SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934

    For the fiscal year ended December 31, 1999

                                       OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934

    For the transition period from ________________ to __________________

                          Commission File Number 1-9900

                         ARIZONA LAND INCOME CORPORATION
              (Exact name of small business issuer in its charter)

         Arizona                                                 86-0602478
(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                               Identification No.)

                        2999 North 44th Street, Suite 100
                             Phoenix, Arizona 85018
               (Address of principal executive offices) (Zip Code)

          Issuer's telephone number, including area code (602) 952-6800

           Securities registered pursuant to Section 12(b) of the Act:

     Title or class                    Name of each exchange on which registered
     --------------                    -----------------------------------------
Common Stock, no par value                         American Stock Exchange

           Securities registered pursuant to Section 12(g) of the Act:

                                      None
                                (Title or Class)

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

         Check if there is no  disclosure  of  delinquent  filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure will
be contained,  to the best of  Registrant's  knowledge,  in definitive  proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

         The issuer's  revenues for the fiscal year ended December 31, 1999 were
$1,076,000.

         The aggregate  market value of the voting stock held by  non-affiliates
of the registrant,  based upon the average of the high and the low prices of the
registrant's Series A Common Stock as reported by the American Stock Exchange on
March 16, 2000,  was  approximately  $4,234,100.  Shares of voting stock held by
each  executive  officer and  director and by each person who owns 5% or more of
the  outstanding  voting  stock have been  excluded in that such  persons may be
deemed  affiliates.  This  determination  of affiliate status is not necessarily
conclusive.

                    APPLICABLE ONLY TO CORPORATE REGISTRANTS

         Indicate the number of shares  outstanding of each of the  Registrant's
classes of common stock, as of the latest practicable date.

     2,201,880 shares of Class A Common Stock outstanding on March 15, 2000
           100 shares of Class B Common Stock outstanding on March 15, 2000

                       DOCUMENTS INCORPORATED BY REFERENCE

         Materials from the  registrant's  Proxy Statement  relating to the 2000
Annual Meeting of Shareholders (the "Proxy Statement") have been incorporated by
reference into Part III, Items 9, 10, 11 and 12.

          Transitional Small Business Disclosure Format Yes [ ] No [X]
<PAGE>
                                TABLE OF CONTENTS
                                                                           Page
                                                                           ----

PART I.....................................................................  1
    ITEM 1.  DESCRIPTION OF BUSINESS.......................................  1
    ITEM 2.  DESCRIPTION OF PROPERTY.......................................  4
    ITEM 3.  LEGAL PROCEEDINGS.............................................  4
    ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...........  4

PART II....................................................................  5
    ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS......  5
    ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.....  6
    ITEM 7.  FINANCIAL STATEMENTS..........................................  9
    ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
             ACCOUNTING AND FINANCIAL DISCLOSURE........................... 22

PART III................................................................... 22
    ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
             PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE
             EXCHANGE ACT.................................................. 22
    ITEM 10. EXECUTIVE COMPENSATION........................................ 22
    ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
             MANAGEMENT.................................................... 22
    ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................ 22

PART IV.................................................................... 22
    ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.............................. 22


                                       i
<PAGE>
                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS.

         BACKGROUND.  Arizona Land Income  Corporation (the "Company") is a real
estate  investment trust organized as an Arizona  corporation on March 10, 1988.
On that same date, the Company issued 100 shares of the Company's Class B Common
Stock to YSP Holdings,  Inc.,  the Company's  sponsor,  in return for an initial
capital contribution of $1,000.  Operations of the Company commenced on June 13,
1988.

         In June 1988,  the Company began  investing in first  mortgage loans on
unimproved real property  located in the  metropolitan  Phoenix area. Such loans
included  mortgage loans secured or  collateralized  by first  mortgages,  first
deeds of trust and real property  subject to agreements for sale and subdivision
trusts ("First Mortgage Loans"). From its inception until December 31, 1991, the
Company purchased interests totaling $34,120,000 in twenty First Mortgage Loans.
Since January 1, 1992, the Company has purchased only two First Mortgage  Loans,
and has  had to  institute  foreclosure  proceedings  with  respect  to  certain
properties  securing other First Mortgage Loans. See "Investment  Objectives and
Criteria" below. See also Note 4 to the financial  statements included in Item 7
for additional  information  concerning the Company's First Mortgage Loans.  The
Company has not identified any  opportunities to make new loans;  therefore,  in
the event of a loan maturity or sale of property,  the Company currently intends
to distribute the proceeds,  beyond what is needed for day-to-day  operations of
the Company, to its shareholders.

         The Company's goal has been to pay  distributions  of available cash to
shareholders and to preserve and protect  shareholders' net capital  investment.
The Company pays  extraordinary cash distributions to its shareholders when such
distributions  are warranted  based upon the Company's cash reserves at the time
of the  distribution  as well as the  Company's  projected  need  for  operating
capital.  During the 1999 fiscal year,  the Company  declared and paid four cash
distributions.  The  first  distribution  was for $.10 per share and was paid on
April  15,  1999 to  shareholders  of  record  on  April  6,  1999.  The  second
distribution  was for  $1.10  per  share  and  was  paid  on  July  15,  1999 to
shareholders of record on July 1, 1999. The third  distribution was for $.10 per
share and was paid on October 15, 1999 to  shareholders  of record on October 1,
1999. The fourth distribution was for $.10 per share and was paid on January 14,
2000 to shareholders of record on December 30, 1999.

         NO  PRESENT  INTENTION  TO  DISSOLVE.  As  disclosed  in the  Company's
prospectus used in connection  with the Company's 1988 initial public  offering,
the Company's  intent at the time of the public  offering was to dissolve within
approximately eight years after the date of such offering. The Company currently
has no immediate plans to dissolve and may not voluntarily  dissolve  anytime in
the immediate future. Any decision by the Company to dissolve will be determined
by the Company's  Board of Directors and will depend upon market  conditions and
other  pertinent  factors.  The  Company's  Board  of  Directors  possesses  the
discretion  to (i) continue to operate the Company and hold such First  Mortgage
Loans or real property until the Company's Board of Directors determines that it
is the Company's  best interest to dispose of such  investments,  (ii) sell such
First Mortgage Loans or real property on or about the dissolution date, in which
case the sale proceeds in excess of monies owed by the Company to creditors will
be distributed to the  shareholders  on a pro rata basis,  or (iii) issue to the
shareholders  participating  interests  in such  First  Mortgage  Loans  or real
property on a basis  proportionate to their respective stock ownership interests
in  the  Company.   In  the  event  the  Company  issues  to  its   shareholders
participating  interests in a First Mortgage Loan, the Advisor  (defined  below)
will continue to act as servicing  agent for the First Mortgage Loan and will be
paid a quarterly servicing fee equal to 1/16 of 1% of the aggregate  outstanding
loan balance of the First Mortgage Loan until the First Mortgage Loan is sold or
repaid.

         QUALIFICATION  AS A REAL  ESTATE  INVESTMENT  TRUST.  The  Company  has
qualified for real estate  investment  trust  ("REIT")  status for all tax years
since  its  inception,  and  management  and the  Company's  Board of  Directors
<PAGE>
believes  that the  Company  has  completed  the  necessary  steps to permit the
Company  to  continue,  if it so  chooses,  REIT  status  for the tax year ended
December  31,  1999.  REIT status  allows the Company to deduct from its federal
taxable income (and not pay taxes upon) dividends paid to its shareholders.  See
Item 6 - Management's Discussion and Analysis or Plan of Operation.

         Generally,  if the Company is to maintain its REIT status, it must meet
a series of qualifications  including:  (i) restrict its investments principally
to assets that produce  interest  from  mortgage  loans  collateralized  by real
estate or which produce real property  rental income;  (ii) pay out at least 95%
of its taxable income (excluding  capital gains) to its shareholders;  (iii) pay
taxes at corporate  tax rates on capital  gains or  distribute  capital gains as
dividends to its shareholders;  (iv) hold less than 10% of the voting securities
of any single  issuer;  and (v) have an  independent  manager or advisor for its
assets. If the Company fails to maintain its status as a REIT, the Company would
not be  entitled to deduct from its federal  taxable  income  dividends  paid to
shareholders.

         INVESTMENT   OBJECTIVES   AND   CRITERIA.   In   evaluating   potential
investments,  the Company has  historically  considered such factors as: (i) the
borrower's  cash  investment  in the real property  securing the First  Mortgage
Loan;  (ii) the  loan-to-value  ratio of the  First  Mortgage  Loan;  (iii)  the
maturity date of the First Mortgage Loan;  (iv) the appraised  value, if any, or
past purchase prices of the real property  securing the First Mortgage Loan; (v)
the existence,  if any, of significant  debt junior to the first lien;  (vi) the
potential that the real property will  appreciate in value;  (vii) the identity,
financial  strength and payment history (if any) of the borrower under the First
Mortgage  Loan;  (viii)  the  growth,  tax  and  regulatory  environment  of the
communities in which the  properties  are or will be located;  (ix) the location
and  condition  of the  real  property;  (x) the  supply  of,  and  demand  for,
properties  of similar type in the  vicinity;  (xi) the  prospects for liquidity
through  the sale or  foreclosure  of the real  property;  and (xii)  such other
factors that become relevant in the course of the Company's evaluation process.

         The  Company's  historical  investment  objective  was to locate  First
Mortgage  Loans  that  satisfied  the  foregoing  investment  criteria.  Due  to
generally poor economic conditions in Arizona and in metropolitan Phoenix during
the early  1990's,  the Company did not acquire any  additional  First  Mortgage
Loans from 1989 until 1998 (other than refinancings or restructuring of existing
First Mortgage  Loans).  In 1998,  the Company  acquired one First Mortgage Loan
identified in footnote four to the Financial  Statements as loan 21. The Company
also  acquired  one First  Mortgage  Loan  identified  in  footnote  four to the
Financial Statements as loan 22 in 1999.

         MANAGEMENT  ARRANGEMENTS.  The Company has no employees.  The Company's
affairs are managed by its  non-salaried  officers under the  supervision of its
Board of Directors.  The Company and ALI Advisor,  Inc. (the "Advisor")  entered
into an advisory and servicing agreement (the "Advisory  Agreement") at the time
of the Company's  incorporation.  The Advisory  Agreement has expired by its own
terms;  however,  the Company and the Advisor have agreed to continue to operate
as if the terms and conditions of the Advisory Agreement are still in effect.

         Pursuant to the Advisor's  agreement  with the Company,  the Advisor is
authorized  to:  (i)  purchase  First  Mortgage  Loans,  subject  to review  and
ratification  by the Company's  Board of Directors;  (ii) serve as the exclusive
investment and financial advisor and provide research,  economic and statistical
data in connection with investments and financial  policies;  (iii) investigate,
select and conduct relations with accountants,  attorneys,  brokers,  investors,
and  others as  necessary;  (iv)  maintain  bank  accounts  and  records  deemed
appropriate  or  requested  by  the  Company's  Board;  (v)  perform  or  obtain
accounting  and other  services;  (vi) collect and remit  principal and interest
payments due on the First Mortgage Loans;  and (vii) perform such other services
as set forth in the Advisory Agreement.

                                       2
<PAGE>
         The Company has agreed to pay the Advisor a servicing fee for servicing
the Company's First Mortgage Loans.  The servicing fee is payable  quarterly and
equals 1/16 of 1% of the sum of (i) the  aggregate  outstanding  loan balance of
the First Mortgage Loans in the Company's mortgage loan portfolio,  and (ii) the
recorded value of property  acquired by the Company through  foreclosure,  as of
the first day of each fiscal quarter. During 1999 and 1998, the Company paid the
Advisor a servicing fee of approximately $38,000 and $40,700, respectively.

         The Company also agreed to pay the Advisor a management  fee for aiding
the Company in developing  investment  policies and  analyzing and  recommending
investments to the Company. The management fee will be paid for each quarter the
shareholders'  cumulative  return on  capital  investment  as of the end of such
quarter  exceeds  12.7%,  and will equal 30% of the Company's  available cash in
excess of that  necessary to provide  shareholders  with a cumulative  return on
capital  investment  in excess of 12.7%.  The  Company  did not  accrue or pay a
management fee to the Advisor in 1999 or 1998.

         The Company also agreed to reimburse  the Advisor  quarterly  for other
expenses  incurred in servicing  the Company's  First  Mortgage  Loans,  such as
legal, accounting and transfer agent fees and copying and mailing costs incurred
in preparing and mailing periodic  reports to shareholders.  The Company did not
reimburse the Advisor for any such expenses in 1999 or 1998.

         1999   TRANSACTIONS  AND  LOAN   MODIFICATIONS.   Set  forth  below  is
information  concerning the transactions and modifications that affect the First
Mortgage  Loans and which  occurred  during  1999.  The  mortgage  loan  numbers
referred  to below are  identifiers  for those loans on the books and records of
the Company. Additionally, these numbers are identified in the Company's initial
offering  prospectus  dated  June 6, 1988 and in Notes 4 and 5 to the  Company's
financial statements set forth in Item 7 hereof.

         1999 LAND SALES. The Company had five land sales during the 1999 fiscal
year, which in the aggregate generated a $267,000 gain on sale of properties.

         The Company  completed  three small land sales during the first half of
1999.  The Company  acquired  these three parcels of property,  located in Pinal
County,  Arizona,  through  foreclosure  on loan 6. The first  sale was a 3 acre
parcel of property;  proceeds to the Company  from this sale were  approximately
$5,900 cash.  The second sale was an 8.69 acre parcel of  property;  proceeds to
the Company from this sale were  approximately $900 cash and a $10,400 note. The
third sale was a 3.3 acre parcel of property;  proceeds to the Company from this
sale were approximately $1,000 cash and a $3,000 note.

         The Company  completed two land sales during the period of July 1, 1999
through September 30, 1999. The first sale was approximately an 8 acre parcel of
property  located  in  Peoria,  Arizona,  which  the  Company  acquired  through
foreclosure  on loan 11.  Proceeds to the Company  from this sale were  $507,800
cash. The second sale was a 4.4 acre parcel of property located in Pinal County,
Arizona,  which the Company acquired through  foreclosure on loan 6. Proceeds to
the Company from this sale were approximately $700 cash and a $4,700 note.

         In summary, the Company had five land sales during the 1999 fiscal year
that produced approximately $516,300 cash and $18,100 of receivables.

         In  addition to the above  referenced  land  sales,  for the  operating
period of January 1, 1999 through March 31, 1999,  the Company issued loan 22 to
a  third-party  to fund the purchase of land in Surprise,  Arizona.  The initial
proceeds of $562,000 were used in partial  settlement of the purchase price, and
a $14,000 mortgage broker fee was paid to an officer of the Company.  Loan 22 is

                                       3
<PAGE>
a 50% loan  participation  interest  on a  $1,125,000  loan that is secured by a
first deed of trust on 9.99 acres of land  located in  Surprise,  Arizona.  Such
loan was due December 15, 1999,  bears  interest at 3% over the prime rate never
to be less than 10.75%, and requires monthly interest payments.

         On January 13, 1999,  the Company also  received a total cash payoff on
loan 2 in the amount of  approximately  $675,100,  which included  approximately
$649,200 of principal and approximately $26,000 of interest. This collection was
in addition to periodic collections of principal on other notes.

         The Company also  modified one loan during 1999.  The maturity  date on
loan 22 was extended to June 15, 2000, from December 15, 1999.

ITEM 2. DESCRIPTION OF PROPERTY.

         The Company's  principal offices are located at the offices of Peacock,
Hislop, Staley and Given ("PHS&G"),  2999 North 44th Street, Suite 100, Phoenix,
Arizona,  85018. Messrs.  Peacock,  Hislop, Staley and Given are officers and/or
directors  of the  Company,  and  Messrs.  Peacock,  Hislop  and  Staley are the
shareholders  of ALI  Advisor.  The Company  does not pay for the use of PHS&G's
facilities.

         Information  regarding  the  status of real  property  acquired  by the
Company pursuant to the foreclosure of certain First Mortgage Loans is set forth
in Note 5 to the Company's financial Statements contained in Item 7.

ITEM 3. LEGAL PROCEEDINGS.

         None.

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

         None.

EXECUTIVE OFFICERS OF THE COMPANY.

         Barry W. Peacock,  age 62, has served as the Company's  President  from
its inception in 1988. Mr. Peacock is Chairman of the Board of Peacock,  Hislop,
Staley and Given  ("PHS&G"),  a position he has held since the inception of that
company in June 1989. Mr. Peacock served as a senior executive with Young, Smith
& Peacock, Inc. ("YSP") from 1964 until June 1989, and most recently as Managing
Director--Municipal Bonds.

         Larry P. Staley,  age 57, has served as the  Company's  Vice  President
from its inception in 1988. Mr. Staley is Vice Chairman of the Board of PHS&G, a
position he has held since June 1989.  Prior to that date,  Mr. Staley served in
various  capacities  with YSP,  where he was employed  from 1973 until he joined
PHS&G in 1989.

         David W. Miller,  age 51, has served as Secretary of the Company  since
his election to such office on  September  22,  1988.  Mr.  Miller has served as
Senior  Vice  President,  Chief  Financial  Officer and a member of the Board of
Directors of PHS&G since June 1989.  Prior to that date,  Mr.  Miller  served in
various  capacities  with YSP,  where he was employed  from 1971 until he joined
PHS&G in 1989.

                                       4
<PAGE>
                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

         The Company has two classes of common equity securities, Class A Common
Stock and Class B Common Stock.  All 100 shares of the Company's  Class B Common
Stock were  purchased by YSP  Holdings,  Inc.  ("YSP  Holdings"),  the Company's
sponsor, in connection with the formation of the Company and are currently owned
by YSP  Holdings.  The  Company's  Class B  Common  Stock is not  traded  on any
exchange.

         The  Company's  Class A  Common  Stock is  listed  for  trading  on the
American Stock Exchange ("AMEX"). As of March 15, 2000, there were approximately
58 holders of record of the Class A Common Stock.  In the Company's  estimation,
based upon information  available to the Company,  there are  approximately  450
beneficial  owners of the Company's  Class A Common  Stock.  The market price of
Class A Common  Stock at the close of trading  on March 16,  2000 was $4 3/8 per
share.  The  following  table  sets forth the high and low prices on AMEX of the
Class A Common  Stock  for each  quarterly  period in 1998 and 1999 and the cash
distributions paid per share of Class A Common Stock for such periods.

         On March 15, 1994,  the  Company's  Board of Directors  authorized  the
repurchase  of  shares  of the  Company's  Class A Common  Stock in open  market
transactions.  Since  authorizing the repurchase of shares of Common Stock,  the
Company has  repurchased  301,520  shares of Class A Common  Stock.  The Company
intends to continue to  periodically  make open market  purchases of its Class A
Common Stock. During the 1999 fiscal year, 51,600 shares were repurchased.

                                                     Dividends/Distributions
                                                      Declared Per Share of
 Calendar Quarter         High         Low         Class A Common Stock (1)(2)
 ----------------         ----         ---         ---------------------------
1998
   First Quarter         7 3/16       5 1/16                   0.10
   Second Quarter        7            5 3/14                   0.10
   Third Quarter         7            6                        0.10
   Fourth Quarter        6 1/2        5 5/8                    0.10
1999
   First Quarter         6 1/16       5 3/4                    0.10
   Second Quarter        6 3/4        5 5/8                    1.10
   Third Quarter         5 7/8        4 5/8                    0.10
   Fourth Quarter        4 7/8        4 1/4                    0.10

----------
(1)  See Note 7 to the financial statements included in Item 7.
(2)  The Company pays  extraordinary cash distributions to its shareholders when
     such  distributions are warranted based upon the Company's cash reserves at
     the time of the  distribution  as well as the Company's  projected need for
     operating  capital.  During 1999,  the Company  declared and paid four cash
     distributions.  The first  distribution was for $.10 per share and was paid
     on April 15, 1999 to  shareholders  of record on April 6, 1999.  The second
     distribution  was for  $1.10  per  share  and was paid on July 15,  1999 to
     shareholders of record on July 1, 1999. The third distribution was for $.10
     per share and was paid on October  15,  1999 to  shareholders  of record on
     October 1, 1999.  The  fourth  distribution  was for $.10 per share and was
     paid on January 14, 2000 to shareholders of record on December 30, 1999.

                                       5
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

RESULTS OF OPERATIONS

         YEAR ENDED  DECEMBER 31, 1999 VS.  1998.  The Company had net income of
approximately $1,043,000 or $.44 per share of Class A Common Stock, for the year
ended  December 31, 1999,  compared to net income of  approximately  $981,000 or
$.42 per share of Class A Common  Stock,  for the year ended  December 31, 1998.
The increase in the net income for the year ended December 31, 1999 is primarily
attributable  to the increase in income on mortgages and the increase in the tax
benefit from the prior year. Interest income from First Mortgage Loans increased
to  approximately  $664,900 in 1999 from  $464,000 in 1998.  Gain on the sale of
property increased to approximately $267,300 in 1999 from $199,000 in 1998.

         The Company had other income of approximately  $12,700 in 1999 compared
to other income of $83,000 in 1998. The other income  received by the Company in
1999 is primarily  attributable to lease rentals on land received by the Company
through foreclosure actions.

         The Company's  expenses decreased in the aggregate to $153,000 in 1999,
compared to $189,000 in 1998. This decrease of $36,000 is primarily attributable
to the decrease in professional  services from approximately  $65,600 in 1998 to
approximately $46,100 in 1999.

         The Company did not record any loan loss reserve or land write-downs in
1999 or 1998 because of the stabilization of the Phoenix real estate market.

         Net cash provided by operating activities was approximately $673,000 in
1999 compared to net cash provided by operating  activities of $415,000 in 1998.
Net cash  provided by investing  activities  in 1999 and 1998 was  approximately
$440,000 and $1,387,000,  respectively. Net cash used in financing activities in
1999 and 1998 was approximately $3,311,000 and $944,000, respectively.

OUTLOOK

         FORWARD-LOOKING   STATEMENTS.   The   following   discussion   contains
forward-looking  statements,  as well as a discussion of risks and uncertainties
that could affect the Company. Due to the risks and uncertainties, the Company's
actual  results  may  differ  materially  from  the  results  discussed  in  the
forward-looking statements.

         REAL ESTATE INVESTMENT OUTLOOK.  Refinancing of the loan or sale of the
underlying  real  property  serves as a principal  method for borrowers to repay
mortgage loans on unimproved  real property such as the Company's First Mortgage
Loans.  In Arizona in general,  and in  metropolitan  Phoenix in  particular,  a
number of factors combined to negatively impact borrowers'  ability to refinance
their loans on unimproved  real property or sell the underlying  property during
the early  1990's.  First,  the shortage of available  financing for real estate
development  and  improvement  reduced the demand for unimproved  real property,
causing a lack of liquidity in the market for unimproved property.  Second, real
estate  values in  metropolitan  Phoenix  had been in decline  and only began to
stabilize in the middle to late 1990's. Third, the lack of liquidity and decline
in values resulted in a large number of defaults on mortgage loans on unimproved
real property.  In turn,  this resulted in the  acquisition of large real estate
portfolios by Arizona financial institutions. These financial institutions, some
of which were under  government  supervision,  contributed to the illiquidity in
the market by holding their portfolios for extended periods of time.

         The Company  believes these and other factors have negatively  impacted
borrowers'  ability  to pay on their  First  Mortgage  Loans.  Because  interest
payments on First  Mortgage  Loans  constitute  the Company's  primary source of
income,  borrowers'  failure  to pay on their  First  Mortgage  Loans have had a
significant  adverse impact on the Company's  operating results.  In appropriate
circumstances,  the Company has modified a First Mortgage Loan at the request of

                                       6
<PAGE>
the borrower.  These  modifications have included the deferral by the Company of
principal due, the deferral of interest and, in certain instances, a decrease in
the interest rate paid by the borrower. In other circumstances,  the Company has
instituted  foreclosure  and other legal  proceedings to protect its interest in
the First Mortgage Loan and the underlying  property.  As a result,  the Company
now owns, and is attempting to sell, a number of  properties.  See Notes 4 and 5
to the  financial  statements,  included  in Item 7 for  additional  information
concerning the Company's First Mortgage Loans and for information regarding land
held for sale.  The Company has not  identified  any  opportunities  to make new
loans;  therefore,  in the event of a loan  maturity  or sale of  property,  the
Company currently intends to distribute the proceeds,  beyond what is needed for
day-to-day operations of the Company, to its shareholders.

         The Company  believes that the market for  unimproved  real property in
Phoenix  continues to improve,  as evidenced by the number of land sales for the
Company during 1999 and 1998. The Company sold five parcels of land in 1999, and
anticipates that additional parcels will be sold in 2000.  However, no assurance
can be made that such sales will occur.

         POTENTIAL DISSOLUTION. As disclosed in the Company's prospectus used in
connection with the Company's 1988 initial public offering, the Company's intent
at the time of the public  offering was to dissolve within  approximately  eight
years after the date of such  offering.  The Company  currently has no immediate
plans to dissolve  and may not  voluntarily  dissolve  anytime in the  immediate
future.  Any  decision  by the  Company to dissolve  will be  determined  by the
Company's  Board of Directors and will depend upon market  conditions  and other
pertinent factors.  The Company's Board of Directors possesses the discretion to
(i) continue to operate the Company and hold such First  Mortgage  Loans or real
property  until  the  Company's  Board of  Directors  determines  that it is the
Company's  best  interest to dispose of such  investments,  (ii) sell such First
Mortgage Loans or real property on or about the dissolution  date, in which case
the sale  proceeds in excess of monies owed by the Company to creditors  will be
distributed  to the  shareholders  on a pro rata  basis,  or (iii)  issue to the
shareholders  participating  interests  in such  First  Mortgage  Loans  or real
property on a basis  proportionate to their respective stock ownership interests
in  the  Company.   In  the  event  the  Company  issues  to  its   shareholders
participating  interests in a First  Mortgage Loan, the Advisor will continue to
act as servicing  agent for the First Mortgage Loan and will be paid a quarterly
servicing fee equal to 1/16 of 1% of the aggregate  outstanding  loan balance of
the First Mortgage Loan until the First Mortgage Loan is sold or repaid.

LIQUIDITY AND CAPITAL RESOURCES

         The Company  believes  that the funds  generated  from  interest on and
payments of First Mortgage  Loans as well as the sale of its properties  will be
sufficient to meet the Company's working capital requirements and to finance any
additional  investments.  No other  arrangements,  such as lines of credit, have
been made to obtain external sources of liquidity. However, the Company believes
that such arrangements could be obtained by the Company, if necessary.

         The Company  currently  has no  commitments  for any  material  capital
expenditures  and does not anticipate any such  expenditures  in the foreseeable
future.

DIVIDENDS

         In 1998,  the Company  declared and paid four cash  distributions.  The
first  distribution  was for $.10 per share  and was paid on April  15,  1998 to
shareholders  of record on April 7, 1998. The second  distribution  was for $.10
per share  and was paid on July 15,  1998 to  shareholders  of record on July 1,
1998. The third  distribution was for $.10 per share and was paid on October 15,
1998 to shareholders of record on October 1, 1998. The fourth  distribution  was
for $.10 per share and was paid on December 31, 1998 to  shareholders  of record
on December 17, 1998.

                                       7
<PAGE>
         In 1999,  the Company  declared and paid four cash  distributions.  The
first  distribution  was for $.10 per share  and was paid on April  15,  1999 to
shareholders of record on April 6, 1999. The second  distribution  was for $1.10
per share  and was paid on July 15,  1999 to  shareholders  of record on July 1,
1999. The third  distribution was for $.10 per share and was paid on October 15,
1999 to shareholders of record on October 1, 1999. The fourth  distribution  was
for $.10 per share and was paid on January 14, 2000 to shareholders of record on
December 30, 1999.

         In order for the Company to maintain its status as a qualified REIT, it
must, among other requirements, pay out in the form of dividends at least 95% of
its taxable income (excluding  capital gains) to shareholders and must pay taxes
at corporate  tax rates on capital  gains or  distribute at least 95% of capital
gains as dividends to shareholders.  If the Company fails to maintain its status
as a REIT,  the  Company  would no longer be entitled to deduct from its federal
taxable income (and not pay federal taxes on) dividends paid to shareholders.

                                       8
<PAGE>
ITEM 7. FINANCIAL STATEMENTS

                                      INDEX

                                                                         Page
                                                                         ----

Report of Independent Public Accountants                                  10

Financial Statements-

   Balance Sheet - December 31, 1999                                      11

   Statements of Operations - For the Years Ended
     December 31, 1999 and 1998                                           12

   Statements of Stockholders' Equity - For the Years
     Ended December 31, 1999 and 1998                                     13

   Statements of Cash Flows - For the Years Ended
     December 31, 1999 and 1998                                           14

Notes to Financial Statements - December 31, 1999 and 1998                15



        Certain schedules are omitted as the information is not required.

                                       9
<PAGE>
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To Arizona Land Income Corporation:


We  have  audited  the  accompanying   balance  sheet  of  ARIZONA  LAND  INCOME
CORPORATION  (an Arizona  corporation)  as of December 31, 1999, and the related
statements of  operations,  stockholders'  equity and cash flows for each of the
two years in the 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 auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable  assurance about whether the financial  statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting  the amounts and  disclosures in the financial  statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by  management,  as well as  evaluating  the  overall  financial  statement
presentation.  We believe  that our audits  provide a  reasonable  basis for our
opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of Arizona Land Income Corporation
as of December 31, 1999,  and the results of its  operations  and its cash flows
for each of the two years in the period ended  December 31, 1999,  in conformity
with accounting principles generally accepted in the United States.


                                         /s/ ARTHUR ANDERSEN LLP


Phoenix, Arizona,
February 3, 2000.

                                       10
<PAGE>
                         ARIZONA LAND INCOME CORPORATION

                                  BALANCE SHEET

                                DECEMBER 31, 1999


                                     ASSETS

ASSETS:
  Cash and cash equivalents                                        $  1,907,438
                                                                   ------------
  Investments-
    Accrued interest receivable                                         282,406
    Mortgage notes receivable (Note 4)                                7,247,564
    Investment in partnership (Note 2)                                  325,538
    Land held for sale (Note 5)                                       3,182,034
                                                                   ------------
                                                                     11,037,542
    Less - reserve for losses                                          (618,769)
                                                                   ------------
        Total investments, net                                       10,418,773
                                                                   ------------
                                                                   $ 12,326,211
                                                                   ============

                          LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES:
  Accounts payable and other liabilities                           $     25,362
  Accrued property taxes                                                  7,671
  Dividends payable                                                     233,533
                                                                   ------------
        Total liabilities                                               266,566
                                                                   ------------
COMMITMENTS AND CONTINGENCIES (Note 2)

STOCKHOLDERS' EQUITY (Notes 1 and 8):
  Class A common stock, $.10 stated value, 10,000,000
   shares authorized, 2,308,480 shares issued and
   outstanding                                                          230,848
  Class B common stock, $.10 stated value, 10,000
   shares authorized, 100 shares issued and
   outstanding                                                               10
  Additional paid-in capital                                         23,551,348
  Distributions in excess of earnings                               (11,722,561)
                                                                   ------------
        Total stockholders' equity                                   12,059,645
                                                                   ------------
                                                                   $ 12,326,211
                                                                   ============

       The accompanying notes are an integral part of this balance sheet.

                                       11
<PAGE>
                         ARIZONA LAND INCOME CORPORATION

                            STATEMENTS OF OPERATIONS

                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998


                                                       1999             1998
                                                   -----------      -----------
INCOME:
  Interest on mortgages                            $   664,909      $   464,233
  Interest on temporary investments                    139,428          222,620
  (Loss) income from investment in partnership          (7,934)         183,792
                                                   -----------      -----------
  Other income                                          12,710           82,786
                                                   -----------      -----------
     Total income before gain on sale
       of properties                                   809,113          953,431
                                                   -----------      -----------
EXPENSES:
  Property taxes                                        12,796           22,739
  Professional services                                 46,056           65,612
  Advisory fees to related party (Note 6)               37,993           40,699
  Administration and general                            33,629           36,350
  Directors' fees                                       22,800           23,200
  Interest expense                                          --              458
                                                   -----------      -----------

     Total expenses                                    153,274          189,058
                                                   -----------      -----------

INCOME BEFORE GAIN ON SALE OF PROPERTIES               655,839          764,373

GAIN on sale of properties, net                        267,319          198,923
                                                   -----------      -----------

NET INCOME BEFORE TAXES                                923,158          963,296

INCOME TAX BENEFIT (Note 2)                           (120,000)         (17,786)
                                                   -----------      -----------
     Net income                                    $ 1,043,158      $   981,082
                                                   ===========      ===========

INCOME PER COMMON SHARE                            $       .44      $       .42
                                                   ===========      ===========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
  OUTSTANDING                                        2,349,041        2,360,080
                                                   ===========      ===========

        The accompanying notes are an integral part of these statements.

                                       12
<PAGE>
                         ARIZONA LAND INCOME CORPORATION

                       STATEMENTS OF STOCKHOLDERS' EQUITY

                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998


<TABLE>
<CAPTION>
                                    Common Stock             Additional     Distributions        Total
                              ------------------------        Paid-in         in Excess      Stockholders'
                                Shares         Amount         Capital        of Earnings        Equity
                              ----------     ---------     ------------     ------------     ------------
<S>                          <C>           <C>           <C>              <C>              <C>
BALANCE, December 31, 1997     2,360,180     $ 236,018     $ 23,791,072     $ (9,502,848)    $ 14,524,242
 Dividends declared                   --            --               --         (944,032)        (944,032)
 Net income                           --            --               --          981,082          981,082
                              ----------     ---------     ------------     ------------     ------------

BALANCE, December 31, 1998     2,360,180       236,018       23,791,072       (9,465,798)      14,561,292
  Repurchase of Class A
   common stock                  (51,600)       (5,160)        (239,724)              --         (244,884)
  Dividends declared                  --            --               --       (3,299,921)      (3,299,921)
  Net income                          --            --               --        1,043,158        1,043,158
                              ----------     ---------     ------------     ------------     ------------

BALANCE, December 31, 1999     2,308,580     $ 230,858     $ 23,551,348     $(11,722,561)    $ 12,059,645
                              ==========     =========     ============     ============     ============
</TABLE>

        The accompanying notes are an integral part of these statements.

                                       13
<PAGE>
                         ARIZONA LAND INCOME CORPORATION

                            STATEMENTS OF CASH FLOWS

                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

<TABLE>
<CAPTION>
                                                                 1999            1998
                                                             -----------     -----------
<S>                                                          <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income                                                  $ 1,043,158     $   981,082
 Adjustments to reconcile net income to net
  cash provided by operating activities --
  Gain on sale of properties                                    (267,319)       (198,923)
  Unrealized gain on investments and other
   non-cash income                                                    --         (73,464)
  (Loss) income on investment in partnership                       7,934        (183,792)
 Changes in certain assets and liabilities
  affecting operating activities --
   Decrease (increase) in accrued interest receivable              4,779         (32,124)
   Increase (decrease) in accounts payable and other
    liabilities                                                    6,443         (49,799)
   Decrease in accrued property taxes                             (1,618)        (27,922)
   Decrease in deferred tax liability                           (120,000)             --
                                                             -----------     -----------
      Net cash provided by operating activities                  673,377         415,058
                                                             -----------     -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
 Return on partnership investment                                     --         229,075
 Principal payments received under mortgage notes
  receivable                                                     813,388       1,072,247
 Proceeds from sales of properties                               516,287       1,685,978
 Purchase of mortgage notes receivable                          (889,688)     (1,579,744)
 Cash purchases of land and mortgage interest                         --        (180,713)
 Proceeds from sale of investment in equity securities                --         160,652
                                                             -----------     -----------
      Net cash provided by investing activities                  439,987       1,387,495
                                                             -----------     -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
 Payment of dividends                                         (3,066,388)       (944,032)
 Repurchase of Class A common stock                             (244,884)             --
                                                             -----------     -----------
      Net cash used in financing activities                   (3,311,272)       (944,032)
                                                             -----------     -----------

(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS              (2,197,908)        858,521

CASH AND CASH EQUIVALENTS, beginning of year                   4,105,346       3,246,825
                                                             -----------     -----------

CASH AND CASH EQUIVALENTS, end of year                       $ 1,907,438     $ 4,105,346
                                                             ===========     ===========
SCHEDULE OF NON--CASH INVESTING AND FINANCING ACTIVITIES:
 New mortgages related to sales of properties                $    18,057     $ 1,502,939
 Dividends declared in excess of dividends paid              $   233,533     $        --

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
 Interest paid                                               $        --     $       458

 Income tax refunds received                                 $        --     $    17,786
</TABLE>

        The accompanying notes are an integral part of these statements.

                                       14
<PAGE>
                         ARIZONA LAND INCOME CORPORATION

                          NOTES TO FINANCIAL STATEMENTS

                           DECEMBER 31, 1999 AND 1998


(1) ORGANIZATION AND OPERATIONS:

Arizona Land Income  Corporation  (the Company) was incorporated in the State of
Arizona on March 10, 1988 as a wholly owned subsidiary of YSP Holdings, Inc. and
completed an initial  public  offering on June 13, 1988. The net proceeds of the
initial  public  offering  of  $25,808,600  were used to acquire  and  originate
mortgage  loans  secured by  unimproved  real  property  located in the  Phoenix
metropolitan  area.  The Company has two  classes of common  stock,  Class A and
Class B. The  Class A shares  are  listed  for  trading  on the  American  Stock
Exchange.

The current  capitalization  of the Company and minimal  cash flow  requirements
afford the  Company  the ability to hold the  properties  and to finance  future
sales with a cash downpayment and terms.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

         CASH AND CASH EQUIVALENTS

Investments  with an original  maturity of less than 90 days when  purchased are
considered cash equivalents. At December 31, 1999, cash equivalents consisted of
U.S. Treasury Notes of $1,799,603 which mature in February 2000.

         MORTGAGE NOTES RECEIVABLE

Mortgage  notes  receivable  are presented at cost in the  accompanying  balance
sheet.  It is the Company's  policy to  discontinue  the accrual of interest for
notes in default as of the default date. In management's opinion, mortgage notes
receivable are stated at amounts not in excess of net realizable value.

         INVESTMENT IN PARTNERSHIP

During  1991,  the Company  purchased a 21.6%  limited  partnership  interest in
Pinnacle  Peak  Office/Resort  Investors,  the  borrower  on loan 1. The Company
accounts for this  investment  under the equity method.  The Company  recorded a
loss of  $7,934  in 1999  and  income  of  $183,792  in  1998,  related  to this
investment,  and  received a return on capital of $-0- and  $229,075 in 1999 and
1998, respectively.

         REVENUE RECOGNITION

Revenue from land sales is recognized in accordance  with Statement of Financial
Accounting Standards (SFAS) No. 66, ACCOUNTING FOR SALE OF REAL ESTATE, when the
parties  to the  sale  are  bound  by  the  terms  of a  contract,  an  adequate
downpayment  is  received,  a  reasonable  likelihood  exists  that any  related
receivable  will be collected and all  conditions  precedent to the closing have
been performed.

                                       15
<PAGE>
         INCOME TAXES AND REIT STATUS

The Company has elected treatment as a real estate investment trust (REIT) under
Internal Revenue Code (IRC) Sections 856-860. A REIT is taxed in the same manner
as any corporation  except that it may deduct certain  qualifying  distributions
made to shareholders  and reduce or eliminate any potential  income taxes.  This
distribution  deduction must be at least 95% of the REIT's taxable  income.  For
all years presented, the Company has met the 95% distribution requirement.

The  Company   previously   elected  to  treat  certain  qualified  property  as
foreclosure  property under IRC Section 856(e)(5).  Accordingly,  during 1997, a
$120,000  deferred  federal  income tax  provision  was  recorded to reflect the
cumulative book to tax difference on foreclosure property sales through December
31, 1997 and the expected  future taxes to be paid when the gains are  reflected
in the income tax returns. During 1999, the Company determined it would not have
to pay taxes on any future  foreclosure  property  sales  based on  certain  tax
planning  strategies.  Thus,  the  deferred  tax  liability  was  removed  and a
corresponding  $120,000 income tax benefit was recorded in the accompanying 1999
statement of  operations.  During 1998, a tax refund of $17,786 was received and
recorded as income.

For income tax purposes,  certain  expenses or reserves for financial  reporting
purposes are not allowed as current tax deductions.  Similarly,  the Company may
take certain current  deductions for tax purposes that are not current  expenses
for financial  reporting purposes.  For example,  the Company recognized gain on
the sale of property for financial  reporting purposes which is in excess of the
current taxable amount from the sales. As a result of these differences, taxable
income  totaled   approximately   $650,000  and  $970,000  for  1999  and  1998,
respectively,  before  deductions for dividends  paid. Net operating  losses for
federal  income tax purposes  available to offset future  taxable income totaled
approximately  $2,240,000  at December  31,  1999,  and expire  through the year
ending 2010. Capital loss carry-forwards  total approximately  $196,000 and will
expire if unused in 2005.

         INCOME PER COMMON SHARE

Income per common share is computed  based upon the weighted  average  number of
shares of common stock outstanding  during the year. There are no stock options,
warrants or other common stock equivalents.

         USE OF ESTIMATES

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from these estimates.

         LONG-LIVED ASSETS

SFAS No.  121,  ACCOUNTING  FOR THE  IMPAIRMENT  OF  LONG-LIVED  ASSETS  AND FOR
LONG-LIVED ASSETS TO BE DISPOSED OF, is utilized to determine if write-downs are
required  related to land held for sale.  SFAS No. 121  requires  the Company to
recognize  impairment losses for long-lived assets whenever events or changes in
circumstances  result in the carrying amount of the assets  exceeding the sum of
the expected future cash flows associated with such assets.

                                       16
<PAGE>
(3) CONCENTRATIONS OF CREDIT RISK:

The Company's financial instruments that are exposed to concentrations of credit
risk consist primarily of short-term investments and mortgage notes receivable.

The Company's short-term investments are in high-quality  securities placed with
a  major  bank.  The  Company's   investment   policy  limits  its  exposure  to
concentrations of credit risk.

The  Company's  mortgage  notes  receivable  result  primarily  from the sale of
property to a broad base of borrowers  although  several loans are a significant
portion of total assets (see Note 4).

(4) MORTGAGE NOTES RECEIVABLE:

Management  determines  the rate and related  terms on its  individual  mortgage
notes  receivable  based  on  the  underlying  collateral,  the  quality  of the
borrower,  and the down payment  received.  The  majority of the mortgage  notes
receivable outstanding at December 31, 1999, were originated within the last 1-6
years and in management's  opinion,  the factors used to determine the rates and
related terms have not changed significantly. Based on this, management believes
that the fair market values of its mortgage notes receivable  approximate  their
carrying  amounts.  As of December  31, 1999,  all loans are current,  except as
described below, and all noncurrent loans are stated at amounts not in excess of
net  realizable  value of the  collateral  securing  the  loans.  Therefore,  no
additional adjustment for impairment is necessary.

Mortgage notes receivable consist of the following at December 31, 1999:

<TABLE>
<CAPTION>
                                                                                        The Company's
                                                                                        Participation
                                                                                        Interest as a     The Company's
Original                               Stated         Final                             % of Current    Participation at
  Loan      Collateral, Property      Interest      Maturity           Periodic           Principal       December 31,
 Number       Location and Size         Rate          Date           Payment Terms         Balance            1999
 ------       -----------------         ----          ----           -------------         -------            ----
<S>     <C>                              <C>         <C>         <C>                         <C>           <C>
  3-1    635   acres   -   Section   9,   8%        02/05/11   Annual  interest  payments     80%          $ 853,285
         Township 6 South  Range 3 East                        through   February   2001,
         of the  Gila  and  Salt  River                        then annual  principal and
         Base  and   Meridian  -  Pinal                        interest    payments    of
         County, Arizona                                       $158,955 through maturity.
                                                               Loan is current.

   5)    18.8 acres  - 1/2 mile east of   9%        02/01/01   In  1998,   the  loan  was     100%            496,664
         Pima Road and1/4mile  south of                        modified  for the borrower
         Bell   Road   -    Scottsdale,                        to make  annual  principal
         Arizona                                               payments  of $25,000  plus
                                                               semi-annual        accrued
                                                               interest  payments through
                                                               August  1,  2000.  Balloon
                                                               payment  consisting of the
                                                               unpaid    principal   plus
                                                               accrued    interest    due
                                                               February 1, 2001.  Loan is
                                                               current.

   6)    27  lots  in   Hidden   Valley   9%-12.3%  07/01/05   Multiple   borrowers  (26)   -86.47%            62,800
         Ranch, Pinal County,  Arizona.                        monthly     payments    of
         12     parcels    in    either                        principal  and interest of
         Bellflower       Ranch      or                        varying  payment  amounts.
         Butterfield  Ranch in  Cochise                        Approximately  $14,000  of
         County, Arizona.                                      these loans are late or in
                                                               default   but  are   fully
                                                               collateralized.
</TABLE>
                                       17
<PAGE>
<TABLE>
<CAPTION>
                                                                                       The Company's
                                                                                       Participation
                                                                                       Interest as a    The Company's
Original                               Stated         Final                            % of Current   Participation at
  Loan      Collateral, Property      Interest      Maturity          Periodic           Principal      December 31,
 Number       Location and Size         Rate          Date          Payment Terms         Balance           1999
 ------       -----------------         ----          ----          -------------         -------           ----
<S>     <C>                              <C>         <C>        <C>                         <C>           <C>
  10)    7.47  acres - 16th  Street and    10%      04/01/02   On April 1, 1998, the loan  91.43%         1,055,455
         Bell Road - Phoenix, Arizona                          was   modified  to  annual
                                                               principal   and   interest
                                                               payments    of    $200,451
                                                               through   April  1,  2001.
                                                               Balloon payment consisting
                                                               of  the  unpaid  principal
                                                               plus accrued  interest due
                                                               April  1,  2002.  Loan  is
                                                               current.

  15)    50.85  acres  -  South  of the    8%       08/30/00   Quarterly    payments   of    100%           467,421
         Southwest  Corner of Hawes and                        principal  and interest of
         Brown Road - Mesa, Arizona                            $18,700  through  May  30,
                                                               2000.    Balloon   payment
                                                               consisting  of the  unpaid
                                                               principal   plus   accrued
                                                               interest  due  August  30,
                                                               2000. Loan is current.

  16)    20 acres - West  side of I-17;    9%       09/12/02   Annual     payments     of    100%           194,964
         approximately    2-3/4   miles                        principal  and interest of
         north of Happy  Valley  Road -                        $20,583 through  September
         Maricopa County, Arizona                              12, 2001.  Balloon payment
                                                               consisting    of    unpaid
                                                               principal   plus   accrued
                                                               interest due September 12,
                                                               2002. Loan is current.

17-3)    2.11  acres  (Lots  4  and  5,   8%        04/15/08   Monthly     payments    of    100%            73,515
         Phoenix  International Science                        principal  and interest of
         Center)  I-17 and Deer  Valley                        $993. Loan is current.
         Road, Phoenix, Arizona.



  18)    153.63   acres   -   Southwest   7%        03/27/10   Annual     payments     of    100%         1,705,960
         corner  of Pecos  Road and Val                        principal  and interest of
         Vista Drive - Maricopa County,                        $144,258 through March 27,
         Arizona.                                              2009.    Balloon   payment
                                                               consisting    of    unpaid
                                                               principal   plus   accrued
                                                               interest   due  March  27,
                                                               2010. Loan is current.

  21)    53   acres  -   Dixileta   and  12%        12/16/02   Outstanding  balance  is a    100%         1,775,000
         Scottsdale Roads - Scottsdale,                        draw  on  a  total  credit
         Arizona                                               facility  of   $1,775,000.
                                                               Interest for first year to
                                                               be    paid    using    the
                                                               remainder  of  the  credit
                                                               facility.      Semi-annual
                                                               interest  payments through
                                                               maturity.  Balloon payment
                                                               of the  principal  balance
                                                               plus accrued  interest due
                                                               December     16,     2002.
                                                               Contingent        interest
                                                               payable    upon    certain
                                                               events   defined   in  the
                                                               note.

  22)    9.99 acres - Northwest  corner  11.5%      06/15/00   Interest payable quarterly     50%           562,500
         of  Brookside  Lane  and  Bell                        with principal  originally
         Road - Surprise, Arizona                              due   12/15/99.   Borrower
                                                               exercised option to extend
                                                               principal    payment    to
                                                               6/15/00.                                  ----------
                                                                                                         $7,247,564
                                                                                                         ==========
</TABLE>
                                       18
<PAGE>
Scheduled  principal  repayments  of mortgage  notes  receivable at December 31,
1999, are as follows:

            Year                                   Amount
            ----                                   ------

            2000                                $1,172,792
            2001                                   599,314
            2002                                 2,956,541
            2003                                   107,392
            2004                                   115,881
            Thereafter                           2,295,644
                                                ----------
                                                $7,247,564
                                                ==========

(5) LAND HELD FOR SALE:

The Company has  received  land as a result of  foreclosures  on several  loans.
Interest accrual ceases at the date of default. The mortgage receivable balance,
related accrued interest and foreclosure  costs are transferred to land held for
sale at cost on the date the title is transferred. In management's opinion, land
held for sale is stated at amounts  not in excess of fair  value less  estimated
costs to sell.

The following land is owned by the Company at December 31:

Original                                             The Company's
  Loan                                               Participation
 Number                                                Interest         1999
 ------                                                --------         ----

  6)     354.5 acres - Southwest corner of Warner       86.47%        $3,079,197
         and  Sossaman Roads -  Maricopa  County,
         Arizona

         30.53 acres - Pinal County                     86.47%            46,948

 17)     .01 acres - Southwest corner of I-17 and
         Deer Valley Road - Phoenix, Arizona              100%            55,889
                                                                      ----------
                                                                      $3,182,034
                                                                      ==========

The  reserve for losses of $618,769  at  December  31,  1999,  relates to loan 6
above. These reserves are absorbed as the specific land sales occur. Reserves of
$463,417 and $431,667 were absorbed in  conjunction  with land sales during 1999
and 1998, respectively. No additional reserves were provided in 1999 or 1998.

                                       19
<PAGE>
(6) RELATED PARTY TRANSACTIONS:

The Company is a party to the following  agreements  with  affiliates  who share
common management and directors with the Company:

   Affiliate                                       Agreement
   ---------                                       ---------

ALI Advisor, Inc.              Management  fees  of 30% of  available  cash,  as
                               defined,  will be paid in any  quarter  when  the
                               cumulative  return to  investors  is in excess of
                               12.7%.  A servicing  fee for  servicing  loans of
                               1/16 of 1% of total assets,  as defined,  will be
                               paid  quarterly.   In  addition,   certain  other
                               overhead expenses will also be paid.
PHS
                               Mortgage,  Inc.  All loans made after the initial
                               purchase at June 13, 1988,  have been  originated
                               by the mortgage company and origination fees were
                               paid by the borrowers.

Peacock, Hislop, Staley        The Company utilizes PHS&G on certain  investment
& Given (PHS&G)                transactions  involving  excess cash. No fees are
                               paid for such services.

In December  1998,  the  Company  issued  loan 21 to a  third-party  to fund the
purchase of land in Scottsdale, Arizona. The initial proceeds of $1,579,744 were
used in settlement of the purchase  price,  including a $53,000  mortgage broker
fee paid to an officer of the  Company.  The  Company has  committed  to fund an
additional  $195,256  to pay for the initial  year of interest on the loan.  The
loan agreement provides for the Company to share in future profits from sales of
collateral parcels via contingent interest  provisions.  Additionally,  the loan
agreement  includes  provisions  for  contingent  service fees to be paid to PHS
Mortgage, Inc. upon certain events defined in the note. There were no contingent
service fees paid to PHS Mortgage, Inc. in 1999 or 1998.

In February  1999,  the  Company  issued  loan 22 to a  third-party  to fund the
purchase of land in Surprise,  Arizona.  The initial  proceeds of $562,000  were
used in partial  settlement of the purchase price,  including a $14,000 mortgage
broker fee paid to an officer of the Company.

(7) DIVIDENDS PAID:

Distributions related to Class A dividends for 1999 are as follows:

                                                    Amount
   Date Declared    Record Date     Date Paid     Per Share      Total Amount
   -------------    -----------     ---------     ---------      ------------

     03/26/99        04/06/99        04/15/99       $ .10         $  236,008
     06/21/99        07/01/99        07/15/99        1.10          2,596,022
     09/21/99        10/01/99        10/15/99         .10            234,358
     11/17/99        12/30/99        01/14/00         .10            233,533
                                                    -----         ----------

                                                    $1.40         $3,299,921
                                                    =====         ==========

Approximately 32% of the dividends per share in 1999 represent  distributions of
ordinary  taxable  income.  The  remainder  represented  a return of  capital or
capital gain income.

                                       20
<PAGE>
Distributions related to Class A dividends for 1998 were as follows:

                                                    Amount
   Date Declared    Record Date     Date Paid     Per Share      Total Amount
   -------------    -----------     ---------     ---------      ------------

     03/27/98        04/07/98       04/15/98        $ .10          $236,008
     06/19/98        07/01/98       07/15/98          .10           236,008
     09/18/98        10/01/98       10/15/98          .10           236,008
     12/10/98        12/17/98       12/31/98          .10           236,008
                                                    -----          --------

                                                    $ .40          $944,032
                                                    =====          ========

100% of the  dividends  per share in 1998  represent  distributions  of ordinary
taxable income.

(8) SUBSEQUENT REPURCHASE OF SHARES:

In January 2000, the Company  repurchased 106,600 shares in two transactions for
$458,116. Upon repurchase of the shares, the Company canceled the shares.

                                       21
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
        AND FINANCIAL DISCLOSURE.

         None.

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
        COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.

         Information responsive to this item is incorporated herein by reference
to the "Information  Concerning Directors and Nominees" section contained in the
Company's Proxy Statement  relating to its 2000 Annual Meeting of  Shareholders,
which will be filed with the  Securities  and Exchange  Commission in accordance
with Rule 14a-6(c)  promulgated  under the Securities  Exchange Act of 1934 (the
"2000 Proxy  Statement").  With the exception of the foregoing  information  and
other information  specifically  incorporated by reference into this Form 10-KSB
Report,  the Company's 2000 Proxy Statement is not being filed as a part hereof.
Information  respecting executive officers of the Company who are not continuing
directors or nominees is set forth at Part I of this Report.

         No disclosure  is required with respect to Item 405 of Regulation  S-B,
"Section 16(a) Beneficial Ownership Reporting Compliance."

ITEM 10. EXECUTIVE COMPENSATION.

         The  Company  did not  compensate  its  executive  officers  for  their
services in the fiscal year ending  December  31, 1999.  Additional  information
responsive to this item is  incorporated  herein by reference to the  "Executive
Compensation" section of the Company's 2000 Proxy Statement.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         Information  concerning the Class A Common Stock  beneficially owned by
each director of the Company,  by all officers and directors of the Company as a
group and by each shareholder known by the Company to be the beneficial owner of
more than 5% of the outstanding  Class A Common Stock is incorporated  herein by
reference to the "Security  Ownership of Principal  Shareholders and Management"
section of the Company's 2000 Proxy Statement.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         Information responsive to this item is incorporated herein by reference
to the "Certain  Transactions and  Relationships"  section of the Company's 2000
Proxy Statement.

                                     PART IV

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.

         The  following is a list of the  financial  statements  of Arizona Land
Income Corporation included at Item 7 of Part II.

                                       22
<PAGE>
Financial Statements

                                                                  Page or Method
                                                                    of Filing
                                                                    ---------

  Report of Independent Public Accountants                           Page 10
  Financial Statements:
      Balance Sheet - December 31, 1999                              Page 11
      Statements of Operations - For the Years Ended
       December 31, 1999 and 1998                                    Page 12
      Statements of Stockholders' Equity - For the Years Ended
       December 31, 1999 and 1998                                    Page 13
      Statements of Cash Flows - For the Years Ended
       December 31, 1999 and 1998                                    Page 14
      Notes to Financial Statements - December 31, 1999 and 1998     Page 15

(a) Exhibits.

Exhibit                                                  Page or Method
Number               Description                        Method of Filing
------               -----------                        ----------------

3-A      Articles  of  Incorporation  of  the        Incorporated  by  Reference
         Company, as amended.                        to Exhibit 3-A to Amendment
                                                     No. 3 to S-18 No. 33-20625.

3-B      Bylaws of the Company, as amended.          Incorporated  by  Reference
                                                     to Exhibit 3-B to Amendment
                                                     No. 3 to S-18 No. 33-20625.

10-A     June 13, 1988 Advisory and Servicing        Incorporated  by  Reference
         Agreement between ALI Advisor,  Inc.        to  Exhibit   10-A  to  the
         and the Company.                            Company's  Annual Report on
                                                     Form   10-K  for  the  year
                                                     ended December 31, 1998

10-B     January 17, 1989 Stock  Purchase and        Incorporated  by  Reference
         Sale Agreement between Young,  Smith        from the  Company's  Report
         &  Peacock  Holdings,  Inc.,  Young,        on Form 8-K  dated  January
         Smith  &  Peacock,  Inc.,  Barry  W.        30, 1989
         Peacock,  Thomas R. Hislop and Larry
         P. Staley.

                                       23
<PAGE>
Exhibit                                                  Page or Method
Number               Description                        Method of Filing
------               -----------                        ----------------

10-C     Modification  of Loan Document dated        Incorporated  by  Reference
         July 21, 1990,  between ALI Advisor,        to  Exhibit   10-E  to  the
         Inc. and Pinnacle Peak Office/Resort        Company's  Annual Report on
         Investors  Limited  Partnership,  an        Form   10-K  for  the  year
         Arizona  limited  partnership  (Loan        ended   December  31,  1990
         1).                                         ("1990 Form 10-K")

10-D     Modification of Loan Documents dated        Incorporated  by  Reference
         July 1, 1990,  between ALI  Advisor,        to Exhibit 10-F to the 1990
         Inc. and North Scottsdale Horseman's        Form 10-K
         Park  Limited  Partnership  III,  an
         Arizona  limited  partnership  (Loan
         5b).

10-E(1)  Indemnification  Agreement dated May        Incorporated  by  Reference
         12, 1992 between Arizona Land Income        to  Exhibit   10-L  to  the
         Corporation and Robert Blackwell.           Company's  Annual Report on
                                                     Form   10-K  for  the  year
                                                     ended December 31, 1993

10-E(2)  Indemnification    Agreement   dated        Incorporated  by  Reference
         October 1, 1991 between Arizona Land        to  the  Company's   Annual
         Income    Corporation   and   Burton        Report on Form 10-K for the
         Freireich.                                  year  ended   December  31,
                                                     1994

24       Powers of Attorney                          See Signature page

27       Financial Data Schedule                     Filed herewith

(b) Reports on Form 8-K

    During the last quarter of 1999,  the Company  filed no reports
    on Form 8-K.

                                       24
<PAGE>
                                   SIGNATURES

     Pursuant to the  requirements  of  Sections  13 or 15(d) of the  Securities
Exchange Act of 1934,  the Company has duly caused this report on Form 10-KSB to
be  signed  on  its  behalf  by the  undersigned,   thereunto  duly  authorized,
this 27th day of March, 2000.

                                   ARIZONA LAND INCOME CORPORATION


                                   By:/s/ Thomas R. Hislop
                                      ------------------------------------------
                                      Thomas R. Hislop
                                      Vice President and Chief Financial Officer

                                POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS,  that each person whose  signature  appears
below  constitutes and appoints Barry W. Peacock,  Thomas R. Hislop and Larry P.
Staley, and each of them, his true and lawful attorneys-in-fact and agents, with
full powers of substitution and  resubstitution,  for him and in his name, place
and stead,  in any and all  capacities,  to sign any and all  amendments to this
Form 10-KSB Annual Report, and to file the same, with all exhibits thereto,  and
other  documents  in  connection  therewith  with the  Securities  and  Exchange
Commission,  granting unto said  attorneys-in-fact and agents, and each of them,
full  power  and  authority  to do and  perform  each and  every  act and  thing
requisite and  necessary to be done in and about the  premises,  as fully and to
all intents and purposes as he might or could do in person hereby  ratifying and
confirming  all that said  attorneys-in-fact  and agents,  or his  substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report on Form 10-KSB has been signed below by the  following  persons on behalf
of the Company and in the capacities and on the date indicated.

     Signature                       Title                            Date
     ---------                       -----                            ----


/s/ Barry W. Peacock            President                         March 27, 2000
---------------------------
Barry W. Peacock


/s/ Thomas R. Hislop            Chairman of the Board, Vice       March 27, 2000
---------------------------     President Treasurer, Chief
Thomas R. Hislop                Executive Officer and Chief


/s/ Larry P. Staley             Financial Officer
---------------------------     Vice President                    March 27, 2000
Larry P. Staley


/s/ Robert Blackwell            Unaffiliated Director             March 27, 2000
---------------------------
Robert Blackwell


/s/ Burton P. Freireich         Unaffiliated Director             March 27, 2000
---------------------------
Burton P. Freireich

                                       25