As filed with the Securities and Exchange Commission on March 30, 2004

                       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, 2003

       or

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

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                         Commission File Number 33-87570

                        American Church Mortgage Company

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

                 (Name of small business issuer in its charter)

                            10237 Yellow Circle Drive
                              Minnetonka, MN 55343
                            Telephone: (952) 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:      $2,459,254

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, 2004 was: 2,485,231

            Transition Small Business Disclosure Format: Yes ___ No X


                      DOCUMENTS INCORPORATED BY REFERENCE:

              Definitive proxy statement for the annual meeting of
                    shareholders to be held on May 28, 2004.
 -------------------------------------------------------------------------------



<PAGE>




                        AMERICAN CHURCH MORTGAGE COMPANY
                                   FORM 10-KSB


                                      INDEX                                Page
                                                                           No.

                                     PART I

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

Item 2.    Description of Property..................................       15

Item 3.    Legal Proceedings........................................       15

Item 4.    Submission of Matters to a Vote of Security Holders......       15

                                     PART II

Item 5.    Market for Registrant's Common Equity and
           Related Stockholder Matters...............................      15

Item 6.    Management's Discussion and Analysis
           or Plan of Operation......................................      17

Item 7.    Financial Statements:.....................................      20

                  Balance Sheets
                  December 31, 2003 and 2002.........................      F-2

                  Statements of Operations
                  Years Ended December 31, 2003 and 2002.............      F-4

                  Statements of Stockholders' Equity
                  December 31, 2003 and 2002.........................      F-5

                  Statements of Cash Flows
                  Years Ended December 31, 2003 and 2002.............      F-6

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

Item 8.    Changes In and Disagreements With
           Accountants on Accounting and Financial Disclosure........      20

Item 8A.   Controls and Procedures...................................      20

                                    PART III

Item 9.    Directors, Executive Officers, Promoters and Control
           Persons; Compliance With Section 16 (a) of the
           Exchange Act..............................................      20

Item 10.   Executive Compensation....................................      20

Item 11.   Security Ownership of Certain Beneficial Owners and
           Management................................................      20

Item 12.   Certain Relationships and Related Transactions............      21

Item 13.   Exhibits and Reports on Form 8-K..........................      22

Item 14.   Principal Accountants Fees and Services...................      22


<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 ours or our  management  or  Board of
Directors, including the on-going public sale of our securities, 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 our 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 our loan portfolio and our ability to compete in making loans
to borrowers;  payment default on loans made by us, which could adversely affect
our  ability  to  make  distributions  to  our  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 us should not be construed
as exhaustive or as any admission  regarding the adequacy of disclosures made by
us prior to the  effective  date of such Act.  Matters  which are the subject of
forward  looking  statements are beyond our ability to control and in many cases
we 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  $2,000,000.  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, 2004, we have made 90
loans to 80 churches in the aggregate  amount of  $37,110,655,  with the average
principal amount of such loans being $412,341.  Of the 90 loans we have made, 23
loans totaling $6,343,556 have been repaid early by the borrowing  churches.  We
also own, as of February 29, 2004,  $5,573,860 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.  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 public  offerings  of our common  stock,  as well as our
current public offering of common stock and secured investor certificates.

Public Offerings

     On April 26, 2002 the Securities and Exchange Commission declared effective
our fourth public  offering of 1,500,000  common shares at a price of $10.00 per
share  ($15,000,000) and $15,000,000 of Secured Investor  Certificates under SEC
file 333- 75836. The Offering is conducted on a "best-efforts" basis pursuant to
applicable rules of the Securities and Exchange  Commission.  As of February 29,
2004,  708,994.5 shares  ($7,089,945) and $14,885,000 of certificates  have been
sold through, our advisor's affiliate, American Investors Group, Inc., to public
investors.  We plan to terminate  this offering in April 2004. We expect to have
sold all $15,000,000 in Secured Investor  Certificates and approximately 800,000
shares ($8,000,000) of our common stock.

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.,  ("American") 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 (bonds) of such borrowers
to the investing general public. Since its inception, American has underwritten

                                        3

<PAGE>



approximately 200 church bond financings, in which approximately $393,410,000 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 $1,967,000.

     In the course of its business,  American identified a demand from potential
borrowers  for  smaller  loans  of  $100,000  to  $2,000,000.   Because  of  the
regulatory,  administrative expenses and complexity normally associated with the
bond financing business,  American  determined that the economic  feasibility of
bond financing  diminished  for financings  under  $1,000,000.  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.  Our 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  $2,000,000,  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.

     "Average  Invested  Assets"  for any period  shall mean the  average of the
aggregated  book value of the assets of the  corporation  invested,  directly or
indirectly,  in loans (or interests in loans) secured by real estate,  and first
mortgage bonds,  before reserves for  depreciation or bad debts or other similar
non-cash  reserves  computed  by taking the average of such values at the end of
each calendar month during such period.

     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-five  years,  we  may  determine  to  emphasize
longer-term  fixed-rate loans in our 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) enforcing the terms of our
loans;  (vii)  shareholder  relations and (viii)  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.
This fee is reduced to 1% on assets  from $35 million to $50 million and to .75%
on assets over $50  million.  The  Advisor's  management  fees are  computed and
payable monthly.

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 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

                                        4

<PAGE>
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  Types  we  may  offer  to   prospective   borrowing
institutions:



<TABLE>
<CAPTION>

    Loan Type                          Interest Rate (1)                   Origination Fee (2)
20/25 Year Term (3)                Fixed @ 8.25%/8.50% respectively                    3.5%
20 Year Term (3)                   Variable Annually @ Prime + 2.50%                   3.5%
Renewable Term  (4)                      Fixed @:
<S>  <C>                           <C>                                     <C>
     3 Year                               7.75%                                        3.5%
     5 Year                               7.95%                                        3.5%
     7 Year                               8.25%                                        3.5%
     10 Year                              8.35%                                        3.5%
Construction 1 Year Term                  Fixed @ 9.00%                                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.  Origination  fees are often  subject  to  negotiations  with
          borrowers and thus, may be less than these amounts.

     (3)  Fully amortized  repayment term.  Amortization  terms may vary, as may
          other loan  terms,  depending  on  individual  loan  negotiations  and
          competitive forces.

     (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  upon each renewal date. If renewed
          by the  borrower,  the  interest  rate is  adjusted  to  Prime  plus a
          specified percentage "spread," i.e., two and one half percent (2.50%).

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 do, in fact,  negotiate these terms
and fees with certain of our 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    applications  containing key  information  concerning the  prospective
          borrowers;

     o    project description;

     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.

     All  appraisals  and  financial  statements  are  prepared  by  independent
third-party  professionals who 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 certain

                                        5

<PAGE>
of its staff.  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 by the borrower 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
recording  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 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
$2,000,000 line of credit with Beacon Bank, Shorewood, Minnesota. As of February
29, 2004, we have no outstanding balance against our line of credit.  Currently,
we may  borrow up to 50% of the  value of our  Average  Invested  Assets to make
loans  regardless  of our  capacity to (i) sell our  securities  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 our common  stock and
Secured  Investor  Certificates,  minus  reserves for  operating  expenses,  and
bad-debt reserves,  as determined by the Advisor. Cash resources available to us
for lending purposes include,  in addition to the net proceeds from future sales
of our common stock and Secured  Investor  Certificates  (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  furnishes  advice and  recommendations  concerning  our
business  affairs,  provides  administrative  services  to us  and  manages  our
day-to-day operations. Among other things, the Advisor:

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

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

     o    services all mortgage loans we make;

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


                                        6

<PAGE>



     o    deals   with   regulatory   agencies,   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; and

     o    as  requested  by us, makes  reports to us of its  performance  of the
          foregoing  services  and  furnishes  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, proxy  solicitation  expenses,  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 officers
and  employees  of the  Advisor,  including  travel 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,  directors and
officers  liability  insurance premiums and unreimbursed costs directly relating
to closing of loan transactions.

     In the event that our Total Operating Expenses (excluding  interest) 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 total  principal  amount of  mortgage-secured  debt  securities we
          purchase from churches and other non-profit religious organizations is
          limited to 30% of our Average Invested Assets.

     (iii)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 all loans, we will require a written appraisal  certified
          by a member of the Appraisal  Institute ("MAI"),  or a state-certified
          appraiser.

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

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

     (vi) 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 days of the loan  closing  date.  On loans of $500,000 or less,
          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 absent express
          approval by our Board of Directors.

     (vii)The Advisor  typically  requires the borrower to arrange for automatic
          electronic payment or drafting of monthly payments.

     (viii) The Advisor 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.

     (ix) 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.

     (x)  The  Advisor  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).

     (xi) We  require  borrowers  to  maintain a general  perils  and  liability
          coverage  insurance  policy naming us as the  loss-payee in connection
          with  damage or  destruction  to the  property of the  borrower  which
          typically includes  weather-related damage, fire, vandalism and theft.
          Our  advisor may require  the  borrower to provide  flood,  earthquake
          and/or other special coverage.

     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;


                                        8

<PAGE>

     (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;

     (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)  The aggregate  borrowings of the  corporation,  secured and unsecured,
          shall be  reasonable  in relation to the  Shareholder's  Equity of the
          corporation  and shall be reviewed  by the  Independent  Directors  at
          least  quarterly.  The  maximum  amount of such  borrowings  shall not
          exceed 300% of  Shareholder's  Equity in the absence of a satisfactory
          showing that a higher level of borrowing is appropriate;

     (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  business of making loans to churches  and other  non-profit  religious
organizations is highly competitive. We compete 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.


                                        9

<PAGE>
Employees

     We have no employees.  Our daily  operations 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.

     Subject to the  supervision  of the 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 Philip
J. Myers.  Mr.  Myers is  President  of the Advisor  and  President  of American
Investors Group, Inc., the underwriter of our past and current public offerings.
The Advisor  employs  three  persons on a part-time or other basis.  The Company
does not  presently  expect to directly  employ any  persons in the  foreseeable
future, since all of our administrative  functions and operations are contracted
for through the Advisor.  However,  legal, accounting and certain other services
are provided to us by outside professionals and paid by us directly.

Operations

     Our  operations  currently  are located in the 8,200 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 Philip J. Myers our President and a
member of our Board of  Directors.  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.

Risks Related to Mortgage Lending

     We Are Subject to the Risks  Generally  Associated  with Mortgage  Lending.
Mortgage  lending involves various risks,  many of which are  unpredictable  and
beyond our control and  foresight.  It is not possible to identify all potential
risks  associated  with  mortgage  lending.   Some  of  the  more  common  risks
encountered may be summarized as follows:

<TABLE>
<CAPTION>

<S>      <C>                                             <C>
1)       low demand for mortgage loans                   ;    availability of alternative financing and competitive
2)       interest rate fluctuations                           conditions
3)       changes in the level of consumer confidence     ;    factors affecting specific borrowers
4)       availability of credit-worthy borrowers         ;    interest rate fluctuations
5)       national and local economic conditions          ;    losses associated with default, foreclosure of a mortgage,
6)       demographic and population patterns                  and sale of the mortgaged property
7)       zoning regulations                              ;    state and federal laws and regulations
8)       taxes and tax law changes                       ;    bankruptcy or insolvency of a borrower
</TABLE>

     Second Mortgage Loans Pose Additional  Risks. Our financing  policies allow
us to make second  mortgage  loans.  The principal  amount of such loans may not
exceed 20% of our average  invested  assets.  Second  mortgage loans entail more
risk than first mortgage loans,  as foreclosure of senior  indebtedness or liens
could require us to pay the senior debt or risk losing our mortgage.

     Fixed-Rate  Debt  Can  Result  in  Yield   Fluctuations.   Fixed-rate  debt
obligations carry certain risks. A general rise in interest rates could make the
yield on a particular  mortgage  loan lower than  prevailing  rates.  This could
negatively  affect  our value and  consequently  the value of our shares and the
certificates.  Neither we nor our advisor can predict changes in interest rates.
We will  attempt  to reduce  this risk by  maintaining  medium  and  longer-term
mortgage loans and through  offering  adjustable rate loans to borrowers.  We do
not intend to borrow funds or sell  certificates  if the cost of such  borrowing
exceeds the income we believe we can earn from lending the funds.

     The Mortgage Banking Industry Is Highly Competitive. We compete with a wide
variety of lenders,  including banks,  savings and loan associations,  insurance
companies,  pension funds and fraternal  organizations  for mortgage loans. Many
competitors have greater financial resources, larger staffs and longer operating
histories  than we have, and thus may be a more  attractive  lender to potential
borrowers.  We intend to compete 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  non-profit   religious
organizations.


                                       10

<PAGE>



     Fluctuations  in  Interest  Rates  May  Affect  Our  Ability  to Repay  the
Certificates.  Prevailing  market  interest rates impact  borrower  decisions to
obtain new loans or to  refinance  existing  loans,  possibly  having a negative
effect upon our ability to originate  mortgage loans. If interest rates decrease
and the  economic  advantages  of  refinancing  mortgage  loans  increase,  then
prepayments  of higher  interest  mortgage  loans in our portfolio  would likely
reduce our portfolio's overall rate of return (yield).

     We Are Subject to the Risks  Associated  with  Fluctuations in National and
Local Economic Conditions. The mortgage lending industry is subject to increased
credit risks and rates of foreclosures during economic  downturns.  In addition,
because we provide  mortgages to churches and other religious  organizations who
generally  receive  financing through  charitable  contributions,  our financial
results are subject to fluctuations based on a lack of consumer  confidence or a
severe or  prolonged  national or regional  recession.  As a result of these and
other  circumstances,  our potential  borrowers may decide to defer or terminate
plans for financing their  properties  decreasing  demand for mortgage loans. In
addition,  during  such  economic  times  we may be  unable  to  locate  as many
credit-worthy borrowers.

     Our Business May Be Adversely Affected If Our Borrowers Become Insolvent or
Bankrupt.  If any of our borrowers become insolvent or bankrupt,  the borrower's
mortgage  payments will be delayed and may cease  entirely.  We may be forced to
foreclose  on the  mortgage  and take legal  title to the real  estate and incur
expenses related to the foreclosure and disposition of the property. As of March
30, 2004, we had four first mortgage loans and one foreclosed  property for sale
totaling  $1,588,963.  We are continuing to work with the borrower of two of the
loans  totaling  $643,355 to bring their  payments  current.  We have  initiated
foreclosure  proceedings  on two  loans  totaling  $729,256  and  expect to take
possession  of these  churches  and list  their  properties  for  sale.  We have
foreclosed on one church loan in the amount of $216,352 and currently  have this
property listed with a local realtor.  We may incur a loss in these transactions
if the  borrowers  of the first two loans  are  unable to bring  their  payments
current and if we are unable to dispose of the three  remaining  properties  and
are unable to recoup our expenses and outstanding balance from the sale of these
properties.

Risks Related to Mortgage Lending to Churches

     Churches Rely on Member Contributions to Repay Our Loans.  Churches rely on
member  contributions for their primary source of income.  Member  contributions
are used to repay  our  loans.  The  membership  of a church  or the per  capita
contributions of its members may not increase or remain constant after a loan is
funded.  A decrease  in a  church's  income  could  result in its  temporary  or
continued inability to pay its obligation to us, which may affect our ability to
pay dividends on our common stock or repay the certificates.  We have no control
over the financial performance of a borrowing church after a loan is funded.

     Churches Depend Upon Their Senior Pastors. A church's senior pastor usually
plays an important role in the  management,  spiritual  leadership and continued
viability of that church. A senior pastor's absence,  resignation or death could
have a negative impact on a church's operations,  and thus its continued ability
to generate revenues sufficient to service its obligations to us.

     The Limited Use Nature of Church  Facilities  Can Limit the Resale Value of
Our Mortgage  Collateral.  Our loans are secured  principally by first mortgages
upon the  real  estate  and  improvements  owned  or to be  owned  by  borrowing
churches.   Although  we  will  require  an  appraisal  of  the  premises  as  a
pre-condition  to making a loan, the appraised  value of the premises  cannot be
relied upon as being the actual  amount  which might be obtained in the event we
need to foreclose after a default by the borrower.  The actual liquidation value
of church,  school or other  institutional  premises could be adversely affected
by, among other factors:  (i) its limited use nature;  (ii) the  availability on
the market of similar properties;  (iii) the availability and cost of financing,
rehabilitation or renovation to prospective  buyers; (iv) the length of time the
seller is willing to hold the property on the market; or (v) the availability in
the area of the mortgaged  property of  congregations or other buyers willing to
pay the fair value for a church facility. This factor may influence our decision
to restructure the terms of a non-performing loan rather than foreclosing on the
church property.

     Expenses of Foreclosure  May Prevent Us From Recovering the Full Value of a
Loan.  If we  foreclose  on a mortgage  and take legal title to a church's  real
estate,  real estate  taxes could be levied and  assessed  against the  property
until sold since the property  would no longer be owned by a non-profit  entity.
The  property  may also  incur  operating  expenses  pending  its sale,  such as
property insurance,  security, repairs and maintenance.  These expenses would be
our financial responsibility,  and could be substantial in relation to our prior
loan if we cannot readily  dispose of the property.  Such expenses could prevent
us from recovering the full value of a loan in the event of foreclosure.

Risks Related to Us

     Our Failure to Qualify as a Real Estate  Investment  Trust Could Reduce the
Funds We Have Available For Investment.  We operate as a real estate  investment
trust.  As a  REIT,  we are  allowed  a  deduction  for  dividends  paid  to our
shareholders in computing our taxable income.  Thus, only our  shareholders  are
taxed on our taxable  income that we distribute.  This  treatment  substantially
eliminates  the "double  taxation"  of earnings to which most  corporations  and
their shareholders are subject. Qualification as a REIT involves the application
of highly technical and complex Internal Revenue Code provisions.




                                       11

<PAGE>



     To qualify and  maintain our status as a REIT,  we must meet certain  share
ownership,  income,  asset and  distribution  tests on a  continuing  basis.  No
assurance can be given that we will satisfy  these tests at all times.  Further,
the requirements for a REIT may substantially affect day-to-day  decision-making
by our advisor.  Our advisor may be forced to take action it would not otherwise
take or refrain  from action  which might  otherwise  be  desirable  in order to
maintain our REIT status.

     If we fail to  qualify  as a REIT in any  taxable  year,  then we  would be
subject to federal income tax on our taxable income at regular  corporate  rates
and not be allowed a deduction for  distributions to  shareholders.  We would be
disqualified  from treatment as a REIT for the four taxable years  following the
year of losing our REIT status. We intend to operate as a REIT. However,  future
economic,  market,  legal,  tax or other  consequences  may  cause  our board of
directors to revoke the REIT election.  The payment of taxes  resulting from our
disqualification  as a REIT or  revocation of REIT status would reduce the funds
available for  distribution to shareholders or for investment.  Because interest
paid to certificate holders will be a deductible business expense to us, loss of
our REIT  status  would not  necessarily  impede our  ability  to make  interest
payments to holders of certificates.

     Conflicts of Interest  Arise From Our  Relationship  with Our Advisor.  The
terms of transactions  involving our formation and the formation of our advisor,
and our  contractual  relationship  with our  advisor,  were not  negotiated  at
arm's-length.  Our non- independent directors and officers may have conflicts of
interest in enforcing  agreements  between us and our advisor.  Future  business
arrangements and agreements between us and our advisor and their affiliates must
be approved by our board of directors,  including a majority of our  independent
directors.

Risks Related to the Shares

     There Is No  Public  Market  for Our  Shares.  There is no  market  for our
shares. It is unlikely that a market will develop. There are no current plans to
list on any exchange or qualify our shares for quotation on NASDAQ. In addition,
the market for REIT  securities  historically  has been less  liquid  than other
types of publicly-traded equity securities.

     There Are Restrictions on Certain Transfers of Our Shares.  Our articles of
incorporation  and bylaws  prohibit a transfer of shares to any person who, as a
result,  would  beneficially  own  shares in  excess of 9.8% of the  outstanding
capital stock and allow us to redeem shares held by any person in excess of 9.8%
of the outstanding  capital stock.  These  provisions may reduce market activity
for the shares and the  opportunity  for  shareholders  to receive a premium for
their shares.

     Fluctuations  in  Interest  Rates  May  Cause  the  Value of Our  Shares to
Fluctuate.  Prevailing market interest rates impact borrower decisions to obtain
new loans or to refinance existing loans, possibly having a negative effect upon
our ability to originate  mortgage  loans.  Fluctuations  in interest  rates may
cause the value of the shares to  fluctuate  unpredictably.  If  interest  rates
decrease and the economic  advantages of refinancing  mortgage  loans  increase,
then prepayments of higher interest mortgage loans in our portfolio would likely
reduce the portfolio's overall rate of return (yield).

     Interest  Payments to Certificate  Holders May Reduce Dividend  Payments on
Our Shares.  In addition to the offering of our shares,  we have sold nearly all
of our Investors Saver Certificates  ($15,000,000) at various interest rates and
maturity  terms of 2 to 7 years.  We are deploying  the funds  received from the
sale of  Certificates  into new loans at rates that provide a positive  interest
rate spread. This spread,  however,  may be materially and adversely affected by
changes in prevailing  interest rates which would reduce our net income. If this
occurs,  we may not have  sufficient  net income  after  paying  interest on the
certificates  to maintain  dividends to  shareholders  at the levels paid in the
past  or even to pay  dividends  at all.  In  addition,  because  dividends  are
directly  affected by the yields  generated on the Company's  portfolio of loans
and bonds,  shareholders  dividends  can be expected to fluctuate  significantly
with interest rates generally.

Risks Related to the Certificates

     We May Incur More Indebtedness. We may incur additional indebtedness in the
future. We may assign or pledge some of our mortgage-secured promissory notes or
other collateral in connection with incurring this additional indebtedness.  Our
ability to incur  additional  indebtedness  is  presently  limited to 50% of our
Average Invested Assets by our bylaws.  We are currently seeking an amendment to
our by-laws from  shareholders  allowing us to incur  indebtedness up to 300% of
our shareholder  equity,  the level  permitted  under North American  Securities
Administrators   Association  ("NASAA")  guidelines.   We  will  have  sold  all
$15,000,000  certificates and approximately  800,000  ($8,000,000) shares of our
common stock as of March 30, 2004.  Unless this By-Law  amendment is ratified by
shareholders,  our future growth in asset base will be highly dependent upon our
ability to sell additional shares of our common stock.

     There Are Potential Adverse Effects Associated With Lending Borrowed Funds.
We are deploying the proceeds from the sale of Investor Saver  Certificates into
loans to churches and other  non-profit  religious  organizations.  We have also
used our line of credit with Beacon  Bank,  Shorewood,  Minnesota,  from time to
time,  to fund  loans,  and  intend to use our line of credit in this way in the
future.  Lending  borrowed funds is subject to greater risks than in unleveraged
lending. The profit we realize from lending borrowed funds is largely determined
by the  difference,  or  "spread,"  between  the  interest  rates  we pay on the
borrowed funds and



                                       12

<PAGE>

the interest  rates that our borrowers pay us. Our spread may be materially  and
adversely  affected by changes in prevailing  interest rates.  Furthermore,  the
financing  costs  associated  with  lending  borrowed  funds could  decrease the
effective  spread in lending  borrowed funds,  which could adversely  affect our
ability  to pay  interest  on and repay the  certificates  as they  mature.  The
Company's  management  believes that it is advantageous to raise capital at this
time through the issuance of Investor Saver Certificates due to historically low
interest rates.

     There Is No Public Market for the Certificates.  There is no market for the
certificates.  It is unlikely that a market will  develop.  There are no current
plans to list on any  exchange  or qualify our  certificates  for  quotation  on
NASDAQ. In addition,  the market for REIT securities  historically has been less
liquid than other types of publicly-traded securities.

     There Is No  Sinking  Fund,  Insurance  or  Guarantee  Associated  With the
Certificates.  We do not contribute funds to a separate account,  commonly known
as a sinking  fund,  to repay  principal  or interest on the  certificates  upon
maturity or default. Our certificates are not certificates of deposit or similar
obligations  of, or  guaranteed  by, any  depository  institution.  Further,  no
governmental or other entity insures or guarantees  payment on the  certificates
if we do  not  have  enough  funds  to  make  principal  or  interest  payments.
Therefore,  holders  of our  certificates  have  to  rely  on our  revenue  from
operations,  along  with  the  security  provided  by  the  collateral  for  the
certificates, for repayment of principal and interest on the certificates.

     The Collateral for the Certificates May Not Be Adequate If We Default.  The
certificates must at all times be secured by  mortgage-secured  promissory notes
and church bonds having an outstanding  principal balance equal to at least 120%
of the outstanding  principal balance of the certificates.  If we default in the
repayment of the certificates,  or another event of default occurs,  the trustee
will not be able to foreclose on the mortgages securing the promissory notes and
bonds in order to obtain funds to repay certificate holders. Rather, the trustee
will need to look to the revenue stream associated with our borrowers'  payments
on or repayment of the promissory  notes and bonds or revenue  derived from sale
of the promissory notes or bonds to repay  certificate  holders.  If the trustee
chooses to rely on revenues received from our borrowers, certificate holders may
face a delay in payment on  certificates  in the event of default,  as borrowers
will repay their  obligations to us in accordance  with  amortization  schedules
associated with their  promissory notes or bonds. If the trustee chooses to sell
promissory  notes or bonds in the event of our default,  the  proceeds  from the
sales may not be  sufficient  to repay our  obligations  on all  outstanding  or
defaulted certificates.

     The  Certificates  Are  Not  Negotiable  Instruments  and  Are  Subject  to
Restrictions on Transfer.  The certificates are not negotiable debt instruments.
Rights of record  ownership of the certificates may be transferred only with our
advisor's prior written consent.  Certificate  holders are not be able to freely
transfer the certificates.

     We Are  Obligated  To Redeem  Certificates  Only In Limited  Circumstances.
Certificate  holders  have no  right to  require  us to  prepay  or  redeem  any
certificate  prior to its  maturity  date,  except in the case of death or if we
replace our current advisor. Further, even in the event of death, we will not be
required  to  redeem  certificates  if we have  redeemed  at  least  $25,000  of
principal  amount of  certificates  during  the  calendar  quarter.  There is no
present intention to redeem certificates prior to maturity except in the case of
death of a certificate holder.

     We May Not Have  Sufficient  Available  Cash to Redeem  Certificates  If We
Terminate Our Advisory  Agreement With Our Current Advisor.  We will be required
to offer to redeem all  outstanding  certificates  if we terminate  our advisory
agreement with Church Loan Advisors,  Inc., our current advisor, for any reason.
If the holders of a significant principal amount of certificates request that we
redeem their certificates,  we may be required to sell a portion of our mortgage
loan and church bond portfolio to satisfy the redemption requests. Any such sale
would  likely be at a discount to the recorded  value of the mortgage  loans and
bonds being sold. Further, if we are unable to sell loans or church bonds in our
portfolio, we may be unable to satisfy the redemption obligations.

     The Indenture Contains Limited Protection For Holders of Certificates.  The
indenture  governing the  certificates  contains only limited  events of default
other than our failure to pay  principal  and  interest on the  certificates  on
time. Further, the indenture provides for only limited protection for holders of
certificates upon a consolidation or merger between us and another entity or the
sale or transfer of all or substantially all of our assets. If we default in the
repayment of the certificates under the indenture, certificate holders will have
to rely on the trustee to exercise  any  remedies on their  behalf.  Certificate
holders will not be able to seek remedies against us directly.

Risks Related to Management

     We Are Dependent Upon Our Advisor. Our advisor, Church Loan Advisors, Inc.,
manages us and selects our  investments  subject to general  supervision  by our
board of directors and compliance with our lending policies.  We depend upon our
advisor and its  personnel  for most  aspects of our  business  operations.  Our
success  depends  on the  success  of our  advisor  in  locating  borrowers  and
negotiating loans upon terms favorable to us. Among others, our advisor performs
the following services for us:

                                       13

<PAGE>
<TABLE>
<CAPTION>
<S>                                                            <C>
;    mortgage loan marketing and procurement                   ;    managing relationships with our accountants and attorneys
;    bond portfolio selection and investment                   ;    corporate management
;    mortgage loan underwriting                                ;    bookkeeping
;    mortgage loan servicing                                   ;    reporting to state, federal, tax and other regulatory
;    money management                                                 authorities
;    developing and maintaining business relationships         ;    reports to shareholders and shareholder relations
;    maintaining "goodwill"                                    ;    Loan enforcement and collections
</TABLE>

     Our  shareholders'  right to participate in management is generally limited
to the  election  of  directors.  Certificate  holders  will  have no  right  to
participate in our  management.  Certificate  holders must be willing to entrust
our management to our advisor and our board of directors.

     We Have Conflicts of Interest with Our Advisor and Affiliates. Affiliations
and conflicts of interests  exist among our officers and directors and the owner
and  officers  and  directors  of our  advisor and  affiliates.  Our advisor and
affiliates are both owned by our President,  Philip Myers. Our President and the
officers  and  directors  of our  advisor are  involved in the church  financing
business  through  their   affiliations  with  American   Investors  Group,  Inc
("American ").  American  originates,  offers and sells first mortgage bonds for
churches.  We may  purchase  first  mortgage  bonds  issued by churches  through
American in its capacity as underwriter for the issuing church,  or as broker or
dealer  on  the  secondary  market.  In  such  event,   American  would  receive
commissions  (paid by the issuing church) on original issue bonds, or "mark-ups"
in connection  with any secondary  transactions.  If we sell church bonds in our
portfolio,  the bonds  will be sold  through  American.  We would  pay  American
commissions in connection with such transactions,  but in no event, in excess of
those normally charged to customers.

     Our bylaws limit the amount of all commissions, mark-downs or mark-ups paid
to American. Our business dealings with our advisor and its affiliates also must
be approved by a majority of our board of directors, including a majority of our
independent directors.

     Generally, mortgage loans we originate are smaller than the bond financings
originated by American.  However,  there may be circumstances  where our advisor
and American could recommend either type of financing to a prospective borrower.
The decisions of our advisor and American could affect the credit quality of our
portfolio.

     Redemption  Obligations Relating to the Certificates May Affect Our Ability
to Replace our Advisor.  We will be required to offer to redeem all  outstanding
certificates  if we terminate our advisory  agreement with Church Loan Advisors,
Inc. Our  independent  directors are required to review and approve the advisory
agreement with our advisor on an annual basis. The redemption provision relating
to the  certificates  may have the effect of reducing our ability to replace our
current advisor.

Risks Related to Environmental Laws

     We May Face Liability Under  Environmental  Laws. Under federal,  state and
local laws and  regulations,  a secured  lender  (like us) may be liable,  under
certain  limited  circumstances,  for the costs of  removal  or  remediation  of
certain  hazardous or toxic  substances  and other costs  (including  government
fines and injuries to persons and adjacent  property).  Liability may be imposed
whether or not the owner or lender knew of, or was responsible for, the presence
of  hazardous  or toxic  substances.  The costs of  remediation  or  removal  of
hazardous or toxic substances, or of fines for personal or property damages, may
be  substantial  and  material  to our  business  operations.  The  presence  of
hazardous  or toxic  substances,  or the  failure  to  promptly  remediate  such
substances,  may adversely  affect our ability to resell real estate  collateral
after  foreclosure or could cause us to forego  foreclosure.  This is a changing
area of the law.  The  courts  have  found  both in  favor  and  against  lender
liability in this area under various factual scenarios.

     The   Collateral   For  Our  Loans  and  Our  Lenders  May  Be  Subject  to
Environmental  Claims. If there are environmental  problems  associated with the
real estate  securing any of our loans,  the  associated  remediation or removal
requirements  imposed by federal,  state and local laws could affect our ability
to realize value on our collateral or our borrower's ability to repay its loan.




                                       14

<PAGE>

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 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.

     Foreclosure was completed on a church located in Battle Creek, Michigan. We
have  determined  the fair  value of the  property  to be  $156,352.  The church
congregation has disbanded and the church's property is currently unoccupied. We
have  taken  possession  of the church and have  listed  the  property  for sale
through a local realtor.

Item 3.   Legal Proceedings.

     There are presently no legal actions  against us or our advisor  pending or
threatend.

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

     None, other than as contemplated in our upcoming proxy statement.

                                     PART II

Item 5. Market for Common Equity, Related Stockholder Matters and Small Business
Issuer Purchases of Equity Securities.

     Outstanding Securities

     As of  February  29,  2004,  2,485,231  shares  of  our  common  stock  and
$14,885,000 of secured investor  certificates  were issued and  outstanding.  On
April 26, 2002, the Securities and Exchange  Commission  declared  effective our
fourth public offering of 1,500,000 common shares at a price of $10.00 per share
and  $15,000,000 of secured  investor  certificates.  We are currently  offering
common  stock  and  secured  investor   certificates   under  this  registration
statement, which is scheduled to terminate in April 2004.

     Lack of Liquidity and Absence of Public Market Price.

     There  is no  market  for our  common  shares.  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.  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 quoted
on the National  Association of Securities  Dealers,  Inc.  Automated  Quotation
System ("NASDAQ").  However, we value our shares at $10 per share since this has
been the public  offering price for our shares and the price at which shares are
purchased in our dividend reinvestment program.

     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.


                                       15

<PAGE>

     We repurchased  the following  shares as outlined in the table below during
fiscal year of 2003:

<TABLE>
<CAPTION>

           Period                   Number of Shares            Average Price Paid Per Share
<S>                           <C>                              <C>
1st Quarter 2003                          8,650                             $9.22
2nd Quarter 2003                          4,873                             $8.99
3rd Quarter 2003                          None                                -
4th Quarter 2003                          3,060                             $9.07
Totals:                                  16,583                             $9.09
============================ ===============================  =================================
</TABLE>

     We are under no obligation to purchase shares from  shareholders.  However,
any shares we purchase and the price we pay to shareholders  for their shares is
at complete  discretion  of our  advisor.  Shares  purchased  were not part of a
publicly  announced  plan to  repurchase  shares  nor does the  Company  plan or
anticipate any stock repurchase plans.

Holders of Our Common Shares

     As of February 29, 2004, we had 1,074 record holders of our $.01 par common
stock,  including our first Shareholder,  Apostle Holdings Corp. (formerly known
as: 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  years  on our  common  stock as
follows:

<TABLE>
<CAPTION>
     For Quarter       Dollar Amount Distributed                      Annualized Yield Per $10
       Ended:           Per Share:                                     Share Represented:
                                2003                   2002                  2003               2002


<S>                           <C>                    <C>                    <C>                 <C>
     March 31st               $.165625               $.20625                6.625%              8.25%
      June 30th                $.1625                $.209375               6.50%              8.375%
   September 30th             $.153125                $.1875                6.125%              7.50%
    December 31st             $.16875                $.165625               6.75%              6.625%
</TABLE>

     As a Real Estate Investment Trust, we make regular quarterly  distributions
to  shareholders.  The amount of distributions to them equal at least 90% 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  until 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 in which we are selling shares
by (i) collecting  from borrowers an origination fee at the time a loan is made,
(ii) timing our lending activities to coincide as much as possible with sales of
our Shares and  Certificates,  and (iii)  investing  our  undeployed  capital in
Permitted  Temporary  Investments  that offer the highest  yields  together with
safety and liquidity.  However,  there can be no assurance that 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
securities.  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
90% of our "real estate  investment  trust taxable  income." For the fiscal year
ended December 31, 2003 we distributed  substantially  all of our taxable income
to our  Shareholders in the form of quarterly  dividends.  We intend to continue
distributing  virtually  all of such income to our  Shareholders  on a quarterly
basis, subject to (i)



                                       16

<PAGE>



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

     Our total  assets  increased  from  $29,235,738  at  December  31,  2002 to
$37,138,987 at December 31, 2003 and increased from  $16,683,091 at December 31,
2001 to $29,235,738 at December 31, 2002. The primary reason for the increase in
total assets from  December  31, 2001 through  December 31, 2003 was a result of
the sale and  issuance  of our common  stock and secured  investor  certificates
pursuant to our fourth public offering, the proceeds of which were (and continue
to be)  deployed  into  new  mortgage  loans.  Shareholders'  Equity  rose  from
$19,797,311  at December  31, 2002 to  $21,864,907  at December 31, 2003 for the
same  reasons.  Our  liabilities  for both  periods are largely  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. Our primary  liability at December
31,  2003 and 2002 is our long term  notes  payable,  which is  $14,257,000  and
$7,428,000 respectively.

          Results of Operations

     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  September  30,  2003.  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  September  30,  2003 was
$.153125  representing an annualized  yield of 6.125%.  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 and a corresponding  high
level of origination  income earned 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 September  30, 2003  shareholders  of
record was significantly  lower than the average dividend amount due directly to
large cash  balances we received  from our fourth  public  offering of stock and
secured  investor  certificates  and held in money  market  instruments  pending
deployment in new loans to churches. Because interest earned in our money market
account at present  yields 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.

     Net income for our fiscal year ended  December 31, 2003 was  $1,300,754  on
total  revenues  of  $2,459,254  compared  to  $1,289,941  on total  revenues of
$1,785,443 for the year ended December 31, 2002.  Interest  income earned on the
Company's  portfolio  of loans was  $1,906,051  for the year ended  December 31,
2003, compared to $1,322,220 for 2002. This increase was due to the fact that 26
new loans were originated in fiscal year ended December 31, 2003.  Excluded from
revenue for the year ended December 31, 2003 is $286,836 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
90% of "Taxable Income," the dividends declared and paid to our Shareholders for
the  quarters  ended  March 31,  2003,  June 30,  2003,  September  30, 2003 and
December 31, 2003 included  origination income even though it was not recognized
in its entirety as income for the period under GAAP. Our operating  expenses for
our fiscal year ended  December 31, 2003 were $466,362  compared to $376,852 for
our fiscal year ended December 31, 2002.




                                       17

<PAGE>

     Our Board of  Directors  declared  dividends  of $.165625 for each share of
record on March 31,  2003,  $.1625  for each  shares  held of record on June 30,
2003,  $.153125 for each share held of record September 30, 2003 and $.16875 for
each share held of record on December 31, 2003. Based on the four quarters ended
March 31, 2003,  June 30, 2003,  September  30, 2003 and December 31, 2003,  the
dividends paid represented an 6.625%,  6.50%, 6.125% and 6.75 % annualized yield
to shareholders, respectively, for an effective overall annual yield of 6.50% in
2003. In 2003,  and  especially in the third quarter of 2003, our dividend yield
was  significantly  lower than in prior periods.  This decrease  results in part
from the large cash  balances we received  from our current  public  offering of
common stock and Secured Investor Certificates,  which were held in money market
instruments  pending  deployment in new loans.  Because  interest  earned in our
money market account is substantially lower than interest earned on our mortgage
loans,  interest income earned was lower than in prior periods.  Dividend yields
in 2003 were also  largely  influenced  by the  prepayment  by churches of older
higher  interest  rate loans in our  portfolio,  and the funding of numerous new
loans at interest rates significantly lower than those funded in earlier years.

         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 transfer agents, registrar
and dividend reinvestment agent.

     In  addition,  we are able to  borrow  funds in an  amount up to 50% of our
Average Invested Assets in order to increase our lending capacity.  We currently
have a $2,000,000 secured line of credit with Beacon Bank, Shorewood, Minnesota.
As of  February  29,  2004 we have no  outstanding  balance  against our line of
credit.  This credit line is secured by the pledge of  $2,104,000  in  principal
amount of our Church Bonds.  Interest on our line of credit is payable to Beacon
Bank on a monthly  basis.  We believe  that the rate at which we lend funds will
always be higher than the cost at which we borrow the funds  (currently our rate
at which we can borrow  funds under this line of credit is prime  interest  rate
plus 1/2%). However, there can be no assurance that we can always lend funds out
at rates higher than the rate at which we borrow the funds.  When we do carry on
outstanding  balance  on this line of credit we plan to  "pay-down"  any  future
borrowings  on our line of credit by (i) selling  additional  securities  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 or decreases in
the  prime  lending  rate as well as the  increase  or  decrease  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 our Board
of Directors.

     On April 26, 2002 the Securities and Exchange Commission declared effective
our registration statement to sell to the public $1,500,000 shares of our common
stock at $10 per share  ($15,000,000)  and to sell to the public  $15,000,000 of
debt  securities,  which we call  "Secured  Investor  Certificates."  Our future
capital  needs are  expected  to be met by (i) our  current  and  future  public
offerings of our shares and/or our certificates;  (ii) the repayment of existing
loans;  (iii)  dividend  reinvestment  by our  shareholders  under our  dividend
reinvestment plan; and (iv) borrowing under our line of credit.

     We may borrow funds up to an amount that equals 50% of our Average Invested
Assets.  The objective of our current  offering of shares and certificates is to
raise  intermediate  term funds that we can deploy  into new loans at rates that
provide a  positive  spread.  This  additional  loan  development  will  further
diversify  our  loan  portfolio  while  generating  origination  income  to  the
advantage to our shareholders.  The cost of this capital is expected to be lower
than if borrowed  directly from banks at variable  rates of interest.  Our April
2004 proxy statement will request  shareholders to amend our by-laws to allow us
to incur  indebtedness up to 300% of our shareholders  equity,  The objective of
this  amendment  will be to enable us to sell more  certificates  at  prevailing
lower interest rates to facilitate future growth.

         Loan Loss Reserve Policy

     We follow a loan loss reserve policy on our portfolio of loans outstanding.
This critical policy requires complex  judgements and the need to make estimates
of future  events,  which may or may not  materialize  as  planned.  This policy
reserves for principal  amounts  outstanding on a particular  loan if cumulative
interruptions  occur in the normal  payment  schedule of a loan. Our policy will
reserve for the outstanding  principal  amount of a loan in our portfolio if the
amount is in doubt of being collected.


     We have  three  first  mortgage  loans that are three or more  payments  in
arrears.  The first loan has an outstanding  balance of approximately  $236,350.
The church has missed  more than five  mortgage  payments in 2003 and has missed
one mortgage  payment in 2004. We have engaged legal counsel to foreclose on the
church's property.  The church has made all required payments since being served
foreclosure notice. The second loan is a first mortgage loan with an outstanding
balance of $390,000. The church has



                                       18

<PAGE>

not made a mortgage  payment since September 2003. We have engaged legal counsel
and  are  currently  foreclosing  on the  property.  The  third  loan is a first
mortgage loan with an  outstanding  balance of $413,005.  The church missed four
mortgage  payments in 2003. We have reserved for this loan and are continuing to
work with the church to bring  their  mortgage  current.  They have not missed a
mortgage payment in the last four months.

Listed below is our current loan loss reserve policy:


<TABLE>
<CAPTION>
  Incident      Percentage of Loan                                          Status of Loan
                     Reserved
<S>           <C>                    <C>
============= ====================== ============================================================================================
1.             None                  Loan is current, no interruption in
                                     payments during history of the loan,
                                     ("interruption" means receipt by us more
                                     than 30 days after scheduled payment date).
2.            None                   Loan current, previous interruptions experienced, but none in the last six month period.
3.            None                   Loan current, previous interruptions experienced, but none in the last 90 day period.
4.            1.00%                  Loan serviced regularly, but 2 or 3 payments cumulative in arrears.  Delinquency notice been
                                     sent.
5.            2.00%                  Loan serviced regularly, but 4 or 5 payments cumulative in arrears.
6.            5.00%                  Loan more than 5 payments cumulative in arrears, loan servicing intermittent during the last 90
                                     days.
                                     Ability of obligor to continue to service
                                     the loan at scheduled levels in doubt.
                                     Restructuring contemplated or imminent.
7.            The Greater Of: (I)    Loan is declared to be in default.  Foreclosure proceeding underway or imminent. Reserve amount
              Accumulate reserve     dependent on value of collateral. All expenses related to enforcing loan agreements are
              during default period  expensed.
              equal to principal loan
              balance in excess of
              65% of original
              collateral value; or (ii)
              1% of the remaining
              principal balance each
              quarter during which
              the default remains in
              effect
</TABLE>

Loan loss reserves are recorded on a quarterly basis.

         Critical Accounting Policies and Estimates

     Preparation of our financial statements requires estimates and judgments to
be made that affect the amounts of assets,  liabilities,  revenues  and expenses
reported.  Such decisions  include the selection of the  appropriate  accounting
principles  to be  applied  and the  assumptions  on  which  to base  accounting
estimates.  We evaluate  these  estimates  based on assumptions we believe to be
reasonable under the circumstances.

     The  difficulty in applying  these  policies  arises from the  assumptions,
estimates and judgments  that have to be made  currently  about matters that are
inherently uncertain, such as future economic conditions,  operating results and
valuations as well as management  intentions.  As the difficulty increases,  the
level of precision decreases,  meaning that actual results can and probably will
be different from those currently estimated.

     Of our  significant  accounting  policies,  described  in the  notes to our
financial  statements included herewith,  we believe that the estimation of fair
value of our mortgage loans receivable and bond portfolio  involve a high degree
of judgment.  We estimate the fair value of our mortgage loans  receivable to be
the same as the carrying value because of minimal  changes in interest rates and
quality of the underlying  collateral  since initial  purchase.  We estimate the
fair value of the bond  portfolio to be the same as the carrying  value because,
even  though  there is no ready  public  market  for  these  bonds,  the cost is
current.  We do not consider  future cash flows,  the interest rate or the yield
rate  of a loan or  bond  in  estimating  fair  value.  We do not  consider  the
availability  of a  market  for a loan or  bond in  estimating  fair  value.  In
addition, the loan loss policy,  previously discussed,  is a critical accounting
policy.

                                       19

<PAGE>

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.

          None

Item 8A. Controls and Procedures

     Within the 90 days prior to the date of this Annual  Report on Form 10-KSB,
an independent Internal Audit was conducted by Michael G. Holmquist,  one of our
independent  directors.  He  evaluated  the  effectiveness  of  our  "disclosure
controls and procedures"  (Disclosure Controls),  and our "internal controls and
procedures for financial reporting" (Internal Controls).

     In evaluating our Disclosure  Controls and Internal Controls,  our CEO, CFO
and Mr. Holmquist noted that our advisor, Church Loan Advisors,  Inc., maintains
our books and records.  An administrator  employed by the advisor is responsible
for original  entries in our financial  records and for  reconciling our records
with  statements  received  from our bank.  The chief  operating  officer of the
advisor  oversees  the  activities  of the  advisor's  administrator.  The chief
operating  officer of the advisor reports directly to our CEO and CFO, Philip J.
Myers. We originate all mortgage loans in our portfolio.  Legal documentation of
our mortgage loan portfolio is prepared under the direct supervision of our CEO.

     In accordance with  Securities and Exchange  Commission  requirements,  the
CEO, CFO and Mr. Holmquist note that, since the date of the Controls  Evaluation
to the date of this Annual  Report,  there have been no  significant  changes in
Internal Controls or in other factors that could  significantly  affect Internal
Controls,   including  any   corrective   actions  with  regard  to  significant
deficiencies and material weaknesses.

     Based  upon  the  Controls  Evaluation,  our  CEO,  CFO and  Mr.  Holmquist
concluded  that our  Disclosure  Controls are  effective to ensure that material
information  relating to the company is made known to management and the advisor
and that our Internal  Controls are  effective to provide  reasonable  assurance
that our financial  statements are fairly presented in conformity with generally
accepted accounting principles.

                                    PART III


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

     The  information  set forth under the  captions  "Nominees,"  "How does the
Board operate?" and "Section 16(a) beneficial ownership reporting compliance" in
the definitive proxy statement for the annual meeting of shareholders to be held
on May 28, 2004, to be filed with the Securities  and Exchange  Commission on or
before April 15, 2004, is incorporated by this reference.

     The  Company  has not  adopted a Code of  Business  Conduct and Ethics that
applies  to  all  directors,  officers  and  employees  of  the  Company.  Since
inception,  the Company has not had employees and the Company's  activities have
been  directed by the Advisor.  In addition,  the  Company's  and the  Advisor's
activities  have  been  governed  by the  Company's  by-laws  and  the  Advisory
Agreement.  Both of these documents  comply with the NASAA REIT Guidelines which
include  substantive  limitations on, among other things,  conflicts of interest
and related party transactions.

Item 10.  Executive Compensation

     The   information   set  forth  under  the  caption   "How  are   directors
compensated?"  in the  definitive  proxy  statement  for the  annual  meeting of
shareholders  to be held on May 28, 2004,  to be filed with the  Securities  and
Exchange  Commission  no later than 120 days  after the end of the  fiscal  year
covered by this report.

Item 11.  Security Ownership of Certain Beneficial Owners and Management

     The information set forth under the caption "Security  Ownership of Certain
Beneficial  Owners and  Management"  in the definitive  proxy  statement for the
annual meeting of  shareholders to be held on May 28, 2004, to be filed with the
Securities  and Exchange  Commission no later than 120 days after the end of the
fiscal year covered by this report.

                                       20

<PAGE>

Item 12.  Certain Relationships and Related Transactions

     The  information  set forth under the caption  "Certain  Relationships  and
Related Party  Transactions"  in the definitive  proxy  statement for the annual
meeting  of  shareholders  to be held on May 28,  2004,  to be  filed  with  the
Securities and Exchange  Commission not later than 120 days after the end of the
fiscal year covered by this report.



                                       21

<PAGE>



Item 13. Exhibits and Reports on Form 8-K

(a) Exhibits

<TABLE>
<CAPTION>

  Exhibit Title
    No.
<S>  <C>                                                                                <C>
     3.1  Amended and Restated Articles of Incorporation                                3

     3.2  Second Amended and Restated Bylaws                                            4

     4.1  Specimen Common Stock Certificate                                             3

     4.2  Trust Indenture between the Company and The Herring National Bank             2

     10.1 Amended and Restated REIT Advisory  Agreement  Between the Company and        4
          Church Loan Advisory, Inc.

     10.2 Amendment No. 1 to Advisory  Agreement  Between the Company and Church        1
          Loan Advisors, Inc.

     10.3 Dividend Reinvestment Plan                                                    1

     10.4 Line of Credit Agreement with Beacon Bank dated March 18, 2002                2

     10.5 $2,000,000 Promissory Note and Combined Security Agreement between the        2
          Company and Beacon Bank dated March 18, 2002

     10.7 Security Agreement between the Company and The He Bank, as Trustee            2

     31.1 Certification Pursuant to Section 302of Sarbanes 2002.                        5

     32.1 Certification  Pursuant to 18 U.S.C. Section 1350, pursuant to Section        5
          906 of the Sarbanes Oxley Act of 2002


     (1)  Incorporated   herein  by  reference  to  th  Company's   Registration
          Statement on Form S-11 filed June 29, 1999.
     (2)  Incorporated   herein  by  reference  to  th  Company's   Registration
          Statement on Form S-11/A filed April 26, 2002.
     (3)  Incorporated   herein  by  reference  to  th  Company's   Registration
          Statement on Form 8-A filed April 30, 1999.
     (4)  Incorporated  herein  by  reference  to  the  Company's   Registration
          Statement on Form S-11 filed December 21, 2001.
     (5)  Filed herewith
</TABLE>

(b) Reports on Form 8-K

     The Company did not file form 8-K in the fourth quarter of 2003.

Item 14. Principal Accounts Fees and Services

     Before the Independent  Auditors are engaged by the Company to render audit
or  non-audit  services,  the  engagement  is approved  by Mr.  Philip J. Myers,
President and a Directo of ours. The Company does not have an audit committee.

Audit Fees

     The aggregate fees billed by the Company's  principal  accountant,  Boulay,
Heutmaker,  Zibell & Co. P.L.L.P.  for  professional  services  rendered for the
audit of the  Company's  annual  financial  statements  and review of  financial
statements included in the Company's forms 10-QSB, or services that are normally
provided by the accountant in connection  with statutory and regulatory  filings
or engagements, were $31,328 and $20,880 in 2003 and 2002, respectively.

Audit-Related Fees

     Consists of fees for  assurance and related  services  that are  reasonably
related to the  performance  of the audit or review of financial  statements and
are not  reported  under  "Audit  Fees." These  services  include  consultations
concerning financial accounting and reporting standards.


                                       22

<PAGE>



Tax Fees

     Consists of fees for products and services othe than the services  reported
above. The tax fees were $1,800 in 2003 and 2002.

All Other Fees

     There  were no fees  billed  in  2003  or  2002 by th  Company's  principal
accountant  for products or services  provided  other than those included in the
"Audit Fee" and "Tax Fees" above.



                                       23

<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 30, 2004

                                                By: /s/ Philip J. Myers

                                                     Philip J. Myers, 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/ Philip J. Myers Date:        03/30/04
---------------------------------- ---------------
Philip J. Myers
President, Treasurer and Director

By: /s/ Dennis J. Doyle Date:        03/30/04
----------------------------------- --------------
Dennis J. Doyle, Director

By: /s/ Michael G. Holmquist Date:   03/30/04
----------------------------------- --------------
Michael G. Holmquist, Director

By: /s/ Robert O. Naegele, Jr. Date: 03/30/04
----------------------------------- --------------
Robert O. Naegele, Jr., Director

By: /s/ Kirbyjon H. Caldwell Date:   03/30/04
----------------------------------- --------------
Kirbyjon H. Caldwell, Director




                                       24

<PAGE>




INDEX TO EXHIBITS


<TABLE>
<CAPTION>

  Exhibit Title
    No.
<S>  <C>                                                                                <C>
     3.1  Amended and Restated Articles of Incorporation                                3

     3.2  Second Amended and Restated Bylaws                                            4

     4.1  Specimen Common Stock Certificate                                             3

     4.2  Trust Indenture between the Company and The Herring National Bank             2

     10.1 Amended and Restated REIT Advisory  Agreement  Between the Company and        4
          Church Loan Advisory, Inc.

     10.2 Amendment No. 1 to Advisory  Agreement  Between the Company and Church        1
          Loan Advisors, Inc.

     10.3 Dividend Reinvestment Plan                                                    1

     10.4 Line of Credit Agreement with Beacon Bank dated March 18, 2002                2

     10.5 $2,000,000 Promissory Note and Combined Security Agreement between the        2
          Company and Beacon Bank dated March 18, 2002

     10.7 Security Agreement between the Company and The He Bank, as Trustee            2

     31.1 Certification Pursuant to Section 302of Sarbanes 2002.                        5

     32.1 Certification  Pursuant to 18 U.S.C. Section 1350, pursuant to Section        5
          906 of the Sarbanes Oxley Act of 2002


     (1)  Incorporated   herein  by  reference  to  th  Company's   Registration
          Statement on Form S-11 filed June 29, 1999.
     (2)  Incorporated   herein  by  reference  to  th  Company's   Registration
          Statement on Form S-11/A filed April 26, 2002.
     (3)  Incorporated   herein  by  reference  to  th  Company's   Registration
          Statement on Form 8-A filed April 30, 1999.
     (4)  Incorporated  herein  by  reference  to  the  Company's   Registration
          Statement on Form S-11 filed December 21, 2001.
     (5)  Filed herewith
</TABLE>



                                       25

<PAGE>





                                                                    Exhibit 31.1


                             OFFICER'S CERTIFICATE

                            PURSUANT TO SECTION 302

I, Philip J. Myers,  Chief  Executive  Officer  and Chief  Financial  Officer of
American Church Mortgage Company (the "Company") certify that:

     1.   I have  reviewed  this form  10-KSB of the Company for the fiscal year
          ended December 31, 2003:

     2.   Based on my  knowledge,  this  report  does  not  contain  any  untrue
          statements  of a  material  fact  or omit to  state  a  material  fact
          necessary to make the statements  made, in light of the  circumstances
          under which such  statements we made, not  misleading  with respect to
          the period covered by this report;

     3.   Based on my knowledge,  the financial  statements and other  financial
          information  included in this report  fairly  present in all  material
          respects the financial condition, results of operations and cash flows
          of the Company as of and for, the periods presented in this report:

     4.   I am responsible for establishing and maintaining  disclosure controls
          and  procedures  (as defined in Exchange Act Rules 13a-5(e) and 15d-15
          (e)) for the Company and have:

          (a)  Designed such disclosure  controls and procedures,  or cause such
               disclosure  control  and  procedures  to be  designed  under  our
               supervision,  to ensure that material information relating to the
               small business issuer, including its consolidated subsidiaries is
               made known to me by others  within those  entities,  particularly
               during the perio in which this report is being prepared:

          (b)  Omitted in accordance with SE Release Nos. 33-8238 and 34- 47986

          (c)  Evaluated the effectiveness o the Company's  disclosure  controls
               and procedures and presented in this report our conclusions about
               the effectiveness of the disclosure  controls and procedures,  as
               of th end of the  period  covered  by this  report  based on such
               evaluation; and

          (d)  Disclosed  in this  report any change in the  Company's  internal
               control  over  financial   reporting  that  occurred  during  the
               Company's   most  recent  fiscal   quarter  that  has  materially
               affected,  or is  reasonably  likely to  materially  affect,  the
               Company's internal contro over financial reporting, and

     5. I have  disclosed,  based  on my  most  recent  evaluation  of  internal
controls  over  financial  reporting,  to the  Company's  auditors and the audit
committee  of th  Company's  board  of  directors  (or  persons  performing  the
equivalent functions):

          (a)  All significant deficiencies and material weaknesses in th design
               or operation of internal controls over financial  reporting which
               are  reasonabl  likely  to  adversely  affect  th small  business
               issuer's  ability  to  record,  process,  summarized  and  report
               financial information; and

          (b)  any fraud,  whether or not material,  that involves management or
               other employees who have a significant  role i the small business
               issuer's internal control over financial reporting.

Dated: March 30, 2004


                                   By: /s/ Philip J. Myers
                                       Chief Executive Officer and
                                       Chief Financial Officer



                                       26

<PAGE>


                                                                    Exhibit 32.1

                           CERTIFICATION PURSUANT TO
                           18 U.S.C. SECTION1350T TO
                           AS ADOPTED PURSUANT TO TO
                 SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection  with the Annual Report of America  Church  Mortgage  Company
(the  "Company")  on Form 10-KSB for the fiscal year ended  December 31, 2003 as
filed with the  Securities  and  Exchange  Commission  on the date  hereof  (the
"Report"), the undersigned,  in the capacities and on the dates indicated below,
hereby  certifies  pursuant to 18 U.S.C.  Section 1350,  as adopted  pursuant to
Section of the Sarbanes-Oxley Act of 2002, that to this knowledge:

          1.   The Report fully complies with the  requirements of Section 13(a)
               or 15(d) of the Securities Exchange Act of 1934 and

          2.   The information  contained in the Repor fairly  presents,  in all
               material  respects,   the  financial  condition  and  results  of
               operation of the Company.

Dated: March 30, 2004

                                   By: /s/ Philip J. Myers
                                       Chief Executive Officer and
                                       Chief Financial Officer


















                                       27

<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,  2003  and  2002  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 auditing standards generally accepted
in the  United  States of  America.  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, 2003 and 2002,  and the results of its operations and
its  cash  flows  for the  years  then  ended,  in  conformity  with  accounting
principles generally accepted in the United States of America.


                                                  Certified Public Accountants

Minneapolis, Minnesota
February 24, 2004

                                      F-1
<PAGE>


                        AMERICAN CHURCH MORTGAGE COMPANY

                                  Balance Sheet




<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------------
                                                                                                  December 31
                      ASSETS                                                              2003                  2002
------------------------------------------------------------------------------------------------------------------------------------

Current Assets
<S>                                                                                   <C>                 <C>
    Cash and equivalents                                                              $ 4,368,769         $  7,852,220
    Accounts receivable                                                                    61,423               63,602
    Interest receivable                                                                   135,648               94,385
    Current maturities of mortgage loans receivable, net of
          allowance of $52,111 and $112,111 at
          December 31, 2003 and 2002                                                      919,859              290,759
    Current maturities of bond portfolio                                                   54,000               47,000
                                                                                      -----------          -----------
            Total current assets                                                        5,539,699            8,347,966


Mortgage Loans Receivable, net of current maturities                                   25,383,192           16,140,961

Real-Estate Held for Sale                                                                 156,352

Deferred Investors Saver Certificates Offering Costs,
    net of accumulated amortization of $143,339 and
    $29,875 at December 31, 2003 and 2002                                                 568,458              377,174

Bond Portfolio, net of current maturities                                               5,431,286            4,309,637


Other                                                                                      60,000               60,000
                                                                                    -------------        -------------

            Total assets                                                              $37,138,987          $29,235,738

                                                                                       ==========           ==========
</TABLE>

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

                                      F-2
<PAGE>


                        AMERICAN CHURCH MORTGAGE COMPANY

                                  Balance Sheet




<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                  December 31
            LIABILITIES AND STOCKHOLDERS' EQUITY                                              2003               2002
------------------------------------------------------------------------------------------------------------------------------------


Current Liabilities
<S>                                                                                    <C>               <C>
    Current maturities of investor saver certificates                                  $     684,000
    Accounts payable                                                                          17,296     $       39,690
    Mortgage loan commitment                                                                                  1,243,827
    Deferred income                                                                           31,630             18,247
    Dividends payable                                                                        411,481            361,941
                                                                                        ------------       ------------
            Total current liabilities                                                      1,144,407          1,663,705


Deferred Income, net of current maturities                                                   556,673            346,722


Investors Saver Certificates                                                              13,573,000          7,428,000


Stockholders' Equity
    Common stock, par value $.01 per share
        Authorized, 30,000,000 shares
        Issued and outstanding, 2,452,277 at December 31, 2003
            and 2,205,568 shares at December 31, 2002                                         24,523             22,056
    Additional paid-in capital                                                            22,471,234         20,182,798
    Accumulated deficit                                                                     (630,850)          (407,543)
                                                                                        ------------       ------------
            Total stockholders' equity                                                    21,864,907         19,797,311
                                                                                          ----------         ----------

            Total liabilities and equity                                                 $37,138,987        $29,235,738
                                                                                          ==========         ==========

</TABLE>

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

                                      F-3
<PAGE>


                        AMERICAN CHURCH MORTGAGE COMPANY

                             Statement of Operations




<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------------
                                                                                           Years Ended December 31
                                                                                            2003               2002
------------------------------------------------------------------------------------------------------------------------------------


<S>                                                                                      <C>                <C>
Interest Income                                                                          $2,459,254         $1,785,443

Operating Expenses
  Other operating expenses                                                                  406,362            376,852
  Real-estate impairment loss                                                                60,000
                                                                                          ---------          ---------
     Total operating expenses                                                               466,362            376,852
                                                                                          ---------          ---------

Operating Income                                                                          1,992,892          1,408,591

Other Expense
    Interest expense                                                                        692,138            118,650

Income Taxes                                                                                  -                 -
                                                                                          ---------          ---------

Net Income                                                                               $1,300,754         $1,289,941
                                                                                          =========          =========

Basic and Diluted Income Per Common Share                                                $      .55         $      .66
                                                                                          =========          =========

Weighted Average Common Shares Outstanding                                                2,345,604          1,964,428
                                                                                          =========          =========

</TABLE>
Notes to Financial Statements are an integral part of this Statement.

                                      F-4
<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, 2001                             1,769,774     $17,698           $16,256,712       ($   201,115)

    Issuance of 464,544 shares of
        common stock, net of offering
        costs                                            464,544       4,645             4,194,541

    Redemption of 28,750 shares of
        common stock                                      (28,750)      (287)             (268,455)

    Net income                                                                                              1,289,941

    Dividends declared                                                                                     (1,496,369)
                                                       ---------      ------            ----------          ---------

Balance, December 31, 2002                             2,205,568      22,056            20,182,798           (407,543)

    Issuance of 263,292 shares of
         common stock, net of offering
         costs                                           263,292       2,633             2,439,755

    Redemption of 16,583 shares of
         common stock                                    (16,583)       (166)             (151,319)

    Net income                                                                                              1,300,754

    Dividends declared                                                                                     (1,524,061)
                                                      ---------       ------           -----------          ----------

Balance, December 31, 2003                            2,452,277      $24,523           $22,471,234        ($   630,850)
                                                      =========       ======            ==========          ==========


Notes to Financial Statements are an integral part of this Statement.
</TABLE>
                                      F-5
<PAGE>


                        AMERICAN CHURCH MORTGAGE COMPANY

                             Statement of Cash Flows

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                           Years Ended December 31
                                                                                         2003                  2002
------------------------------------------------------------------------------------------------------------------------------------

Cash Flows from Operating Activities
<S>                                                                                  <C>                  <C>
    Net income                                                                       $  1,300,754         $  1,289,941
    Adjustments to reconcile net income to net cash
        from operating activities:
        Impairment loss on real-estate                                                     60,000
        Provision for losses on mortgage loans receivable                                 (60,000)             101,000
        Amortization of deferred bond offering costs                                      113,464               29,875
        Deferred income                                                                   223,334              104,027
        Change in assets and liabilities
            Accounts receivable                                                             2,179               (5,594)
            Interest receivable                                                           (41,263)             (28,149)
            Accounts payable                                                              (22,394)              35,340
                                                                                        ---------            ---------
            Net cash from operating activities                                          1,576,074            1,526,440

Cash Flows from Investing Activities
    Investment in mortgage loans receivable                                           (14,596,927)          (5,261,000)
    Collections of mortgage loans receivable                                            3,325,417            1,995,300
    Investment in bond portfolio                                                       (2,763,890)          (2,048,000)
    Proceeds from bond portfolio called/sold                                            1,635,241              853,874
                                                                                       ----------            ----------
            Net cash used for investing activities                                    (12,400,159)          (4,459,826)

Cash Flows from Financing Activities
    Proceeds from investors saver certificates                                          6,829,000            7,428,000
    Proceeds from stock offering, net of offering costs                                 2,442,392            4,199,186
    Payments for deferred saver certificate offering costs                               (304,752)            (378,755)
    Deferred equity offering costs                                                                              28,293
    Stock redemptions                                                                    (151,485)            (268,742)
    Dividends paid                                                                     (1,474,521)          (1,478,932)
                                                                                        ---------            ---------
            Net cash from financing activities                                          7,340,634            9,529,050
                                                                                        ---------            ---------

Net Increase (Decrease) in Cash and Equivalents                                        (3,483,451)           6,595,664

Cash and Equivalents - Beginning of Year                                                7,852,220            1,256,556
                                                                                        ---------            ---------

Cash and Equivalents - End of Year                                                   $  4,368,769         $  7,852,220
                                                                                        =========            =========

                                  - Continued -

Notes to Financial Statements are an integral part of this Statement.
</TABLE>
                                      F-6
<PAGE>


                        AMERICAN CHURCH MORTGAGE COMPANY

                       Statement of Cash Flows - Continued




<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                           Years Ended December 31
                                                                                         2003                   2002
------------------------------------------------------------------------------------------------------------------------------------



Supplemental Schedule of Noncash Financing and
    Investing Activities
    Offering costs reclassified and charged to additional
<S>                                                                                  <C>                    <C>
        paid-in capital                                                              $     49,478           $   182,628
                                                                                      ===========            ==========
    Dividends payable                                                                 $   411,481           $   361,941
                                                                                       ==========            ==========
    Mortgage loan commitment                                                                                 $1,243,827
                                                                                                              =========
    Reclassification of mortgage receivable to
        real-estate held for sale                                                     $   216,352
                                                                                       ==========

Supplemental Cash Flow Information
    Cash paid during the year for
        Interest                                                                      $   692,138           $   131,367
                                                                                       ==========            ==========

Notes to Financial Statements are an integral part of this Statement.
</TABLE>

                                      F-7
<PAGE>


                        AMERICAN CHURCH MORTGAGE COMPANY

                          Notes to Financial Statements

                           December 31, 2003 and 2002




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.

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.  The most
sensitive  estimates  relate  to the  allowance  for  mortgage  loans,  and  the
valuation of the bond portfolio.  It is at least reasonably  possible that these
estimates  could  change in the near term and that the effect of the change,  in
any, would be material to the financial statements.

Cash

The  Company  considers  all  highly  liquid  debt  instruments  purchased  with
maturities 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, 2003 and 2002, such
investments  were  $361,055 and  $1,852,548,  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."


                                      F-8
<PAGE>



                        AMERICAN CHURCH MORTGAGE COMPANY

                          Notes to Financial Statements

                           December 31, 2003 and 2002




The  Company   classifies   its  bond   portfolio   as   "available-for   sale."
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.  During 2003,  the Company sold $56,000 of its bonds below par
(which was the Company's cost) to an affiliate of the Advisor.  During 2002, the
Company  sold  $497,000 of its bonds at par, to an affiliate of the Advisor (see
Note 5). There were no losses on the sale of the bonds in 2003 and 2002.

Allowance for Mortgage Loans Receivable

The Company  records its loans at their  estimated  net  realizable  value.  The
Company's loan policy  provides an allowance for estimated  uncollectible  loans
based on its evaluation of the current status of its loan portfolio. This policy
reserves for principal  amounts  outstanding on a particular  loan if cumulative
interruptions occur in the normal payment schedule of a loan. The Company policy
will reserve for the  outstanding  principal  amount of a loan in the  Company's
portfolio  if the  amount  is in  doubt  of being  collected.  Additionally,  no
interest  income is  recognized  on impaired  loans.  At December 31, 2003,  the
Company reserved $52,111 for four mortgage loans that are three or more mortgage
payments in arrears.

At December 31, 2002, the Company reserved  $112,111 for two mortgage loans that
are three or more mortgage payments in arrears,  one of which was in the process
of being  foreclosed.  The total impaired loans,  which are loans that have been
foreclosed  or are no longer  performing,  were $0 and  $277,787 at December 31,
2003 and 2002, respectively.

Real-Estate Held for Sale

Foreclosure  was completed on a church located in Battle Creek,  Michigan valued
at  $156,352.  The church  congregation  disbanded  and the church  property  is
currently  unoccupied.  The Company owns and has taken  possession of the church
and has listed the property for sale through a local realtor.

Deferred Offering Costs

Deferred equity offering costs are charged to  stockholders'  equity when equity
subscriptions are received.

Deferred investors saver certificates offering costs are amortized over the term
of the  certificates  using the  straight  line method  which  approximates  the
effective interest method.

                                      F-9
<PAGE>


                        AMERICAN CHURCH MORTGAGE COMPANY

                          Notes to Financial Statements

                           December 31, 2003 and 2002




Revenue Recognition

Interest  income on mortgage loans is recognized as earned.  Interest  income on
the bond portfolio is recognized on the interest payable date.

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

Dividend Re-investment Plan

Dividends  re-invested  to purchase  common stock were $266,850 and $217,419 for
the years ended December 31, 2003 and 2002, respectively.

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.

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.

Newly Issued Pronouncements

The Company has considered the accounting  pronouncements  issued after December
2002 and has determined that none of these  pronouncements  will have a material
impact on its financial statements.







                                      F-10
<PAGE>


                        AMERICAN CHURCH MORTGAGE COMPANY

                          Notes to Financial Statements

                           December 31, 2003 and 2002




2.  MORTGAGE LOANS AND BOND PORTFOLIO

At December 31, 2003, the Company had first mortgage loans  receivable  totaling
$26,355,162.  The loans bear interest ranging from 6.00% to 12.00%.  At December
31, 2002, the Company had first mortgage loans receivable  totaling  $16,543,831
that bore  interest  ranging  from 8.50% to 12.00%.  Included in mortgage  loans
receivable for 2002 is $1,243,827,  representing  loans that were closed in 2002
and the proceeds disbursed in 2003.

The Company  also had a portfolio  of secured  church bonds at December 31, 2003
and 2002, which are carried at cost plus amortized  interest  income.  The bonds
pay either  semi-annual or quarterly  interest ranging from 5.00% to 12.00%. The
combined principal of $5,533,860 at December 31, 2003 is due at various maturity
dates between  February 1, 2004 and July 15, 2023. Six bond issues comprised 84%
and  86% of the  Company's  bond  portfolio  at  December  31,  2003  and  2002,
respectively.

The maturity schedule for mortgage loans and bonds receivable as of December 31,
2003, is as follows:

<TABLE>
<CAPTION>
                                                                      Mortgage Loans       Bond Portfolio

<S>        <C>                                                      <C>                      <C>
           2004                                                     $     919,859            $     54,000
           2005                                                           619,142                  55,000
           2006                                                           680,076                  57,000
           2007                                                           747,063                 198,000
           2008                                                           820,049                 175,070
           Thereafter                                                  22,568,973               4,994,790
                                                                       ----------               ---------
                                                                       26,355,162               5,533,860
           Less loan loss reserves                                        (52,111)
           Less discount from par                                                                 (48,574)
                                                                       ----------               ---------

                       Totals                                         $26,303,051              $5,485,286
                                                                       ==========               =========
</TABLE>









                                      F-11
<PAGE>


                        AMERICAN CHURCH MORTGAGE COMPANY

                          Notes to Financial Statements

                           December 31, 2003 and 2002




3.  INVESTORS SAVER CERTIFICATES

Investors saver certificates (see Note 7) are collateralized by certain mortgage
loans  receivable  of  approximately   the  same  value  as  the   certificates.
Additionally,  the Company incurred  deferred offering costs related to the debt
offering. The maturity schedule for the investors saver certificates at December
31, 2003 is as follows:

                                                          Investor Saver
                                                           Certificates
                                                       --------------------
                                                       --------------------

           2004                                           $     684,000
           2005                                               1,321,000
           2006                                               1,982,000
           2007                                               2,900,000
           2008                                               2,374,000
           Thereafter                                         4,996,000
                                                            -----------

                      Totals                                $14,257,000
                                                             ==========

Interest expense related to these  Certificates for the years ended December 31,
2003 and 2002, respectively,  is $692,138 and $118,650, and is included in other
expenses.

4.  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 5) an option to purchase  3,000
shares of common stock  annually upon their  re-election.  The purchase price of
the  stock  is the  fair  market  value  at the  grant  date.  No  options  were
outstanding at December 31, 2003 due to the termination of the plan. At December
31,  2002,  99,000  shares at a price of $10 per option  were  outstanding.  The
options  were  exercisable  November  15,  1996  and  incrementally  at one year
intervals after the date of grant and expired November 15, 2002 through November
15, 2006.  No options were  exercised as of December 31, 2002.  The Stock Option
Plan was terminated by the Company's  Board of Directors in January 2003 and all
outstanding  stock options were cancelled,  subject to approval by the Company's
shareholders. No options were exercised during the Plan's existence.

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,  as  amended,  are not
material to its financial statements.

                                      F-12
<PAGE>


                        AMERICAN CHURCH MORTGAGE COMPANY

                          Notes to Financial Statements

                           December 31, 2003 and 2002




5.  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 has expensed Advisor management
and  origination  fees of  approximately  $545,000 and $291,000  during 2003 and
2002, respectively.

The Advisor and the Company are  related  through  common  ownership  and common
management. See Notes 1 and 7 for additional transactions.

6.  INCOME TAXES

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 90% of its
taxable  income.  In 2003,  the  Company  had pretax  income of  $1,300,754  and
distributions  to shareholders  in the form of dividends  during the tax year of
$1,524,061.  The expected tax expense to the Company,  pre-dividends  would have
been  $442,256.  In 2002,  the  Company  had  pretax  income  subject  to tax of
$1,289,941 and distributions to shareholders in the form of dividends during the
tax year of $1,496,369. The expected tax expense to the Company,  pre-dividends,
would have been $438,580 in 2002.

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

                                                 2003                  2002
                                                 ----                  ----


         Expected tax expense                  $442,256             $438,580
         Benefit of REIT distributions         (490,990)            (508,289)
         Valuation allowance                     48,734               69,709
                                                -------              -------

                     Totals                    $     -              $    -
                                                =======              =======

                                      F-13
<PAGE>


                        AMERICAN CHURCH MORTGAGE COMPANY

                          Notes to Financial Statements

                           December 31, 2003 and 2002



<TABLE>
<CAPTION>
The components of deferred income taxes are as follows:
                                                                                     2003              2002

<S>                                                                                <C>               <C>
         Loan origination fees                                                     $172,823          $124,089
         Loan loss allowance                                                         17,718            38,118
         Valuation allowance                                                       (130,541)         (102,207)
                                                                                   --------           -------

                                                                                  $  60,000         $  60,000
                                                                                   ========          ========

The total deferred tax assets are as follows:
                                                                                    2003               2002

         Deferred tax assets                                                       $190,541          $162,207
         Deferred tax asset valuation allowance                                    (130,541)         (102,207)
                                                                                    -------           -------

                     Net deferred tax asset                                       $  60,000         $  60,000
                                                                                   ========          ========
</TABLE>
The change in the valuation allowance was $28,334 and $69,709 for 2003 and 2002,
respectively.

7.  PUBLIC OFFERINGS OF THE COMPANY

In December 2001, the Company filed a Registration Statement with the Securities
and Exchange Commission for a fourth public offering of its common stock and its
first public  offering of debt  securities,  which the  Securities  and Exchange
Commission  declared effective April 26, 2002. The Company is offering 1,500,000
shares of its common stock at a price of $10 per share and $15,000,000 principal
amount of its Series "A" secured  investor  certificates.  The  certificates pay
quarterly  interest with two,  three,  four, five and seven year maturities with
interest rates ranging from 4.00% to 7.00%. Certificates may be purchased in any
multiple of $1,000.  The offering is being  underwritten  by American  Investors
Group (an  affiliate  of the Advisor) on a "best  efforts"  basis and no minimum
sale of stock or  certificates  will be  required.  As of December  31, 2003 and
2002,  respectively,  the Company has sold 671,450 and 452,424  shares of common
stock  and  $14,257,000  and  $7,428,000  of its  Series  "A"  secured  investor
certificates.

Pursuant  to the  terms of the  Underwriting  Agreement,  the  Company  incurred
expense to the managing underwriter and participating broker-dealers commissions
and non-reimbursable expenses of approximately $449,154 and $669,579 during 2003
and 2002, respectively, in connection with this public offering.

                                      F-14
<PAGE>


                        AMERICAN CHURCH MORTGAGE COMPANY

                          Notes to Financial Statements

                           December 31, 2003 and 2002




8.  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, 2003 and 2002:
<TABLE>
<CAPTION>

                                                                 2003                                 2002
                                                ------------------------------------   -------------------------------
                                                      Carrying              Fair           Carrying           Fair
                                                       Amount              Value            Amount            Value
                                                     ----------        -------------      ----------      ------------

<S>                                               <C>                <C>               <C>                <C>
      Cash and equivalents                        $  4,368,769       $  4,368,769      $  7,852,220       $  7,852,220
      Accounts receivable                               61,423             61,423            63,602             63,602
      Interest receivable                              135,648            135,648            94,385             94,385
      Mortgage loans receivable                     26,303,051         26,303,051        16,431,720         16,431,720
      Bond portfolio                                 5,485,286          5,485,286         4,356,637          4,356,637
      Investors saver certificates                  14,257,000         14,257,000         7,428,000          7,428,000
</TABLE>

The carrying value of cash and equivalents approximates fair value. The carrying
value of the mortgage loans  receivable  approximates  fair value because of the
substantial  turnover and activity in this portfolio.  The carrying value of the
bond portfolio  approximates  fair value because of minimal  changes in interest
rates and quality of the  underlying  collateral  since  initial  purchase.  The
carrying  value of the  investor  saver  certificates  approximates  fair  value
because  the  interest  rates that the  certificates  have been sold at have not
changed significantly in the past year.

9.  LINE OF CREDIT

The Company obtained a $1,000,000 line of credit with its bank on July 22, 1999,
which  was  increased  to  $2,000,000  on March 18,  2002,  subject  to  certain
borrowing base limitations,  through August 1, 2004. Interest is charged at 1/2%
over the prime rate  totaling  4.50% and 4.75% at  December  31,  2003 and 2002,
respectively. The line of credit is collateralized by the mortgage secured bonds
held by the Company.  There was no balance  outstanding at December 31, 2003 and
2002.  Interest  expense  related to the line of credit was $0 and  $12,717  for
December 31, 2003 and 2002, respectively.




                                      F-15
<PAGE>















                        AMERICAN CHURCH MORTGAGE COMPANY

                              Minnetonka, Minnesota

                              Financial Statements

                           December 31, 2003 and 2002