has been elected. It should be
noted that the additional earnings are not based upon the total amount paid in
on a certificate, but upon the reserve value of the certificate during the year
for which the additional earnings are granted.
When added to the guaranteed minimum rate of 3-1/2%, additional earnings have
resulted in gross annual yields on the unborrowed portion of the certificate as
follows:
1990 - 7.89% 1995 - 6.12%
1991 - 6.27% 1996 - 4.50%
1992 - 4.56% 1997 - 4.61%
1993 - 4.24% 1998 - 4.21%
1994 - 3.96% 1999 - 3.77%
Past yields are no guarantee of future performance.
7
<PAGE>
The total annual income earned on the investment portfolio will determine the
amount of additional earnings in the following manner:
o After the guaranteed 3-1/2% earnings are applied to the reserves for each
certificate, the next 1% of the portfolio's earnings are allocated to the
Company to cover operating expenses.
o The next 4% of investment portfolio earnings, over the aforesaid 4-1/2%
earnings, will be applied as additional earnings to the reserves for each
certificate.
o On income earned over the first 8-1/2% of portfolio earnings, one half is
credited to the reserves for each certificate as additional earnings and one
half is credited to the Company.
Additional earnings for any certificate will be reduced proportionately for any
period of the fiscal year during which the reserves behind such certificate were
unfunded or ineligible for any reason.
Tax Treatment of the Certificate
Under Federal income tax laws and regulations in effect prior to January 1,
1976, the yield on certificates was treated as ordinary income upon maturity or
surrender. The increase in value, including additional credits, is accumulated
over the years on a tax-deferred basis until surrender or maturity. Thus, under
the tax treatment in effect for certificates issued prior to January 1, 1976 you
could arrange to take your certificate proceeds at a time most favorable to you
from a tax standpoint. Often this is at retirement or semi-retirement when
income is reduced and the individual's tax bracket is lower.
Regulations adopted by the U.S. Treasury Department changed this treatment for
certificates issued after December 31, 1975. Under the new regulations, holders
of certificates issued after December 31, 1975 would include as ordinary income,
under the definition of original issue discount, in each year during the life of
the certificate a ratable portion of the difference between the face amount and
the purchase price and also an amount to be computed as assumed additional
earnings. However, certificates issued prior to December 31, 1975 would not be
affected by the new regulations.
8
<PAGE>
Counsel to the Company have advised that the certificates offered by this
Prospectus should be considered to be certificates issued prior to January 1,
1976 and that there should be no income tax payable on such certificates until
maturity or surrender. Such counsel have further advised that the purchase of
such certificates from Gow Holdings, Inc. by a third party would be a purchase
of certificates issued prior to January 1, 1976 and that no income tax should be
payable by such purchasers until the maturity or surrender of such certificates.
However, such counsel has also further advised that no revenue ruling has been
sought to ascertain the position of the Internal Revenue Service on the matter.
Prospective purchasers should consult with an independent tax adviser with
respect to the tax consequences of this investment.
USING THE CERTIFICATE
Borrowing
At any time after the date of purchase of your certificate, the Company will
loan to you up to 98% of the value of your certificate.
Loans bear interest, payable in advance, at a maximum rate of 5% per year on the
unpaid balance.
While the loan is for one year, it will be renewed each additional year if the
value of your certificate is sufficient to pay the required interest, or if you
pay the interest due on the loan. If interest is not paid when due, it will be
added to the existing balance of your loan.
Whenever the loan balance equals or exceeds the maximum allowable, the Company
may apply the surrender value in payment of the loan and forward the remaining
certificate balance, if any, to you. At this point your certificate shall become
void.
Upon a final settlement with you as the result of surrender or maturity, the
amount of the loan shall be deducted from the amount otherwise due you.
As security for the loans, a loan agreement is to be executed specifying the
assignment of your certificate to the Company.
During any period when there is a loan outstanding, all the certificate reserves
attributable to your certificate will continue to earn the guaranteed minimum
rate of 3-1/2%. However, only the unborrowed reserves will be entitled to the
additional earnings.
9
<PAGE>
Receiving Cash Before Maturity
If you find that you need your money prior to maturity, you may surrender all or
part of your certificate by giving us instructions in writing. Certificates may
be redeemed by the Company upon demand for their cash surrender values.
There are no penalties or charges for redemption. All certificates issued by the
Company provide guaranteed minimum cash surrender values before maturity. The
following examples illustrate various surrender values. (These numbers are
approximate, actual calculations would be determined on a per diem basis so
values may be slightly lower or higher.)
Certificate's Features:
Purchase Date: January 1, 2000
Total Certificate Cost
(including markup of $1,564) is: $ 39,999
You surrendered the certificate
on January 1st in the following
year(s) after purchase as follows:
Surrender Value
Case A Case B
With annual earnings With annual earnings
limited to 3-1/2% of 5.00% which includes
guaranteed rate the 3-1/2% guaranteed rate.
Year 1 $ 39,780 $40,356
Year 3 $ 42,613 $44,491
Maturity $ 44,302 $46,925
(February 16, 2004)
In cases A and B Total Certificate Cost (less the markup) plus earnings are
compounded annually up to, and including, the day of surrender.
In cases A and B it is assumed there are no outstanding loans on the
certificate.
In case B, the 5.00% annual earnings used for illustrative purposes is the
Company's average annual portfolio yield for the past ten-year period, this is
no guarantee of future performance.
10
<PAGE>
At Maturity
You may surrender your certificate at maturity and receive its full cash
surrender value.
At maturity you may also elect to receive the total value of your certificate
under various settlement options which include:
1. Withdrawing the total value in not less than quarterly installments of at
least $500.00 per installment.
2. Leaving all, or any part of, the total value with the Company to accrue
interest for an additional period of up to 20 years as may be designated by
you.
Certificates left with the Company under the above options will earn interest at
the guaranteed annual rate of 3-1/2%. These certificates may also receive
additional earnings that will be calculated upon the reserves for each
certificate at December 31st.
You may elect at any time after the effective date of a settlement option to
terminate your settlement option and receive the entire reserve then maintained
under the above option 1 and 2.
HOW YOUR INVESTMENT IS PROTECTED
Issuer of the Certificate
The Association for Investment in United States Guaranteed Assets, Inc. is a
wholly owned subsidiary of Gow Holdings, Inc.
Gross income of the Company is derived from interest on investments and
certificate loans. The Company's net income is determined by deducting the
following expenses from gross income:
o provision for certificate reserves (interest accrued on certificate holder
accounts) and
o other expenses, including taxes
For a more detailed financial accounting see the audited financial statements
(See page 16.)
Government Regulations
The face amount certificate is a security regulated under the Investment Company
Act of 1940. Its offer and sale are subject to regulations under federal and
state securities laws. It is not a bank product, an equity investment, a form of
life insurance or an investment trust.
11
<PAGE>
Investments on Deposit
The Federal Investment Company Act of 1940 requires the Company to keep cash or
qualified investments on deposit in a segregated account to protect the value of
all of our outstanding certificates. These investments back the entire value of
your certificate reserves.
Certificate reserve requirements on December 31, 1999 were $36,974,132. The
value of our investments on deposit determined in accordance with generally
accepted accounting principles were $37,340,751.
Our investments are on deposit with Fleet Bank, Rochester, New York.
For comments regarding the valuation of investments see note one to the
financial statements.
Investment Policies
The Company is restricted by its Articles of Incorporation to the following
investments:
o U.S. Government securities which include Treasury Bonds, Notes and Bills and
securities issued by instrumentalities of the United States Government.
o The insured portion of loans guaranteed by the Small Business Administration
and The Farmers Home Administration.
o Mortgage loans guaranteed by the Veterans Administration or insured by the
Federal Housing Administration (FHA and VA Mortgages).
o Certificates guaranteed as to the payment of principal and interest by the
Government National Mortgage Association (GNMA certificates).
o Short-term loans under the Order of Exemption from certain provisions of the
Investment Company Act of 1940 which was granted to the Company by the
Securities and Exchange Commission. These loans may be made to affiliated
and nonaffiliated mortgage bankers, are callable on demand, and bear
interest to the Company at the prime rate or more. Security for these loans
shall be FHA/VA mortgages, GNMA certificates or other U.S. Government
guaranteed securities.
Portfolio Turnover - There are no restrictions on rates of portfolio turnover.
Purchasing Securities on Margin - We will not purchase any securities on margin
or participate on a joint basis or a joint and several basis in any trading
account in securities.
12
<PAGE>
Short Sales - We will not effect the short sale of any security.
Borrowing Money - The Company has not borrowed money and has no present
intention of doing so. It may borrow in the future only when necessary for the
clearance or delivery of purchases and sales of investments.
Underwriting - We do not intend to engage in the public distribution of
securities issued by others.
ADDITIONAL INFORMATION ABOUT THE COMPANY
Our Directors, Management Staff and Affiliates
<TABLE>
<CAPTION>
NAME OFFICE PRINCIPAL OCCUPATION &AFFILIATE
- ---- ------ -------------------------------
<S> <C> <C>
William C. Gow Chairman of the Chairman of the Board of Directors of Gow
Board of Directors Holdings, Inc. since July 1998. Chairman of the
Board of Directors of USGI Holdings, Inc. from July
1980 to July 1998. Chairman of the Board of
Directors of Merrill Lynch Huntoon, Paige Inc. from
December 1978 to June 1980. Chairman of the
Board of Directors of Huntoon, Paige & Co., Inc.;
1967 to December 1978.
Marcie Gow Pajolek Vice-President Vice President of The Association for Investment in
United States Guaranteed Assets, Inc. since 1990.
Elected to the Board of Directors December 1998.
Lucia Leone Secretary Secretary of the Company since December 1998.
Edward J. Martin Director Practicing Attorney with the law firm of Stroock &
Stroock & Lavan LLP since June 1997. Formerly of
counsel to Reid & Priest from June 1994 to June
1997; partner of Shea & Gould for more than 16
years prior to June 1994; partner in Bartel, Engelman
& Fishman for more than two years prior to 1978;
associate of Dewey, Ballantine, Bushby, Palmer &
Wood for more than five years prior to 1975.
</TABLE>
13
<PAGE>
The Company's Auditors
A firm of independent accountants audits the Company's financial statements at
the close of each fiscal year (December 31st). Copies of our annual financial
statements are available to any certificate holder upon request. Dworken,
Hillman, La Morte & Sterzcala, P.C. has audited the financial statements for the
years ended December 31, 1999, 1998 and 1997. These statements are included in
this prospectus.
The Company's Offices
Our offices and Mailing Address is:
101 Merritt 7 Corporate Park
Norwalk, CT 06851
Our Phone: (203) 341-9775
FINANCIAL INFORMATION
Summary of Selected Financial Information
The following selected financial information has been derived from the audited
financial statements and should be read in conjunction with those statements and
the related notes to those financial statements. Also see Management's
Discussion of Operations.
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Investment income $ 1,768,389 $ 1,731,335 $ 1,695,277 $ 1,638,569 $ 1,681,622
Investment expenses 100,220 106,376 109,449 169,922 158,877
Provision for
certificate reserves 1,266,828 1,249,730 1,231,261 1,189,455 1,251,309
Net income 242,370 221,854 208,858 164,458 158,994
Total assets $37,394,618 $36,241,845 $35,037,649 $33,798,197 $32,412,633
</TABLE>
<PAGE>
Management's Discussion of Operations
The Company's investment income is derived from interest income on investments
and loans to certificate holders. The Company's primary portfolio policy was one
of investing in U.S. Government or Government guaranteed securities.
Rates and yields on these securities during 1999 were slightly lower than those
prevailing in 1998. The income from this source resulted in a yield on
unborrowed reserves for 1999 of 3.77% versus 4.21% in 1998. Reflecting a
decrease in rates of return, the provision for certificate reserves in 1999 was
approximately the same as in 1998.
The Company's investment objectives are to assure the maximum safety and
liquidity of the investment portfolio. To that end investments have been limited
to U.S. Government or Government guaranteed securities and short-term loans
under the Order of Exemption which are secured by Government guaranteed
securities. The average maturity of the investments in U.S. Government Treasury
Notes/Bills is eleven (11) months.
There is no expected change in the asset mix of the portfolio in the foreseeable
future.
<PAGE>
Independent Auditors' Report
Board of Directors and Security Holders
Association for Investment in United States
Guaranteed Assets, Inc.
We have audited the accompanying balance sheets of Association for Investment in
United States Guaranteed Assets, Inc. as of December 31, 1999 and 1998 and the
related statements of income, retained earnings and cash flows for each of the
years in the three year period ended December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Association for Investment in
United States Guaranteed Assets, Inc. as of December 31, 1999 and 1998 and the
results of its operations and its cash flows for each of the years in the three
year period ended December 31, 1999, in conformity with generally accepted
accounting principles.
Bridgeport, Connecticut Dworken, Hillman, LaMorte & Sterczala, P.C.
March 1, 2000
<PAGE>
ASSOCIATION FOR INVESTMENT
IN UNITED STATES GUARANTEED ASSETS, INC.
BALANCE SHEETS
December 31, 1999 and 1998
Assets
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Qualified assets (Note 2):
Cash $ 12,076 $ 27,828
Investments in U.S. Treasury Notes and Bills, at cost which
approximates market 6,497,195 6,603,886
Certificates loans, secured by applicable certificate reserves (Note 3) 30,463,510 29,115,244
Receivable for accrued interest (Note 5) 395,156 468,206
----------- -----------
37,367,937 36,215,164
Other assets 26,681 26,681
----------- -----------
$37,394,618 $36,241,845
=========== ===========
Liabilities and Shareholder's Equity
Certificate reserves (Note 3):
Reserves to mature:
Series 28, fully paid certificates (Note 5) $32,577,438 $31,328,352
Series 28I, installment certificates 8,253 7,763
Reserve for additional credits 4,388,441 4,371,189
----------- -----------
36,974,132 35,707,304
Current liabilities, exclusive of certificate reserve liabilities:
Unearned interest on certificate holders' loans 68,301 78,691
Accrued expenses, taxes and other 71,297 79,487
----------- -----------
37,113,730 35,865,482
----------- -----------
Shareholder's equity:
Common stock, par value $1 per share, authorized, issued and
outstanding 250,000 shares 250,000 250,000
Capital in excess of par value 1,000 1,000
Retained earnings 29,888 125,363
----------- -----------
280,888 376,363
----------- -----------
$37,394,618 $36,241,845
=========== ===========
</TABLE>
See notes to financial statements.
<PAGE>
ASSOCIATION FOR INVESTMENT
IN UNITED STATES GUARANTEED ASSETS, INC.
STATEMENTS OF INCOME
Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Investment income:
Interest income: (Note 5)
Investments $ 295,614 $ 331,493 $ 367,483
Certificate loans 1,472,775 1,399,842 1,327,794
1,768,389 1,731,335 1,695,277
Investment expenses:
Officer's salary 45,479 45,480 49,269
Professional fees 16,500 17,886 17,694
Custodial fees 18,681 17,966 19,058
Printing, promotion and telephone 4,913 7,630 8,156
Directors' fees 6,000 6,000 8,000
Payroll taxes 3,731 4,022 4,065
Other 4,916 7,392 3,207
100,220 106,376 109,449
Net investment income 1,668,169 1,624,959 1,585,828
Provision for certificate reserves
(Notes 3 and 5) 1,266,828 1,249,730 1,231,261
Income before income taxes 401,341 375,229 354,567
Income taxes (Note 4) 158,971 153,375 145,709
Net income $ 242,370 $ 221,854 $ 208,858
========== ========== ==========
STATEMENTS OF RETAINED EARNINGS
Years Ended December 31, 1999, 1998 and 1997
1999 1998 1997
Balance, beginning $ 125,363 $ 178,509 $ 159,651
Add net income 242,370 221,854 208,828
Deduct cash dividends on common stock (337,845) (275,000) (190,000)
Balance, ending $ 29,888 $ 125,363 $ 178,509
========== ========== ==========
</TABLE>
See notes to financial statements.
<PAGE>
ASSOCIATION FOR INVESTMENT
IN UNITED STATES GUARANTEED ASSETS, INC.
STATEMENTS OF CASH FLOWS
Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 242,370 $ 221,854 $ 208,858
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for certificate reserves 1,266,828 1,249,730 1,231,261
Change in assets and liabilities:
(Increase) decrease in accrued interest 73,050 (46,444) (66,741)
Increase (decrease) in unearned interest (10,390) 2,006 9,126
Increase (decrease) in accrued expenses (8,190) 5,606 (19,793)
Net cash provided by operating activities 1,563,668 1,432,752 1,362,711
Cash flows from investing activities:
Acquisition of other assets (26,681)
Proceeds from sale and maturity of investments 9,333,788 11,566,856 13,193,368
Purchase of investments (9,227,097) (11,226,375) (13,069,019)
(Increase) decrease in loans to affiliates 14,173 (12,372)
Disbursements for certificate loans (1,348,266) (1,476,081) (1,279,699)
Net cash used in investing activities (1,241,575) (1,148,108) (1,167,722)
Cash flows from financing activities:
Cash dividends paid (337,845) (275,000) (190,000)
Net cash used in financing activities (337,845) (275,000) (190,000)
Net increase (decrease) in cash (15,752) 9,644 4,989
Cash, beginning 27,828 18,184 13,195
Cash, ending $ 12,076 $ 27,828 $ 18,184
========== ============ ============
Supplemental disclosures of cash flows
Information:
Cash payment for income taxes $ 131,625 $ 112,000 $ 98,266
========== ============ ============
</TABLE>
See notes to financial statements.
<PAGE>
ASSOCIATION FOR INVESTMENT
IN UNITED STATES GUARANTEED ASSETS, INC.
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 1999, 1998 and 1997
1. Nature of business and significant accounting policies:
Nature of business:
The Company is an issuer of Series 28 Face amount certificates. The Company
is a wholly-owned subsidiary of Gow Holdings, Inc. ("Parent"). Effective
January 1, 1998, the stock of the Company was transferred from Huntoon
Hastings Capital Corp. to USGI Holdings, Inc. Effective July 28, 1998, the
stock of the Company was transferred to Gow Holdings, Inc.
The Company's financial statements are prepared in accordance with generally
accepted accounting principles and comply with Section 28 of the Investment
Company Act of 1940.
Use of estimates:
Management uses estimates and assumptions in preparing these financial
statements in accordance with generally accepted accounting principles.
Those estimates and assumptions affect the reported amount of assets and
liabilities, the disclosure of contingent assets and liabilities, and
reported revenue and expenses. Actual results could vary from the estimates
that were used.
Valuation of qualified assets:
Qualified assets are stated at cost, except for United States Treasury Bills
which are stated at amortized cost which approximates market value. An
allowance for loss will be provided if evidence indicates a permanent
decline in the underlying value and earning power of individual securities.
Income recognition:
Security transactions are recorded on the trade date. Interest income is
recorded when earned. Discounts on United States Treasury Bills are
amortized over the terms of the securities to which they apply. Unearned
interest on certificate loans is amortized on a straight-line basis over
the life of the loan.
Provision for certificate reserves:
Certificate reserves accrue at the rate of 3 1/2% compounded annually. In
addition, at the end of each fiscal year of the Company, each certificate
upon which all payments including all installments, have been made will
receive "additional credits" calculated on the earnings attributable to the
invested reserves. Borrowed reserves are not eligible for additional
credits.
<PAGE>
ASSOCIATION FOR INVESTMENT
IN UNITED STATES GUARANTEED ASSETS, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 1999, 1998 and 1997
1. Nature of business and significant accounting policies (continued):
Cash:
For the purposes of the Statement of Cash Flows, the Company considers
investments with original maturities of three months or less to be a cash
equivalent.
The Company maintains its cash in bank deposit accounts that, at times, may
exceed federally insured limits. The Company believes it is not exposed to
any significant credit risk on cash and cash equivalents.
Fair value of financial instruments:
The carrying amount of cash, investments in U.S. Treasury Notes and Bills,
accounts, loans and other receivables, loans payable and trade payables
approximates fair value because of the short maturity of those instruments.
The carrying amount of Certificate Loans approximates fair value because
these loans are secured by related Certificate Reserves. The carrying
amount of Certificate Reserves approximates fair value because under the
terms of the Certificates, a holder can sell their certificates at any time
for its carrying amount.
2. Qualified assets:
Under the provisions of its certificates and the Investment Company Act of
1940, at December 31, 1999, the Company was required to have qualified
assets (as that term is defined in Section 28 (b) of the Act), of
$37,224,132. As shown in the accompanying balance sheet, the Company had
qualified assets of $37,357,937.
Pursuant to the requirements of the Investment Company Act of 1940,
"Qualified Assets" are to be maintained on deposit with Fleet Bank under a
"Depository Agreement" to meet certificate reserve requirements of
$36,974,132, at December 31, 1999. Assets on deposit as of December 31,
1999 are as follows:
Cash $ 12,076
United States Treasury Bills 6,497,195
Certificate loans, secured by certificate reserves 30,831,480
----------
$37,340,751
===========
<PAGE>
ASSOCIATION FOR INVESTMENT
IN UNITED STATES GUARANTEED ASSETS, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 1999, 1998 and 1997
3. Certificate reserves:
Reserves maintained on outstanding certificates have been computed in
accordance with the provisions of the certificates and Section 28 of the
Investment Company Act of 1940. The total gross rate of accumulation on
Series 28 and 28I certificates for 1999 was 3.77%. Gross rates of
accumulation on certificate reserves were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------------------- ------------------------- -------------------------
Annual Gross Annual Gross Annual Gross
Total Rates of Total Rates of Total Rates of
Reserves Accumulation Reserves Accumulation Reserves Accumulation
------------ ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Reserves
to mature:
Series 28 $32,577,438 3.50% $31,328,352 3.50% $30,122,784 3.50%
Series 28I 8,253 3.50% 7,763 3.50% 7,579 3.50%
Additional credits
on Series 28 and
28I certificates 4,388,441 .27% 4,371,189 .71% 4,327,211 1.11%
----------- ----------- -----------
$36,974,132 $35,707,304 $34,457,574
=========== =========== ===========
</TABLE>
4. Income taxes:
The Company files a consolidated federal income tax return with its parent
and affiliates. The tax liability is allocated to the Company on a
separate-return basis.
The provision for income taxes is composed of the following for the years
ended December 31, 1999, 1998 and 1997:
1999 1998 1997
-------- -------- --------
Federal $124,857 $114,626 $107,593
State 34,114 38,749 38,116
-------- -------- --------
$158,971 $153,375 $145,709
======== ======== ========
<PAGE>
ASSOCIATION FOR INVESTMENT
IN UNITED STATES GUARANTEED ASSETS, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 1999, 1998 and 1997
4. Income taxes (continued):
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Computed "expected" federal tax expense $136,456 $127,578 $120,553
Increase in taxes resulting from state income
taxes, net of federal benefit 22,515 25,797 25,156
-------- -------- --------
Actual tax expense $158,971 $153,375 $145,709
======== ======== ========
</TABLE>
5. Related party transactions:
AtDecember 31, 1999, the Parent owned certificates with an aggregate cost of
$29,352,000 ($27,864,000 in 1998) and had a related loan balance of
$28,772,000 ($27,301,000 for 1998) with accrued interest of $368,000
($420,000 for 1998).
During 1999, the Company made certificate reserve provisions of approximately
$990,000 ($937,000 and $879,000 for 1998 and 1997, respectively) and
recorded earned interest of $1,390,500 ($1,094,400 and $1,226,200 for 1998
and 1997, respectively), both, pertaining to the affiliate's certificates
and loans.
The affiliate has borne all operational expenses of the Company, other than
those set forth in the statements of income.
<PAGE>
INFORMATION NOT REQUIRED IN PROSPECTUS
Marketing Arrangements.
See "Buying Certificates: p.2 of the Prospectus.
Other Expenses of Issuance and Distribution.
The estimated expenses payable in connection with the distribution of
securities being registered by the Registration statement are as follows:
Securities and Exchange Commission registration fee....... $ 2,027
Accounting fees...........................................
Printing and engraving.................................... 220
Legal fees................................................ 500
Blue Sky fees and expenses................................
Miscellaneous.............................................
Total..................................................... $ 2,747
------------
All of the foregoing expenses will be borne by Gow Holdings, Inc., parent of
the Registrant.
Relationship with Registrant of Experts Named in Registration Statement.
None.
Sales to Special Parties.
None.
Recent Sales of Unregistered Securities.
None.
Subsidiaries of Registrant.
None.
Franchises and Concessions.
None.
<PAGE>
Indemnification of Directors and Officers.
Section 5 of Article 23 of the Annotated Code of Maryland provides in part:
"(a) Any corporation of this State may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative (other than an action by or in the right of
the corporation) by reason of the fact that he is or was a director, officer,
employee, or agent of the corporation, or is or was serving at the request of
the corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise. The
indemnification may be against expenses (Including attorneys' fees),
judgments, fines, and amounts paid in settlement actually and reasonably
incurred by him in connection with the action, suit, or proceeding if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and , with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The termination of any action, suit, or proceeding, by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person
did not act in good faith and in a manner which he reasonably believed to be
in or not opposed to the best interest of the corporation, and, with respect
to any criminal action or proceeding, had reasonable cause to believe that
his conduct was unlawful.
"(b) Any corporation of this State may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee, or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust or other enterprise.
The indemnification may be against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of the action or suit if he acted in good faith and in a manner he
reasonably believed to be or not opposed to the best interests of the
corporation; except that no indemnification shall be made in respect of any
claim, issue, or matter as to which the person has been adjudged to be liable
for negligence or misconduct in the performance of his duty to the
corporation, unless and only to the extent that the court in which the action
or suit was brought, or a court of equity in the county in which the
corporation has its principal office, determines upon application that,
despite the adjudication of liability but in view of all circumstances of the
case, the person is fairly and reasonably entitled to indemnify for the
expenses which the court shall deem proper."
The Board of Directors of Registrant has resolved to indemnify all directors,
officers and employees in accordance with the terms of the above Section. The
Board of Directors of Registrant intends to obtain liability insurance covering
officers, directors and key staff personnel. The insurance terms provide, with
certain exceptions and exclusions, for protection of the insured personnel
against unindemnified losses from claims and expenses resulting from any
negligent act, any error, any omission or any breach of duty while acting in
their respective capacities.
<PAGE>
Insofar as indemnification or liabilities arising under the Securities Act
of 1933 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 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 controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Treatment of Proceeds from Stock being Registered.
Not applicable.
Financial Statements and Exhibits.
(a) 1. Included in the Prospectus:
Independent Auditor's Report
Balance Sheets, December 31, 1999 and 1998
Statements of Income, Years Ended December 31, 1999, 1998 and 1997
Statements of Retained Earnings, Years Ended December 31, 1999, 1998 and
1997 Statements of Cash Flows, Years Ended December 31, 1999, 1998 and 1997
Notes to Financial Statements.
(2) Included elsewhere in the Registration Statement:
Schedule I as of December 31, 1976 and Schedule VI as of December 31, 1976
thru 1999 are incorporated by reference to the Company's Annual Reports (Form
10-K) filed with the Securities and Exchange Commission in March 1976 through
1999. All other schedules have been omitted because they are not applicable,
not required or the information is included in the financial statements or
notes thereto.
<PAGE>
(3) Reports and Consent of Certified Public Accountants.:
(b) Exhibits:
1 Form of Dealer Agreement, filed as exhibit 1 to Registration Statement
No. 2-55358, filed under prospectus dated February 12, 1976.
3.1 Articles of Incorporation, filed as exhibit 1 to Registration
Statement No. 811-2563 and incorporated herein by reference and made a
part hereof filed under prospectus dated May 1, 1977.
3.2 Amendment to Articles of Incorporation, filed as exhibit 3.2 to
Registration Statement No. 2-53024 and incorporated herein by
reference and made a part hereof, filed under prospectus dated
November 1, 1976.
3.2a Articles of Amendment--consent dated April 8, 1977
3.2b Articles of Amendment--Dated April 15, 1977
3.3 By-Laws, filed as exhibit 2 to Registration Statement No. 81102563 and
incorporated herein by reference and made a part hereof , filed under
prospectus dated May 1, 1977.
4.1 Form of Series 28 Face Amount Certificate, filed as exhibit 4 to
Registration Statement No. 811-2563 and incorporated herein by
reference and made a part hereof, filed under prospectus May 1, 1977.
7 Opinion and consent of Messrs. Emmet, Marvin & Martin, filed as
exhibit 7 to Registration Statement No. 2-63910 Number 20 dated July
1, 1998.
<PAGE>
REPORT AND CONSENT OF CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Security Holders
Association for Investment in United States
Guaranteed Assets, Inc.
We consent to the use in Post-Effective Amendment No. 22 to Registration
Statement of Association For Investment In United States Guaranteed Assets, Inc.
of our report dated March 1, 2000 appearing in the prospectus, which is part of
the Registration Statement, and to the reference to us under the heading
"Selected Financial Data" and "Experts" in such prospectus.
Bridgeport, Connecticut
April 19, 2000
DWORKEN, HILLMAN, LAMORTE & STERCZALA, P.C.
<PAGE>
ASSOCIATION FOR INVESTMENT IN UNITED STATES
GUARANTEED ASSETS, INC.
SCHEDULE VI - CERTIFICATE RESERVES
December 31, 1999
Description Balance December 31, 1999
- ------------------------------------------ -------------------------
Yield to Maturity
an Annual Payment Amount of
Basis Reserves
------------------ ---------
Series
- ------
Paid-up certificates -
Series 28....................... 3.50% $32,577,438
Installment basis -
Series 28I....................... 3.50% 8,253
Additional credits:
Series 28........................ 0.27% 4,388,441
-----------
$36,974,132
<PAGE>
APPLICATION FORM
I am of legal age in the State of my residence and I hereby purchase Series 28
face amount certificates in the face amounts indicated below which are as
described in the Prospectus dated May 15, 2000 of Association for Investment in
United States Guaranteed Assets, Inc. and acknowledge receipt of a copy of such
Prospectus, I understand that this purchase is irrevocable.
NO APPLICATION FORM WILL BE PROCESSED
UNLESS ACCOMPANIED BY PAYMENT IN FULL
(EXCEPT THAT ACCRUED INTEREST WILL BE BILLED ON TRANSFER)
Face Amount Payment Enclosed
- ---------------------- ----------------------
($12,500 minimum) ($5,000 minimum)
REGISTRATION the Certificates should be Registered as follows:
MR. MRS. MISS. MS.
- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Print Applicant's Name. For clarity, please skip a space where appropriate.
MR. MRS. MISS. MS.
- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Print Joint Registrant's Name, if any. In case of joint registration, a joint
tenancy with right of survivorship will be presumed, unless a tenancy in common
is indicated. For clarity, please skip a space where appropriate.
- --------------------------------------------------------------------------------
Print Street Address City State Zip Code
- --------------------------------------------------------------------------------
Signature of Applicant Date Signature of Joint Registrant Date
- --------------------------------------------------------------------------------
Taxpayer's Account Number -or- Name of Taxpayer whose
Social Security Number Account Number appears at left.
Accrued interest will be billed to above address.
PLEASE MAKE CHECKS PAYABLE TO
"FLEET BANK c/o USGA ACCOUNT"
Please mail this signed Application Form
and your check for the total price shown above to:
USGA, 101 Merritt 7 Corp. Park, Norwalk, CT 06851
- --------------------------------------------------------------------------------
TO BE COMPLETED BY YOUR INVESTMENT DEALER
- --------------------------------------------------------------------------------
Dealer Code # Investment Firm Name Authorized Signature Date
- --------------------------------------------------------------------------------
Print Street Address City State Zip Code
- --------------------------------------------------------------------------------
Branch Code # Salesperson's Code # Salesperson's Last Name
