As filed with the Securities and Exchange Commission on March 22, 2000

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10-KSB

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[X]      Annual Report Under Section 13 or 15(d) of the Securities  Exchange Act
of 1934 For the Fiscal Year Ended December 31, 1999

                                       or

     [ ] Transition Report Under Section 13 or 15(d) of the Securities  Exchange
Act of 1934 For the Transition Period from __________ to __________.
--------------------------------------------------------------------------------


                         Commission File Number 33-87570

                        American Church Mortgage Company

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              (Exact name of small business issuer in its charter)

                            10237 Yellow Circle Drive

                              Minnetonka, MN 55343

                            Telephone: (612) 945-9455

                  I.R.S. Employer Identification No. 41-1793975

     State or other jurisdiction of incorporation or organization: Minnesota

Securities registered under Section 12(b) of the Exchange Act:  None

Securities  registered  under Section  12(g) of the Exchange Act:  Common Stock,
$.01 par value

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 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 ]

State issuer's revenues for its most recent fiscal year:      $1,109,436

State the  aggregate  market value of the voting and  non-voting  common  equity
stock held by  non-affiliates  computed by  reference  to the price at which the
common equity was sold, or the average bid and asked price of such common equity
stock, as of a specified date within the past 60 days:

      Not applicable.

The number of shares  outstanding of the issuer's $.01 par value common stock as
of February 29, 2000 was: 1,379,540 ----------

                    DOCUMENTS INCORPORATED BY REFERENCE: NONE

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<PAGE>




                        AMERICAN CHURCH MORTGAGE COMPANY
                                   FORM 10-KSB

                                      INDEX                           Page
                                                                       No.

                                     PART I

Item 1.    Description of Business..............................        3

Item 2.    Description of Property..............................       10

Item 3.    Legal Proceedings....................................       10

Item 4.    Submission of Matters to a Vote of Security Holders..       10

                                     PART II

Item 5.    Market for Registrant's Common Equity and
           Related Stockholder Matters..........................       10

Item 6.    Management's Discussion and Analysis

           or Plan of Operation.................................       12

Item 7.    Financial Statements:................................       14

                  Balance Sheet

                  December 31, 1999 and 1998....................      F-2

                  Statement of Operations

                  Years Ended December 31, 1999 and 1998........      F-4

                  Statements of Stockholders' Equity

                  December 31, 1999 and 1998....................      F-5

                  Statements of Cash Flows

                  Years Ended December 31, 1999 and 1998........      F-6

                  Notes to Financial Statements.................      F-8

Item 8.    Changes In and Disagreements With

           Accountants on Accounting and Financial Disclosure...       14

                                    PART III

Item 9.    Directors, Executive Officers, Promoters and Control
           Persons; Compliance With Section 16 (a) of the

           Exchange Act........................................       15

Item 10.   Executive Compensation..............................       16

Item 11.   Security Ownership of Certain Beneficial Owners and
           Management..........................................       17

Item 12.   Certain Relationships and Related Transactions......       17

Item 13.   Exhibits and Reports on Form 8-K....................       20








<PAGE>



                                     PART I

          In  connection  with  the  "safe  harbor"  provisions  of the  Private
Securities  Litigation  Reform  Act of 1995,  readers of this  document  and any
document  incorporated by reference  herein,  are advised that this document and
documents  incorporated by reference into this document  contain both statements
of historical facts and forward looking  statements.  Forward looking statements
are subject to certain risks and uncertainties, which could cause actual results
to differ  materially from those  indicated by the forward  looking  statements.
Examples  of forward  looking  statements  include,  but are not  limited to (i)
projections  of  revenues,  income or loss,  earning or loss per share,  capital
expenditures,  dividends,  capital  structure and other  financial  items;  (ii)
statements of plans and  objectives of the Company or its management or Board of
Directors,  including the on-going public sale of its shares by the Company,  or
estimates or  predictions  of actions by  borrowers,  competitors  or regulatory
authorities;   (iii)  statements  of  future  economic  performance;   and  (iv)
statements of assumptions  underlying  other statements and statements about the
Company or its business.

          This  document and  documents  incorporated  by reference  herein also
identify important factors which could cause actual results to differ materially
from  those   indicated  by  forward   looking   statements.   These  risks  and
uncertainties  include,  among other things,  interest rate fluctuations as they
effect the relative  yield of the  Company's  loan  portfolio and its ability to
compete  in making  loans to  borrowers;  payment  default  on loans made by the
Company,   which  could   adversely   affect  the  Company's   ability  to  make
distributions to its  Shareholders;  the actions of competitors;  the effects of
government  regulation;  and other factors which are described  herein and/or in
documents incorporated by reference herein.

          The  cautionary  statements  made  pursuant to the Private  Litigation
Securities  Reform Act of 1995 above and elsewhere by the Company  should not be
construed  as  exhaustive  or  as  any  admission   regarding  the  adequacy  of
disclosures made by the Company prior to the effective date of such Act. Matters
which are the subject of forward  looking  statements  are beyond the ability of
the Company to control and in many cases the Company cannot predict what factors
would cause  results to differ  materially  from those  indicated by the forward
looking statements.

Item 1.    Description of Business

General

           Incorporated  as a Minnesota  corporation on May 27, 1994, we operate
as a Real Estate  Investment  Trust  ("REIT") and are engaged in the business of
making mortgage loans to churches and other non-profit  religious  organizations
throughout the United States. The principal amount of loans we offer ranges from
$100,000 to  $1,000,000.  We may also  invest up to 30% of our Average  Invested
Assets in mortgage secured debt securities  (bonds) issued by churches and other
non-profit religious organizations.  Between the date upon which we began active
business  operations  (April 15,  1996),  and February 29, 2000, we have made 38
loans to 33 churches in the aggregate  amount of  $13,930,750,  with the average
size  being  $366,599.  Of the 38  loans  we have  made,  eight  loans  totaling
$2,432,000 have been repaid early by the borrowing churches.  We also own, as of
February  29,  2000,  $2,067,000  principal  amount  of  Church  Bonds  which we
purchased  at a price of par value  ($1,000) or less.  At no time have we paid a
premium for any of the bonds in our portfolio.  We sold $195,000 of our bonds at
"par" during 1999.  The face value of bonds in our  portfolio as of February 29,
2000 was $2,067,000.  Subject to supervision of our Board of Directors,  our day
to day  business  operations  are managed by Church  Loan  Advisors,  Inc.  (the
"Advisor"),  which provides investment  advisory and administrative  services to
us. The  principals  of the Advisor  include  principals  of American  Investors
Group, Inc., an NASD member broker-dealer which has served as underwriter of the
three public offerings of our common stock.

Public Offerings

           On July 11, 1995,  the Securities  and Exchange  Commission  declared
effective  our first public  offering of 2,000,000  common  shares at a price of
$10.00 per share ($20,000,00)  under SEC File 33-87570.  We achieved the Minimum
Offering  of at least  200,000  shares  ($2,000,000)  sold to not less  than 100
individuals  (the  "Minimum  Offering")  on April 15,  1996.  Until the  Minimum
Offering  was  achieved,  we could not  commence  our active  business of making
mortgage loans to churches.  Consequently,  business  operations  from inception
(May 27,  1994) to  completion  of the Minimum  Offering  (April 15,  1996) were
limited to daily business  organizational  efforts,  activities  relating to the
offering, reviewing potential candidates for church mortgage loans to be made by
us once the Minimum Offering was achieved, and conducting informational meetings
with   brokers  and   broker-   dealers   identified   to  the  Company  by  the
Underwriter--American  Investors Group, Inc. ("American"), an affiliate of ours.
We concluded our initial public offering on November 8, 1996. As of such date we
had sold 335,481 shares to approximately  281 individuals,  not including 20,000
shares  ($200,000)  previously  purchased  by  our  initial  shareholder  -- DRM
Holdings, Inc., another of our affiliates.

           On  September  26,  1997,  the  Securities  and  Exchange  Commission
declared  effective our second public  offering of 1,500,000  common shares at a
price of $10.00 per share ($15,000,000)  under SEC File 333-27601.  The Offering
was  co-  underwritten  by  American  Investors  Group,  Inc.  and  LaSalle  St.
Securities, Inc., Chicago, Illinois ("LaSalle").  American acted in the capacity
of the Managing Underwriter. The Offering was conducted on a"best-efforts" basis
pursuant to  applicable  rules of the  Securities  and Exchange  Commission.  We
concluded our second public offering on January 22, 1999. We sold 799,759 shares
during our second public offering.

                                        3


<PAGE>



           On September 23, 1999 the Securities and Exchange Commission declared
effective  our third public  offering of 1,500,000  common  shares at a price of
$10.00 per share ($15,000,000)  under SEC File 333-81819.  The Offering is being
conducted  on a  "best-efforts"  basis  pursuant  to  applicable  rules  of  the
Securities and Exchange Commission. As of February 29, 2000, we had sold 171,269
shares,  and had 1,379,540 shares  outstanding and  approximately 911 individual
shareholders.

The Company's Business Activities

           Our business is managed by Church Loan  Advisors,  Inc.,  Minnetonka,
Minnesota  (the  "Advisor").  We have no  employees.  The  Advisor's  affiliate,
American  Investors Group,  Inc., has been engaged since 1987 in the business of
underwriting first mortgage bonds for churches  throughout the United States. In
underwriting church bonds, they review financing proposals,  analyze prospective
borrowers' financial capability, and structure, market and sell, mortgage-backed
securities which are debt obligations (notes) of such borrowers to the investing
general public.  The shareholders,  officers and directors of American have been
engaged  in the  business  of  church  financing  since  1983,  with a  combined
experience of  approximately  68 years in this  business.  Since its  inception,
American has underwritten  approximately  163 church bond  financings,  in which
approximately  $253,348,000  million in first  mortgage  bonds have been sold to
public investors. The average size of single church bond financings underwritten
by American since its inception is approximately $1,554,282 million.

           In the course of its business,  American has identified a demand from
potential borrowers for smaller loans of $100,000 to $1,000,000.  Because of the
regulatory,  administrative expenses and complexity normally associated with the
bond financing business,  American  determined that the economic  feasibility of
bond financing has diminished for financings  under  $750,000.  As a result,  we
believe  that many  churches  are forced to either  forego the project for which
their  financing  request  was made,  fund their  project  from cash flow over a
period  of time and at  greater  expense,  or seek bank  financing  at terms not
always favorable or available to them, due to the historic reticence of banks to
lend to churches for other than economic reasons.  The Company's objective is to
provide a lending source to this segment of the industry-by  capitalizing on the
human resources and experience available at American and the Advisor, and taking
advantage of the marketing, advertising and general goodwill of American.

Financing Business

           Our  primary  business  is to make  first  mortgage  loans in amounts
ranging from $100,000 to $1,000,000,  to churches and other non-profit religious
organizations,  and selecting and investing in mortgage-secured debt instruments
("Church Bonds") issued by churches and other non-profit religious organizations
throughout the United States. We attempt to apply essentially all of our working
capital  (after  adequate  reserves  determined  by the Advisor)  toward  making
mortgage  loans and  investing in Church  Bonds.  We seek to enhance  returns on
investments on such loans by:

     o offering  terms of up to 20 years or more,  generating the highest yields
possible under current market conditions;

     o seeking origination fees (i.e.  "points") from the borrower at the outset
of a loan and upon any renewal of a loan;

     o making a limited amount of higher-interest  rate second mortgage loans to
qualified borrowers; and

     o purchasing a limited amount of  mortgage-secured  debt securities  having
various   maturities   issued  by  churches  and  other   non-profit   religious
organizations.

           Our policies limit the amount of second  mortgage loans to 20% of the
Company's Average Invested Assets on the date any second mortgage loan is closed
and limit the  amount of  mortgage-secured  debt  securities  to 30% of  Average
Invested Assets on the date of their purchase.  All other mortgage loans made by
us (or  Church  Bonds  purchased  for  investment)  will be  secured  by a first
mortgage  (or deed of trust)  lien in favor of us.  Although  we attempt to make
mortgage loans for various terms  typically  ranging from three to twenty years,
we may determine to emphasis longer-term fixed-rate loans in its discretion,  in
order to reduce the risk to us of downward interest rate fluctuations.

           Our lending and investing  operations,  including  determination of a
prospective borrower's or church bond issuer's financial credit worthiness,  are
made on our behalf by the Advisor.  Employees and agents of the Advisor  conduct
all aspects of our  business,  including (i)  marketing  and  advertising;  (ii)
communication  with prospective  borrowers;  (iii) processing loan applications;
(iv) closing the loans; (v) servicing the loans; (vi) shareholder  relations and
(vii) administering our day-to-day  business.  In consideration of its services,
the  Advisor  is  entitled  to  receive  a fee equal to 1 1/4%  annually  of the
Company's Average Invested Assets,  plus one-half of any origination fee charged
to  borrowers  on mortgage  loans we make.  The  Advisor's  management  fees are
computed and payable monthly.

                                        4


<PAGE>



Current First Mortgage Loan Terms

           We offer  prospective  borrowers a selection of "Loan  Types,"  which
include a choice of fixed or variable  rates of interest  indexed to the "prime"
rate of interest, the U.S. Treasury 10-Year Notes, or other generally recognized
reference  index,  and having  various terms to maturity,  origination  fees and
other terms and conditions.  The Loan Types, interest rates and fees offered and
charged  by  us  may  from   time-to-time  be  limited,   changed  or  otherwise
unilaterally  amended  by the  Advisor  in its  discretion  as a result  of such
factors  (among  others) as (i)  balance of Loan  Types in our  portfolio;  (ii)
competition from other lenders;  (iii)  anticipated need to increase the overall
yield to our mortgage loan portfolio;  (vi) local and national economic factors;
and (v) actual  experience in borrowers'  demand for the loans. In addition,  we
may make mortgage loans on terms other than those identified in our list of Loan
Types. Subject to change, modification or elimination at our complete discretion
, the following is a list of the currently  available  Loan Type we may offer to
prospective borrowing institutions:

<TABLE>
<CAPTION>
   Loan Type                          Interest Rate (1)                      Origination Fee (2)

<S>                                <C>                                                 <C>
15 Year Term (3)                   Fixed @ Prime + 1.45%                               4.0%
20 Year Term (3)                   Fixed @ Prime + 1.50%                               4.0%
20 Year Term (3)                   Variable Annually @ Prime + 1.25%                   4.0%
Renewable Term  (4)                Fixed @ Prime plus:
     3 Year                               1.10%                                        4.0%
     5 Year                               1.25%                                        4.0%
     7 Year                               1.40%                                        4.0%
Construction 1 Year Term           Fixed @ Prime + 2.25%                               2.0%
=================================  ========================================= =========================
</TABLE>

(1) "Prime" means the prime rate of interest charged to preferred customers,  as
published by a federally chartered bank chosen by our Advisor.

(2) Origination fees are based on the original  principal amount of the loan and
are  collected  from the  borrower  at the  origination  and  renewal  of loans,
one-half of which is payable directly to the Advisor.

(3) Fully amortized repayment term.

(4) Renewable  term loans are repaid based on a 20-year  amortization  schedule,
and are renewable at the  conclusion of their initial term for  additional  like
terms up to an aggregated  maximum of 20 years. We charge a fee of 1% to
the borrower by us upon the date of each  renewal.  If renewed by the  borrower,
the interest rate is adjusted upon renewal to Prime plus a specified  percentage
"spread," i.e., one and a quarter percent (1.25%).

The above table describes  certain material terms of Loan Types,  interest rates
and fees  currently  offered  and  charged by us.  The table does not,  however,
purport to identify all possible Loan Types,  terms, rates, and fees that we may
offer  from  time-to-time.  We may  determine  at any time to  modify  the terms
identified  above and/or offer loan terms  different than any of the Loan Types,
interest  rates and fees  identified  above and does, in fact,  negotiate  these
terms and fees with many of its borrowers.

Mortgage Loan Processing and Underwriting

     Mortgage  loan  applications  are prepared  and  verified by our  Advisor's
personnel in our Loan  Origination  and  Underwriting  Department.  Verification
procedures are designed to assure a borrower's qualification under our Financing
Policies  which are  specifically  identified  herein and  include,  among other
things, obtaining:

     o written  applications  (and  exhibits)  signed and  authenticated  by the
prospective borrower in form and substance dictated by us;

     o financial statements in accordance with our Financing Policies;

     o corporate records and other organizational documents of the borrower;

     o preliminary title report or commitment for mortgagee title insurance; and

     o a real estate appraisal in accordance with the Financing Policies.

                                        5


<PAGE>



     All  appraisals  and  financial  statements  are  prepared  by  independent
third-party  professionals  who  are  we  approve  based  on  their  experience,
reputation and education.  Completed loan applications,  together with a written
summary are then presented to our Underwriting Committee.  Our loan Underwriting
Committee is comprised of the  Advisor's  President and  Vice-President  and our
President. Our Advisor may arrange for the provision of mortgage title insurance
and for the services of  professional  independent  third-party  accountants and
appraisers on behalf of borrowers in order to achieve  pricing  efficiencies  on
their  behalf  and to  assure  the  efficient  delivery  of  title  commitments,
preliminary  title  reports and title  policies,  and financial  statements  and
appraisals  meeting our underwriting  criteria.  Our Advisor may arrange for the
direct payment for such professional  services and for the direct  reimbursement
to it of such expenditures by borrowers and prospective borrowers.  Upon closing
and  funding  of  mortgage  loans,  a  negotiable  origination  fee based on the
original  principal  amount of each loan may be  charged,  of which  one-half is
payable to our Advisor, and the other one-half to us.

 Loan Commitments

     Subsequent to approval by our Underwriting Committee,  and prior to funding
a  loan,  we may  issue  a  loan  commitment  to  qualified  applicants.  A loan
commitment  deposit may be required  from the  borrowing  church to commence the
loan preparation  procedure.  These deposits are directly applied by the Advisor
to engage  accountants and appraisers to prepare their respective reports on the
Church.   Commitments  may  indicate,  among  other  things,  the  loan  amount,
origination  fees,  closing  costs,  underwriting  expenses  (if  any),  funding
conditions,  approval  expiration  dates  and  interest  rate and  other  terms.
Commitments  generally set forth a "prevailing" interest rate that is subject to
change in accordance with market interest rate fluctuations until the final loan
closing  documents  are prepared,  at which time we commit to a stated  interest
rate. In certain cases we may establish ("lock in") interest rate commitments up
to sixty  (60) days from the  commitment  to  closing;  however,  interest  rate
commitments  beyond sixty days will not normally be issued  unless we receive an
appropriate  fee premium based upon our assessment of the risk associated with a
longer period.

Loan Portfolio Management

     Our portfolio of mortgage loans and Church Bonds is managed and serviced by
our  Advisor  in  accordance  with  the  Advisory  Agreement.   The  Advisor  is
responsible for all aspects of our mortgage loan business, including closing and
recordation  of mortgage  loans;  collecting  payments of principal and interest
payments regularly and upon the maturity of a loan;  enforcing loan payments and
other  lender's  requirements;  periodic  review of each  mortgage loan file and
determination  of its reserve  classification;  and  exercising  our remedies in
connection  with any  defaulted  or  non-performing  loans.  Fees  and  costs of
attorneys,  insurance,  bonds and other direct  expenses  incurred in connection
with the  exercise of such  remedies are our  responsibility.  We may , however,
recoup  these  expenses  from the  borrower in the  process of pursuing  the our
remedies. The Advisor will not receive any additional  compensation for services
rendered in connection with loan portfolio  management or exercising remedies on
our behalf in the event of a loan default.

Loan Funding and Bank Borrowing

     Our mortgage  loans (and our purchases of Church Bonds) will be funded with
available cash resources and, at the discretion of the Advisor,  with borrowings
under a line of credit with a commercial  lender or bank.  We  currently  have a
$1,000,000  line of credit  with  Beacon  Bank,  Shorewood,  Minnesota.  We have
borrowed  against our line of credit and had an outstanding  balance of $800,000
as of  February  29,  2000.  We may borrow up to 50% of the value of our Average
Invested Assets to make loans  regardless of our capacity to (i) sell the Shares
on a continuing  basis, or to (ii) reposition  assets from the maturity or early
repayment of mortgage loans in our portfolio. Cash resources generally available
to us consist  primarily of the net proceeds from the sale of the Shares,  minus
reserves for operating  expenses,  and bad-debt  reserves,  as determined by the
Advisor.  As our business  develops and over the course of time,  cash resources
available  to us for  lending  purposes  will  include,  in  addition to the net
proceeds  from future sales of Shares (if any),  (i) principal  repayments  from
borrowers on loans made by us, (ii)  dividends  reinvested  by our  Shareholders
electing the Dividend Reinvestment Plan, and (iii) funds borrowed under any line
of credit arrangement.

The Advisory Agreement

     We have entered into a contract with the Advisor (the "Advisory Agreement")
under which the Advisor will furnish advice and  recommendations  concerning our
business  affairs,   provide  administrative  services  to  us  and  manage  our
day-to-day operations. Among other things, the Advisor:

     o serves as our mortgage loan  underwriter  and advisor in connection  with
its primary business of making loans to churches;

     o advises and selects  Church Bonds to be purchased and held for investment
by us;

     o provides  marketing and advertising and generates loan leads directly and
through its Affiliates;

                                        6


<PAGE>



     o on  our  behalf,  deals  with  borrowers,  lenders,  banks,  consultants,
accountants, brokers, attorneys, appraisers, insurers and others;

     o supervises the  preparation,  filing and  distribution of tax returns and
reports to governmental  agencies and to Shareholders  and acts on our behalf in
connection with Shareholder relations;

     o provides  office space and personnel as required for the  performance  of
the foregoing services as Advisor; and o as requested by us, makes reports to us
of  its  performance   ofthe  foregoing   services  and  furnish's   advice  and
recommendations with respect to other aspects of our business.

     In performing  its services under the Advisory  Agreement,  the Advisor may
use facilities,  personnel and support services of its Affiliates. Expenses such
as legal and accounting fees,  stock transfer agent,  registrar and paying agent
fees, and dividend  reinvestment  agent fees are direct expenses of ours and are
not provided for by the Advisor as part of its services.

     The Advisory  Agreement is renewable  annually by us for one-year  periods,
subject to our determination, including a majority of the Independent Directors,
that the Advisor's  performance has been  satisfactory and that the compensation
paid the Advisor has been  reasonable.  We may terminate the Advisory  Agreement
with  or  without  cause  upon 60  days  written  notice  to the  Advisor.  Upon
termination of the Advisory  Agreement by either party,  the Advisor may require
us to  change  our name to a name  that does not  contain  the word  "American,"
"America"  or the  name of the  Advisor  or any  approximation  or  abbreviation
thereof, and that is sufficiently dissimilar to the word "America" or "American"
or  the  name  of  the  Advisor  as  to  be  unlikely  to  cause   confusion  or
identification  with either the  Advisor or any person or entity  using the word
"American" or "America" in its name. Our Board of Directors shall determine that
any successor Advisor possess sufficient  qualifications to perform the advisory
function for us and justify the  compensation  provided for in its contract with
us.

     Pursuant to the Advisory  Agreement,  the Advisor is required to pay all of
the expenses it incurs in providing  services to us, including,  but not limited
to, personnel expenses, rental and other office expenses, expenses of directors,
officers and  employees of the Advisor  (except  out-of-pocket  expenses of such
persons who are directors or officers of ours that incurred in their  capacities
as our  directors  and  officers),  and all of its  overhead  and  miscellaneous
administrative  expenses  relating to  performance  of its  functions  under the
Advisory  Agreement.  We are required to pay all other  expenses we incur in the
daily operations of our  business-such as the costs and expenses of reporting to
various governmental  agencies and the Shareholders;  the general conduct of our
operations as a mortgage  lender;  fees and expenses of  appraisers,  directors,
auditors, outside legal counsel and transfer agents, and costs directly relating
to closing of loan transactions.

     In the event that out Total Operating  Expenses exceed in any calendar year
the  greater  of (a) 2% of our  Average  Invested  Assets  or (b) 25% of our net
income,  the Advisor is obligated to reimburse us, to the extent of its fees for
such  calendar  year,  for the amount by which the  aggregate  annual  operating
expenses paid or incurred by us exceed the limitation. The Independent Directors
may,  upon a finding  of  unusual  and  non-recurring  factors  which  they deem
sufficient,  determine that a higher level of expenses is justified in any given
year.

     Our bylaws provide that the Independent Directors are to determine at least
annually the  reasonableness of the compensation we pay to our Advisor.  Factors
to be  considered  in reviewing the Advisory Fee include the size of the fees of
the Advisor in relation to the size,  composition and  profitability of our loan
portfolio,  the rates charged by other investment advisors performing comparable
services,  the success of the Advisor in generating  opportunities that meet our
investment objectives, the amount of additional revenues realized by the Advisor
for other  services  performed  for us, the  quality  and extent of service  and
advice  furnished by the Advisor,  the quality of our investments in relation to
investments  generated  by the  Advisor  for its own  account,  if any,  and the
performance of our investments.

     The Advisory  Agreement  provides for  indemnification by us of the Advisor
and each of its directors,  officers and employees  against expense or liability
arising out of such person's  activities in rendering  services to us,  provided
that the conduct  against which the claim is made was determined by such person,
in good faith,  to be in our best interests and was not the result of negligence
or misconduct.

Financing Policies

     Our business of mortgage lending to churches and other non-profit religious
organizations  is  managed  in  accordance  with and  subject  to the  policies,
guidelines,  restrictions and limitations  identified herein (collectively,  the
"Financing  Policy").  The intent of the Financing Policy is to identify for our
Shareholders  not only the general  business in which we are  involved,  but the
parameters of our lending business. These policies may not be changed (except in
certain  immaterial  respects  by majority  approval of the Board of  Directors)
without the approval of a majority of the Independent Directors, and the holders
of a majority of our outstanding Shares at a duly held meeting for that purpose:

                                        7


<PAGE>



     (i)      Loans made by us will be limited to churches and other  non-profit
              religious  organizations,  and will be secured by  mortgages.  The
              total  principal  amount of all second mortgage loans that we fund
              shall be  limited  to 20% of Average  Invested  Assets.  All other
              loans will be first mortgage loans.

     (ii)     The loan amount  cannot exceed 75% of the value of the real estate
              and  improvements  securing each loan, such value being determined
              based on a written appraisal  prepared by an appraiser  acceptable
              to the Advisor. On loans over $500,000,  we will require a written
              appraisal  certified  by  a  member  of  the  Appraisal  Institute
              ("MAI"), or a state- certified appraiser.

     (iii)    An ALTA (American Land Title  Association) or equivalent  Mortgage
              Title Policy must be furnished to us by the borrower  insuring our
              mortgage interest.

     (iv)     The borrower's long-term debt (including the proposed loan) cannot
              exceed four (4) times their gross income for the previous twelve
              (12) months.

     (v)      The borrower must furnish us with  financial  statements  (balance
              sheet and income and expense  statement)  for their last three (3)
              complete  fiscal years and a current  financial  statement for the
              period  within ninety (90) days of the loan closing date. On loans
              equal to or less than $500,000, the last complete fiscal year must
              be reviewed by an independent  accounting firm. On loans in excess
              of $500,000,  the last complete  fiscal year financial  statements
              must be audited by an independent auditor.  Borrowers in existence
              for less than three fiscal years must provide financial statements
              since their  inception.  No loan will be extended to a borrower in
              operation less than two years (24 months) absent express  approval
              by our Board of Directors.

     (vi)     In its  discretion,  the Advisor,  on our behalf,  may require the
              borrower  to arrange  for  automatic  electronic  or  drafting  of
              monthly payments.

     (vii)    In its  discretion,  the Advisor,  on our behalf,  may require (i)
              key-man  life  insurance  on the life of the  senior  pastor  of a
              church;   (ii)  personal   guarantees  of  church  members  and/or
              affiliates; and (iii) other security enhancements for our benefit.

     (viii)   The borrower must agree to provide to us annual reports (including
              financial  statements)  within  120 days of each  fiscal  year end
              beginning  with the fiscal year end next  following the funding of
              the loan.

     (ix)     In its  discretion,  the Advisor,  on our behalf,  may require the
              borrower  to  grant  to us a  security  interest  in all  personal
              property  located and to be located  upon the  mortgaged  premises
              (excluding property leased by the borrower).

         These Financing Policies are in addition to the prohibited  investments
and activities identified hereinafter and which are set forth in our bylaws.

Prohibited Investments and Activities

         Our  bylaws  impose  certain   prohibitions  and  restrictions  on  our
investment practices and lending activities, including prohibitions against:

         (i)      Investing more than 10% of our total assets in unimproved real
                  property or mortgage loans on unimproved real property;

         (ii)     Investing in commodities or commodity futures contracts other
                  than "interest rate futures" contracts intended only for
                  hedging purposes;

         (iii)    Investing in mortgage loans (including  construction loans) on
                  any  one  property  which  in the  aggregate  with  all  other
                  mortgage  loans  on  the  property  would  exceed  75%  of the
                  appraised   value   of   the   property   unless   substantial
                  justification   exists   because  of  the  presence  of  other
                  underwriting criteria;

         (iv)     Investing in mortgage loans that are subordinate to any
                  mortgage or equity interest of the Advisor or the Directors
                  or any of their Affiliates;

         (v)      Investing in equity securities;

         (vi)     Engaging in any short sales of securities or in trading, as
                  distinguished from investment activities;


                                        8


<PAGE>



         (vii)    Issuing redeemable equity securities;

         (viii)   Engaging in underwriting or the agency distribution of
                  securities issued by others;

         (ix)     Issuing  options  or  warrants  to  purchase  our Shares at an
                  exercise  price less than the fair market  value of the Shares
                  on the date of the issuance or if the issuance  thereof  would
                  exceed 10% in the aggregate of our outstanding Shares;

         (x)      Issuing debt securities  unless the debt service  coverage for
                  the most recently completed fiscal year, as adjusted for known
                  changes, is sufficient to properly service the higher level of
                  debt;

         (xi)     Investing in real estate contracts of sale unless such
                  contracts are in recordable form and are appropriately
                  recorded in the chain of title;

         (xii)    Selling or leasing to the Advisor, a Director or any Affiliate
                  thereof  unless  approved  by  a  majority  of  our  Directors
                  (including a majority of our Independent  Directors),  who are
                  not otherwise  interested in such  transaction,  as being fair
                  and reasonable to us;

         (xiii)   Acquiring  property  from  any  Advisor  or  Director,  or any
                  Affiliate   thereof,   unless  a  majority  of  our  Directors
                  (including a majority of our  Independent  Directors)  who are
                  not  otherwise  interested  in such  transaction  approve  the
                  transaction  as being fair and reasonable and at a price to us
                  which  is no  greater  than  the  cost  of the  asset  to such
                  Advisor, Director or any Affiliate thereof, or if the price to
                  us is in excess of such cost, that  substantial  justification
                  for such excess  exists and such excess is  reasonable.  In no
                  event  shall  the  cost  of  such  asset  exceed  its  current
                  appraised value;

         (xiv)    Investing or making  mortgage  loans unless a  mortgagee's  or
                  owner's  title  insurance  policy  or  commitment  as  to  the
                  priority of the mortgage or condition of title is obtained; or

         (xv)     Issuing shares on a deferred payment basis or other similar
                  arrangement.

         We do not invest in the  securities of other issuers for the purpose of
exercising control, to engage in the purchase and sale of investments other than
as described in this Report, to offer securities in exchange for property unless
deemed prudent by a majority of the Directors,  to issue senior securities or to
make loans to other  persons  except in the  ordinary  course of our business as
described herein.

         We will not make loans to or borrow from,  or enter into any  contract,
joint venture or transaction with, any of our Directors or officers, the Advisor
or any  Affiliate of any of the  foregoing  unless a majority of our  Directors,
including a majority of our Independent  Directors,  approves the transaction as
fair and reasonable to us and the transaction is on terms and conditions no less
favorable  to us than those  available  from  unaffiliated  third  parties.  Any
investment  by us in any  property,  mortgage  or  other  real  estate  interest
pursuant to a transaction  with the Advisor or any Directors or officers thereof
will be based upon an appraisal of the  underlying  property from an independent
qualified  appraiser selected by the Independent  Directors and will not be made
at a price greater than fair market value as determined by such appraisal.

Competition

         The real estate financing industry generally is highly competitive.  We
will compete  within our  geographic  areas of operation  with a wide variety of
investors and other lenders,  including  banks,  savings and loan  associations,
insurance  companies,  pension funds and fraternal  organizations which may have
investment  objectives  similar to our own. A number of these  competitors  have
greater financial  resources,  larger staffs and longer operating histories than
we do. We compete  principally  by limiting our  business  "niche" to lending to
churches  and other  non-profit  religious  organizations,  offering  loans with
competitive and flexible terms, and emphasizing our expertise in the specialized
industry segment of lending to churches and other religious organizations.

Employees

         We have no employees. Our daily opertions and other material aspects of
our business are managed by the Advisor on a "turn-key" basis using employees of
the Advisor and/or its Affiliates. At present, certain officers and directors of
American  and the  Advisor are  providing  services to us at no charge and which
will not be reimbursed to them. These services include,  among others, legal and
analytic  services  relating to the execution of our business plan,  development
and  preparation of reports to be filed under the  Securities  Exchange Act, and
utilization  of  proprietary  forms and  documents  utilized  by the  Advisor in
connection with our business operations.

                                        9


<PAGE>



Subject to the supervision of the our Board of Directors, our business is
managed by Church Loan Advisors, Inc. (the "Advisor"), which provides us
investment advisory and administrative services. The Advisor is owned by V.
James Davis, David G. Reinhart and Philip J. Myers. Mr. Reinhart and Mr.
Davis are officers and directors of ours, and they are also directors of
the Advisor. Philip J. Myers is President of the Advisor and of American
Investors Group, Inc., our underwriter in our current public offering. Mr.
Reinhart is Chairman of the Board of Directors of American. The Advisor is
not a registered advisor under the Investment Advisor's Act of 1940, nor
are we a registered investment company under the Investment Company Act of
1940. As of the date of this Report, the Advisor employs five persons on a
part-time or other basis. We do not presently expect to directly employ any
persons in the foreseeable future, since all administrative functions and
operations will be contracted for through the Advisor. However, legal,
accounting and certain other services are provided to us by outside
professionals and paid by us directly. See Item 11 "Security Ownership of
Certain Beneficial Owners and Management," and Item 12 "Certain
Relationships and Related Transactions."

 Operations

         Our  operations  currently are located in the 8,400 square foot offices
of the Advisor's affiliate,  American Investors Group, Inc., 10237 Yellow Circle
Drive, Minnetonka,  Minnesota 55343. These facilities are owned by Yellow Circle
Partners,  L.L.P., a partnership owned by Mr. Reinhart and Mr. Myers. We are not
charged  any  rent for our use of these  facilities,  or for our use of  copying
services,  telephones,  facsimile machines,  postage service, office supplies or
employee services, since these costs are covered by the advisory fee paid to the
Advisor.  The Advisor  pays rent and other fees to Yellow  Circle  Partners on a
monthly  basis.  We believe that the terms of this  arrangement  are at least as
favorable to us as those available from unaffiliated  third parties on an arm's-
length basis.

Item 2.   Description of Property

         Our operations are located in the leased offices of American  Investors
Group, Inc., in Minnetonka,  Minnesota.  It is expected that for the foreseeable
future our  operations  will  continue  to be housed in these or similar  leased
premises along with American's operations and those of its Affiliates, including
the Advisor.  We are not directly  charged for rent, nor do we incur other costs
relating to such leased  space,  since the Advisor is including  this expense in
the Advisory Fee.

Item 3.   Legal Proceedings.

         Not applicable.


Item 4.   Submission of Matters to a Vote of Security Holders.

         Not applicable.


                                     PART II

Item 5.   Market for Registrant's Common Equity and Related Stockholder Matters.

         Market Information

         As of February 29,  2000,  1,359,540  shares of our common  shares were
issued and  outstanding  in the public,  excluding  20,000  shares  owned by our
initial  shareholder  DRM Holdings,  Inc. Our initial public  offering (SEC file
33-87570)  which  began July 11, 1995 was closed  November 8, 1996 with  335,481
shares  having been sold.  On September 26, 1997,  the  Securities  and Exchange
Commission  declared  effective our second public  offering of 1,500,000  common
shares at a price of $10.00 per share ($15,000,000) under SEC File 33-87570. The
Offering was  co-underwritten  by American Investors Group, Inc. and LaSalle St.
Securities,  Inc.,  ("LaSalle").  American acted in the capacity of the Managing
Underwriter  and  is an  affiliate  of  ours.  The  Offering  was  conducted  on
a"best-efforts"  basis  pursuant  to  applicable  rules  of the  Securities  and
Exchange  Commission.  We concluded  our second  public  offering on January 22,
1999.  We sold 799,759  shares in our second public  offering.  On September 23,
1999, the Securities and Exchange Commission declared effective our third public
offering of 1,500,000 common shares at a price of $10.00 per share ($15,000,000)
under SEC File 333-81819.  The Offering is being  conducted on a  "best-efforts"
bais pursuant to applicable rules of the Securities and Exchange Commission.  As
of February 29,  2000,  we have sold 171,269  shares and have  1,379,540  shares
outstanding and approximately 911 shareholders.

                                       10


<PAGE>



         Lack of Liquidity and Absence of Public Market Price.

         There  currently is no market for our common shares and there can be no
assurance that a market will develop.  It is not expected that a material market
for the shares will  develop  any time soon.  In  addition,  the market for REIT
securities  historically  has been less liquid  than  non-real  estate  types of
publicly-traded equity securities.  Further, because of such illiquidity and the
fact that the shares  would be valued by  market-makers  (if a market  develops)
based on market forces which consider various factors beyond our control,  there
can be no assurance  that the market value of the shares at any given time would
be the same or higher than the public purchase price of our shares. In addition,
the market  price,  if any  develops,  could  decline  if the yields  from other
competitive  investments  exceed the actual  dividends paid by us on our shares.
Our  common  stock is not  listed  on any  exchange  and is not yet  listed  for
quotation on the National  Association  of Securities  Dealers,  Inc.  Automated
Quotation System ("NASDAQ").

         Repurchase of Our Shares

         Although  our  common  shares are not  redeemable  by us, we may at our
complete  discretion,  repurchase  shares offered to us from time to time by our
Shareholders.  In such  event,  we may pay  whatever  price  the  Advisor  deems
appropriate  and   reasonable,   and  any  such  shares   repurchased   will  be
re-designated  as  "unissued,"  will no longer be  entitled to  distribution  of
dividends and will cease to have voting rights.

         Holders of Our Common Shares

         As of  February  29,  2000,  we had 911 record  holders of our $.01 par
common stock, including our first Shareholder,  DRM Holdings,  Inc., a Minnesota
corporation and affiliate of the Advisor,  which owns 20,000 shares for which it
paid $200,000 ($10.00 per share).

         Dividends

         We paid  dividends  for the prior  fiscal  year on our common  stock as
follows:

<TABLE>
<CAPTION>
 Distribution Date:         For Quarter Ended:       Dollar Amount Distributed    Annualized Yield Per $10
                                                      Per Share:                    Share Represented:

<S>                         <C>                      <C>                                  <C>
   April 30, 1999             March 31, 1999         $.1875                               7.50%
    July 30, 1999             June 30, 1999          $.21875                              8.75%
  October 30, 1999          September 30, 1999       $.228125                             9.125%
  January 30, 2000          December 31, 1999        $.215625                             8.625%
</TABLE>

         As  a  Real  Estate   Investment   Trust,  we  make  regular  quarterly
distributions  to  Shareholders.  The amount of  distributions  to them equal at
least 95% of our "real estate  investment  trust  taxable  income."  Shareholder
distributions  are estimated  for our first three  quarters each fiscal year and
adjusted  annually  based  upon our  audited  year-end  financial  report.  Cash
available for  distribution to our  Shareholders  is derived  primarily from the
interest portion of monthly mortgage payments we receive from churches borrowing
money  from us,  from  origination  and other  fees paid to us by  borrowers  in
connection with loans we make, interest income from  mortgage-backed  securities
issued by churches and other non-profit  religious  organizations  purchased and
held by us for  investment  purposes,  and earnings on any  Permitted  Temporary
Investments made us. All dividends are paid by us at the discretion of the Board
of  Directors  and  will  depend  upon our  earnings  and  financial  condition,
maintenance  of  real  estate  investment  trust  status,  funds  available  for
distribution, results of operations, economic conditions, and such other factors
as our Board of Directors deems relevant.

          During any period where our shares of common  stock are being  offered
and sold and the proceeds therefrom accumulated for the purpose of funding loans
to be made by us, the relative  yield  generated  by such  capital,  and,  thus,
dividends  (if any) to  Shareholders,  could be less than  expected once we have
fully  invested such funds into loans.  We intend to combat to the extent we can
the  possibility  of low yields during the periods where we're selling shares by
(i) collecting  from borrowers an origination fee at the time a loan is made (of
which one-half of any  origination fee charged in connection with a loan is paid
directly  to the  Advisor as  additional  compensation--the  other  one-half  is
payable to us),  and (ii) timing our lending  activities  to coincide as much as
possible  with sales of our  Shares.  However,  there can be no  assurance  that
either  or  both  of  these  strategies  will  improve  current  yields  to  our
Shareholders in periods of our business  operations when capital is being raised
through  the sale of  additional  common  shares.  In order to  qualify  for the
beneficial tax treatment  afforded real estate investment trusts by the Internal
Revenue  Code,  we are  required  to pay  dividends  to holders of our Shares in
annual amounts which are equal to at least 95% of our "real estate investment

                                       11


<PAGE>



trust  taxable  income."  For  the  fiscal  year  ended  December  31,  1999  we
distributed  substantially  all of our taxable income to our Shareholders in the
form of quarterly dividends. We intend to continue distributing all or a portion
of  such  income  to our  Shareholders  on a  quarterly  basis,  subject  to (i)
limitations  imposed by  applicable  state law, and (ii) the factors  identified
above. The portion of any dividend that exceeds our earnings and profits will be
considered  a return of  capital  and will not  currently  be subject to federal
income tax to the extent that such dividends do not exceed a Shareholder's basis
in their Shares.

         Funds  available  to us from the  repayment  of  principal  (whether at
maturity or otherwise) of loans made by us, or from sale or other disposition of
any properties or any of our other investments,  may be reinvested in additional
loans to churches,  invested in mortgage-backed securities issued by churches or
other non-profit  organizations,  or in Permitted Temporary Investments,  rather
than  distributed  to the  Shareholders.  We can pass  through the capital  gain
character  of any  income  generated  by  computing  its net  capital  gains and
designating a like amount of our  distribution  to our  Shareholders as "capital
gain  dividends." The  distribution  requirement to maintain  qualification as a
real estate investment trust does not require distribution of net capital gains,
if generated. Thus, if we have a choice of whether to distribute any such gains,
undistributed  net  capital  gains (if any) will be  taxable to us. The Board of
Directors,  including a majority of the  Independent  Directors,  will determine
whether and to what extent the proceeds of any  disposition  of property will be
distributed to our Shareholders.

Item 6.  Management's Discussion and Analysis or Plan of Operation.

         The following  discussion  regarding our financial statements should be
read in conjunction with the financial  statements and notes thereto included in
this Report beginning at page F-1.

         Financial Condition

         During our year ended  December 31, 1999 our total assets  increased by
$2,649,263  due  primarily  to sale of our common  stock in our second and third
"best efforts" public offerings. Our total liabilities increased by $602,328 due
to deferred income, dividends declared but not yet paid as of December 31, 1999,
and an  outstanding  balance  of  $500,000  payable to Beacon  Bank,  Shorewood,
Minnesota for a line of credit we established in fiscal year 1999 .

         Results of Operations-1996-1997

         We began  active  business  operations  on or  about  April  15,  1996,
therefore,  results of operations  through  December 31, 1996 are  reflective of
approximately  255 days of  operations.  Between  the date  upon  which we began
active  business  operations  and  December  31,  1996,  we made  loans to seven
churches in the aggregate amount of $2,802,000,  with an average loan size being
$400,000.  We also purchased in the secondary market for $46,412 (which includes
$407 in accrued  interest)  First  Mortgage  Church  Bonds in the face amount of
$50,000 and  purchased  for $72,800  Second  Mortgage  Church  Bonds in the face
amount of $100,000.

         We  completed  our first full fiscal year of  operations  December  31,
1997. During that fiscal year we funded five more first mortgage loans and three
second mortgage loans to churches for an aggregate amount of $2,665,712,  and we
purchased  $2,000 principal amount of First Mortgage Church Bonds for a purchase
price of $871.

         Results of Operations - 1998

         During our fiscal year ended December 31, 1998 we funded six more first
mortgage loans and two second  mortgage  loans totaling  $1,793,750 and $355,000
respectively.  We also  purchased  $925,300  principal  amount of First Mortgage
Church  Bonds for a purchase  price of  $922,445.  During  this year,  two first
mortgage loans and one second mortgage loan in the aggregate amounts of $730,000
and $350,000  respectively,  were repaid early.  We also had two First  Mortgage
Church Bonds called for  redemption  (early  repayment).  The face amount of the
combined bonds was $33,000, our original aggregate purchase price was $29,225.

         Results of Operations -1999

         During our fiscal year ended December 31, 1999 we funded  fourteen more
first  mortgage  loans  and  one  second  mortgage  loan  to  churches  totaling
$5,696,000 and $235,000  respectively.  We also purchased  $1,382,000  principal
amount of First Mortgage Church Bonds for a purchase price of $1,375,478. During
this  year,  three  first  mortgage  loans and one second  mortgage  loan in the
aggregate amounts of $952,000 and $100,000  respectively,  were repaid early. We
also sold $246,000  First  Mortgage  Church Bonds for $244,170 and sold our only
Second Mortgage Church Bond for $100,000. We had two First Mortgage Church Bonds
called for redemption (early  repayment).  The face amount of the combined bonds
was $12,000.

         Net income  for our  fiscal  year ended  December  31,  1999 was
$971,879 on total revenues of $1,109,436  compared to $712,365 on total revenues
of $782,013 for the year ended December 31, 1998.  Interest income earned on the
Company's  portfolio of loans was $848,346 for the year ended December 31, 1999,
compared to $655,219 for 1998. This increase was due

                                       12


<PAGE>



to the fact that fifteen new loans were originated in fiscal year ended December
31,  1999 .  Excluded  from  revenue  for the year ended  December  31,  1999 is
$114,801 of  origination  income,  or  "points,"  we  received.  Recognition  of
origination income under generally accepted accounting  principles ("GAAP") must
be deferred over the expected life of each loan. However,  under tax principles,
origination  income is recognized in the period received.  Accordingly,  because
our status as a real estate investment trust requires,  among other things,  the
distribution to Shareholders of at least 95% of "Taxable  Income," the dividends
declared and paid to our  Shareholders  for the  quarters  ended March 31, 1999,
June 30, 1999,  September  30, 1999 and December 31, 1999  included  origination
income even though it was not  recognized  in its  entirety for the period under
GAAP.

         Our Board of Directors declared quarterly  dividends of $.1875 for each
share held of record on March 31,  1999,  $.21875  per share held of record June
30, 1999, $.228125 per share held of record September 30, 1999, and $.215625 per
share  held of  record on  December  31,  1999.  Based on the four  quarters  of
operations for the quarters ended March 31, 1999,  June 30, 1999,  September 30,
1999,  and December 31, 1999,  the dividends  paid  represented a 7.50%,  8.75%,
9.125% and 8.625% annualized yield to Shareholders respectively for an effective
overall annual dividend yield of 8.50% in 1999.

         Since our inception, we have experienced our highest quarterly dividend
payment for the quarter  ended  December  31,  1997 and  experienced  our lowest
quarterly  dividend  payment for the quarter ended March 31, 1999. The quarterly
dividend paid for each share held of record on December 31, 1997 was $.25625 per
share representing an annualized yield of 10.25%. The quarterly dividend payment
for each  share  held of record on March 31,  1999 was  $.1875  representing  an
annualized  yield of 7.50%.  The  dividend  payment  for  December  31, 1997 was
significantly higher than the average dividend amount due to the large number of
loans funded during the quarter.  Each loan funded during the quarter  generates
origination  income which is due and payable to shareholders as "Taxable Income"
even though origination income was not recognized in its entirety for the period
under "GAAP". By way of further  comparison,  the dividend payment made to March
30,  1999  shareholders  of record  was  significantly  lower  than the  average
dividend  amount due directly to large cash balances we received form our second
stock offering and held in money market  instruments  pending  deployment in new
loans to  churches.  Because  interest  earned in our money  market  account  is
substantially lower than interest earned on our mortgage loans,  interest income
earned was lower than is anticipated to be earned once the offering proceeds are
fully deployed into new loans.

         Our total assets  increased  from  $10,266,327  at December 31, 1998 to
$12,915,590  at December 31, 1999.  The primary reason for the increase in total
assets from December 31, 1998 through December 31, 1999 was a result of the sale
and  issuance  of our common  stock  pursuant  to our  second  and third  public
offerings,  the proceeds of which were (and  continue to be)  deployed  into new
mortgage loans.  Shareholders'  Equity rose from $9,906,384 at December 31, 1998
to $11,953,319 at December 31, 1999 for the same reasons.  Our  liabilities  for
both periods are primarily comprised of a "Deferred Income" item, reflecting our
practice of recognizing our  origination  income -- fees charged to borrowers at
the  commencement of its loans -- over the life of each loan.  Another  material
liability  for both  periods  includes  dividends  declared as of the end of the
period  reported  on, but which are not paid  until the 30th day of the  ensuing
month.  The  December  31, 1999  balance  sheet also  reflected  a liability  of
$500,000  representing  the  balance as of such date on our line of credit  with
Beacon Bank.

          Our second  public  offering  concluded  January 22,  1999. A total of
779,759 shares were sold during our second public Offering. We began the sale of
shares in our third public  offering on September 22, 1999 and have sold 171,269
shares  representing  $1,712,690  as of February 29, 2000.  During the two-month
period ended February 29, 2000 our total assets again  increased by $790,964 due
primarily to the continued public sale of our common stock. Between December 31,
1999 and February 29, 2000 we financed one  additional  first  mortgage loan for
$500,000.  All loans made by us range in interest  rate charged to the borrowers
from 9.50% to 12.00%. Many of our loans have repayment schedules of up to twenty
years, but may be prepaid at any time without penalty.  As of February 29, 2000,
the average,  principal-adjusted interest rate on our loan portfolio was 10.22%.
Our portfolio of Church Bonds has an average current yield of 9.12%.

Liquidity and Capital Resources

         Our  revenue  is  derived   principally  from  interest   income,   and
secondarily,  from origination fees and renewal fees generated by mortgage loans
that we make.  We also earn income  through  interest on funds that are invested
pending their use in funding mortgage loans or distributions of dividends to our
Shareholders,  and on income  generated on church bonds we may purchase and own.
We generate  revenue  through (i)  permitted  temporary  investments  of the net
proceeds from the sale of the shares,  and (ii)  implementation  of our business
plan of  making  mortgage  loans to  churches  and  other  non-profit  religious
organizations.  Our principal  expenses are advisory fees,  legal and accounting
fees, communications costs with our Shareholders,  and the expenses of our stock
transfer agent, registrar and dividend reinvestment agent.

         Our future capital needs are expected to be met by (i) additional  sale
of our shares to the public (ii)  prepayment,  repayment at maturity and renewal
of mortgage  loans made by us, and (iii)  borrowed  funds.  We believe  that the
"rolling" effect of mortgage loans maturing,  together with dividends reinvested
under our Dividend  Reinvestment  Plan,  will provide a  supplemental  source of
capital  to fund our  business  operations  in future  years.  Nevertheless,  we
believe that it may be desirable, if not necessary, to sell additional shares of
common  stock in order to  enhance  our  capacity  to make  mortgage  loans on a
continuous  basis.  There can be no assurance  that the we will be able to raise
additional capital on terms acceptable for such purposes.

                                       13


<PAGE>



           In  addition,  we are able to borrow funds in an amount not to exceed
50% of our Average Invested Assets in order to increase our lending capacity. We
currently have a $1,000,000 secured line of credit with Beacon Bank,  Shorewood,
Minnesota. As of February 29, 2000 we have borrowed $800,000 against our line of
credit.  This credit line is secured by the pledge of  $1,000,000  in  principal
amount of our Church Bonds.  We are charged  interest on the line of credit at a
rate of the prime-interest rate, plus 1.00%. We have borrowed funds at a rate as
low as 9.00% and as high as 9.75% (our current borrowing rate).  Interest on our
line of credit is payable to Beacon Bank on a monthly  basis.  We do not believe
the recent  interest  rate  increases by the Federal  Reserve  Board will have a
material adverse effect on our borrowing  capacity or the carrying interest rate
charged by Beacon  Bank.  We have loaned funds at rates that are higher than the
current  interest rate being charged by the bank. In addition,  the higher prime
interest lending rates have caused us to increase the interest rates on loans we
make.  We believe  that the rate  at which we  lend  funds will always be higher
than the cost at which we borrow the funds.  However,  there can be no assurance
that we can loan funds out at rates  higher than the rate at which we borrow the
funds. We anticipate to "pay-down" our line of credit by (i) selling  additional
shares in our  public  offering;  (ii)  applying  the  proceeds  from  principal
payments on our current loan portfolio  payments and any loan  re-payments;  and
(iii) use the proceeds raised in our dividend reinvestment program. Increases in
the prime  lending rate as well as the increase in the rate of interest  charged
on our loans has and likely will continue to impact interest income we will earn
and,  accordingly,  influence  dividends  declared  by the  Company's  Board  of
Directors.

Item 7.  Financial Statements.

         Financial  Statements  required by this item can be found  beginning on
page F-1 of this Form-10KSB and are deemed incorporated herein by reference.

Item 8.  Changes in and Disagreements With Accountants on Accounting and
              Financial Disclosure.

         Not Applicable

                   (Balance of Page Intentionally Left Blank)

                                       14


<PAGE>



                                    PART III

Item 9.  Directors, Executive Officers, Promoters and Control Persons;
              Compliance With Section 16(a) of the Exchange Act.

         (a) Our  Directors  are elected for a term  expiring at the next annual
Shareholder's  meeting and serve for one-year  terms and until their  successors
are duly elected and qualified.  Annual Shareholder  Meetings are typically held
in May.  Our officers  serve at the  discretion  of the our Board of  Directors.
Among other  requirements,  in order to maintain its REIT status,  a majority of
the our Directors must be  "independent."  Our executive  officers and Directors
are as follows:

<TABLE>
<CAPTION>
            Name                 Age       Office                                        Director Since

<S>                               <C>      <C>                                                <C>
   David G. Reinhart              47       President, Treasurer and Director                  1994
   V. James Davis                 55       Vice-President, Secretary and Director             1994
   Kirbyjon H. Caldwell           47       Independent Director                               1994
   Robert O. Naegele, Jr.         59       Independent Director                               1994
   Dennis J. Doyle                48       Independent Director                               1994
   John M. Clarey                 58       Independent Director                               1994
</TABLE>


     David G. Reinhart, has been a Director since our inception,  and has served
as our  President  and  Treasurer  since  January  19,  1999.  He  served as our
Vice-President  and Secretary  since our inception until January 19, 1999. He is
also  Chairman of the Board of Directors of American  Investors  Group,  Inc., a
Director and Officer of the Advisor, and President,  director and shareholder of
DRM Holdings, Inc. ("DRM"), the parent corporation of American. Mr. Reinhart has
served as legal counsel to banks, trust companies and broker-dealers in the area
of church  financings  and  otherwise  since  approximately  March 1984.  He was
employed in the St. Paul firm of Reinhart Law Offices,  P. A. from November 1985
to  February  1987,  and from July 1983 to November  1985 he was  employed as an
Associate  Attorney  with  the law firm of  Robins,  Kaplan,  Miller  &  Ciresi,
Minneapolis,  Minnesota.  Mr.  Reinhart  received his Juris Doctor  degree,  cum
laude, in May 1979, from Hamline  University School of Law, St. Paul,  Minnesota
and received his Bachelor of Science degree in May 1976, from Northern  Michigan
University,  Marquette, Michigan. Mr. Reinhart has practiced law in the areas of
corporate  finance  and  general  business  law  since  1979  and has  developed
expertise in the area of church  financing.  He is employed from time-to-time as
Adjunct Professor of Law, Hamline University School of Law.

V. James Davis, has been a Director of ours since our inception,  and has served
as our  Vice-President  and  Secretary  since January 19, 1999. He served as our
President  and  Treasurer  since our  inception  until  January 19,  1999.  From
November  1986 to October 1996 he served as President and a Director of American
Investors Group,  Inc. Prior to November,  1986, he was employed as President of
Keenan & Clarey,  Inc.,  Minneapolis,  Minnesota,  a church bond underwriter and
broker-dealer, where he also served as Financial and Operations Principal and as
a  Director.  From  January  1976 to March  1984,  Mr.  Davis  was  employed  as
Administrative  Vice-President,  and  Financial  and  Operations  Principal,  by
Offerman & Co.,  Inc.,  Minneapolis,  Minnesota,  a national  broker-dealer  and
originator  of  corporate  bond  financing  projects.  Mr. Davis has been in the
securities business since 1970 and was previously employed with other securities
firms in Appleton,  Wisconsin  and  Rockford,  Illinois.  He holds a Bachelor of
Science  degree in Liberal Arts from the  University  of  Wisconsin  -Whitewater
(1967) and completed course work at St. Joseph College, Rensselaer, Indiana. Mr.
Davis holds a General  Operations  Principal license and a Financial  Operations
Principal license with the National Association of Securities Dealers, Inc.

     Kirbyjon H. Caldwell, has served as an Independent Director since September
1994. He currently is Senior Pastor of Windsor Village United  Methodist  Church
and St. John's United Methodist Church in Houston, Texas, in which capacities he
has served since January 1982 and September  1992,  respectively.  Membership in
both churches is approximately 7,500 combined and their ministries reach a broad
segment of the Houston  region.  Kirbyjon  Caldwell  received his B.A. degree in
Economics from Carlton College (1975),  an M.B.A. in Finance from the University
of  Pennsylvania's  Wharton  School  (1977),  and his Masters in  Theology  from
Southern  Methodist  University School of Theology (1981). He is a member of the
Boards  of  Directors  of  Texas  Commerce  Bank  (Houston),   Hermann  Hospital
(Houston),  Greater Houston Partnership, The United Way of The Texas Gulf Coast,
and the American  Cancer  Society.  He is also the founder and member of several
foundations and other community development organizations.

     Robert O. Naegele,  Jr., has served as an  Independent  Director  September
     1994. Mr. Naegele's  professional  background  includes  advertising,  real
     estate  development,  and  consumer  products,  with a special  interest in
     entrepreneurial ventures and small developing companies.  Most recently, he
     led a group of  investors  to  apply  for,  and  receive  an NHL  Expansion
     Franchise,  the  Minnesota  Wild, to begin play in a new arena in St. Paul,
     Minnesota,  in the Fall of the year 2000. Mr. Naegele and his wife,  Ellis,
     lived in Minneapolis through 1993 and now reside in Naples, Florida.

                                       15


<PAGE>



     Dennis J. Doyle,  has served as an  Independent  Director  since  September
1994. He is the majority  shareholder and co-founder of Welsh  Companies,  Inc.,
Minneapolis,  Minnesota  -- a  full-service  real  estate  company  involved  in
property management,  brokerage,  investment sales, construction and residential
and commercial development. Welsh Companies was co-founded by Mr. Doyle in 1980,
and has five regional  offices and 220 employees.  Mr. Doyle is the recipient of
numerous civic awards  relating to his business  skills.  He also is a member of
the Board of  Directors of HEART (a  non-profit  organization),  The  Children's
Theater (Minneapolis) and Grow Biz International,  a publicly-owned  company. He
is also a member of the Board of Advisors of the Minnesota Real Estate  Journal,
and a member  of the  International  Commercial  Realty  Services  ("ICRS")  and
National Association of Office and Industrial Parks ("NAIOP").

     John M. Clarey, has served as an Independent Director since September 1994.
Since January  1992,  he has been  employed as First Vice  President of Miller &
Schroeder  Financial,  Inc., a Minneapolis,  Minnesota based investment  banking
firm and NASD- member  broker-dealer.  From February 1991 through December 1991,
Mr.  Clarey was a general  partner  of the  Clarepoint  Partners,  LP, a private
venture  capital firm,  of which he was one of the  founders.  From July 1989 to
February  1991,  he was a Senior Vice  President  of Miller,  Johnson and Kuehn,
Inc., a  Minneapolis-based  broker-dealer.  From November 1980 to July 1989, Mr.
Clarey  served as  President  and Chief  Executive  Officer of  Allison-Williams
Company, a  Minneapolis-based  investment banking firm specializing in municipal
and corporate finance.  From September 1965 to November 1970, he was employed as
Executive Vice President of Keenan & Clarey,  Inc., a Minneapolis  broker-dealer
specializing  in  structuring  and  development  of  corporate  debt  issues and
financings for churches and other non-profit corporations.  During his career in
the  securities  and finance  industry,  Mr.  Clarey has been active as a senior
officer and director of local,  regional,  and national  trade and  professional
associations  and has served as a  volunteer  officer  and  director  of various
charitable  organizations.  He graduated from Marquette  University,  Milwaukee,
Wisconsin (1963) with a B.A. in economics.

     Administration  of the day-to-day  operations of the Company is provided by
the Advisor under the Advisory Agreement. We currently have no employees and the
Company's  officers  receive  no  compensation  for their  services,  other than
through  their  interests  in the Advisor and  affiliates  of the  Company.  Our
officers have no employment  contracts with us or the Advisor and are considered
employees "at will." We believe that,  because of the depth of management of the
Advisor  and  its  Affiliates,  the  loss of one or more  key  employees  of the
Advisor,  or one or more of our  officers,  would  not have a  material  adverse
effect  upon our  operations.  As  required  by our  bylaws,  a majority  of the
Directors are Independent Directors in that they are otherwise unaffiliated with
and do not  receive  compensation  from us  (other  than in  their  capacity  as
Directors) or from the Advisor or American.

     Our Directors are  responsible  for considering and approving our policies.
They  meet as often and  devote  such time to our  business  as their  oversight
duties may require.  Pursuant to our bylaws, the Independent  Directors have the
responsibility  of evaluating the capability and  performance of the Advisor and
determining that the compensation being paid to the Advisor by us is reasonable.

     Directors and officers are  permitted to engage in other  activities of the
type  conducted by us, and neither our Articles of  Incorporation  or bylaws nor
any policy of ours restricts  officers or Directors from  conducting,  for their
own account or on behalf of others, business activities of the type conducted by
us.

     The Directors and officers are nevertheless not relieved of their duties of
loyalty to us and our  Shareholders.  The Directors may be removed by a majority
vote of all Shares  outstanding  and  entitled to vote at any annual  meeting or
special meeting called for such purpose.

Item 10.    Executive Compensation.

     Our two executive  officers do not receive  compensation  from us, however,
     Mr. Davis and Mr.  Reinhart  each own a one-third  interest in the Advisor.
     The  Advisor  receives  Advisory  Fees  under  the  terms  of its  Advisory
     Agreement  with  us.  See  Item  12  Certain   Relationships   and  Related
     Transactions.

     We  currently  pay each  Independent  Director a fee of $500 for each board
meeting ($200 for telephonic meetings), limited to $2,500 per year. In addition,
we reimburse  Directors for travel  expenses  incurred in connection  with their
duties as our Directors.  We also have adopted a Stock Option Plan for Directors
and the Advisor,  under which each  Director  and the  Advisor's  president  are
granted  annually options to purchase 3,000 Shares each of our common stock at a
price equal to the fair market value at the date of the grant.

Warrants and Options

     On September 30, 1994,  the Board of Directors  adopted a Stock Option Plan
for  Directors  and the Advisor (the "Option  Plan") to be  administered  by our
Directors,  which  provides for a grant of an option to purchase 3,000 shares of
$.01 par value Common Stock, subject to certain adjustments,  to a Director upon
his or her  appointment  or election and upon each  re-election  (directors  are
elected  annually) or to the Advisor upon the  Advisor's  appointment  or annual
re-appointment. The purchase price of the Common Stock granted under each option
shall be the fair market  value,  as defined in the Option Plan, at the time the
option is granted. On

                                       16


<PAGE>



November 15, 1994,  1995,  1996, 1997, 1998 and 1999 we issued options under the
Option Plan to each of our six directors  and the  President of the Advisor,  to
purchase  3,000 shares each.  All of the options  issued  November 15, 1994 have
expired  unexercised.  Therefore  options are currently  outstanding for a total
105,000  shares at a price of $10 per  share.  These  options  vest and are thus
exercisable on or after  November 15, 1996 and expire  November 15, 2000 through
November 15, 2004.

     We may grant  full-time  employees and our existing  directors and officers
and the Advisor  warrants,  options,  stock  purchase  rights,  incentive  stock
options or similar  arrangements  to  purchase  shares of our Common  Stock.  In
accordance  with  applicable  state law,  we have  agreed to limit the number of
options or warrants  issuable to the Advisor,  Affiliates or any Director to ten
percent  of the  outstanding  Shares of the  Company on the date of grant of any
options or warrants.  The  purchase  price of shares  issuable  pursuant to such
warrants or options  will not be less than the fair market  value at the time of
the grant.

     We may refuse to allow the  exercise of a warrant  into Common Stock if the
effect of such  exercise or  conversion  would,  in the opinion of our  counsel,
disqualify or jeopardize our status as a real estate  investment trust under the
Internal Revenue Code.

Item 11.      Security Ownership of Certain Beneficial Owners and Management.

              The following table sets forth as of February 29, 2000, the number
of shares  beneficially owned by each director and by all executive officers and
Directors as a group,  and the beneficial owner of 5% or more of our outstanding
stock . Unless  otherwise noted,  each of the following  persons has sole voting
and  investment  power  with  respect to the  Shares  set forth  opposite  their
respective names.

<TABLE>
<CAPTION>
                                                  Number of Shares              Percent
     Name of Beneficial Owner (1)               Beneficially Owned (2)          Of Class
     ----------------------------               ----------------------          ---------
<S>                                                     <C>    <C>                  <C>
        David G. Reinhart .........................     10,000 (3)                  .72%
        Robert O. Naegele, Jr......................     5,000                       .36%
        V. James Davis.............................     2,332                       .17%
        Kirbyjon H. Caldwell.......................      ----                      ----
        Dennis J. Doyle............................      ----                      ----
        John M. Clarey.............................      ----                      ----
        All Executive Officers and Directors
             as a Group (five individuals).........    17,332                      1.26%
</TABLE>
------------------------------------------------

(1)     The address for the Directors is 10237 Yellow Circle Drive, Minnetonka,
        Minnesota 55343.

(2)     Excludes 15,000 Shares  (105,000 shares in the aggregate)  which each of
        our  Directors  and the  President  of the  Advisor  have an  option  to
        purchase  pursuant  to the  Stock  Option  Plan  for  Directors  and the
        Advisor. Options to purchase 84,000 Shares are currently exercisable

(3)     Shares indicated are owned of record by DRM Holdings,  Inc., a Minnesota
        corporation  ("DRM")  which  owns a total of 20,000  shares of stock for
        which it paid $200,000 ($10.00 per share).  These shares are "restricted
        securities"  and  may  not be  sold,  transferred  or  assigned  without
        compliance  with state and federal rules and  regulations  governing the
        transfer of securities considered "restricted". DRM is owned by David G.
        Reinhart,  our  President,  Treasurer  and a Director;  and by Philip J.
        Myers,  the  Advisor's  President.  Mssrs.  Reinhart  and Myers are also
        directors of the Advisor. The number of shares and percentages set forth
        above are calculated by multiplying  the total number of Shares owned by
        DRM by the  percentage  such  individuals'  ownership  of  stock  in DRM
        relates  to the  total  outstanding  shares  of stock of DRM.  Philip J.
        Myers, the Advisor's President, could be considered the beneficial owner
        of 10,000 shares.

Item 12.      Certain Relationships and Related Transactions.

The Advisor

     Subject to the  supervision  of the Board of  Directors,  our  business  is
     managed  by  the   Advisor,   which   provides   investment   advisory  and
     administrative  services.  The Advisor is owned  equally by V. James Davis,
     David G.  Reinhart  and Philip J. Myers.  Messrs..  Davis and  Reinhart are
     officers  and  Directors  of ours.  Messrs..  Reinhart  and  Myers are also
     shareholders, officers and directors of DRM Holdings, Inc., which owns 100%
     of American  Investors Group, Inc. Messrs.  Reinhart and Myers together own
     all outstanding  common stock of DRM Holdings,  Inc. As of the date of this
     Report,  the Advisor  employed,  directly or  otherwise,  five persons on a
     part-time  basis,  including  Philip J. Myers,  our  President and Scott J.
     Marquis, our Vice President.

     Pursuant  to the  Advisory  Agreement,  we  must  pay the  Advisor  certain
advisory  fees and expenses,  as defined in the agreement and remit  one-half of
any  origination fee collected from a borrower in connection with mortgage loans
made or renewed by us.

                                       17


<PAGE>



American Investors Group, Inc.

     Pursuant to the Underwriting Agreement in connection with our second public
offering which commenced  September 26, 1997 and concluded  January 22, 1999, we
paid the Managing  Underwriter and Co-Underwriter  selling  commissions equal to
$332,185 and $143,672 respectively. We also paid non-accountable expenses of the
Managing  Underwriter  (American) and the Co- Underwriter  (LaSalle) $63,983 and
$13,000  respectively.  In  addition,  we agreed to indemnify  the  Underwriters
against certain civil  liabilities,  including  liabilities under the Securities
Act of  1933.  The  public  offering  price  of the  Shares  was  determined  by
negotiations  between us and the  Managing  Underwriter  based on the price paid
($10.00 per share) by our initial  shareholder  and  shareholders  who purchased
shares in our initial public offering, which was completed November 8, 1996. The
Managing Underwriter (American) is an affiliate of the Advisor.

     Pursuant to the Underwriting  Agreement in connection with our third public
offering which commenced September 23, 1999 the underwriter  (American) has been
paid selling commissions equal to $101,905 as of February 29, 2000. We have also
paid  approximately  $30,000  non-accountable  expenses of the  underwriter.  In
addition,  we agreed to indemnify  them, as  underwriters  against certain civil
liabilities,  including liabilities under the Securities Act of 1933. The public
offering price of the Shares was determined by  negotiations  between us and the
underwriter  based  on  the  price  paid  ($10.00  per  share)  by  the  initial
shareholder  and  shareholders  who  purchased  shares in our  prior two  public
offerings.  The  following  table sets forth the name and  positions  of certain
officers and all directors of American:

       Name                                           Position

  Philip J. Myers                             President, Secretary and Director
  Scott J. Marquis                            Vice President
  David G. Reinhart                           Chairman, Board of Directors

         In the course of our business, we have purchased and expect to continue
to purchase,  church bonds being underwritten and sold by American.  Although we
would not pay any  commissions,  American  would benefit from such purchase as a
result of  commissions  paid to it by the issuer of such  bonds.  American  also
would  benefit  from  mark-ups on bonds  bought from it and mark- downs on bonds
sold through it by us on the secondary  market.  Any church bonds we purchase in
an initial offering will be purchased for investment purposes only at the public
offering price.  Church bonds purchased in the secondary market, if any, will be
purchased at the best price available,  subject to customary  markups (or in the
case of sales --  markdowns),  on terms no less  favorable than those applied to
other customers of American,  and would not exceed industry  standards or in any
event (in the case of  mark-ups  and  mark-downs  on  secondary  bond  sales and
purchases)  exceed five percent of the  principal  amount of bonds  purchased or
sold.  It is our policy not to invest in excess of 30% of our  Average  Invested
Assets in Church Bonds.

Church Loan Advisors, Inc.

         Our Advisor,  Church Loan  Advisors,  Inc., is a Minnesota  corporation
(the  "Advisor"),  the  Advisor was  organized  on May 27, 1994 to engage in the
business  of  rendering  lending  and  advisory  services  solely to us,  and to
administer  our  business  affairs and  operations.  The  Advisor's  offices are
located at 10237 Yellow Circle Drive, Minnetonka, Minnesota 55343.

         The following  table sets forth the names and positions of the officers
and directors of the Advisor:

       Name                                            Position

  Philip J. Myers                             President, Treasurer and Director
  Scott J. Marquis                            Vice President, Secretary
  V. James Davis                              Director
  David G. Reinhart                           Director

         Philip J. Myers, age 43, is President,  Treasurer and a Director of the
Advisor,  having  served  in such  capacities  since its  inception.  He is also
currently employed full-time as President,  Secretary and a Director of American
Investors Group,  Inc. Mr. Myers earned his Bachelor of Arts degree in Political
Science  in 1977 from the State  University  of New York at  Binghamton  and his
Juris Doctor Degree from the State  University of New York at Buffalo  School of
Law in 1980.  From 1980 until 1982,  Mr.  Myers  served as an attorney  with the
Division of Market Regulation of the U.S.  Securities and Exchange Commission in
Washington,  D.C.  and,  from 1982 to 1984,  as an attorney with the Division of
Enforcement  of the Securities  and Exchange  Commission in San Francisco.  From
August  1984 to  January  1986,  he was  employed  as an  attorney  with the San
Francisco  law firm of  Wilson,  Ryan and  Compilongo  where he  specialized  in
corporate finance,  securities and broker-dealer  matters.  From January 1986 to
January 1989 when he became affiliated with American  Investors Group, Inc., Mr.
Myers was  engaged as Senior  Vice-President  and General  Counsel of  Financial
Planners Equity  Corporation  ("FPEC"),  a 400 broker securities dealer formerly
located in Marin County,  California. He is a member of the New York, California
(inactive  status) and  Minnesota  Bar  Associations,  and a registered  General
Securities Principal.

                                       18


<PAGE>



         Scott J.  Marquis,  age 42,  is  Vice-President  and  Secretary  of the
Advisor,  having served in such  capacities  since December 13, 1994. He is also
currently  employed full-time as Vice-President and of American Investors Group,
Inc.,  where he has been employed since  February 1987.  Prior to his employment
with American  Investors Group, Inc., Mr. Marquis was employed for approximately
seven years with the Minneapolis-based broker-dealer,  Piper, Jaffray Companies,
in the capacity of supervisor of its trade clearance department.  Mr. Marquis is
a  licensed  financial  principal  and  registered  representative  of  American
Investors  Group,  Inc.,  and holds his  Series 7, 63 and 27  licenses  from the
National Association of Securities Dealers, Inc.

         See  Item 9 above  for a  description  of the  positions  and  business
experience of V. James Davis and David G.  Reinhart,  both of whom are Directors
of the Advisor.

         The  Advisory  Agreement.  We have  entered  into a  contract  with the
Advisor (the "Advisory  Agreement")  under which the Advisor will furnish advice
and recommendations  concerning our affairs, provides administrative services to
us, and manages our  day-to-day  affairs.  In performing  its services under the
Advisory  Agreement,  the  Advisor  may use  facilities,  personnel  and support
services of its Affiliates.  Expenses such as legal and accounting  fees,  stock
transfer agent, registrar and paying agent fees, and dividend reinvestment agent
fees are our direct  expenses and are not provided for by the Advisor as part of
its services.

         The  Advisory  Agreement  is  renewable  annually  by us  for  one-year
periods,  subject to a  determination,  including a majority of the  Independent
Directors,  that the Advisor's  performance has been  satisfactory  and that the
compensation paid by us to the Advisor has been reasonable. We may terminate the
Advisory  Agreement  with or  without  cause  on 60 days  written  notice.  Upon
termination of the Advisory  Agreement by either party,  the Advisor may require
us to  change  our name to a name  that does not  contain  the word  "American,"
"America"  or the  name of the  Advisor  or any  approximation  or  abbreviation
thereof, and that is sufficiently dissimilar to the word "America" or "American"
or  the  name  of  the  Advisor  as  to  be  unlikely  to  cause   confusion  or
identification  with either the  Advisor or any person or entity  using the word
"American"  or "America" in its name,  however,  we may continue to use the word
"church" in our name. Our directors shall  determine that any successor  Advisor
possess  sufficient  qualifications  to perform the advisory function for us and
justify the compensation provided for in its contract with us.

         Pursuant to the Advisory Agreement,  the Advisor is required to pay all
of the expenses it incurs in providing  us services  including,  but not limited
to, personnel expenses, rental and other office expenses, expenses of directors,
officers and  employees of the Advisor  (except  out-of-pocket  expenses of such
persons  who  are our  directors  or  officers),  and  all of its  overhead  and
miscellaneous  administrative  expenses relating to performance of its functions
under  the  Advisory  Agreement.  We are  required  to pay all  other  expenses,
including the costs and expenses of reporting to various  governmental  agencies
and our Shareholders and of conducting our operations as a mortgage lender, fees
and expenses of  appraisers,  directors,  auditors,  outside  legal  counsel and
transfer agents, and costs directly relating to closing of loan transactions.

         In the event that our Total  Operating  Expenses exceed in any calendar
year the greater of (a) 2% of our Average  Invested Assets or (b) 25% of our net
income,  the Advisor is obligated to reimburse us, to the extent of its fees for
such  calendar  year,  for the amount by which the  aggregate  annual  operating
expenses paid or incurred by us exceed the limitation. The Independent Directors
may,  upon a finding  of  unusual  and  non-recurring  factors  which  they deem
sufficient,  determine that a higher level of expenses is justified in any given
year.

         Our bylaws provide that the Independent Directors are to determine,  at
least  annually,  the  reasonableness  of the  compensation  which we pay to the
Advisor. Factors to be considered in reviewing the Advisory Fee include the size
of the  fees  of the  Advisor  in  relation  to the  size,  composition  and our
profitability,  the  rates  charged  by  other  investment  advisors  performing
comparable services, the success of the Advisor in generating opportunities that
meet our investment  objectives,  the amount of additional  revenues realized by
the Advisor for other services performed,  the quality and extent of service and
advice  furnished by the Advisor,  the quality of our investments in relation to
investments  generated  by the  Advisor  for its own  account,  if any,  and the
performance of our investments.

                                       19


<PAGE>




Item 13.   Exhibits and Reports on Form 8-K

    (a)    Exhibits

           3.1      Articles of Incorporation*
           3.2      By-Laws*
           4        Specimen Certificate*
           10.1     Advisory Agreement*
           10.2     Dividend Reinvestment Plan of Company*
           10.3     Stock Option Plan for Directors and Advisor (with Exhibits)*
           10.4     Gemisys Corporation Agreement to act as Transfer Agent,
                    Registrar & Dividend Reinvestment Agent*
           10.5     Advisory Agreement between Registrant and Church Loan
                    Advisors, Inc.*
           EX-27    Financial Data Schedule*

           *        Incorporated  herein by reference  to the  Registrant's
                    Registration  Statement on Form S-11  (Commission  File
                    No. 333-81819 ).

         (b)    Reports on Form 8-K

                No reports on Form 8-K were filed during the last quarter of the
period covered by this report.

                                       20


<PAGE>





---- ---------------------------------------------------------------------------


                                   SIGNATURES

         In  accordance  with  Section  13 or 15(d)  of the  Exchange  Act,  the
registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                               AMERICAN CHURCH MORTGAGE COMPANY

Dated:  March 22, 2000
                                        By:   /s/ David G. Reinhart
                                              ------------------------
                                        David G. Reinhart, President, Treasurer
                          (Chief Executive Officer and Chief Accounting Officer)

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
Registrant and in the capacities indicated.

By:       /s/ David G. Reinhart

         David G. Reinhart
         President , Treasurer and a Director

By:       /s/ V. James Davis

         V. James Davis

         Vice-President, Secretary  and a Director

By:       /s/ Dennis J. Doyle                           Date:       03/22/00
         ----------------------------------------              -------------
         Dennis J. Doyle, Director

By:      /s/  John M. Clarey                            Date:       03/22/00
         -----------------------------------------             -------------
         John M. Clarey, Director

By:      /s/ Robert O. Naegele, Jr.                      Date:      03/22/00
         -------------------------------------                  ------------
         Robert O. Naegele, Jr.,  Director

By:      /s/ Kirbyjon H. Caldwell                        Date:     03/22/00
         --------------------------------------                 -----------
         Kirbyjon H. Caldwell, Director

                                       21


<PAGE>








                        AMERICAN CHURCH MORTGAGE COMPANY

                              Minnetonka, Minnesota

                              Financial Statements

                           December 31, 1999 and 1998












<PAGE>







                         REPORT OF INDEPENDENT AUDITORS


Board of Directors
American Church Mortgage Company
Minnetonka, Minnesota

We have  audited the  accompanying  balance  sheet of American  Church  Mortgage
Company  as of  December  31,  1999  and  1998  and the  related  statements  of
operations,  stockholders' equity and cash flows for the years then ended. 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 American  Church  Mortgage
Company as of December 31, 1999 and 1998,  and the results of its operations and
its cash flows for the years then ended, in conformity  with generally  accepted
accounting principles.

                                        Boulay, Heutmaker, Zibell & Co. P.L.L.P.
                                        Certified Public Accountants

Minneapolis, Minnesota
February 10, 2000


<PAGE>


<TABLE>
<CAPTION>
                                 AMERICAN CHURCH MORTGAGE COMPANY

                                         Balance Sheet

--------------------------------------------------------------------------------------------------------
                                                                         December  31
            ASSETS                                                   1999              1998
--------------------------------------------------------------------------------------------------------

Current Assets

<S>                                                          <C>                   <C>
    Cash and equivalents                                     $     382,765         $  2,941,530
    Accounts receivable                                              5,782               28,777
    Current maturities of mortgage loans receivable                218,398              237,242
    Current maturities of bond portfolio                            17,000               12,000
    Prepaids                                                         2,917
                                                                 ---------           ----------
            Total current assets                                   626,862            3,219,549


Mortgage Loans Receivable, net of current maturities            10,189,529            5,994,620


Bond Portfolio, net of current maturities                        2,039,199            1,011,997


Deferred Tax Asset                                                  60,000               40,000


Organizational Expenses, net                                                                161
                                                                -----------         -----------

            Total assets                                        $12,915,590          $10,266,327
                                                                 ==========           ==========

</TABLE>

Notes to Financial Statements are an integral part of this Statement.


<PAGE>


<TABLE>
<CAPTION>
                        AMERICAN CHURCH MORTGAGE COMPANY

                                  Balance Sheet

--------------------------------------------------------------------------------------------------------
                                                                            December 31
LIABILITIES AND STOCKHOLDERS' EQUITY                                  1999               1998
--------------------------------------------------------------------------------------------------------

Current Liabilities

<S>                                                            <C>               <C>
    Line of credit                                             $     500,000
    Management fee payable                                                       $       12,759
    Deferred income                                                   23,078             21,772
    Dividends payable                                                274,280            233,004
                                                                   ---------           --------
            Total current liabilities                                797,358            267,535


Deferred Income, net of current maturities                           164,913             92,408


Stockholders' Equity

    Common stock, par value $.01 per share
        Authorized, 30,000,000 shares
        Issued and outstanding, 1,322,289 at December 31, 1999
            and 1,087,646 shares at December 31, 1998                 13,223              10,876
    Additional paid-in capital                                    12,070,410           9,973,200
    Accumulated deficit                                             (130,314)            (77,692)
                                                                  ----------           ---------
            Total stockholders' equity                            11,953,319           9,906,384
                                                                  ----------           ---------

            Total liabilities and equity                         $12,915,590         $10,266,327
                                                                  ==========          ==========

</TABLE>

Notes to Financial Statements are an integral part of this Statement.


<PAGE>


<TABLE>
<CAPTION>
                        AMERICAN CHURCH MORTGAGE COMPANY

                             Statement of Operations

-------------------------------------------------------------------------------------------------------
                                                                 Years Ended December 31
                                                                1999               1998
-------------------------------------------------------------------------------------------------------



<S>                                                         <C>                  <C>
Interest Income                                             $1,109,436           $782,013

Operating Expenses                                             157,557             76,648
                                                             ---------            -------

Operating Income                                               951,879            705,365

Benefit from Income Taxes                                      (20,000)            (7,000)
                                                             ---------            -------

Net Income                                                  $  971,879           $712,365
                                                             =========            =======

Basic and Diluted Income Per Common Share                   $      .81           $    .86
                                                             =========            =======

Weighted Average Common Shares Outstanding                   1,203,954            825,176
                                                             =========            =======

</TABLE>

Notes to Financial Statements are an integral part of this Statement.


<PAGE>


                        AMERICAN CHURCH MORTGAGE COMPANY

                        Statement of Stockholders' Equity
<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------------------------
                                                                                     Additional
                                                Common Stock                 Paid-In            Accumulated
                                              -----------------              Capital             Deficit
                                              Shares      Amount
---------------------------------------------------------------------------------------------------------------
<S>                                          <C>        <C>                <C>              <C>
Balance, December 31, 1997                   571,615    $  5,716           $ 5,184,882      ($    49,019)

    Issuance of 516,031 shares of
        common stock, net of
        offering costs                       516,031       5,160             4,788,318

    Net income                                                                                   712,365

    Dividends declared                                                                          (741,038)
                                           ---------      ------            ----------           -------
Balance, December 31, 1998                 1,087,646      10,876             9,973,200           (77,692)

    Issuance of 234,643 shares of
        common stock, net of
        offering costs                       234,643       2,347             2,097,210

    Net income                                                                                    971,879

    Dividends declared                                                                         (1,024,501)
                                           ---------      ------            ----------          ---------

Balance, December 31, 1999                 1,322,289     $13,223           $12,070,410       ($   130,314)
                                           =========      ======            ==========          =========
</TABLE>

Notes to Financial Statements are an integral part of this Statement.


<PAGE>


                        AMERICAN CHURCH MORTGAGE COMPANY

                             Statement of Cash Flows
<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------
                                                                           Years Ended December 31
                                                                           1999                1998
------------------------------------------------------------------------------------------------------------
Cash Flows from Operating Activities

<S>                                                                   <C>                  <C>
    Net income                                                        $   971,879          $   712,365
    Adjustments to reconcile net income to net cash
        from operating activities:
        Deferred income taxes                                             (20,000)              (7,000)
        Amortization                                                          161                  303
        Change in assets and liabilities
            Accounts receivable                                            22,995              (28,777)
            Prepaids                                                       (2,917)
            Accounts payable                                              (12,759)              (2,731)
            Deferred income                                                73,811               35,752
                                                                        ---------              -------
            Net cash from operating activities                          1,033,170              709,912

Cash Flows from Investing Activities

    Investment in mortgage loans receivable                            (5,931,000)          (2,498,750)
    Collections of mortgage loans receivable                            1,754,935            1,179,196
    Investment in bond portfolio                                       (1,368,392)            (931,188)
    Proceeds from bond portfolio called/sold                              336,190               33,000
                                                                        ---------            ----------
            Net cash used for investing activities                     (5,208,267)          (2,217,742)

Cash Flows from Financing Activities

    Net borrowings on line of credit                                      500,000
    Proceeds from stock offering, net                                   2,099,557            4,793,478
    Dividends paid                                                       (983,225)            (635,933)
                                                                        ---------            ---------
            Net cash from financing activities                          1,616,332            4,157,545
                                                                        ---------            ---------

Net Increase (Decrease) in Cash and Equivalents                        (2,558,765)           2,649,715

Cash and Equivalents - Beginning of Year                                2,941,530              291,815
                                                                        ---------            ---------

Cash and Equivalents - End of Year                                    $   382,765           $2,941,530
                                                                        =========            =========

</TABLE>
                                  - Continued -

Notes to Financial Statements are an integral part of this Statement.


<PAGE>


                        AMERICAN CHURCH MORTGAGE COMPANY

                       Statement of Cash Flows - Continued
<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------------
                                                                        Years Ended December 31
                                                                        1999                   1998
----------------------------------------------------------------------------------------------------------

Supplemental Schedule of Noncash Financing and
    Investing Activities
    Offering costs reclassified to additional
<S>                                                                  <C>                   <C>
     paid-in capital                                                 $ 122,664             $  71,751
                                                                       =======               =======
    Dividends payable                                                $ 274,280             $ 233,004
                                                                       =======               =======

Supplemental Cash Flow Information
    Cash paid during the year for

        Interest                                                     $  8,180              $      59
                                                                       ======                =======
        Income taxes                                                 $     -               $      -
                                                                       ======                =======

</TABLE>

Notes to Financial Statements are an integral part of this Statement.


<PAGE>


                        AMERICAN CHURCH MORTGAGE COMPANY

                          Notes to Financial Statements

                           December 31, 1999 and 1998

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

American Church Mortgage Company, a Minnesota  corporation,  was incorporated on
May 27, 1994.  The Company was organized to engage  primarily in the business of
making  mortgage loans to churches and other nonprofit  religious  organizations
throughout  the United  States,  on terms  that it  establishes  for  individual
organizations.  Loans  have been  made to  churches  located  in 13 states as of
December 31, 1999.

Accounting 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 amounts of assets and liabilities,
the disclosure of contingent  assets and liabilities,  and the reported revenues
and expenses. Actual results could differ from those estimates.

Cash

The Company  considers  all highly  liquid  debt  instruments  purchased  with a
maturity of three months or less to be cash equivalents.

The Company maintains its accounts primarily at two financial  institutions.  At
times  throughout  the year,  the Company's  cash and  equivalents  balances may
exceed amounts insured by the Federal  Deposit  Insurance  Corporation.  Cash in
money market funds is not Federally insured. At December 31, 1999 and 1998, such
investments  were  $300,000  and  $2,700,000  respectively.  The Company has not
experienced any losses in such accounts.

Bond Portfolio

The Company accounts for its bond portfolio under Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and Equity Securities."

The Company classified its bond portfolio as  "held-to-maturity" in 1998 because
it had the  intent  and  ability  to hold  the  securities  to  maturity.  Bonds
classified as  held-to-maturity  are carried at amortized cost. During 1999, the
Company sold $195,000 of its bonds at par, which was the same as amortized cost,
to an  affiliate  of the Advisor  (See Note 4). There were no gains or losses on
the sale.

In 1999, the Company  reclassified its bond portfolio to an "available-for sale"
classification,  which had no  financial  statement  effect.  Available-for-sale
bonds are carried at fair value. Although no ready public market for these bonds
exists, management believes that their cost approximates their fair value.


<PAGE>

                        AMERICAN CHURCH MORTGAGE COMPANY

                          Notes to Financial Statements

                           December 31, 1999 and 1998

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

Allowance for Mortgage Loans Receivable

The Company  follows a policy of  providing  an  allowance  for  mortgage  loans
receivable.  However,  at December  31, 1999 and 1998,  management  believes the
mortgage  loans  receivable  to be  collectible  in all material  respects,  and
therefore, no allowance is presently provided.

Organizational Expenses

Organizational  expenses  were  stated  at cost  net of  amortization  and  were
amortized using the straight-line method over five years.

Deferred Income

Deferred income  represents loan  origination fees which are recognized over the
life of the loan as an adjustment to the yield on the loan.

Income Taxes

Income taxes are provided  for the tax effects of  transactions  reported in the
financial  statements  and consist of taxes  currently due plus  deferred  taxes
related  primarily to differences in recognition of income from loan origination
fees for financial and income tax  reporting.  Deferred taxes are recognized for
operating losses that are available to offset future taxable income.

The Company has elected to be taxed as a Real Estate  Investment  Trust  (REIT).
Accordingly, the Company will not be subject to Federal income tax to the extent
of  distributions  to its shareholders if the Company meets all the requirements
under the REIT provisions of the Internal Revenue Code.

Income Per Common Share

No adjustments  were made to income for the purpose of calculating  earnings per
share.  Stock  options had no effect on the  weighted  average  number of shares
outstanding.


<PAGE>


                        AMERICAN CHURCH MORTGAGE COMPANY

                          Notes to Financial Statements

                           December 31, 1999 and 1998

2.  MORTGAGE LOANS AND BOND PORTFOLIO

At December 31, 1999, the Company had first mortgage loans  receivable  totaling
$10,407,927.  The loans bear interest ranging from 9.50% to 12.00%.  At December
31, 1998, the Company had first mortgage loans  receivable  totaling  $6,231,862
which bore interest ranging from 9.25% to 15.00%.

The Company  also had a portfolio of mortgage  secured  church bonds at December
31, 1999 and 1998 which are carried at cost plus amortized  interest income. The
bonds pay either semi-annual or quarterly interest ranging from 5.75% to 10.50%.
The  combined  principal  of  $2,056,199  at December 31, 1999 is due at various
maturity dates between  February 1, 2001 and February 1, 2019. Three bond issues
comprised 85% of the total bond  portfolio at December 31, 1999.  One bond issue
comprised 86% of the total bond portfolio at December 31, 1998.

The maturity schedule for mortgage loans and bonds receivable as of December 31,
1999 is as follows:

                                        Mortgage Loans       Bond Portfolio

           2000                       $     218,398            $     17,000
           2001                             245,194                  27,000
           2002                             272,326                  68,000
           2003                             302,474                  37,000
           2004                             335,972                 110,000
           Thereafter                     9,033,563               1,797,199
                                         ----------               ---------

                       Totals           $10,407,927              $2,056,199
                                         ==========               =========

3.  STOCK OPTION PLAN

The Company  adopted a Stock  Option Plan  granting  each member of the Board of
Directors and the president of the Advisor (Note 4) an option to purchase  3,000
shares of common stock  annually upon their  re-election.  The purchase price of
the stock was to be the fair  market  value at the grant date.  On November  15,
1994,  the Company began the annual grant of options to purchase an aggregate of
21,000 shares of common stock at $10 per share. These options became exercisable
November 15, 1995 and 21,000  options  granted  expired  November  15, 1999.  No
options were exercised as of December 31, 1999.

<PAGE>


                        AMERICAN CHURCH MORTGAGE COMPANY

                          Notes to Financial Statements

                           December 31, 1999 and 1998

3.  STOCK OPTION PLAN - Continued

The Company has chosen to account for stock  based  compensation  in  accordance
with APB Opinion 25.  Management  believes that the disclosure  requirements  of
Statement  of  Financial  Accounting  Standards  No. 123 are not material to its
financial statements.

4.  TRANSACTIONS WITH AFFILIATES

The  Company  has  an  Advisory  Agreement  with  Church  Loan  Advisors,  Inc.,
Minnetonka, Minnesota ("Advisor"). The Advisor is responsible for the day-to-day
operations of the Company and provides office space, administrative services and
personnel.

Under the terms of the  Advisory  Agreement,  the  Company  pays the  Advisor an
annual base management fee of 1.25 percent of average invested assets (generally
defined as the  average of the  aggregate  book value of the assets  invested in
securities and equity  interests in and loans secured by real estate),  which is
payable on a monthly  basis.  The  Advisor  will also  receive  one-half  of the
origination  fees paid by a mortgage loan borrower in connection with a mortgage
loan made or renewed by the Company.  The Company paid to the Advisor management
and  origination  fees  totaling  $230,978  and  $101,944  during 1999 and 1998,
respectively.  During 1999 and 1998 the Advisor  waived fees of $0 and  $15,223,
respectively.

The Advisor and the Company are  related  through  common  ownership  and common
management. See Notes 1 and 6.

5.  INCOME TAXES

The income tax benefit consists of the following components:

                                               1999            1998

         Current                            $    -           $   -
         Deferred                            (20,000)        (7,000)
                                              ------          -----

                     Total tax benefit      ($20,000)       ($7,000)
                                              ======          =====



<PAGE>


                        AMERICAN CHURCH MORTGAGE COMPANY

                          Notes to Financial Statements

                           December 31, 1999 and 1998

5.  INCOME TAXES - Continued

As discussed in Note 1, a REIT is subject to taxation to the extent that taxable
income exceeds dividend distributions to its shareholders.  In order to maintain
its status as a REIT,  the Company is required to distribute at least 95% of its
taxable  income.  In 1999,  the  Company  had  pretax  income  subject to tax of
$951,879 and  distributions  to shareholders in the form of dividends during the
tax year of $1,024,501. The expected tax expense to the Company,  pre-dividends,
would have been $323,639.  In 1998, the Company had pretax income subject to tax
of $705,365 and  distributions  to shareholders in the form of dividends  during
the  tax  year  of   $741,038.   The   expected  tax  expense  to  the  Company,
pre-dividends, would have been $241,524.

The  following  reconciles  the income tax benefit with the  expected  provision
obtained by applying statutory rates to pretax income:

                                                1999              1998
                                                ----              ----

         Expected tax expense (benefit)      $323,639          $241,524
         Benefit of REIT distributions       (343,639)         (248,524)
                                              -------           -------

                     Totals                ($  20,000)        ($  7,000)
                                              =======           =======

The components of deferred income taxes are as follows:

                                                1999              1998
                                                ----              ----

         Loan origination fees                $60,000           $40,000
                                               ======            ======

6.  PUBLIC OFFERINGS OF THE COMPANY'S COMMON STOCK

The  Company  filed a second  Registration  Statement  with the  Securities  and
Exchange  Commission  for a public  offering  of its common  stock in 1997.  The
Company  offered to sell 1,500,000  shares of its common stock at a price of $10
per share. The offering was underwritten by a managing underwriter (an affiliate
of the Advisor) and a  co-underwriter  on a "best efforts" basis, and no minimum
sale of stock was required.  The stock sale  commenced on September 26, 1997 and
concluded  on January 22, 1999.  A total of 799,759  shares were sold,  of which
710,339 were sold through December 31, 1998.


<PAGE>


                        AMERICAN CHURCH MORTGAGE COMPANY

                         Notes for Financial Statements

                           December 31, 1999 and 1998

6.  PUBLIC OFFERINGS OF THE COMPANY'S COMMON STOCK - Continued

The Company filed a  Registration  Statement  with the  Securities  and Exchange
Commission  for a third public  offering of its common stock in August 1999. The
Company  offered to sell 1,500,000  shares of its common stock at a price of $10
per share.  The offering was underwritten by an underwriter (an affiliate of the
Advisor)on a "best  efforts"  basis,  and no minimum sale of stock was required.
The stock sale  commenced on September 23, 1999. A total of 119,663  shares have
been sold through December 31, 1999.

Pursuant  to the terms of the  Underwriting  Agreements,  the  Company  paid the
managing   underwriter   and   participating   broker-dealers   commissions  and
non-reimbursable expenses of approximately $170,000 and $331,600 during 1999 and
1998, respectively.

7.  FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair value of the Company's financial  instruments,  none of which
are held for trading purposes, are as follows at December 31, 1999 and 1998:

<TABLE>
<CAPTION>
                                                                 1999                                1998
                                                    ----------------------------        ------------------------------

                                                     Carrying             Fair           Carrying             Fair
                                                      Amount              Value           Amount             Value
                                                    ----------        ----------         ---------          ---------
<S>                                              <C>               <C>                  <C>                <C>
      Cash and equivalents                       $     382,765     $     382,765        $2,941,530         $2,941,530
      Accounts receivable                                5,782             5,782            28,777             28,777
      Mortgage loans receivable                     10,407,927        10,407,927         6,231,862          6,231,862
      Bond portfolio                                 2,056,199         2,056,199         1,023,997          1,023,997
</TABLE>

The carrying value of cash and  equivalents  approximates  fair value.  The fair
value of the mortgage  loans  receivable and the bond portfolio are estimated by
discounting  future cash flows using  current  discount  rates that  reflect the
risks associated with similar types of loans.


<PAGE>

                        AMERICAN CHURCH MORTGAGE COMPANY

                         Notes for Financial Statements

                           December 31, 1999 and 1998

8.  LINE OF CREDIT

The Company has obtained a  $1,000,000  line of credit with its bank on July 22,
1999,  subject to certain  borrowing base  limitations,  through August 1, 2000.
Interest  is charged at 1% over the prime rate  totaling  9.5% at  December  31,
1999. The line of credit is collateralized by the mortgage secured bonds held by
the Company. Outstanding borrowings were $500,000 at December 31, 1999.


<PAGE>