<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 26, 1999.
REGISTRATION NO. 333-81819
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
------------------------
FORM S-11/A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AMERICAN CHURCH MORTGAGE COMPANY
(Exact name of registrant as specified in governing instruments)
10237 YELLOW CIRCLE DRIVE
MINNETONKA, MINNESOTA 55343
(Address of principal executive offices of registrant)
DAVID G. REINHART, PRESIDENT & TREASURER
AMERICAN CHURCH MORTGAGE COMPANY
10237 YELLOW CIRCLE DRIVE
MINNETONKA, MINNESOTA 55343
(Name and address of agent for service)
------------------------
COPIES TO:
PHILIP T. COLTON, ESQ.
MAUN & SIMON, PLC
2000 MIDWEST PLAZA BUILDING WEST
801 NICOLLET MALL
MINNEAPOLIS, MN 55402
(Counsel for Company)
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES AMOUNT BEING OFFERING PRICE AGGREGATE AMOUNT OF
BEING REGISTERED REGISTERED PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, $.01 par value... 1,650,000 Shares(1) $10.00 $16,500,000 $5,000.00
</TABLE>
(1) Includes (i) 1,500,000 authorized and unissued shares to be offered to the
public, and (ii) 150,000 authorized and unissued shares reserved for
issuance under the Registrant's dividend reinvestment plan.
(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(a) under the Securities Act of 1933, as amended
based on (i) actual $10.00 per share for 1,500,000 shares to be offered to
public, and (ii) estimated $10.00 per share purchase price of 150,000 shares
to be registered and reserved for future issuance under the Registrant's
dividend reinvestment plan. There is no current market for the shares.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a)
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
AMERICAN CHURCH MORTGAGE COMPANY
PART 1
INFORMATION REQUIRED IN PROSPECTUS
CROSS REFERENCE SHEET
REQUIRED BY ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION IN FORM S-11 HEADING IN PROSPECTUS
- ---------------------------------------------------------------- -----------------------------------------------------
<C> <S> <C>
1. Forepart of Registration Statement and Outside Front
Cover Page of Prospectus........................... Cover Page of Registration Statement; Outside Cover
Page of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus......................................... Inside Front and Outside Back Cover Pages of
Prospectus
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges.......................... Front Cover Page; Prospectus Summary; Risk Factors
4. Determination of Offering Price...................... Risk Factors--The Price of the Shares May Not Be
Their Actual Value
5. Dilution............................................. Not Applicable
6. Selling Security Holders............................. Not Applicable
7. Plan of Distribution................................. Plan of Distribution
8. Use of Proceeds...................................... Use of Proceeds; Our Business--Financing Business
9. Selected Financial Data.............................. Summary--Summary Financial Information;
Capitalization; Selected Financial Data.
10. Management's Discussion and Analysis of Financial
Condition and Results of Operations................ Management's Discussion and Analysis of Financial
Condition and Results of Operations
11. General Information as to Registrant................. Our Business; Management; Security Ownership of
Management and Others; Certain Relationships and
Transactions with Management; Description of
Capital Stock
12. Policy with Respect to Certain Activities............ Our Business;--Financing Business;--Mortgage Loan
Processing and Underwriting;--Loan Funding and Bank
Borrowing;--Financing Policies;--Prohibited
Investments and Activities;--Policy Changes;
Prospectus Summary--Business Objectives and
Policies
13. Investment Policies of Registrant.................... Our Business--Financing Policies; Prospectus
Summary--Business Objectives and Policies
14. Description of Real Estate........................... Not Applicable
15. Operating Data....................................... Not Applicable
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION IN FORM S-11 HEADING IN PROSPECTUS
- ---------------------------------------------------------------- -----------------------------------------------------
<C> <S> <C>
16. Tax Treatment of Registrant and Its Security
Holders............................................ Summary--Our REIT Status; Risk Factor-Risk Related to
Us--We Are Dependent Upon Our Qualification and
Status as a Real Estate Investment Trust; Federal
Income Tax Consequences
17. Market Price of and Dividends on Registrant's Common
Equity and Related Shareholder Matters............. Summary--Dividends and Distributions; Distributions
18. Description of Registrant's Securities............... Description of Capital Stock
19. Legal Proceedings.................................... Not Applicable
20. Security Ownership of Certain Beneficial Owners and
Management......................................... Security Ownership of Management and Others
21. Directors and Executive Officers..................... Management; The Advisor and the Advisory Agreement
22. Executive Compensation............................... Compensation to Advisor and Affiliates; Management
23. Certain Relationships and Related Transactions....... Risk Factors--Risks Relating to Management;
Management; Security Ownership of Management and
Others; Our Business; Certain Relationships and
Transactions with Management; The Advisor and the
Advisory Agreement; Compensation to Advisor and
Affiliates; Conflicts of Interest; Reports to
Shareholders, Rights of Examination and Additional
Information
24. Selection, Management and Custody of Registrant's
Investments........................................ Risk Factors; Use of Proceeds; Conflicts of Interest;
Compensation to Advisor and Affiliates; Business of
the Company; Management; The Advisor and the
Advisory Agreement
25. Policies with Respect to Certain Transactions........ Risk Factors; Use of Proceeds; Conflicts of Interest;
Compensation to Advisor and Affiliates; Our
Business; Management; The Advisor and the Advisory
Agreement; Plan of Distribution
26. Limitations of Liability............................. Risk Factors; The Advisor and the Advisory Agreement;
Plan of Distribution; Management--Fiduciary
Responsibility of Board of Directors
27. Financial Statements and Information................. Financial Statements
28. Interests of Named Experts and Counsel............... Legal Matters; Experts
29. Disclosure of Commission Position on Indemnification
of Securities Act Liabilities...................... Commission Position on Indemnification of Securities
Act Liabilities
30. Quantitative and Qualitative Disclosures About Market
Risk............................................... Risk Factors--Risks Related to Mortgage
Lending;--Risks Related to Mortgage Lending to
Churches;--Future Changes in Tax Laws May Affect Our
REIT Status; Distributions; Our Business; Federal
Income Tax Consequences
</TABLE>
3
<PAGE>
PROSPECTUS
1,500,000 SHARES
AMERICAN CHURCH MORTGAGE COMPANY
COMMON STOCK
$10.00 PER SHARE
American Church Mortgage Company is a real estate investment trust, or
"REIT." We make mortgage loans to churches and other non-profit religious
organizations. We also purchase bonds issued by such organizations.
The net proceeds from the sale of our common stock fund most of the loans we
make and the debt obligations we purchase. We distribute our income to our
shareholders quarter-annually.
There is no public market for the shares. Shareholders may have difficulty
selling their shares when they want to. Shareholders may have difficulty
reselling shares at the price at which they were purchased.
INVESTMENT IN THE SHARES INVOLVES RISKS AND CONFLICTS OF INTEREST. SEE "RISK
FACTORS" AND "CONFLICTS OF INTEREST."
<TABLE>
<CAPTION>
PRICE TO
PUBLIC SELLING COMMISSION PROCEEDS TO US
<S> <C> <C> <C>
Per Share..................................................... $10.00 $.595 $9.405
Total......................................................... $15,000,000 $892,500 $14,107,500
</TABLE>
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THESE SECURITIES OR DETERMINED THAT THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
AMERICAN INVESTORS GROUP, INC.
Minneapolis, Minnesota
August 26, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUMMARY.......................................... 4
RISK FACTORS................................................ 10
WHO MAY INVEST.............................................. 14
USE OF PROCEEDS............................................. 14
COMPENSATION TO ADVISOR AND AFFILIATES...................... 15
CONFLICTS OF INTEREST....................................... 17
DISTRIBUTIONS............................................... 19
CAPITALIZATION.............................................. 21
SELECTED FINANCIAL DATA..................................... 22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 23
OUR BUSINESS................................................ 26
MANAGEMENT.................................................. 35
SECURITY OWNERSHIP OF MANAGEMENT AND OTHERS................. 39
CERTAIN RELATIONSHIPS AND TRANSACTIONS WITH MANAGEMENT...... 40
THE ADVISOR AND THE ADVISORY AGREEMENT...................... 41
FEDERAL INCOME TAX CONSEQUENCES............................. 43
ERISA CONSEQUENCES.......................................... 49
DESCRIPTION OF CAPITAL STOCK................................ 50
SUMMARY OF THE ORGANIZATIONAL DOCUMENTS..................... 52
PLAN OF DISTRIBUTION........................................ 56
COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES............................................... 58
LEGAL MATTERS............................................... 58
EXPERTS..................................................... 58
REPORTS TO SHAREHOLDERS, AND RIGHTS OF EXAMINATION.......... 59
ADDITIONAL INFORMATION...................................... 60
GLOSSARY.................................................... 61
FINANCIAL STATEMENTS........................................ F-1
APPENDIX I.................................................. A-1
EXHIBIT A--SUBSCRIPTION AGREEMENT
EXHIBIT B--SUITABILITY CERTIFICATE
</TABLE>
3
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS SOME INFORMATION FROM THE PROSPECTUS. IT MAY NOT BE
ALL THE INFORMATION THAT IS IMPORTANT TO YOU. TO UNDERSTAND THIS OFFERING FULLY,
YOU SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY, INCLUDING THE RISK FACTORS AND
THE FINANCIAL STATEMENTS. CERTAIN TERMS ARE DEFINED IN THE GLOSSARY BEGINNING AT
PAGE 61. IN THIS PROSPECTUS, AMERICAN CHURCH MORTGAGE COMPANY REFERS TO ITSELF
AS "WE," "US," AND "OUR." OUR PROSPECTIVE INVESTORS ARE SOMETIMES REFERRED TO AS
"YOU" OR "YOUR."
AMERICAN CHURCH MORTGAGE COMPANY
American Church Mortgage Company is a real estate investment trust, or REIT.
We make mortgage-backed loans from $100,000 to $1,000,000 to churches and other
non-profit religious organizations for the purchase, construction or refinancing
of real estate and improvements. We commenced active business operations on
April 15, 1996. We concluded our initial public offering on November 8, 1996 and
our second public offering on January 22, 1999. As of June 30, 1999 we had
funded 33 mortgage loans in the aggregate principal amount of $10,765,750, and
had purchased for $3,028,921 church bonds having a face value of $3,047,300 Six
loans aggregating $1,832,000 have been repaid early by the borrowers. We intend
to lend funds pursuant to our business plan as funds from the sale of the shares
become available.
American Church Mortgage Company was incorporated in the State of Minnesota
on May 27, 1994. Our executive offices and those of the Advisor are located at
10237 Yellow Circle Drive, Minnetonka (Minneapolis), Minnesota 55343. Our
telephone number is (612) 945-9455.
OUR ADVISOR
We are managed by Church Loan Advisors, Inc. Church Loan Advisors, Inc. is
referred to in this prospectus as CLA or the Advisor. CLA is owned by V. James
Davis, David G. Reinhart and Philip J. Myers. Messrs. Davis, Reinhart and Myers
have 14, 16 and 10 years of experience, respectively, in the area of
mortgage-backed lending to churches through their current and former
associations with American Investors Group, Inc. American Investors Group, Inc.,
which is the underwriter of this offering, is referred to in this prospectus as
the Underwriter or American. Pursuant to the Advisory Agreement between us and
the Advisor, we must pay CLA advisory fees and certain expenses. We also pay CLA
one-half of any origination fees we collect.
OUR REIT STATUS
As a REIT, we generally are not subject to federal income tax on income that
we distribute to our shareholders. Under the Internal Revenue Code, we are
subject to numerous organizational and operational requirements, including a
requirement that we distribute at least 95% of our taxable income as calculated
on an annual basis. If we fail to qualify for taxation as a REIT in any year,
our income will be taxed at regular corporate rates, and we may not be able to
qualify for treatment as a REIT for that year and the next four years. Even if
we qualify as a REIT for federal income tax purposes, we may be subject to
federal, state and local taxes on our income and property and to federal income
and excise taxes on our undistributed income.
CAPITAL STOCK
Our stock consists of 50,000,000 undesignated shares, of which the Board of
Directors has established 30,000,000 shares of Common Stock, par value $.01 per
share. In order to avoid inadvertent loss of REIT status, our Articles of
Incorporation impose limits on the number or percentage of shares that can be
owned by an individual or group.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered.............................. 1,500,000 Shares
Common Stock Outstanding Before Offering (1)...... 1,189,823 Shares
Common Stock Outstanding After Offering (2)....... 2,689,823 Shares
Percentage Owned by Non-Affiliates After
Offering........................................ 99%
Net Proceeds of Offering, Before Expenses......... $14,107,500
Use of Proceeds................................... Principally, to Make Mortgage-Backed Loans to
Churches and other non-profit religious
organizations.
</TABLE>
- ------------------------
(1) Excludes (i) 15,000 shares which each director and the President of the
Advisor (7 individuals; 105,000 shares in the aggregate) have an option to
purchase at a price of $10.00 per share (See "MANAGEMENT--WARRANTS AND
OPTIONS"); and (ii) shares which may be issued during this offering to
shareholders participating in our Dividend Reinvestment Plan.
(2) Assumes sale of all shares offered.
RISK FACTORS
An investment in the shares involves a degree of risk. See "RISK FACTORS"
for a more complete discussion of factors you should consider before purchasing
shares. Some of the significant risks include:
- As a "best efforts" offering, all or a material amount of the shares may
not be sold, and consequently, additional capital may not be available to
us.
- As a "no minimum" offering, there is no minimum number of shares that must
be sold, and we will receive the proceeds from the sale of shares as they
are sold.
- If we fail to maintain status as a REIT, then we will be taxed as a
corporation, which would reduce funds available for distribution to our
shareholders.
- Potential conflicts of interest and mutual benefits to our affiliates, the
Underwriter and the Advisor in connection with our formation, the offering
of the shares, and our on-going business operations could affect decisions
made by the Advisor on our behalf.
- There is no public trading market for the shares, and a market likely will
not develop after this offering.
- No single shareholder may own in excess of 9.8% of our outstanding shares.
This limitation could reduce our liquidity and the liquidity of our
shares, and lower market activity and the resulting opportunity for
shareholders to receive a premium for their shares.
- Fluctuations in interest rates or default in repayment of loans by
borrowers could adversely affect distributions to our shareholders.
5
<PAGE>
CONFLICTS OF INTEREST
A number of potential conflicts exist between us and the Advisor and its
principals. These conflicts include:
- our affiliates own both the Advisor and the Underwriter
- agreements between us and the Advisor and the Underwriter were not
negotiated at arm's-length
- we and the Underwriter have common business interests
- negotiations between us and the Advisor during the organization and
structuring of our operations were not at arm's-length
- the Advisory Agreement was not negotiated at arm's-length
- we share operations facilities with the Advisor and the Underwriter
The Advisor and its affiliates may engage in businesses similar to ours. We
compensate the Advisor and its affiliates for services rendered and pay an
Advisory Fee equal to 1.25% of Average Invested Assets.
OUR INVESTMENT OBJECTIVES
Our investment objectives are to provide our investors with:
- preservation of their investment capital through diversification (loaning
funds to many different borrowers and purchasing bonds issued by many
different issuers);
- greater security through investment in only mortgage-backed loans and
securities (providing collateral in the event of a default); and
- a higher level of distributable income than available in guaranteed or
government-backed fixed-income investments.
BUSINESS OBJECTIVES AND POLICIES
We seek to provide cash distributions of current income to our shareholders
through the implementation of our investment and operating strategy. We make
mortgage loans from $100,000 to $1,000,000 to churches and other non-profit
religious organizations throughout the United States. We seek to enhance returns
by:
- emphasizing shorter-term (0-5 years) and mid-term (5-15 years) loans and
construction loans
- seeking origination fees (i.e. "points") from the borrower at the outset
of a loan and upon any renewal of a loan
- making a limited amount of higher-interest rate second mortgage loans to
qualified borrowers
- purchasing a limited amount of mortgage-secured debt securities issued by
churches and other non-profit religious organizations
Our policies limit the amount of second mortgage loans to 20% of our Average
Invested Assets on the date any second mortgage loan is closed and limit the
amount of mortgage-secured debt securities to 30% of our Average Invested Assets
on the date of their purchase. All other mortgage loans we make are secured by a
first mortgage (or deed of trust). We may make longer-term fixed-interest rate
loans under certain circumstances. We may borrow up to 50% of our Average
Invested Assets.
6
<PAGE>
LENDING GUIDELINES
We follow specified lending guidelines and apply identified criteria in
evaluating the creditworthiness of potential borrowers. These guidelines and
criteria include:
- Loans we make will not exceed 75% of value of the real property and
improvements securing the loan.
- We may not loan more than $1,000,000 to a single borrower.
- We will require appraisals of the property securing our loans.
- The borrower must furnish us with a mortgagee title policy insuring our
interest in the collateral.
- The borrower's long-term debt (including the proposed loan) as of the date
of the mortgage loan may not exceed four times the borrower's gross income
for its most recent twelve months.
- The borrower must furnish us with its reviewed or audited financial
statements for the last two (2) complete fiscal years and financial
statements for the period within ninety (90) days of the loan closing
date.
See "BUSINESS OF THE COMPANY--FINANCING POLICIES."
WHO MAY INVEST
In addition to other requirements, investors must have either: (i) a minimum
annual gross income of $45,000 and a net worth (exclusive of home, home
furnishings and automobiles) of $45,000; or (ii) a net worth (determined with
the foregoing exclusions) of $150,000. Suitability standards may be higher in
certain states.
7
<PAGE>
DIVIDENDS AND DISTRIBUTIONS
We intend to make quarterly distributions to our shareholders. In order to
qualify for the beneficial tax treatment afforded REITs by the Internal Revenue
Code, we must pay dividends to shareholders in annual amounts equal to at least
95% of our REIT taxable income. WE MAY NOT BE ABLE TO PAY DIVIDENDS AT THIS OR
ANY LEVEL. Dividends will be determined by our Board of Directors.
The dividends we have paid to our shareholders since commencement of active
business are as follows:
<TABLE>
<CAPTION>
ANNUALIZED
DOLLAR AMOUNT YIELD
DISTRIBUTED PER SHARE
FOR QUARTER ENDED: DISTRIBUTION DATE: PER SHARE(2): REPRESENTED:
- ---------------------- ------------------- -------------- ---------------
<S> <C> <C> <C>
June 30, 1996 July 30, 1996 $ .1927(1) 9.250%
September 30, 1996 October 30, 1996 .23125 9.250%
December 31, 1996 January 30, 1997 .240625 9.625%
March 31, 1997 April 30, 1997 .225 9.000%
June 30, 1997 July 30, 1997 .22875 9.150%
September 30, 1997 October 30, 1997 .2375 9.500%
December 31, 1997 January 30, 1998 .25625 10.250%
March 31, 1998 April 30, 1998 .23125 9.250%
June 30, 1998 July 30, 1998 .23125 9.250%
September 30, 1998 October 30, 1998 .2125 8.500%
December 31, 1998 January 30, 1999 .225 9.000%
March 31, 1999 April 30, 1999 .1875 7.500%
June 30, 1999 July 30, 1999 .21875 8.750%
</TABLE>
- ------------------------
(1) Represents a 75 day operating quarter (April 15 to June 30, 1996)
(2) Distributions for the first three quarters of a year may exceed accumulated
earnings and profits at such date. However, the annual cumulative dividends
for each year are not intended to exceed annual earnings and profits.
8
<PAGE>
SUMMARY FINANCIAL INFORMATION
The summary financial data presented below is derived from our audited
financial statements at and for the years ended December 31, 1994, 1995, 1996,
1997 and 1998, and from our interim unaudited financial statements for the
six-month periods ended June 30, 1998 and 1999. You should refer to the
financial statements, and notes thereto, for a more detailed presentation of
financial information.
<TABLE>
<CAPTION>
PERIOD FROM MAY 27, SIX MONTHS ENDED
1994 YEAR ENDED DECEMBER 31 --------------------
TO DECEMBER 31, ------------------------------------------ JUNE 30, JUNE 30,
1994 1995 1996 1997 1998 1998 1999
------------------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total Revenues................... 731 4,436 217,390 384,118 782,013 326,460 491,366
Total Operating Expenses......... 5,253 5,759 72,004 6,304 76,648 45,110 72,001
Provision for (Benefit From)
Income Taxes................... -0- -0- (20,000) (13,000) (7,000) -0- -0-
Net Income (loss)................ $ (4,522) $ (1,323) $ 165,386 $ 360,814 $ 712,365 $ 281,350 $ 419,365
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Income (loss) per Common Share... $ (.23) $ (.07) $ .79 $ .91 $ .86 $ .45 $ .36
Weighted Average Common Shares
Outstanding (1)................ 20,000 20,000 209,072 398,160 825,176 618,740 1,174,200
Dividends Declared............... $ -0- $ -0- $ 189,435 $ 379,939 $ 741,676 $ 164,936 $ 317,374
Dividends Declared per Share..... $ -0- $ -0- $ .47185 $ .9475 $ .90 $ .45375 $ .4625
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31 JUNE 30
------------------------------------------------------------ -------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1994 1995 1996 1997 1998 1998 1999
--------- --------- ----------- ----------- ------------ ----------- ------------
BALANCE SHEET DATA:
Total Assets:................... $ 210,278 $ 243,648 $ 3,414,977 $ 5,363,396 $ 10,266,327 $ 8,144,155 $ 11,255,941
--------- --------- ----------- ----------- ------------ ----------- ------------
--------- --------- ----------- ----------- ------------ ----------- ------------
Liabilities and Shareholder's
Equity:
Accounts Payable.............. $ 14,800 $ 49,493 $ 8,482 $ 15,490 $ 12,759 $ 65,254 $ 26,180
Deferred Income............... -0- -0- 45,930 78,428 114,180 105,615 160,143
Dividends Payable............. -0- -0- 80,424 127,899 233,004 174,631 259,858
Shareholder's Equity (net of
deficit accumulated during
development stage).......... 195,478 194,155 3,280,141 5,141,579 9,906,384 7,433,568 10,809,760
--------- --------- ----------- ----------- ------------ ----------- ------------
$ 210,278 $ 243,648 $ 3,414,977 $ 5,363,396 $ 10,266,327 $ 8,144,155 $ 11,255,941
--------- --------- ----------- ----------- ------------ ----------- ------------
--------- --------- ----------- ----------- ------------ ----------- ------------
</TABLE>
- --------------------------
(1) Excludes 15,000 shares which each of our directors and the President of the
Advisor (7 individuals) have an option to purchase, at a price of $10.00 per
share
9
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE SHARES INVOLVES VARIOUS RISKS. IN ADDITION TO THE OTHER
INFORMATION SET FORTH IN THE PROSPECTUS, YOU SHOULD CONSIDER THE FOLLOWING
FACTORS BEFORE MAKING A DECISION TO PURCHASE THE SHARES.
THIS PROSPECTUS CONTAINS FORWARD-LOOKING INFORMATION. FORWARD-LOOKING
INFORMATION MAY BE INDICATED BY WORDS SUCH AS "WILL," "MAY BE," "EXPECTS" OR
"ANTICIPATES." ACTUAL RESULTS COULD DIFFER SIGNIFICANTLY FROM THOSE DESCRIBED IN
THE FORWARD-LOOKING STATEMENTS AS A RESULT, IN PART, OF THE RISK FACTORS SET
FORTH BELOW.
RISKS RELATED TO METHOD AND TERMS OF THIS OFFERING
THIS IS A BEST EFFORTS OFFERING. The Underwriter's obligation to sell the
shares requires only its best efforts to locate purchasers of the shares on our
behalf. The Underwriter is not obligated to purchase any shares. Less than all
of the shares offered may be sold. If less than all the shares offered are sold,
we will have fewer cash assets to apply toward our business plan.
THIS IS A NO MINIMUM OFFERING. The Underwriting Agreement does not require
that a minimum number of shares be sold before we receive proceeds from their
sale. We will receive proceeds from the sale of shares when and if they are
sold.
WE WILL INCUR EXPENSES IN THIS OFFERING. Expenses incurred in connection
with this offering will reduce our assets that will be available for investment.
The value of our assets will have to appreciate significantly in order to offset
these expenses.
THE PRICE OF THE SHARES MAY NOT BE THEIR ACTUAL VALUE. We, with the
Underwriter, determined the offering price of the shares. The initial price is
the same price paid by purchasers of the shares in our two prior public
offerings and by DRM Holdings, Inc., which purchased 20,000 shares prior to our
initial public offering. The public offering price should not be considered an
indication of the actual value of the shares.
RISKS RELATED TO US
WE ARE DEPENDENT UPON OUR QUALIFICATION AND STATUS AS A REAL ESTATE
INVESTMENT TRUST. We operate as a real estate investment trust. As a REIT, the
Company is allowed a deduction for dividends paid to its Shareholders in
computing its taxable income. This treatment substantially eliminates the
"double taxation" of earnings. Qualification as a REIT involves the application
of highly technical and complex Internal Revenue Code provisions. Facts and
circumstances not entirely within our control may affect our ability to qualify
as a REIT.
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 the Advisor. The 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.
CONFLICTS OF INTEREST ARISE FROM OUR RELATIONSHIP WITH THE ADVISOR AND
UNDERWRITER. The terms of transactions involving our formation and the
formation of the Advisor, and our contractual relationship with the Advisor,
were determined by inside (non-independent) directors and officers. The
transactions were not negotiated at arm's-length. These individuals own the
Advisor and the Underwriter. These persons may have conflicts of interest in
enforcing agreements between us and the Advisor or Underwriter. Future
business arrangements and agreements between us and the Advisor or
Underwriter and their affiliates must be approved by our Board of Directors,
including a majority of our Independent Directors.
10
<PAGE>
THERE IS NO PUBLIC MARKET FOR OUR SHARES. There is no market for the
shares. It is unlikely that a market will develop. Our common stock will not be
listed on any exchange and will not be qualified for quotation on NASDAQ. In
addition, the market for REIT securities historically has been less liquid than
other types of publicly-traded equity securities. Until a market develops for
our securities, it may be impossible for you to recoup your investment.
THERE ARE RESTRICTIONS ON THE TRANSFER 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.
RISKS RELATED TO MANAGEMENT
WE ARE DEPENDENT UPON THE ADVISOR. The Advisor, Church Loan Advisors, Inc.,
manages us and selects our investments subject to general supervision by our
Board of Directors and substantial compliance with our lending policies. We
depend upon the Advisor for most aspects of our business operations. Our success
depends on the success of the Advisor in locating and negotiating our loans.
Among others, the Advisor performs the following services for us:
- mortgage loan underwriting and servicing
- marketing and advertising
- generation and follow-up of business leads
- maintaining business relationships
- maintaining "goodwill"
- corporate management
- bookkeeping
- filing reports with state, federal, tax and other regulatory authorities
- reports to shareholders
Shareholders' right to participate in our management is generally limited to the
right to elect directors. You should not purchase shares unless you are willing
to entrust our management to the Advisor and our Board of Directors.
WE HAVE CONFLICTS OF INTEREST WITH THE ADVISOR AND
UNDERWRITER. Affiliations and conflicts of interests exist among our officers
and directors and officers and directors of the Advisor and the Underwriter. The
Advisor and the Underwriter are affiliated by virtue of their common ownership.
An officer and director of ours and some of the officers and directors of the
Advisor are involved in the church financing business through their affiliations
with the Underwriter. The Underwriter underwrites first mortgage bonds for
churches. We may purchase first mortgage bonds issued by churches through the
Underwriter in its capacity as underwriter for the issuing church, or as broker
or dealer on the secondary market. In such event, the Underwriter 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 the Underwriter, and the Underwriter
would realize income in connection with such transactions. These funds may
ultimately benefit our principals and principals of the Advisor.
Our Bylaws limit the amount of all commissions, mark-downs or mark-ups paid
to the Underwriter. Business dealings between us and the Advisor and its
affiliates also must be approved by a majority of our Board of Directors,
including a majority of the Independent Directors.
LOAN VALUES FLUCTUATE AND ADVISOR EXPENSES MAY LOWER YOUR RETURNS. We
cannot control appreciation or depreciation of the value of mortgage loans or
first mortgage bonds. A direct investment in mortgage loans or first mortgage
bonds may avoid costs we incur.
THERE ARE POTENTIAL ADVERSE EFFECTS ASSOCIATED WITH BORROWING ON CASH
FLOW. We may borrow funds to assure our capacity to make loans on a continual
basis. Lending borrowed funds is subject to greater risks than in unleveraged
lending, although it offers the potential of greater returns on investment. The
financing costs associated with lending borrowed funds would impact the our cash
flow, including its ability to pay dividends. Financing costs must be paid
regardless of whether we have sufficient revenue from operations. Our assets
(primarily our mortgage loan and bond portfolio) would be assigned to a bank as
collateral for any such loan. Our Bylaws prohibit us from borrowing more than
50% of the value of our Average Invested Assets. We have obtained a $1,000,000
line of credit with Beacon Bank, Shorewood, Minnesota.
11
<PAGE>
DIVIDENDS ARE DEPENDENT UPON OUR BUSINESS OPERATIONS. Payment of dividends
will be affected by cash available for distribution, results of operations,
economic conditions, applicable state law, advisory fees, and other facts and
circumstances. We intend to deploy proceeds from share sales during the Offering
as rapidly yet prudently as possible, in order to generate the best possible
yields. The proceeds from the sale of the shares may be held in relatively
low-yield secure investments pending application to fund loans. The yield
generated by such capital, and, thus, dividends (if any) to shareholders could
be less than may be expected once we invest funds raised in this offering. We
cannot assure that we will be able to make distributions or the amount of any
distribution if made.
RISKS RELATED TO MORTGAGE LENDING
WE ARE SUBJECT TO THE RISKS 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 can
be summarized as follows:
- low demand for mortgage loans
- changes in the level of consumer confidence
- availability of credit-worthy borrowers
- national and local economic conditions
- demographic and population patterns
- zoning regulations
- taxes
- interest rate fluctuations
- bankruptcy or insolvency of a borrower
- availability of financing and competitive conditions
- general and local economic conditions
- factors affecting specific borrowers
- interest rate fluctuations
- losses associated with default, foreclosure of a mortgage, and sale of the
mortgaged property
- state and federal laws and regulations
SECOND MORTGAGE LOANS POSE ADDITIONAL RISKS. Our financing policies allow
us to fund 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 extinguish 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 the shares.
Neither we nor the Advisor can predict changes in interest rates. We will
attempt to reduce this risk by maintaining a balanced portfolio of short,
medium and longer-term mortgage loans and through offering variable or
otherwise adjustable rate loans to borrowers.
THE MORTGAGE BANKING INDUSTRY IS HIGHLY COMPETITIVE. We compete with a wide
variety of investors, including banks, savings and loan associations, insurance
companies, pension funds and fraternal organizations. 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.
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).
WE MAY BE SUBJECT TO GOVERNMENT REGULATION. We believe that we are not
subject to any specific government regulations affecting our business. However,
there can be no assurance that this is the case. We may be required, or
determine, to register, become licensed, or otherwise qualify to do business in
various states. Compliance with government regulation could increase our cost of
doing business and reduce our overall profitability.
12
<PAGE>
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 inability to pay its
obligation to us.
CHURCHES DEPEND UPON THEIR SENIOR PASTORS. A church's senior pastor often
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 Advisor
may require a borrower to maintain Key-Person life insurance policies on its
senior pastor and successors for the term of the loan.
THE LIMITED/RESTRICTED/SINGLE-USE OF CHURCHES LIMITS THE VALUE OF OUR
MORTGAGE COLLATERAL. Our loans will be secured principally by first mortgages
upon the real estate and improvements owned or to be owned by churches and other
religious and non-profit organizations. 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 of 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 single-use or 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; and (iv)
the length of time the seller is willing to hold the property on the market.
EXPENSES OF FORECLOSURE MAY PREVENT US FROM RECOVERING THE FULL VALUE OF A
LOAN. If we foreclose our mortgage and take legal title to the real estate,
real estate taxes could be levied and assessed against the property. The
property may also incur operating expenses. 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.
WE FACE POTENTIAL LIABILITY UNDER ENVIRONMENTAL LAWS
Under federal, state and local laws and regulations, an owner of real
property or a secured lender (like us) may be liable 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.
FUTURE CHANGES IN TAX LAWS MAY AFFECT OUR REIT STATUS
In this prospectus, we discuss our tax treatment as a REIT and the tax
effect on our shareholders based on existing provisions of the Internal Revenue
Code, existing and proposed regulations, existing administrative interpretations
and existing court decisions. New legislation, regulations, administrative
interpretations or court decisions may significantly change the tax laws.
Therefore, treatment of a REIT or the consequences of purchasing shares may vary
substantially from the treatment we describe in this prospectus. A change in tax
laws may apply retroactively.
13
<PAGE>
WHO MAY INVEST
You should make an investment in the shares only as a long-term investment,
only if you have significant financial means, and only if you have no immediate
need for liquidity of your investment. You must purchase a minimum of 250 shares
($2,500). IRAs and qualified plans may purchase a minimum of 200 shares
($2,000). We have established financial suitability standards for investors.
These standards require you to have either: (i) a minimum annual gross income of
$45,000 and a net worth (exclusive of home, home furnishings and automobiles) of
$45,000; or (ii) a net worth (determined with the foregoing exclusions) of
$150,000. Suitability standards may be higher in some states. You must represent
in the Subscription Agreement that you satisfy any applicable suitability
standards.
We may not complete a sale of the shares until five days after you have
received a prospectus, and you may receive a refund of your investment within
five days after subscribing if you received a prospectus only at the time of
subscription.
USE OF PROCEEDS
The following represents our estimate of the use of the gross offering
proceeds from the sale of the shares, assuming the sale of all the offered
shares.
<TABLE>
<CAPTION>
DOLLAR AMOUNT PERCENT
-------------- ---------
<S> <C> <C>
Gross Offering Proceeds(1):............................................................ $ 15,000,000 100.00%
Less Expenses:
Selling Commissions(2)............................................................... 892,500 5.950
Underwriter's Expense Allowance(3)................................................... 133,000 .886
Offering Expenses(4)................................................................. 70,000 .466
-------------- ---------
Total Public Offering-Related Expenses................................................. 1,095,500 7.302
-------------- ---------
Amount Available for Investment(5)..................................................... $ 13,904,500 92.698%
-------------- ---------
-------------- ---------
</TABLE>
- ------------------------
(1) We are offering the shares on a "best efforts" basis through the
Underwriter. There is no assurance that any Shares will be sold.
(2) We will pay the Underwriter a compensation equal to 5.95% of the gross
offering proceeds, any portion of which may be re-allowed to Soliciting
Dealers. The Underwriter's compensation includes a 4.3% sales commission and
a 1.65% management fee.
(3) We will pay the Underwriter a non-accountable expense allowance of up to
$133,000 (assuming all the shares are sold). Of this, $35,000 is payable
upon the sale of 100,000 shares, the balance of $98,000 is payable ratably
in the sum of $7,000 per 100,000 shares sold in the offering.
(4) These figures are our best estimates of the legal, accounting, printing,
filing fees and other expenses attendant to this Offering, all of which have
been or will be paid to independent professional and service providers.
(5) The Amount Available for Investment, in addition to our other current cash
resources, if any, will be available to make loans. Aside from fees of the
Advisor, substantially all of the net proceeds from the sale of the shares
will be used to make mortgage loans to churches and other non-profit
religious organizations and purchasing first mortgage bonds issued by
churches. Pending application of the proceeds as outlined above, the net
proceeds of this offering will be invested in Permitted Temporary
Investments. We may also use any existing current cash resources to
establish a working capital reserve.
14
<PAGE>
COMPENSATION TO ADVISOR AND AFFILIATES
This table discloses all the compensation the Advisor and its affiliates can
receive either directly or indirectly. In accordance with applicable state law,
the total of all Acquisition Fees and Expenses we pay in connection with our
business cannot exceed 6% of the amount loaned, unless a majority of the
directors (including a majority of the Independent Directors) not otherwise
interested in the transaction approve the transaction as being commercially
competitive, fair and reasonable to us. Our Total Operating Expenses cannot (in
the absence of a satisfactory showing to the contrary) in any fiscal year exceed
the greater of: (a) 2% of the Average Invested Assets; or (b) 25% of our Net
Income for the year. The Independent Directors may, upon a finding of unusual
and nonrecurring factors which they deem sufficient, determine that a higher
level of expenses is justified in any given year. Our Annual Report will provide
you with an explanation of the factors considered in approving any such
additional expenses.
ADVISOR COMPENSATION
<TABLE>
<CAPTION>
ITEM OF
COMPENSATION RECIPIENT AMOUNT OR METHOD OF COMPENSATION
- ------------------------ ----------- -------------------------------------------------------
<S> <C> <C>
OFFERING AND
ORGANIZATIONAL
STAGE:
Warrants/Options (1) Advisor Options to President of Advisor to purchase 15,000
shares at an exercise price of $10.00 per share; annual
options to President of Advisor to purchase 3,000
shares at a purchase price equal to the fair market
value on the date of grant.
OPERATING STAGE:
Advisory Fee (2) Advisor 1.25% annually, paid monthly, of our Average Invested
Assets. The Advisor received Advisory Fees in the
amount of $11,825 for the year ended December 31, 1996,
$17,545 for the year ended December 31, 1997, $52,944
for the year ended December 31, 1998, and $47,726 for
the six month period ended June 30, 1999. The Advisor
received no Advisory Fees prior to April 15, 1996. We
cannot estimate the total amount of Advisory Fees to be
payable to the Advisor, but assuming all of the Shares
are sold and our Average Invested Assets were
$26,000,000, the Advisory Fee would be $325,000 per
year.
Acquisition Advisor In connection with mortgage loans we make, borrowers
Fees/Expenses may be required to pay expenses to the Advisor for
various closing and other loan-related expenses, such
as accounting fees and appraisal fees paid by the
Advisor to independent service providers, and other
costs. The Advisor may retain payments made by the
borrower in excess of costs, but our Bylaws limit the
total of all Acquisition Fees and Acquisition Expenses
to a reasonable amount and in no event in excess of six
percent (6%) of the funds advanced to the borrower.
Advisor Loan Advisor One-half of the origination fees collected from the
Origination Fee borrower at closing in connection with each mortgage
loan we make, payable when and only if an origination
fee is charged and collected. The Advisor received
origination fees in the amount of $52,855 for the year
ended December 31, 1996, $43,980 for the year ended
December 31, 1997, $76,090 for the year ended December
31, 1998, and $62,051 for the six month period ended
June 30, 1999. The Advisor received no origination fees
prior to April 15, 1996. We cannot estimate the total
amount of Advisor loan origination fees that may be
realized by the Advisor, but assuming all of the shares
are sold and we invest in a one year period net
proceeds of $14,000,000 in mortgage loans with an
average origination fee of 4%, the loan origination
fees payable to the Advisor in such year would be
$280,000. As our loans mature or are otherwise repaid,
we may make new loans to borrowers. Loan origination
fees would be payable to the Advisor in connection with
these loans.
</TABLE>
15
<PAGE>
AFFILIATE COMPENSATION
<TABLE>
<CAPTION>
ITEM OF
COMPENSATION RECIPIENT AMOUNT OR METHOD OF COMPENSATION
- ------------------------ ----------- -------------------------------------------------------
<S> <C> <C>
OFFERING AND
ORGANIZATIONAL
STAGE:
Commissions on the Sale Underwriter 5.95% of the gross proceeds from the sales of the
of Shares in this shares. The Underwriter may re-allow all or a portion
Offering of this amount to other participating broker-dealers
who are members of the National Association of
Securities Dealers, Inc.
Non-Accountable Expense Underwriter The sum of $35,000 paid upon the sale of the first
Allowance Relating to 100,000 shares in this offering, with an additional
the Sale of Shares in $98,000 payable ratably based on the number of shares
this Offering (3) sold thereafter, to cover the Underwriter's costs and
expenses relating to the offer and sale of the shares
in this offering.
OPERATING STAGE:
Warrants/Options (1) Directors/ Options to purchase 105,000 (aggregate) shares at an
Advisor exercise price of $10.00 per share; annual options to
directors and President of the Advisor to purchase
3,000 shares at a purchase price equal to the fair
market value on the date of grant.
Commissions and Expenses Underwriter Customary mark-ups and mark-downs on first mortgage
on First Mortgage Bonds church bonds we purchase and sell through the
Purchased (4) Underwriter on the secondary market, and commissions
earned by the Underwriter on church bonds we purchase
in the primary market.
</TABLE>
- ------------------------
(1) We have issued options to six of our directors and to the President of the
Advisor to purchase up to 15,000 Shares each at an exercise price of $10.00
per share. These options may be exercised in limited amounts and expire
ratably, in 3,000 share increments, over five years beginning on November
15, 1999.
(2) The Advisory Fee is intended to compensate the Advisor for its services in
that capacity and for associated expenses it incurs. It does not include the
excess, if any, of funds retained by the Advisor received from borrowers for
prepayment of loan application and closing fees. A majority of the
Independent Directors may determine not to defer such advisory fees or may
determine to accelerate any deferred advisory fees if it is determined that
such payment will not jeopardize our ability to pay cash dividends, create
cash flow problems or violate applicable state law. We may terminate the
Advisory Agreement for any reason upon 60 days written notice.
(3) Organization and Offering Expenses must be reasonable and may in no event
exceed an amount equal to 15% of the proceeds raised in an offering. See
"PLAN OF DISTRIBUTION." The Underwriter is affiliated with the Advisor and
one of our directors and officers by virtue of the common ownership of the
Underwriter by DRM, Holdings, Inc., which is owned by Messrs. Reinhart and
Myers, who together with Mr. Davis, are also shareholders of the Advisor.
(4) The underwriting commission on bonds we purchase in an initial primary
distribution will be paid by the issuer of the bonds. We may purchase first
mortgage bonds from the Underwriter on the secondary market, in which event
we will pay to the Underwriter customary mark-ups on a basis no more or less
favorable than charged by the Underwriter to its other customers in
arm's-length transactions. Likewise, the Underwriter may sell first mortgage
bonds on our behalf, in which event the Underwriter will charge a customary
mark-down. Our principals and the principals of the Advisor may receive a
benefit in connection with such transactions due to their affiliation with
the Underwriter. The Underwriter is primarily engaged in the business of
underwriting, marketing and selling of first mortgage bonds for churches.
16
<PAGE>
CONFLICTS OF INTEREST
We are subject to various conflicts of interest arising from our
relationship with the Advisor, its affiliates (V. James Davis, Philip J. Myers
and David G. Reinhart) and the Underwriter. The Advisor, its affiliates, our
directors and the directors of the Advisor are not restricted from engaging for
their own accounts in business activities similar to ours. These individuals
have been engaged in the business of church financing for approximately 41 years
collectively. Occasions may arise when our interests would be in conflict with
those of one or more of the directors, the Advisor or their affiliates. Our
directors, a majority of which are independent, will endeavor to exercise their
fiduciary duties in a manner that will preserve and protect our rights and the
interests of the shareholders in the event any conflicts of interest arise. Any
transactions between us and any director, the Advisor or any of their
affiliates, other than the purchase or sale, in the ordinary course of our
business, of church bonds from or through the Underwriter, will require the
approval of a majority of the directors who are not interested in the
transaction.
TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
We compensate the Advisor and its affiliates for services they provide to
us. Our Board of Directors will have the responsibility to ensure that such
services are provided on terms no less favorable than we could obtain from
unrelated persons or entities. The Underwriter may receive commissions from our
transactions in church bonds.
COMPENSATION TO THE ADVISOR AND CONFLICTS OF INTEREST
The Advisor will receive an annual advisory fee equal to a 1.25% of our
Average Invested Assets. The fee is not dependent on the Advisor's performance.
The Advisor will receive fees when we make or renew a mortgage loan based upon a
percentage of the amount paid by a mortgage borrower as "points," or origination
fees. Accordingly, a conflict of interest could arise since the retention,
acquisition or disposition of a particular loan could be advantageous to the
Advisor, but detrimental to us, or vice-versa. Because origination fees are
payable upon the closing of the loan or its renewal, and the amount is dependent
upon the size of the mortgage loan, the Advisor may have a conflict of interest
in negotiating the terms of the loan and in determining the appropriate amount
of indebtedness to be incurred by the borrower.
In resolving conflicts of interest, the Board of Directors has a fiduciary
duty to act in our best interest as a whole. We and the Advisor believe that it
would not be possible, as a practical matter, to eliminate these potential
conflicts of interest. However, the Advisory Agreement must be renewed annually
by the affirmative vote of a majority of the Independent Directors. The
Independent Directors may determine not to renew the Advisory Agreement if they
determine that the Advisor is not satisfactorily performing its duties. In
connection with the performance of their fiduciary responsibilities, the
existence of possible conflicts of interest will be one of the factors for the
directors to consider in determining the action we will take.
17
<PAGE>
OUR AFFILIATES MAY COMPETE WITH US
Any of our directors or officers may have personal business interests which
conflict with our interests and may engage in the church lending business and
any other business. A director or officer may have an interest in an entity we
engage to render advice or services, and may receive compensation from such
entity in addition to compensation received from us.
The Underwriter provides financing to churches and other not-for-profit
religious organizations. Therefore, a conflict could arise if the Underwriter
were to pursue and secure a lending opportunity otherwise available to us.
However, the average size of first mortgage bond financings undertaken by the
Underwriter is approximately $1.45 million, with $1,000,000 being its stated
(but not required) minimum financing. We focus on financings ranging from
$100,000 to $1,000,000 in size. Conflicts of interest between the Underwriter
and us likely will be reduced by virtue of the targeted size of loans pursued by
each. We have agreed with the Underwriter that financing prospects of less than
$1,000,000 will be first directed to us for consideration. If we determine that
the loan is not suitable or have insufficient funds to make the loan, or if the
prospective borrower independently declines to accept our lending, then the
Underwriter or its affiliates will have the opportunity to provide financing to
that prospective borrower.
Neither the Advisor nor its affiliates are prohibited from providing the
same services to others, including competitors. These relationships may produce
conflicts in the Advisor's and its affiliates' allocation of time and resources
among various projects.
NON ARM'S-LENGTH AGREEMENTS
Many agreements and arrangements we have with the Advisor or our and its
affiliates, including those relating to compensation, were not negotiated at
arm's-length. The conflicts or potential conflicts arising from these agreements
and managements will be mitigated by the following factors: (i) we intend to be
in substantial compliance with the Statement of Policy Regarding Real Estate
Investment Trusts adopted by the North American Securities Administrators
Association, Inc. ("NASAA") which has a specific limitation on certain fees and
on the amount of our operating expenses, including compensation to the Advisor;
(ii) the Advisor intends to structure its business relationships so as to be
competitive with other programs in the marketplace; and (iii) the agreements and
arrangements are subject to approval by a majority of our Independent Directors.
LACK OF SEPARATE REPRESENTATION
We are represented by the law firm of Maun & Simon, PLC, Minneapolis,
Minnesota, which has also acted and will continue to act as counsel to the
Advisor, our affiliates, and various affiliates of the Advisor with respect to
other matters.
SHARED OPERATIONS FACILITIES
We are located in the leased offices of the Underwriter, American Investors
Group, Inc., in Minnetonka (Minneapolis), Minnesota. We expect to continue to be
housed in these or similar leased premises along with the Underwriter and its
affiliates. We are not separately charged for rent or related expenses. The
Advisor includes these expenses in the Advisory Fee. The office building is
owned by the Underwriter's affiliates.
18
<PAGE>
DISTRIBUTIONS
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
in annual amounts which are equal to at least 80% of our "real estate investment
trust taxable income." We intend to make distributions that meet this
requirement. Annual distributions will be estimated for the first three quarters
of each fiscal year and adjusted annually based upon our audited year-end
financial report. Cash available for distribution will be derived primarily from
the interest portion of monthly mortgage payments from borrowers, but will also
include the following items:
- origination and other fees paid to us by borrowers in connection with such
loans
- interest income from mortgage-backed securities issued by churches and
other non-profit religious organizations
- earnings on any Permitted Temporary Investments
Payments during the first three quarters of each fiscal year may be
comprised in part of "deferred income." The total annual distribution will be
comprised only of "taxable income." All dividends will be paid at the discretion
of the Board of Directors and will depend on the following factors:
- our earnings and financial condition
- maintenance of real estate investment trust status
- funds available for distribution
- results of operations
- limitations imposed by applicable state laws
- economic conditions
- other factors the Board of Directors deems relevant
During the distribution of shares in this offering, dividends paid to each
investor in any quarter (and year) will be pro-rated based on the number of days
in such quarter (or year) the shares were issued and outstanding. The proceeds
from the sale of the shares will be held in money market funds, U.S. government
treasury obligations and similar Permitted Temporary Investments pending
application of such proceeds. The relative yield generated by such capital
during this period, and, thus dividends, (if any), could be less than they are
expected to be once we have fully invested our capital in accordance with our
business plan.
19
<PAGE>
We began making regular quarterly distributions to our shareholders for the
period of operations ended June 30, 1996. Distributions to date, and the
annualized effective yield represented by such distributions are as follows:
<TABLE>
<CAPTION>
DOLLAR AMOUNT ANNUALIZED YIELD
DISTRIBUTION DISTRIBUTED PER SHARE
FOR QUARTER ENDED: DATE: PER SHARE(2): REPRESENTED:
- ---------------------- ------------------- -------------- ----------------
<S> <C> <C> <C>
June 30, 1996 July 30, 1996 $ .1927(1) 9.250%
September 30, 1996 October 30, 1996 .23125 9.250%
December 31, 1996 January 30, 1997 .240625 9.625%
March 31, 1997 April 30, 1997 .225 9.000%
June 30, 1997 July 30, 1997 .22875 9.150%
September 30, 1997 October 30, 1997 .2375 9.500%
December 31, 1997 January 30, 1998 .25625 10.250%
March 31, 1998 April 30, 1998 .23125 9.250%
June 30, 1998 July 30, 1998 .23125 9.250%
September 30, 1998 October 30, 1998 .2125 8.500%
December 31, 1998 January 30, 1999 .225 9.000%
March 31, 1999 April 30, 1999 .1875 7.500%
June 30, 1999 July 30, 1999 .21875 8.750%
</TABLE>
- ------------------------
(1) Represents a 75 day operating quarter (April 15 to June 30, 1996).
(2) Distributions for the first three quarters of a year may exceed accumulated
earnings and profits at such date. However, the annual cumulative dividends
for each year are not intended to exceed annual earnings and profits.
We intend to ameliorate low yields during the deployment of new capital by
(i) collecting from borrowers an origination fee at the time a loan is made (of
which one-half is paid directly to the Advisor, and (ii) timing our lending
activities to coincide as much as possible with sales of the shares. There can
be no assurance that these strategies will improve your current yields on shares
you purchase. 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 your basis in
the shares.
We may reinvest, rather than distribute, funds available from the repayment
of principal of loans we have made, or from sale or other disposition of any
properties or other investments. We can "pass through" the capital gain
character of any income generated by computing our net capital gains and
designating a like amount of our distribution 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,
the Board of Directors has a choice of whether to distribute any such gains.
Undistributed net capital gains will be taxable to us.
We have a dividend reinvestment plan which allows you to reinvest your
dividends in shares of our common stock. Under the plan, the dividends due to
you will be deposited directly with Gemisys Corporation, Englewood, Colorado
("Gemisys"), which combines the purchases of all participating shareholders. You
will not incur any brokerage fees or service charges, although any brokerage
fees we pay are treated as dividend income to you. You can also invest
additional amounts, subject to certain minimums and maximums, on a regular basis
or from time to time and can terminate participation in the dividend
reinvestment plan at any time. See "DESCRIPTION OF CAPITAL STOCK--DIVIDEND
REINVESTMENT PROGRAM."
20
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of June 30, 1999.
<TABLE>
<CAPTION>
JUNE 30, 1999
-------------
<S> <C>
Long Term Debt................................................................. $ -0-
Shareholder's Equity(1)
Common Stock, $.01 par value per share;
30,000,000 shares authorized; issued and outstanding 1,189,823 shares........ 11,898
Additional Paid-In Capital..................................................... 10,933,876
Accumulated Deficit............................................................ (136,014)
Total Shareholder's Equity..................................................... $ 10,809,760
-------------
Total Capitalization....................................................... $ 10,809,760
-------------
-------------
</TABLE>
- ------------------------
(1) Excludes 15,000 shares which each of our directors and the President of the
Advisor (7 individuals; 105,000 shares in the aggregate) have an option to
purchase at a price of $10.00 per share.
21
<PAGE>
SELECTED FINANCIAL DATA
The selected financial data presented below is derived from our audited
financial statements at and for the years ended December 31, 1994, 1995, 1996,
1997 and 1998, and from our interim unaudited financial statements for the
six-month periods ended June 30, 1998 and 1999. The financial statements are
included in the appendix. You should refer to the financial statements, and
notes thereto, for a more detailed presentation of financial information.
<TABLE>
<CAPTION>
PERIOD FROM
MAY 27, 1994 SIX MONTHS ENDED
TO YEAR ENDED DECEMBER 31 ---------------------
DECEMBER 31, ------------------------------------------ JUNE 30, JUNE 30,
1994 1995 1996 1997 1998 1998 1999
------------- --------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues
Interest Income Loans................. $ -0- $ -0- $ 152,259 $ 343,695 $ 655,219 $ 285,661 $ 358,207
Interest Income Other................. 731 4,436 20,729 24,519 76,444 23,8456 103,440
Capital Gains Realized................ -0- -0- -0- 4,298 9,138 2,514 13,458
Origination Income.................... -0- -0- 6,925 11,482 40,338 14,439 16,090
Income Other Sources.................. -0- -0- -0- 124 874 1 171
Escrow Interest Income................ -0- -0- 37,477 -0- -0- -0- -0-
------------- --------- --------- --------- --------- --------- ----------
Total Revenues.......................... 731 4,436 217,390 384,118 782,013 326,460 491,366
Operating Expenses
Professional Fees..................... 1,404 -0- 8,411 8,065 8,988 7,780 13,303
Director Fees......................... 2,000 -0- 1,600 2,400 3,200 1,600 1,600
Amortization.......................... 177 303 303 303 303 152 152
Escrow Interest Expense............... -0- -0- 37,274 -0- -0- -0- -0-
Advisory Fees......................... -0- -0- 11,825 17,545 52,944 29,627 47,764
Other................................. 1,672 5,456 12,591 7,991 11,213 5,951 9,182
------------- --------- --------- --------- --------- --------- ----------
Total Expenses.......................... 5,253 5,759 72,004 36,304 76,648 45,110 72,001
Provision for (Benefit From)
Income Taxes.......................... -0- -0- (20,000) (13,000) (7,000) -0- -0-
Net Income (loss)....................... $ (4,522) $ (1,323) $ 165,386 $ 360,814 $ 712,365 $ 281,350 $ 419,365
------------- --------- --------- --------- --------- --------- ----------
------------- --------- --------- --------- --------- --------- ----------
Income (loss) per Common Share.......... $ (.23) $ (.07) $ .79 $ .91 $ .86 $ .45 $ .36
Weighted Average Common
Shares Outstanding(1)................. 20,000 20,000 209,072 398,160 825,176 618,740 1,174,200
Dividends Declared...................... $ -0- $ -0- $ 189,435 $ 379,939 $ 741,676 $ 164,936 $ 317,374
Dividends Declared per Share............ $ -0- $ -0- $ .47185 $ .9475 $ .90 $ .45375 $ .4625
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31 JUNE 30
------------------------------------------------------ ---------------------
1994 1995 1996 1997 1998 1998 1999
--------- --------- --------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Assets:
Cash and Cash Equivalents............... $ 149,023 $ 135,282 $ 612,744 $ 291,815 $2,941,531 $1,248,563 $1,137,573
Current Maturities of Loans
Receivable............................ -0- -0- 55,436 103,505 237,241 69,723 171,056
Loans Receivable, net of current
maturities............................ -0- -0- 2,605,388 4,808,803 5,994,620 6,649,312 7,962,561
Bonds Receivable........................ -0- -0- 120,640 125,809 1,023,997 139,267 1,933,901
Account Receivable...................... -0- -0- -0- -0- 28,777 -0- -0-
Prepaid Expense......................... -0- -0- -0- -0- -0- -0- -0-
Deferred Offering Costs................. 59,916 107,295 -0- -0- -0- 3,977 10,841
Deferred Tax Asset...................... -0- -0- 20,000 33,000 40,000 33,000 40,000
Organizational Expenses (net)........... 1,339 1,071 769 464 161 313 9
--------- --------- --------- --------- ---------- --------- ----------
Total Assets:............................. $ 210,278 $ 243,648 $3,414,977 $5,363,396 $10,266,327 $8,144,155 $11,255,941
--------- --------- --------- --------- ---------- --------- ----------
--------- --------- --------- --------- ---------- --------- ----------
Liabilities and Shareholder's Equity:
Accounts Payable........................ $ 14,800 $ 49,493 $ 8,482 $ 15,490 $ 12,759 $ 65,254 $ 26,180
Deferred Income......................... -0- -0- 45,930 78,428 114,180 105,615 160,143
Dividends Payable....................... -0- -0- 80,424 127,899 233,004 174,631 259,858
Shareholder's Equity (net of deficit
accumulated during development
stage)................................ 195,478 194,155 3,280,141 5,141,579 9,906,384 7,433,568 10,809,760
--------- --------- --------- --------- ---------- --------- ----------
$ 210,278 $ 243,648 $3,414,977 $5,363,396 $10,266,327 $8,144,155 $11,255,941
--------- --------- --------- --------- ---------- --------- ----------
--------- --------- --------- --------- ---------- --------- ----------
</TABLE>
- ------------------------------
(1) Excludes 15,000 shares which each of our directors and the President of the
Advisor (7 individuals; 105,000 shares in the aggregate) have an option to
purchase, at a price of $10.00 per share.
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION AND PLAN OF OPERATION
American Church Mortgage Company was incorporated in May 1994, began a "best
efforts" offering of our common stock on July 11, 1995, and commenced active
business operations on April 15, 1996 after completion of the "Minimum Amount"
in our initial public offering. Consequently, we had no operating revenues for
the years ended December 31, 1994 and 1995. Expenses were limited to
organizational and offering-related costs.
Business operations from inception to completion of the minimum offering
were limited to daily business organizational efforts, activities relating to
the offering, reviewing potential candidates for church mortgage loans, and
conducting informational meetings with brokers and broker-dealers. We concluded
our initial public offering on November 8, 1996. As of such date we had sold
335,481 shares at $10.00 per share to approximately 281 individuals, not
including 20,000 shares ($200,000) previously purchased by our initial
shareholder--DRM Holdings, Inc.
On September 26, 1997, the Securities and Exchange Commission declared
effective our second public offering of 1,500,000 common shares at a price of
$10.00 per share ($15,000,000). That offering was co-underwritten by American
Investors Group, Inc. and LaSalle St. Securities, Inc. ("LaSalle"). American
acted in the capacity of the Managing Underwriter. The second offering was also
conducted on a "best-efforts" basis. We concluded the second public offering on
January 22, 1999. We sold 779,759 shares during our second public offering at
$10.00 per share. As of June 30, 1999, we had 1,183,823 shares outstanding and
approximately 789 shareholders.
Between April 15, 1996 and June 30, 1999, we made 33 loans to 29 churches in
the aggregate amount of $10,765,750, with the average size being $326,235. Of
the 33 loans we made, six loans totaling $1,832,000 have been repaid by the
borrowing churches. We have purchased in the secondary market for $3,028,921,
first mortgage church bonds in the face amount of $3,047,300 and purchased for
$72,800 second mortgage church bonds in the face amount of $100,000. Three of
the first mortgage church bonds in the face amount of $38,300 have been called
for redemption (early repayment) by the issuing organizations. In addition, we
sold $307,000 principal amount of mortgage bonds for $302,000. We paid $277,800
for these bonds. We intend to fund additional first mortgage loans as investable
assets become available through (i) the sale of additional shares in future
public offerings; (ii) prepayment and repayment at maturity of existing loans;
(iv) borrowed funds; and (v) dividends reinvested under our Dividend
Reinvestment Plan.
RESULTS OF OPERATION
In 1996, we made loans to seven churches in the aggregate amount of
$2,802,000, with an average loan size being $400,000. We also purchased in the
secondary market for $46,412 (which includes $407 in accrued interest) first
mortgage church bonds in the face amount of $50,000 and purchased for $72,800
second mortgage church bonds in the face amount of $100,000. As we commenced
active business operations on April 15, 1996, results of operations through
December 31, 1996 are reflective of only 255 days of operations.
During the fiscal year ended December 31,1997, we funded an additional five
first mortgage loans and three second mortgage loans to churches for an
aggregate amount of $2,665,712 and purchased $2,000 principal amount of first
mortgage church bonds for a purchase price of $871.
During the fiscal year ended December 31, 1998, we funded an additional
six first mortgage loans and two second mortgage loans to churches totaling
$1,793,750 and $355,000 respectively. We also purchased $925,300 principal
amount of first mortgage church bonds for a purchase price of $922,445.
During the fiscal year ending December 31, 1998, two first mortgage loans and
one second mortgage loan in the amounts of $730,000 and $350,000
respectively, were repaid by the borrowing churches in accordance with the
terms of each loan. We had two first mortgage church bonds called for
redemption (early repayment) by the issuing organizations. The two bonds paid
all principal and interest to which we were entitled. The face amount of the
bonds was $33,300. We paid $29,225 for both bonds.
23
<PAGE>
FIRST TWO QUARTERS OF 1999 VERSUS FIRST TWO QUARTERS OF 1998. Our operating
income for the six month period ended June 30, 1999 was $419,365 on total
revenues of $491,366. Interest income earned on our portfolio of loans was
$358,207. Excluded from revenue for the six month period ended June 30, 1999 is
$61,076 of origination income, or "points," we received, recognition of which
under generally accepted accounting principles ("GAAP") must be deferred over
the expected life of each loan. However, under tax principles, origination
income is recognized in the period received. Accordingly, because our status as
a real estate investment trust requires, among other things, the distribution to
shareholders of at least 95% of "Taxable Income," the dividends declared and
paid to shareholders for the quarters ended March 31 and June 30, 1999 included
origination income even though it is not recognized in its entirety for the
period under GAAP.
Total assets for the six month period ended June 30, 1998 increased $989,614
to $11,255,941 primarily as a result of the sale and issuance of common stock
pursuant to our second public offering, the proceeds of which were deployed into
three new mortgage loans, church bonds purchased in the secondary market, and
cash and cash equivalent money market obligations. Shareholders' equity rose
$903,376 to $10,809,760 for the same reason. Our liabilities at the end of the
six month period ended June 30, 1999 are primarily comprised of a "Deferred
Income," reflecting our practice of recognizing origination income and dividends
as of June 30, 1999 but not yet paid over the life of each loan.
Our second public offering concluded January 22, 1999. A total of 779,759
shares were sold during our second public Offering at $10.00 per share. We had
1,183,823 shares outstanding as of June 30, 1999. During the six month period
ended June 30, 1999, we funded seven additional first mortgage loans totaling
$3,031,00 and a second mortgage loan for $235,000. In addition, we purchased
$2,070,000 principal amount of first mortgage church bonds for a purchase price
of $2,059,198 (which includes $18 in accrued interest). All loans we make range
in interest rate charged to the borrowers from 9.85% to 12.00%. As of June 30,
1999, the average, principal-adjusted interest rate on our portfolio of loans
was 10.65%. Our portfolio of bonds has an average current yield of 9.28%.
FISCAL YEAR 1998 VERSUS FISCAL YEARS 1997 AND 1996. Our operating income
for the fiscal year ended December 31, 1998 was $705,365 on total revenues of
$782,013 compared to $360,814 and $165,386 on total revenues of $384,118 and
$217,390 for the years ended December 31, 1997 and 1996 respectively. Interest
income earned on our portfolio of loans was $655,219 for the year ended December
31, 1998 compared to $343,695 and $152,259 for 1997 and 1996, respectively. This
increase is due to the fact that sixteen new loans were originated in fiscal
years ended December 31, 1998 and 1997. Excluded from revenue for the year ended
December 31, 1998 is $14,268 of origination income, or "points," recognition of
which 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 the distribution to shareholders of at
least 95% of "Taxable Income," the dividends declared and paid to shareholders
for the quarters ended March 31, 1998, June 30, 1998, September 30, 1998 and
December 31, 1998 included origination income even though it was not recognized
in its entirety for the period under GAAP.
DIVIDENDS. Our Board of Directors declared quarterly dividends of
$.23125 for each share held of record on March 31, 1998, $.23125 for each
share held of record June 30, 1998, $.2125 for each share held of record
September 30, 1998, and $.225 for each share held of record on December 31,
1998. Based on the four quarters of operations for the quarters ended March
31, 1998, June 30, 1998, September 30, 1998, and December 31, 1998, the
dividends paid represented a 9.25%, 9.25%, 8.50% and 9.00% annualized yield
to shareholders respectively. Total dividends paid in 1998 represented a
9.00% annual rate of return on each share of common stock owned and purchased
for $10 per share. The dividends we paid for fiscal year 1997, our first full
fiscal year of operations, represented a 9.48% annual rate of return on each
share of common stock owned. Our Board of Directors declared a quarterly
dividend of $.1875 for each share held of record on March 31, 1999, and a
quarterly dividend of $.21875 for each share held of record on June 30, 1999,
representing a 7.50% and 8.75% annualized yield to shareholders, respectively.
We paid our highest quarterly dividend payment for the quarter ended
December 31, 1997 and our lowest quarterly dividend payment for the quarter
ended March 31, 1999. The quarterly dividend paid for each share held of record
on December 31, 1998 was $.25625 per share representing an annualized yield of
10.25%. The quarterly dividend payment for each share held of record on March
31, 1999 was $.1875 representing an annualized yield of 7.50%. The dividend
payment for December 31, 1998 was significantly higher than the average dividend
amount due to the large number of loans funded during the quarter. Each loan
funded during the quarter generated origination income. Origination income is
"Taxable Income" even though it is not recognized in its entirety for the period
under GAAP. The comparatively lower dividend payment for March 31, 1999 was
directly related to large cash balances we maintained during the quarter as we
received proceeds from our second stock offering pending deployment in new loans
to churches. Because interest earned in our money market account is
substantially lower than interest earned on its mortgage loans, interest income
earned was lower than is anticipated to be earned once the offering proceeds are
deployed into new loans.
24
<PAGE>
ASSETS OF THE COMPANY. Our total assets increased from $3,414,977 as of
December 31, 1996 to $5,363,396 as of December 31, 1997. As of December 31,
1998, assets increased to $10,259,327. The primary reason for the increase in
totals assets from December 31, 1996 through December 31, 1998 was a result of
the sale and issuance of common stock pursuant to our second public offering.
Shareholders' equity rose from $3,280,141 at December 31, 1996 to $6,251,276 at
December 31, 1997 and again to $9,899,384 at December 31, 1998 for the same
reasons. Liabilities for all periods after December 31, 1995 are primarily
comprised of a "Deferred Income" item, reflecting our practice of recognizing
origination income over the life of each loan. Dividends declared but not yet
paid are a material liability for all periods after December 31, 1995.
LIQUIDITY AND CAPITAL RESOURCES
Our revenue is derived principally from interest income, and secondarily,
from origination fees and renewal fees. We also earn income through interest on
funds that are invested pending their use in funding mortgage loans or
distributions as dividends to 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 shares, and (ii)
making mortgage loans to churches and other non-profit religious organizations.
Our principal expenses are Advisory Fees, legal and accounting fees, shareholder
communications costs, and the expenses of our stock transfer agent, registrar
and dividend reinvestment agent.
Our future capital needs are expected to be met by (i) additional sale of
our shares to the public (ii) prepayment, repayment at maturity and renewal of
mortgage loans, and (iii) borrowed funds. We believe that the "rolling" effect
of mortgage loans maturing, together with dividends reinvested under our
Dividend Reinvestment Plan, will provide a supplemental source of capital to
fund business operations in future years. Nevertheless, we believe that it may
be desirable, if not necessary, to sell additional shares of common stock in
order to enhance our capacity to make mortgage loans on a continuous basis.
There can be no assurance that we will be able to raise additional capital on
favorable terms. We may borrow funds in an amount not to exceed 50% of our
Average Invested Assets in order to increase our lending capacity. We have
obtained a $1,000,000 secured line of credit facility with Beacon Bank,
Shorewood, Minnesota. We intend to use this loan facility to enable us to close
loans on schedule while we may not otherwise have adequate funds on hand. Beacon
Bank line of credit is secured by church bonds owned by us. We have not yet
utilized this line of credit. When we do, we expect to pay it off promptly as
cash becomes available.
We do not believe that inflation at the national level has made a material
impact upon its operations since inception, nor do we believe that currently
anticipated levels of inflation in 1999 will have a material impact on our
business. Nevertheless, if the rate of inflation increased materially, we would
expect interest rates generally to increase, thus possibly making the yield to
investors in the Shares less attractive as compared to alternative fixed-income
investments. If the rate of inflation decreases materially, then interest rates
likely would decline or remain at current levels. A decline in interest rates
generally would require us to offer lower rates to borrowers which, in turn,
could result in lower yields to our shareholders.
25
<PAGE>
OUR BUSINESS
GENERAL
American Church Mortgage Company was incorporated in Minnesota on May 27,
1994 to become a REIT for the purpose of engaging in the business of making
mortgage loans to churches and other non-profit religious organizations.
We make loans throughout the United States in principal amounts limited in
range from $100,000 to $1,000,000. We may invest up to 30% of our Average
Invested Assets in mortgage-secured debt securities (bonds) issued by churches
and other non-profit religious organizations. We have been actively engaged in
the business of making such loans or investing since April 15, 1996. We intend
to lend funds and acquire mortgage secured investments pursuant to our business
plan as additional funds become available from the sale of shares in this
offering, and thereafter as funds from loan repayments, bond maturities,
Dividend Reinvestment Plan funds and other resources become available.
OUR BUSINESS ACTIVITIES
The Advisor's affiliate, American Investors Group, Inc. (the "Underwriter"
or "American") has underwritten first mortgage bonds since 1987 for churches
throughout the United States. In underwriting such bonds, American reviews
financing proposals, analyzes a prospective borrower's financial capability, and
structures, markets and sells, mortgage-backed bond securities to the investing
public. Since its inception through June 30, 1999, American had underwritten
approximately 151 church bond financings, in which approximately $232,438,000 in
first mortgage bonds have been sold to public investors. The average size of
church bond financings underwritten by American since its inception is
approximately $1.5 million. See "APPENDIX I, TABLE III."
In the course of its business, American identified a demand from
potential borrowers for smaller loans of $100,000 to $1,000,000. Because of
the regulatory and administrative expenses associated with bond financing,
the economic feasibility of bond financing diminished for financings under
$750,000. As a result, American believed that many churches were 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 which were not always favorable or available to
them. We provide a lending source to this segment of the industry,
capitalizing on the human resources available at American and the Advisor and
the marketing, advertising and general goodwill of American.
FINANCING BUSINESS
We make first mortgage loans in amounts ranging from $100,000 to
$1,000,000, to churches and other non-profit religious organizations, and
invest in mortgage-secured debt instruments issued by churches and other
non-profit religious organizations ("Church Bonds"). We will 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 by (i) offering competitively
attractive mid-term (5-15 years) loans and long-term (20-year) loans
(although there is no limit on the term of our loans); (ii) seeking
origination fees, or "points," from the borrower at the outset of a loan and
upon any renewal of a loan; (iii) making a limited amount of higher-interest
rate second mortgage loans to qualified borrowers; and (iv) purchasing a
limited amount of Church Bonds. Our policies limit the amount of second
mortgage loans and bonds to 20% of our Average Invested Assets on the date
any second mortgage loan is closed or bond is purchased, and limit the amount
of mortgage-secured debt securities to 30% of Average Invested Assets on the
date of their purchase. As of June 30, 1999, the percentage of Average
Invested Assets in second mortgage loans, and the percentage invested in
mortgage-secured debt securities was 7.2% and 18.9% respectively. All other
mortgage loans we make (or Church Bonds purchased for investment) will be
secured by a first mortgage or deed of trust. As we attempt to make mortgage
loans that maximize interest income, we may make longer-term fixed-rate loans
in our discretion in order to reduce the risk of downward interest rate
fluctuations.
Our lending and investing decisions, including determination of a
prospective borrower's or church bond issuer's financial credit worthiness, are
made for us by the Advisor. We have no employees. 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; and (vi)
administering the Company's day-to-day business.
26
<PAGE>
CURRENT FIRST MORTGAGE LOAN TERMS
We offer prospective borrowers a selection of loan types, which include a
choice of fixed or variable rates of interest indexed to the prime rate, the
U.S. Treasury 10-Year Notes, or another generally recognized reference index,
and having various terms to maturity, origination fees and other terms and
conditions. The terms of loans we offer may be changed by the Advisor as a
result of such factors as (i) the terms of loans in our portfolio; (ii)
competition from other lenders; (iii) anticipated need to increase the overall
yield on our mortgage loan portfolio; (vi) local and national economic factors;
and (v) actual experience in borrowers' demand for the loans. We currently make
available the following loan types:
<TABLE>
<CAPTION>
LOAN TYPE INTEREST RATE(1) ORIGINATION FEE(2)
- ----------------------------- ----------------------------------------- ---------------------
<S> <C> <C>
15 Year Term(3) Fixed @ Prime + 2.00% 4.0%
20 Year Term(3) Fixed @ Prime + 2.10% 4.0%
20 Year Term(3) Variable Annually @ Prime + 1.25% 3.5%
Renewable Term(4) Fixed @ Prime plus:
3 Year 1.50% 3.5%
5 Year 1.75% 3.5%
7 Year 2.00% 3.5%
Construction 1 Year Term Fixed @ Prime + 3.25% 2.0%
</TABLE>
- ------------------------
(1) "Prime" means the prime rate of interest charged to preferred customers, as
published by a federally chartered bank chosen by us.
(2) Origination fees are based on the original principal amount of the loan and
are collected from the borrower at the origination and renewal of loans,
one-half of which is payable directly to the Advisor.
(3) Fully amortized repayment term.
(4) Renewable term loans are repaid based on a 20-year amortization schedule,
and are renewable at the conclusion of their initial term for additional
like terms up to an aggregated maximum of 20 years. We charge a fee of 1%
upon the date of each renewal. If renewed by the borrower, the interest rate
is adjusted upon renewal to Prime plus a specified percentage "spread."
THIS TABLE DESCRIBES MATERIAL TERMS OF LOANS AVAILABLE FROM US. THE TABLE
DOES NOT PURPORT TO IDENTIFY ALL POSSIBLE TERMS, RATES, AND FEES WE MAY OFFER.
WE MAY MODIFY THE TERMS IDENTIFIED ABOVE AND/OR OFFER LOAN TERMS DIFFERENT THAN
THOSE IDENTIFIED ABOVE.
27
<PAGE>
OUR PROPERTY (PORTFOLIO)
As of June 30, 1999, we have twenty first mortgage loans aggregating
$7,588,750 in principal amount and three second mortgage loans aggregating
$745,000 in principal amount. We also owned $1,946,000 principal amount first
mortgage bonds issued by churches. The table below identifies the borrowing
institutions, and certain key terms of the LOANS comprising our loan portfolio
on June 30, 1999.
<TABLE>
<CAPTION>
COLLATERAL
LOAN LOAN INTEREST APPRAISED FUNDING
BORROWING CHURCH AMOUNT TERM RATE VALUE DATE
- --------------------------------------------- -------- ---------- ------------ ---------- --------
<S> <C> <C> <C> <C> <C>
Landmark Apostolic Church.................... $290,000 5 years 10.75% Fixed $ 650,000 4/25/96
Fountain of Life Church...................... $375,000 15 years 11.25% Fixed $ 500,000 5/15/96
River of Life Church......................... $425,000 7 years 11.25% Fixed $ 600,000 5/06/96
Chesapeake Christian Ctr.(1)................. $710,000 5 years 11.00% Fixed $ 850,000 10/30/96
Christ Community Evangelistic Church......... $310,000 15 years 11.25% Fixed $ 440,000 06/27/97
Evangel Temple............................... $312,000 15 years 11.25% Fixed $ 560,000 11/13/97
Zion Dominion C.O.G.I.C.(2).................. $525,000 15 years 11.25% Fixed $ 774,000 10/15/97
St. Luke's Pentecostal....................... $207,000 5 years 10.75% Fixed $ 277,000 12/04/97
Bethlehem Temple, Rialto (Second Mortgage
Loan)...................................... $290,000 5 years(3) 12.00% Fixed $2,375,000 12/24/97
Praise Tabernacle Baptist.................... $245,000 5 years 10.75% Fixed $ 375,000 03/30/98
Agape Ministries............................. $300,000 5 years 10.50% Fixed $ 400,000 05/07/98
New Hope Baptist Church (Second Mortgage
Loan)...................................... $220,000 5 years(3) 11.00% Fixed $ 3,000,00 06/23/98
Pearly Gate Baptist Church................... $490,000 5 years 10.50% Fixed $1,000,000 06/26/98
Mt. Ararat Baptist Church.................... $170,000 5 years 10.75% Fixed $1,000,000 09/24/98
Restoring America's Families Ministries...... $198,750 20 years 9.85% Fixed $ 265,000 12/09/98
United Baptist Church (Second Mortgage
Loan)...................................... $235,000 20 years 10.50% Fixed $2,500,000 01/27/99
Praise Chapel International.................. $115,000 5 years 10.00% Fixed $ 175,000 03/02/99
Vineyard Christian Center.................... $640,000 20 years 9.85% Fixed $ 950,000 03/17/99
Red Mills Baptist Church..................... $400,000 20 years 10.50 Fixed $1,200,000 04/28/99
The Church of Christian Compassion........... $345,000 20 years 9.85% Fixed $ 501,750 04/30/99
Bread of Life Church......................... $435,000 20 years 9.85 Fixed $ 950,000 05/17/99
Greater Hill Zion Baptist.................... $550,000 20 years 9.75% $1,040,000 05/20/99
Freewill Christian Center.................... $596,000 20 years 10.00% $ 797,000 06/22/99
</TABLE>
- --------------------------
(1) Includes an initial loan in the amount of $490,000 and an additional
supplemental loan of $220,000 funded in December 1997.
(2) Includes an initial loan in the amount of $390,000 and an additional
supplemental loan of $135,000 funded in June 1998.
(3) Denotes a five year balloon loan. All principal is due and payable at the
end of the five year period.
28
<PAGE>
OUR PROPERTY (PORTFOLIO) (continued)
We have purchased and currently hold for investment the following
mortgage-secured BONDS:
<TABLE>
<CAPTION>
ORIGINAL
PRINCIPAL PURCHASE FACE YIELD YIELD TO CURRENT MATURITY ISSUE
ISSUER AMOUNT PRICE OF BONDS MATURITY YIELD DATE DATE
- --------------------------------------------- --------- -------- ------------- -------- ------- ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Palm Beach Cathedral......................... $ 2,000 $ 871 7.75% 19.63% 17.80% 01/25/12 01/25/97
Gospel Tabernacle Church..................... $ 3,000 $ 3,000 9.50% 9.50% 9.50% 02/01/10 02/01/98
Gospel Tabernacle Church..................... $ 1,000 $ 1,000 9.25% 9.25% 9.25% 08/01/08 02/01/98
Sharon Baptist............................... $ 3,000 $ 2,970 10.00% 10.126% 10.10% 04/15/14 10/15/97
Apostolic Faith Church....................... $ 5,000 $ 4,500 8.50% 13.277% 9.44% 06/15/01 12/15/93
Greater Open Door Church..................... $ 723,000 $723,000 From 6.35% N/A 9.545% Serially to 12/17/98
to 9.80% 05/01/18
Church of the Great Commission............... $ 4,000 $ 4,000 10.50% 10.50% 10.50% 09/15/13 04/01/95
Pembroke Park C.O.G.I.C...................... $ 4,000 $ 3,920 10.00% 10.308% 10.20% 11/15/09 11/15/95
New Life Baptist Church...................... $ 10,000 $ 9,800 10.05% 10.323% 10.26% 10/15/12 03/15/98
Southern California Word of Faith............ $ 820,000 $820,000 From 9.20% N/A 9.25% From 08/01/14 02/01/99
to 9.25% to 02/01/19
Spiritual Life Ministries.................... $ 250,000 $250,000 9.50% 9.50% 9.50% 02/15/14 02/15/99
New Generation Ministries.................... $ 20,000 $ 20,000 9.70% 9.70% 9.70% 09/15/18 09/15/98
Gates of Heaven.............................. $ 10,000 $ 9,000 10.00% 11.393% 11.11% 05/15/14 11/15/94
Gates of Heaven.............................. $ 10,000 $ 9,000 10.20% 11.790% 11.33% 11/15/10 11/15/94
Gates of Heaven.............................. $ 10,000 $ 9,000 10.20% 11.826% 11.33% 05/15/10 11/15/94
Cornerstone Church Srs II.................... $ 5,000 $ 4,500 9.95% 11.642% 11.06% 05/15/09 05/15/96
Korean Presbyterian Church................... $ 19,000 $ 17,100 10.00% 12.585% 10.00% 08/15/04 08/15/92
Christ Church of Kirkland.................... $ 5,000 $ 4,500 10.10% 11.561% 11.22% 01/01/13 12/29/95
Morning Star Baptist Church.................. $ 11,000 $ 9,900 9.65% 11.088% 10.72% 09/15/12 09/15/94
Full Gospel Christian Assembly............... $ 8,000 $ 7,200 9.50% 11.267% 10.56% 07/01/08 07/01/97
Teen Mania Ministries........................ $ 7,000 $ 6,300 9.50% 11.211% 10.56% 01/01/09 07/01/97
Church of Jesus Christ....................... $ 10,000 $ 8,400 9.65% 12.189% 11.488% 06/01/11 06/01/94
Spiritual Life............................... $ 6,000 $ 5,820 9.85% 10.258% 10.15% 05/15/13 05/15/98
</TABLE>
29
<PAGE>
The Palm Beach Cathedral bonds are "restructured" bonds. A "restructured"
bond issue is one that experienced an interruption in interest and/or principal
payment to bondholders, but by virtue of an agreement and/or court order has
agreed to make payments on terms which may differ from the terms of the original
obligation. By restructuring their first mortgage debt obligation, the church
was able to avoid foreclosure on its church property on which bondholders have a
first mortgage upon the property-- including a security interest in all fixtures
and furnishings. The Palm Beach Cathedral resumed its mortgage debt obligations
to the bondholders under an approved plan of reorganization between the church
and the trustee representing the interest of bondholders. Bondholder's interests
were represented by the Trustee who is responsible for enforcement of the trust
indenture which holds the First Mortgage on the church's property. The Trustee
is responsible for distributing both interest and principal to bondholders as
defined in the mortgage trust indenture. As restructured, the bond debt is now
fully amortized and pays both principal and interest to bondholders
semi-annually. The Palm Beach Cathedral bonds mature on January 25, 2012.
Greater Open Door Church of God in Christ issued $900,000 first mortgage
bonds in November 1998. We purchased the entire bond issue. The bonds were
underwritten by the Underwriter and are secured by a first mortgage on the
Church's real property appraised at $1,200,000. Gospel Tabernacle Church, issued
$3,550,000 first mortgage bonds in February 1998. The bonds were underwritten by
the Underwriter and are secured by a first mortgage on the Church's real
property appraised at $6,000,000.
We purchased the remaining bonds from or through the Underwriter in the
secondary market. There can be no assurance that a secondary market for resale
of the bonds will be available in the future. Therefore, we intend to retain
them until maturity or redemption by the issuing Church.
MORTGAGE LOAN PROCESSING AND UNDERWRITING
The Advisor's personnel process and verify mortgage loan applications.
Verification procedures are designed to assure a borrower's qualification under
our financing policies. Verification procedures include obtaining:
- written applications (and exhibits) signed and authenticated by the
prospective borrower
- financial statements of the prospective borrower
- corporate records and other organizational documents of the borrower
- preliminary title report or commitment for mortgagee title insurance
- a real estate appraisal in accordance with our financing policies
We require that appraisals and financial statements be prepared by
independent third-party professionals who are pre-approved based on their
experience, reputation and education. Completed loan applications, together with
a written summary are then considered by our underwriting committee, comprised
of the Advisor's President, the Advisor's Vice-President, our President, and the
director of Underwriting of the Underwriter. The 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. The 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 will be payable to the Advisor.
LOAN COMMITMENTS
Subsequent to approval by our underwriting committee, and prior to funding a
loan, we issue a loan commitment to qualified applicants. We may charge a loan
commitment fee, but typically do not. Commitments indicate the loan amount,
origination fees, closing costs, underwriting expenses (if any), funding
conditions, approval expiration dates, 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. In certain cases we may establish ("lock in")
interest rate commitments up to sixty days from the commitment to closing.
Interest rate commitments beyond sixty days will not normally be issued unless
we receive a fee premium based upon the assessment of the risk associated with a
longer period.
30
<PAGE>
LOAN PORTFOLIO MANAGEMENT
The Advisor manages and services our portfolio of mortgage loans in
accordance with the Advisory Agreement. The Advisor is responsible for all
aspects of our mortgage loan business, including:
- closing and recording of mortgage documents
- collecting principal and interest payments
- enforcing loan terms and other borrower's requirements
- periodic review of each mortgage loan file
- determination of reserve classifications
- exercising our remedies in connection with defaulted or non-performing
loans
Fees and costs of attorneys, insurance, bonds and other direct expenses
incurred in connection with the exercise of remedies in connection with a loan
default are our responsibility, although they may be recouped from the borrower
in the process of pursuing our remedies. The Advisor will not receive any
additional compensation for services rendered in connection with on-going loan
portfolio management or exercising our remedies in the event of a loan default.
LOAN FUNDING AND BANK BORROWING
Our mortgage loans and purchases of Church Bonds are funded with available
cash resources and, at the discretion of the Advisor, may be funded with
borrowings under a line of credit with a commercial lender or bank. We may
borrow up to 50% of the value of our Average Invested Assets to make loans. In
obtaining such a line of credit, we may assign one or more of our mortgages
and/or mortgage-secured bonds as collateral. We have obtained a $1,000,000
secured line of credit facility with Beacon Bank, Shorewood, Minnesota. We
intend to use this loan facility to enable us to close loans on schedule while
we may not otherwise have adequate funds on hand. The Beacon Bank line of credit
is secured by church bonds owned by us. We have not yet utilized this line of
credit. When we do, we expect to pay it off promptly as cash becomes available.
Initially, our available cash resources will be limited to the net proceeds
from the sale of the Shares, minus reserves for operating expenses, and bad-debt
reserves, as determined by the Advisor. As our business develops and over the
course of time, cash resources available for lending purposes will include, in
addition to the net proceeds from sales of shares:
- principal repayments from borrowers on loans
- dividends reinvested through the Dividend Reinvestment Plan
- funds borrowed under any line of credit arrangement
31
<PAGE>
FINANCING POLICIES
Our business of mortgage lending to churches and other non-profit religious
organizations is managed in accordance with and subject to our financing
policies. Our financing policy identifies our general business guidelines and
the parameters of our lending business.
- Loans we make are limited to churches and other non-profit religious
organizations, and will be secured by mortgages. The total principal
amount of our second mortgage loans and bonds funded is limited to 20% of
our Average Invested Assets. All other loans will be first mortgage loans.
- The loan amount cannot exceed 75% of the value of the real estate and
improvements securing each loan, such value being determined based on a
written appraisal prepared by an appraiser acceptable to the Advisor. On
loans over $500,000, we will require a written appraisal certified by a
member of the Appraisal Institute ("MAI"), or a state-certified appraiser.
- The borrower must furnish us with an ALTA (American Land Title
Association) or equivalent Mortgagee Title Policy insuring our mortgage
interest.
- The borrower's long-term debt (including the proposed loan) cannot exceed
four (4) times the borrower's gross income for the previous twelve (12)
months.
- The borrower must furnish us with financial statements (balance sheet and
income and expense statement) for the last two (2) complete fiscal years
and a current financial statement as of and for the period within ninety
(90) 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 Advisor, on our behalf, may require
that the last complete fiscal year financial statements be audited by an
independent auditor. Borrowers in existence for less than three fiscal
years must provide financial statements since inception. No loan will be
extended to a borrower in operation less than two years (24 months) absent
express approval by our Board of Directors.
- The Advisor, on our behalf, may require the borrower to arrange for
automatic electronic or drafting of monthly payments.
- The Advisor, on our behalf, may require (i) key-man life insurance on the
life of the senior pastor of a church; (ii) personal guarantees of church
members and/or affiliates; and (iii) other security enhancements for our
benefit.
- The borrower must agree to provide us with 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.
- In its discretion, the Advisor, on our behalf, may require the borrower to
grant to us a security interest in all personal property located and to be
located upon the mortgaged premises (excluding property leased by the
borrower).
We require that a borrower maintain at all times during the loan a general
perils and liability coverage insurance policy naming us as a co-insured in
connection with damage or destruction to the property of the borrower, which
typically includes damage caused by fire, flood, vandalism and theft. In its
discretion, the Advisor may require the borrower to provide 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, which
are discussed in the next section.
32
<PAGE>
PROHIBITED INVESTMENTS AND ACTIVITIES
Our Bylaws impose certain prohibitions and restrictions on our investment
practices and activities, including prohibitions against:
- Investing more than 10% of our total assets in unimproved real property or
mortgage loans on unimproved real property;
- Investing in commodities or commodity futures contracts other than
"interest rate futures" contracts intended only for hedging purposes;
- 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;
- Investing in mortgage loans that are subordinate to any mortgage or equity
interest of the Advisor or our directors or any of their affiliates;
- Investing in equity securities;
- Engaging in any short sales of securities or in trading, as distinguished
from investment activities;
- Issuing redeemable equity securities;
- Engaging in underwriting or the agency distribution of securities issued
by others;
- 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;
- Issuing debt securities unless the debt service coverage for the most
recently completed fiscal year, as adjusted for known changes, is
sufficient to properly service the higher level of debt;
- Investing in real estate contracts of sale unless such contracts are in
recordable form and are appropriately recorded in the chain of title;
- Selling or leasing to the Advisor, a director or any affiliate thereof
unless approved as being fair and reasonable by a majority of directors
(including a majority of Independent Directors), not otherwise interested
in such transaction;
- Acquiring property from the Advisor or any director, or any affiliate
thereof (other than church bonds from American Investors Group, Inc. in
the ordinary course of our investing activities), unless a majority of our
directors (including a majority of our Independent Directors) not
otherwise interested in such transaction approve the transaction as being
fair and reasonable and at a price no greater than the cost of the asset
to such Advisor, director or any Affiliate thereof, or if the price 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;
- 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
- Issuing our shares on a deferred payment basis or other similar
arrangement.
We do not intend to 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 prospectus, to offer securities in exchange for
property unless deemed prudent by a majority of our directors, to repurchase or
otherwise reacquire shares, to issue senior securities or to make loans to other
persons except in the ordinary course of our business as described herein.
33
<PAGE>
In the future, we will not make loans to or borrow from, or enter into any
contract, joint venture or transaction with, any director or officer of ours,
the Advisor or any affiliate of any of the foregoing unless a majority of our
directors, including a majority of the 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. If we invest in any property, mortgage or other real estate interest
pursuant to a transaction with the Advisor or any directors or officers thereof,
then the investment will be based upon a current 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.
POLICY CHANGES
The Bylaw relating to policies, prohibitions and restrictions referred to
under "OUR BUSINESS-- PROHIBITED INVESTMENTS AND ACTIVITIES" may not be changed
(except in certain immaterial respects by a majority approval of the Board of
Directors) without the approval of a majority of the Independent Directors and
the approval of the holders of a majority of our shares, at a duly held meeting
for that purpose.
COMPETITION
The real estate financing industry is highly competitive. We compete with a
wide variety of investors, including banks, savings and loan associations,
insurance companies, pension funds and fraternal organizations which may have
investment objectives similar to ours. Some competitors have greater financial
resources, larger staffs and longer operating histories than we have. We 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 this specialized industry segment.
EMPLOYEES
We have no employees. Subject to the supervision of our Board of Directors,
our business is managed by Church Loan Advisors, Inc. (the "Advisor"), which
provides investment advisory and administrative services to us. The Advisor is
owned by V. James Davis, David G. Reinhart and Philip J. Myers, who are our
officers and directors and directors of the Advisor. Philip J. Myers is
President of the Advisor. At present, certain officers and directors of American
and the Advisor are providing services to us at no charge. These services
include, among others, legal and analytic services relating to the
implementation of our business plan, preparation of this prospectus (and
Registration Statement of which this prospectus is a part) and development and
drafting of documents to be utilized by the Advisor in connection with our
business operations.
The Advisor is not a registered advisor under the Investment Advisors Act of
1940, nor are we a registered investment company under the Investment Company
Act of 1940. The Advisor employs three persons on a part-time or other basis. We
do not expect to directly employ any persons in the foreseeable future, since
all administrative functions and operations will be contracted for through the
Advisor. Legal and accounting services will be provided by outside
professionals. We will pay for these services directly.
OPERATIONS
We are located in the 8,400 square foot offices of the Underwriter, American
Investors Group, Inc., 10237 Yellow Circle Drive, Minnetonka, Minnesota 55343.
These facilities are owned by affiliates of the Underwriter. 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. Payments to the Advisor under the Advisory Agreement are intended, at
least in part, to cover the general costs of such facilities, equipment and
services used. We will not reimburse the Advisor for these expenses. We believe
that the terms of this arrangement are at least as favorable to the Company as
those obtainable from unaffiliated third parties. We believe that our current
facilities will be adequate for the foreseeable future.
34
<PAGE>
MANAGEMENT
GENERAL
Directors are elected for a term expiring at the next annual meeting of our
shareholders and serve for one-year terms and until their successors are duly
elected and qualified. Annual shareholder meetings are typically held in May.
Officers serve at the discretion of the Board of Directors. Among other
requirements, in order to maintain its REIT status, a majority of our directors
must be "independent." Our executive officers and directors are as follows:
<TABLE>
<CAPTION>
NAME AGE OFFICE DIRECTOR SINCE
- ----------------------------------- --- ----------------------------------- ---------------
<S> <C> <C> <C>
David G. Reinhart.................. 46 President, Treasurer and Director 1994
V. James Davis..................... 55 Vice-President, Secretary and 1994
Director
Kirbyjon H. Caldwell............... 46 Independent Director 1994
Robert O. Naegele, Jr.............. 58 Independent Director 1994
Dennis J. Doyle.................... 47 Independent Director 1994
John M. Clarey..................... 57 Independent Director 1994
</TABLE>
DAVID G. REINHART, has been a director of ACMC since its inception, and has
served as President and Treasurer of ACMC since January 1, 1999. He served as
Vice-President and Secretary of ACMC from its inception until January 1, 1999.
He is also Chairman of the Board of Directors of the Underwriter, American
Investors Group, Inc., a director and shareholder of the Advisor, Church Loan
Advisors, Inc., and President, director and shareholder of DRM Holdings, Inc.
("DRM"), the parent corporation of American Investors Group. Mr. Reinhart has
served as legal counsel to banks, trust companies and broker-dealers in the area
of church financings and otherwise since approximately March 1984. He currently
acts as counsel for the Underwriter. He was employed in the St. Paul firm of
Reinhart Law Offices, P.A. from November 1985 to February 1987, and from July
1983 to November 1985 he was employed as an Associate Attorney with the law firm
of Robins, Kaplan, Miller & Ciresi, Minneapolis, Minnesota. Mr. Reinhart
received his Juris Doctor degree, cum laude, in May 1979, from Hamline
University School of Law, St. Paul, Minnesota and received his Bachelor of
Science degree in May 1976, from Northern Michigan University, Marquette,
Michigan. Mr. Reinhart has practiced law in the areas of corporate finance and
general business law since 1979 and has developed expertise in the area of
church financing. He is also employed from time-to-time as Adjunct Professor of
Law, Hamline University School of Law, St. Paul, Minnesota. Mr. Reinhart holds
General Securities Representative and General Securities Principal licenses with
the National Association of Securities Dealers, Inc.
V. JAMES DAVIS, has been a director of ACMC since its inception, and has
served as the Vice-President and Secretary of ACMC since January 1, 1999. He
served as President and Treasurer of ACMC from its inception until January 1,
1999. From November 1986 to October 1996 he served as President and a director
of the Underwriter, American Investors Group, Inc. Prior to November, 1986, he
was employed as President of Keenan & Clarey, Inc., Minneapolis, Minnesota, a
church bond underwriter and broker-dealer, where he also served as Financial and
Operations Principal and as a director. From January 1976 to March 1984, Mr.
Davis was employed as Administrative Vice-President, and Financial and
Operations Principal, by Offerman & Co., Inc., Minneapolis, Minnesota, a
national broker-dealer and originator of corporate bond financing projects. Mr.
Davis has been in the securities business since 1970 and was previously employed
with other securities firms in Appleton, Wisconsin and Rockford, Illinois. He
holds a Bachelor of Science degree in Liberal Arts from the University of
Wisconsin--Whitewater (1967) and completed course work at St. Joseph College,
Rensselaer, Indiana. Mr. Davis holds General Securities Representative, General
Operations Principal and Financial Operations Principal licenses with the
National Association of Securities Dealers, Inc.
KIRBYJON H. CALDWELL, has served as an Independent Director of ACMC since
September 1994. He currently is Senior Pastor of Windsor Village United
Methodist Church and St. John's United Methodist Church in Houston, Texas, in
which capacities he has served since January 1982 and September 1992,
respectively. Membership in both churches is approximately 7,500 combined and
their ministries reach a broad segment of the Houston region. Kirbyjon Caldwell
received his B.A. degree in Economics from Carlton College (1975), an M.B.A. in
Finance from the University of Pennsylvania's Wharton School (1977), and his
Masters in Theology from Southern Methodist University School of Theology
(1981). He is a member of the Boards of Directors of Texas Commerce Bank
(Houston), Hermann Hospital (Houston), Greater Houston Partnership, The United
Way of The Texas Gulf Coast, and the American Cancer Society. He is also the
founder and member of several foundations and other community development
organizations.
35
<PAGE>
ROBERT O. NAEGELE, JR., has served as an Independent Director of ACMC since
September 1994. Mr. Naegele's professional background includes advertising, real
estate development, and consumer products, with a special interest in
entrepreneurial ventures and small developing companies. Most recently, he led a
group of investors to apply for, and receive an NHL Expansion Franchise, the
MINNESOTA WILD, to begin play in a new arena in St. Paul, Minnesota, in the Fall
of the year 2000. Mr. Naegele and his wife, Ellis, lived in Minneapolis through
1993 and now reside in Naples, Florida.
DENNIS J. DOYLE, has served as an Independent Director of ACMC since
September 1994. He is the owner and co-founder of Welsh Companies, Inc.,
Minneapolis, Minnesota--a full-service real estate company involved in property
management, brokerage, investment sales, construction and residential and
commercial development. Welsh Companies was co-founded by Mr. Doyle in 1980, and
has five regional offices and 220 employees. Mr. Doyle is the recipient of
numerous civic awards relating to his business skills. He also is a member of
the Board of Directors of HEART (a non-profit organization), The Children's
Theater (Minneapolis) and Grow Biz International, a publicly-owned company. He
is also a member of the Board of Advisors of the MINNESOTA REAL ESTATE JOURNAL,
and a member of the International Commercial Realty Services ("ICRS") and
National Association of Office and Industrial Parks ("NAIOP").
JOHN M. CLAREY, has served as an Independent Director of ACMC since
September 1994. Since January 1992, he has been employed as First Vice President
of Miller & Schroeder Financial, Inc., a Minneapolis, Minnesota based investment
banking firm and NASD-member broker-dealer. From February 1991 through December
1991, Mr. Clarey was a general partner of the Clarepoint Partners, LP, a private
venture capital firm, of which he was one of the founders. From July 1989 to
February 1991, he was a Senior Vice President of Miller, Johnson and Kuehn,
Inc., a Minneapolis-based broker-dealer. From November 1980 to July 1989, Mr.
Clarey served as President and Chief Executive Officer of Allison-Williams
Company, a Minneapolis-based investment banking firm specializing in municipal
and corporate finance. From September 1965 to November 1970, he was employed as
Executive Vice President of Keenan & Clarey, Inc., a Minneapolis broker-dealer
specializing in structuring and development of corporate debt issues and
financings for churches and other non-profit corporations. During his career in
the securities and finance industry, Mr. Clarey has been active as a senior
officer and director of local, regional, and national trade and professional
associations and has served as a volunteer officer and director of various
charitable organizations. He graduated from Marquette University, Milwaukee,
Wisconsin (1963) with a B.A. in economics.
DAY-TO-DAY MANAGEMENT OF OPERATIONS.
The Advisor provides our day-to-day operations under the Advisory
Agreement. We have no employees. Our officers receive no compensation for
their services, other than through their interests in the Advisor and our
affiliates. Our officers have no employment contracts with us or the Advisor
and are considered employees "at will." We believe that, because of the depth
of management of the Advisor and its affiliates, the loss of one or more key
employees of the Advisor, or one or more of our officers, would not have a
material adverse effect upon our operations. As required by our Bylaws, a
majority of our directors are Independent Directors in that they are
otherwise unaffiliated with and do not receive compensation from us (other
than in their capacity as directors) or from the Advisor or the Underwriter.
DUTIES OF DIRECTORS
Our directors are responsible for considering and approving our policies.
Directors meet as often and devote such time to our business as their oversight
duties may require. Pursuant to our Bylaws, the Independent Directors have the
responsibility of evaluating the capability and performance of the Advisor and
determining that the compensation we pay to the Advisor is reasonable.
Directors and officers are permitted to engage in other activities of the
type we conduct. Neither our Articles of Incorporation or Bylaws nor any of our
policies restrict officers or directors from conducting, for their own account
or on behalf of others, business activities of the type we conduct.
Directors and officers have a duty to us and our shareholders. Our directors
may be removed by a majority vote of all shares outstanding and entitled to vote
at any annual meeting or special meeting called for such purpose.
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<PAGE>
EXECUTIVE COMPENSATION
We have officers and directors, but no employees as our operations and
business are managed by the Advisor. Officers are not compensated other than
through their interest in the Advisor and our other affiliates.
We currently pay each Independent Director a fee of $500 for each board
meeting ($200 for telephonic meetings), limited to $2,500 per year. We reimburse
directors for travel expenses incurred in connection with their duties as
directors. In 1998, the Independent Directors (four in number) were paid a total
of $3,200 in director's fees. We have adopted a Stock Option Plan for Directors
and the Advisor, under which each director and the Advisor's President are
granted annually options to purchase 3,000 shares each of our common stock at a
price equal to the fair market value at the date of the grant.
FIDUCIARY RESPONSIBILITY OF BOARD OF DIRECTORS AND INDEMNIFICATION
The Board of Directors and the Advisor are accountable to us and our
shareholders as fiduciaries. Consequently, they must exercise good faith and
integrity in handling our affairs. Similarly, the Advisor has contractual
obligations to us which it must discharge with the utmost good faith and
integrity. This is a rapidly developing and changing area of the law. If you
have questions concerning the duties of our directors, then you should
consult with your own counsel.
Our Articles require us to indemnify and pay or reimburse reasonable
expenses to any individual who is our present or former director, officer,
employee or agent, PROVIDED THAT: (i) the director, Advisor or other party
seeking indemnification has determined, in good faith, that the course of
conduct which caused the loss or liability was in our best interest; (ii) the
director, the Advisor or other person seeking indemnification was acting on
our behalf or performing services on our behalf; (iii) such liability or loss
was not the result of negligence or misconduct on the part of the indemnified
party, except that in the event the indemnified party is or was an
Independent Director, such liability or loss shall not have been the result
of gross negligence or willful misconduct; and (iv) such indemnification or
agreement to be held harmless is recoverable only out of our assets and not
from our shareholders directly.
We may advance amounts to persons entitled to indemnification for legal
and other expenses and costs incurred as a result of legal action instituted
against or involving such person if: (i) the legal action relates to the
performance of duties or services by the indemnified party for or on our
behalf; and (ii) the indemnified party receiving such advances undertakes, in
writing, to repay the advanced funds, with interest at the rate we
determined, in cases in which such party would not be entitled to
indemnification. The Board of Directors may deny the payment of advances to a
non-Independent Director if a majority of the Independent Directors shall
determine, in the exercise of their reasonable discretion, that the
non-Independent Director seeking advances would not be entitled to
indemnification.
Subject to the limitations described above, we have the power to purchase
and maintain insurance on behalf of an indemnified party. We may procure
insurance covering our liability for indemnification. The indemnification
permitted by our Articles is more restrictive than permitted under the Minnesota
Business Corporation Act.
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<PAGE>
WARRANTS AND OPTIONS
On September 30, 1994, the Board of Directors adopted a Stock Option Plan
for Directors and the Advisor (the "Option Plan") to be administered by our
directors, which provides for a grant of an option to purchase 3,000 shares of
$.01 par value Common Stock, subject to certain adjustments, to a director upon
his or her appointment or election and upon each re-election (directors are
elected annually) or to the Advisor upon the Advisor's appointment or annual
re-appointment. The purchase price of the Common Stock granted under each option
is the fair market value, as defined in the Option Plan, at the time the option
is granted. On November 15, 1994, 1995, 1996, 1997 and 1998, we issued options
under the Option Plan to each of our six directors and the President of the
Advisor, to purchase 3,000 shares each (an aggregate of 105,000 shares) at a
price of $10 per share. These options vested or vest one year after their grant,
and are thus exercisable beginning November 15, 1995 through 1999 and expire
four years after their grant, and thus expire beginning November 15, 1999
through 2003. Options to purchase 84,000 shares are currently exercisable.
We may grant full-time employees, our existing directors and officers and
the Advisor warrants, options, stock purchase rights, incentive stock options or
similar arrangements to purchase shares of our Common Stock. In accordance with
applicable state law, we have agreed to limit the number of options or warrants
issuable to the Advisor, Affiliates or any directors to ten percent of our
outstanding shares on the date of grant of any options or warrants. The purchase
price of shares issuable pursuant to such warrants or options will not be less
than the fair market value at the time of the grant.
We may refuse to allow the exercise of a warrant into Common Stock if the
effect of such exercise or conversion would, in the opinion of our counsel,
disqualify or jeopardize our status as a real estate investment trust under the
Internal Revenue Code.
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<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND OTHERS
The following table sets forth as of June 30, 1999, certain information
regarding beneficial ownership of our shares, as adjusted to give effect to the
issuance of the shares offered hereby, by (i) each person known by us to be the
beneficial owner of 5% or more of the outstanding shares; (ii) each of our
directors and executive officers; and (iii) all of our directors and officers as
a group. The percentage of shares outstanding before and after the Offering is
calculated separately for each person and excludes shares issuable upon exercise
of options. Unless otherwise noted, each of the following persons has sole
voting and investment power with respect to the shares set forth opposite their
respective names.
<TABLE>
<CAPTION>
PERCENT OF SHARES
OUTSTANDING
NUMBER OF SHARES --------------------------
BENEFICIALLY BEFORE AFTER
NAME OF BENEFICIAL OWNER(1) OWNED(2) OFFERING OFFERING(6)
- ------------------------------------------------- -------------------- ----------- -------------
<S> <C> <C> <C>
Iron Workers Local #498.......................... 109,207(3) 9.18% 4.06%
David G. Reinhart................................ 10,000(4) .84 .37
Robert O. Naegele, Jr............................ 5,000 .42 .19
V. James Davis................................... 1,237 .10 .05
Kirbyjon H. Caldwell............................. -- -- --
Dennis J. Doyle.................................. -- -- --
John M. Clarey................................... -- -- --
All Executive Officers and Directors as a Group
(six individuals).............................. 16,237(5) 1.36% .60%
</TABLE>
- ------------------------
(1) The address for the directors is 10237 Yellow Circle Drive, Minnetonka,
Minnesota 55343.
(2) Excludes 15,000 shares (105,000 shares in the aggregate) which each of our
directors and the President of the Advisor have an option to purchase
pursuant to the Stock Option Plan for Directors and the Advisor. Options to
purchase 84,000 Shares are currently exercisable.
(3) As of June 30, 1999, the Iron Workers Local 498 Pension Plan and Iron
Workers Local 498 Health and Welfare Fund, 4749 W. Lincoln Drive, Suite 202,
Matteson, Illinois 60443, owns collectively 109,207 shares. This investor
may purchase additional shares in this offering.
(4) Shares indicated are owned of record by DRM Holdings, Inc., a Minnesota
corporation ("DRM") which owns a total of 20,000 shares of stock for which
it paid $200,000 ($10.00 per share). These shares are "restricted
securities." DRM is owned by David G. Reinhart, our President, Treasurer and
a Director; and by Philip J. Myers, the Advisor's President. Messrs.
Reinhart and Myers are also directors of the Advisor and of the Underwriter.
The number of shares and percentages set forth above are calculated by
multiplying the total number of shares owned by DRM by the percentage such
individuals' ownership of stock in DRM relates to the total outstanding
shares of stock of DRM. Philip J. Myers, the Advisor's President, could be
considered the beneficial owner of 10,000 shares (.84% before Offering and
.37% after Offering).
(5) Includes the shares discussed in footnote (4) above.
(6) Assumes sale of all 1,500,000 shares offered hereby. Assumes named
beneficial owners do not purchase any shares in this offering.
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<PAGE>
CERTAIN RELATIONSHIPS AND TRANSACTIONS WITH MANAGEMENT
The Advisor manages our business subject to the supervision of our Board of
Directors. The Advisor provides us with investment advisory and administrative
services. The Advisor is owned by V. James Davis, David G. Reinhart and Philip
J. Myers. Messrs. Davis and Reinhart are our officers and two of our directors.
Messrs. Reinhart and Myers are also shareholders, officers and directors of DRM
Holdings, Inc, which owns American Investors Group, Inc. (the "Underwriter").
Messrs. Reinhart and Myers together own all of the total outstanding common
stock of DRM Holdings, Inc. The Advisor employs two key persons on a part-time
basis, including Philip J. Myers, President and Scott J. Marquis, Vice
President. The Advisor, on our behalf, regularly uses the services of personnel
employed by American Investors Group, Inc. We incur no direct cost for such
services, except for the advisory fee we pay to the Advisor.
TRANSACTIONS WITH THE ADVISOR.
Pursuant to an Advisory Agreement, we pay the Advisor certain advisory fees
and expenses and remits one-half of any origination fee collected from a
borrower. For the year ended December 31, 1998, we paid to the Advisor total
advisory fees in the amount of $52,944 and the Advisor received loan origination
fee income of $49,000. In 1997, we paid to the Advisor total advisory fees in
the amount of $17,545, and the Advisor received loan origination fee income of
$43,980. During the six month period ended June 30, 1999, we paid the Advisor
advisory fees in the amount of $47,764 and the Advisor received loan origination
fee income of $62,051. The Advisor voluntarily waived $15,223 and $23,119 in
advisory fees in 1998 and 1997, respectively. Those advisory fees were waived by
recommendation by the Advisor to the Board of Directors because of offering and
related expenses we incurred in our incipient period of operations and the
Advisor's desire to lessen the impact of such expenses on our operations, and
because a material portion of our assets had not yet been invested in mortgage
loans and/or church bonds, which reduced the Advisor's day-to-day operational
activities. The waiver of fees by the Advisor was voluntary and cannot be
expected to occur in the future. We believe that the terms of the Advisory
Agreement are no less favorable to us had we entered into the agreement with an
independent third party as advisor.
TRANSACTIONS WITH THE UNDERWRITER.
Pursuant to the Underwriting Agreement, we will pay the Underwriter a sales
commission equal to 5.95% of the gross amount of sales of the shares in this
offering, plus a non-accountable expense reimbursement of up to $133,000,
assuming all the shares are sold. The Underwriter is an affiliate of the
Advisor. We believe that the terms of the Underwriting Agreement are no less
favorable to us than if we had entered into the agreement with an independent
third party as underwriter. The following table sets forth the name and
positions of certain officers and all directors of the Underwriter:
<TABLE>
<CAPTION>
NAME POSITION
- ---------------------------------------------- ----------------------------------------------
<S> <C>
Philip J. Myers............................... President, Secretary and Director
Scott J. Marquis.............................. Vice President
David G. Reinhart............................. Chairman of the Board of Directors
</TABLE>
In the course of our business, we may purchase church bonds being
underwritten and sold by American Investors Group, Inc. Although we would not
pay any commissions, American will benefit from such purchases as a result of
commissions paid to it by the issuer of the bonds. American also may benefit
from mark-ups on bonds we buy from it and mark-downs on bonds we sell through
it on the secondary market. We will purchase church bonds for investment
purposes only, and only at the public offering price. Church bonds we
purchase in the secondary market, if any, will be purchased at the best price
available, subject to customary markups (or in the case of sales--markdowns),
on terms no less favorable than those applied to other customers of American,
and will not exceed industry standards or in any event (in the case of
mark-ups and mark-downs on secondary bond sales and purchases) exceed five
percent of the principal amount of bonds purchased or sold. Principals of
ACMC and the Advisor may receive a benefit in connection with such
transactions due to their affiliation with the Underwriter. It is our policy
not to invest in excess of 30% of our Average Invested Assets in church
bonds. All future transactions between us and our officers, directors and
affiliates will be approved, in advance, by a majority of the independent and
disinterested directors.
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<PAGE>
THE ADVISOR AND THE ADVISORY AGREEMENT
CHURCH LOAN ADVISORS, INC.
Church Loan Advisors, Inc., a Minnesota corporation (the "Advisor"), was
incorporated on May 27, 1994 to render lending and advisory services to us, and
to administer our business affairs and operations. The Advisor's offices are
located at 10237 Yellow Circle Drive, Minnetonka (Minneapolis), Minnesota 55343.
The following table sets forth the names and positions of the officers and
directors of the Advisor:
<TABLE>
<CAPTION>
NAME POSITION
- ---------------------------------------------- ----------------------------------------------
<S> <C>
Philip J. Myers............................... President, Treasurer and Director
Scott J. Marquis.............................. Vice President, Secretary
V. James Davis................................ Director
David G. Reinhart............................. Director
</TABLE>
PHILIP J. MYERS, age 43, is President, Treasurer and a director of the
Advisor, having served in such capacities since its inception. He is also
currently employed full-time as President, Secretary and a director of the
Underwriter, American Investors Group, Inc. Mr. Myers earned his Bachelor of
Arts degree in Political Science in 1977 from the State University of New York
at Binghamton and his Juris Doctor Degree from the State University of New York
at Buffalo School of Law in 1980. From 1980 until 1982, Mr. Myers served as an
attorney with the Division of Market Regulation of the U. S. Securities and
Exchange Commission in Washington, D. C. and, from 1982 to 1984, as an attorney
with the Division of Enforcement of the Securities and Exchange Commission in
San Francisco. From August 1984 to January 1986, he was employed as an attorney
with the San Francisco law firm of Wilson, Ryan and Compilongo where he
specialized in corporate finance, securities and broker-dealer matters. From
January 1986 to January 1989 when he became affiliated with American Investors
Group, Inc., Mr. Myers was engaged as Senior Vice-President and General Counsel
of Financial Planners Equity Corporation, a 400 broker securities dealer
formerly located in Marin County, California. He is a member of the New York,
California (inactive status) and Minnesota State Bar Associations, and a
registered General Securities Principal. Mr. Myers holds General Securities
Representative and General Securities Principal licenses with the National
Association of Securities Dealers, Inc.
SCOTT J. MARQUIS, age 41, is Vice-President and Secretary of the Advisor,
having served in such capacities since December 13, 1994. He is also currently
employed full-time as Vice-President of the Underwriter, American Investors
Group, Inc., where he has been employed since February 1987. Prior to his
employment with American Investors Group, Inc., Mr. Marquis was employed for
approximately seven years with the Minneapolis-based broker dealer, Piper
Jaffray Companies in the capacity of supervisor of its trade clearance
department. Mr. Marquis is a licensed financial principal and registered
representative of American Investors Group, Inc., and holds his Series 7, 63 and
27 licenses from the National Association of Securities Dealers, Inc.
See "MANAGEMENT" for a description of the positions and business experience
of V. James Davis and David G. Reinhart, both of whom are directors of the
Advisor.
41
<PAGE>
THE ADVISORY AGREEMENT
We have entered into a contract with the Advisor (the "Advisory Agreement")
under which the Advisor provides advice and recommendations concerning our
business affairs, provides us with administrative services and manages our
day-to-day affairs. The Advisor provides us with the following services:
- serves as our mortgage loan underwriter and advisor in connection with our
primary business of making loans to churches
- advises and selects Church Bonds for us to purchase and hold for
investment
- provides marketing and advertising and generates loan leads directly and
through its affiliates
- deals with borrowers, lenders, banks, consultants, accountants, brokers,
attorneys, appraisers, insurers and others
- supervises the preparation, filing and distribution of tax returns and
reports to governmental agencies, prepares reports to shareholders and
acts on our behalf in connection with shareholder relations
- provides office space and personnel
- reports to us on its performance of the foregoing services
- 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, and dividend reinvestment agent fees are our direct expenses and are not
provided for by the Advisor as part of its services.
The Advisory Agreement expires annually. We expect to renew the agreement
annually, subject to our determination, including a majority of the Independent
Directors, that the Advisor's performance has been satisfactory and that the
compensation we have paid to the Advisor has been reasonable. We may terminate
the Advisory Agreement with or without cause on 60 days written notice. Upon
termination of the Advisory Agreement by either party, the Advisor may require
us to change our name to a name that does not contain the word "American,"
"America" or the name of the Advisor or any approximation or abbreviation
thereof, and that is sufficiently dissimilar to the word "America" or "American"
or the name of the Advisor as to be unlikely to cause confusion or
identification with either the Advisor or any person or entity using the word
"American" or "America" in its name. We may continue to use the word "church" in
our name. Our directors will determine that any successor Advisor possesses
sufficient qualifications to perform the advisory function for us and justify
the compensation provided for in its contract with us.
The Advisor's compensation under the Advisory Agreement is set forth under
"COMPENSATION TO ADVISOR AND AFFILIATES." The Advisor is required to pay all of
the expenses it incurs in providing services to us, including, personnel
expenses, rental and other office expenses, expenses of officers and employees
of the Advisor, and all of its overhead and miscellaneous administrative
expenses relating to performance of its functions under the Advisory Agreement.
We pay other expenses, including expenses of reporting to governmental agencies
and shareholders, fees and expenses of appraisers, directors, auditors, outside
legal counsel and transfer agents, and costs directly incurred relating to
closing of loan transactions and to enforcing loan agreements.
In the event that our Total Operating Expenses exceed in any calendar year
the greater of (a) 2% of our Average Invested Assets or (b) 25% of our net
income, the Advisor must 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 exceeds 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.
Our Bylaws require the Independent Directors to determine at least
annually the reasonableness of the compensation we pay to the Advisor. Our
Independent Directors originally approved the Amended and Restated Advisory
Agreement and the Amended and Restated Bylaws on May 19, 1995 and approved on
January 19, 1999, the renewal of the Restated Advisory Agreement for another
year. Factors 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.
42
<PAGE>
The Advisory Agreement requires us to indemnify 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 interest and was not the result of negligence or misconduct.
The foregoing is a summary of the material provisions of the Advisory
Agreement. Reference is made to the Advisory Agreement, filed as an Exhibit to
the Registration Statement of which this prospectus is a part, for a complete
statement of its provisions.
PRIOR PERFORMANCE OF ADVISOR AND AFFILIATES
The principals of the Advisor, and our officers have been engaged in the
underwriting of first mortgage bonds issued by churches since 1987. Messrs.
Myers and Reinhart, together with American's Director of Underwriting comprise
American's "Underwriting Committee," which reviews and approves church mortgage
bond financings. These individuals, serving on our behalf and on behalf of the
Advisor, constitute our Underwriting Committee which selects and approves our
mortgage loans to churches and our acquisition of mortgage-backed securities and
investments.
Since its inception in January 1987 through June 30, 1999, American has
underwritten approximately 151 church bond financings involving the sale of
approximately $232,438,000 in aggregate principal amount of first mortgage bonds
issued by churches. The average size of the financings is approximately $1.5
million, and ranged in size from approximately $100,000 to $15.5 million. The
number of bondholders (investors) in an average size bond financing is
approximately 380. The locations of these financings include 25 states and all
regions of the United States. See "APPENDIX I, TABLE III."
Of the bond financings underwritten by American, approximately 57 have been
retired early. Four of the bond issues underwritten by American since its
inception have experienced an event of default, as described in APPENDIX I
attached hereto. Additional information with respect to the bond financings
conducted by the Advisor's affiliate and Underwriter, American Investors Group,
Inc. ("American") are set forth in APPENDIX I.
FEDERAL INCOME TAX CONSEQUENCES
THE DISCUSSION OF FEDERAL INCOME TAX TREATMENT OF REAL ESTATE INVESTMENT
TRUSTS AND THEIR SHAREHOLDERS SET FORTH BELOW IS A SUMMARY. IT DOES NOT ADDRESS
ALL POTENTIAL CONSEQUENCES OF WHETHER WE QUALIFY AS A REIT. THIS SUMMARY DOES
NOT ADDRESS THE SPECIFIC CONSEQUENCES TO EACH PURCHASER OF AN INVESTMENT IN THE
SHARES. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR AS TO THE SPECIFIC CONSEQUENCES
OF THE PURCHASE OF SHARES, INCLUDING THE APPLICATION OF STATE AND LOCAL TAX LAWS
AND OF ANY POSSIBLE CHANGES IN THE TAX LAWS.
QUALIFICATION AS A REAL ESTATE INVESTMENT TRUST
GENERAL. We operate as a real estate investment trust under the Internal
Revenue Code (the "Code"). Our ability to qualify as a REIT depends, in part, on
the timing and nature of our investments. There can be no assurance that we will
qualify to be taxed as a REIT. Qualification as a real estate investment trust
is dependent on future events.
In the opinion of Maun & Simon, PLC, whose opinion has been filed as an
exhibit to the Registration Statement of which this prospectus is a part, we
have been organized in conformity with the requirements for qualification as a
REIT and our method of operation permits us to meet the requirements for
qualification and taxation as a REIT. This opinion is based on various
assumptions and is conditioned upon certain representations we have made as to
factual matters. In addition, this opinion is based upon the factual
representations we have made in this prospectus. Qualification and taxation as a
REIT depends upon our ability to meet, through actual annual operating results,
distribution levels and diversity of stock ownership, the various qualification
tests imposed under the Code discussed below, the results of which will not be
reviewed by Maun & Simon, PLC or other legal counsel. No assurance can be given
that our business or that the actual results of our operation for any particular
taxable year will satisfy the REIT requirements. The anticipated income tax
treatment described in this prospectus may be changed, perhaps retroactively, by
legislative, administrative or judicial action at any time.
The following is a general summary of the provisions that govern the federal
income tax treatment of a REIT and its shareholders. This summary is qualified
in its entirety by the applicable Code provisions, rules and regulations
promulgated thereunder, and administrative and judicial interpretations thereof.
43
<PAGE>
BENEFITS OF QUALIFICATION AS A REIT. The Code provides special tax
treatment for organizations that qualify as REITs. An entity that qualifies as a
REIT generally is not subject to federal corporate income taxes on its net
income that is currently distributed to shareholders. This treatment
substantially eliminates the "double taxation" (at the corporate and shareholder
levels) that generally results from investment in a corporation.
Even if we qualify as a REIT, we will be subject to federal income tax as
follows:
- We will be taxed at regular corporate rates on any undistributed REIT
taxable income, including undistributed net capital gains; provided,
however, that if we have a net capital gain, we will be taxed at regular
corporate rates on our undistributed REIT taxable income, computed without
regard to net capital gain and the deduction for capital gains dividends,
plus a 35% tax on undistributed net capital gain, if our tax as thus
computed is less than the tax computed in the regular manner.
- Under certain circumstances, we may be subject to the "alternative minimum
tax" on our items of tax preference.
- If we have (i) net income from the sale or other disposition of
"foreclosure property" which is held primarily for sale to customers in
the ordinary course of business or (ii) other non-qualifying income from
foreclosure property, it will be subject to tax at the highest regular
corporate rate on such income.
- If we have net income from "prohibited transactions" (which are, in
general, certain sales or other dispositions of property (other than
foreclosure property) held primarily for sale to customers in the ordinary
course of our business (i.e., when we are acting as a dealer)), such
income will be subject to a 100% tax.
- If we fail to satisfy the 75% gross income test or the 95% gross income
test (as discussed below), and has nonetheless qualified as a REIT because
certain other requirements have been met, we will be subject to a 100%
penalty tax on the gross income attributable to the greater of the amount
by which we fail the 75% or 95% test, multiplied by a fraction intended to
reflect our profitability.
- If we fail to distribute by the end of each year at least the sum of (i)
85% of our REIT ordinary income for such year, (ii) 95% of our REIT
capital gain net income for such year, and (iii) any undistributed taxable
income from prior periods, we will be subject to a 4% excise tax on the
excess of such required distribution over the amounts actually
distributed.
- If we acquire any asset (a "Built-In Gain Asset") from a C corporation
(i.e., generally a corporation subject to full corporate-level tax) in a
transaction in which our basis of the asset is determined by reference to
the C corporation's basis of the asset (or any other property), and
recognize gain on the disposition of such asset during the 10-year period
(the "Recognition Period") beginning on the date on which we acquired the
asset, then, to the extent of the built-in gain (i.e., the excess of the
fair market value of such asset on the date we acquire the asset over our
adjusted basis in such asset on such date), such gain will be subject to
tax at the highest regular corporate rate pursuant to Treasury Regulations
that have not yet been promulgated.
REQUIREMENTS FOR QUALIFICATION. The Code defines a REIT as a corporation,
trust or association (i) which is managed by one or more trustees or directors;
(ii) the beneficial ownership of which is evidenced by transferable shares, or
by transferable certificates of beneficial interest; (iii) which would be
taxable, but for Sections 856 through 859 of the Code, as a domestic
corporation; (iv) which is neither a financial institution nor an insurance
company subject to certain provisions of the Code; (v) the beneficial ownership
of which is held by 100 or more persons; (vi) during the last half of each
taxable year not more than 50% of the outstanding stock of which is owned,
directly or indirectly, by five or fewer individuals (which term includes
certain entities); and (vii) which meets certain other tests, described below.
Conditions (i) to (iv) must be met during the entire taxable year. Condition (v)
must be met during at least 335 days of a taxable year of 12 months, or during a
proportionate part of a taxable year of less than 12 months.
To qualify as a REIT for a taxable year, we must elect or previously have
elected to be so treated and must meet other requirements, certain of which are
summarized below, including percentage tests relating to the sources of its
gross income, the nature and diversification of our assets and the distribution
of its income to shareholders.
44
<PAGE>
ASSET TESTS. At the close of each quarter of our taxable year, we must
satisfy three tests relating to the nature and diversification of our assets:
1. At least 75% of the value of our total assets must be represented by
real estate assets, cash, cash items and government securities.
2. Not more than 25% of our total assets may be represented by certain
securities other than those includable in the 75% asset class.
3. Of the investments included in the 25% asset class, the value of any one
issuer's securities may not exceed 5% of the value of our total assets
and we may not own more than 10% of any one issuer's outstanding voting
securities.
INCOME TESTS. There are three income requirements necessary for maintenance
of REIT status.
First, at least 75% of our gross income (excluding gross income from certain
sales of property held primarily for sale) for each taxable year must be derived
directly or indirectly from: (i) rents from real property; (ii) interest on
obligations secured by mortgages on real property or interests in real property;
(iii) gain from the sale or other disposition of real property (including
interests in real property and interests in mortgages on real property) not held
primarily for sale to customers in the ordinary course of business; (iv)
dividends or other distributions on, and gain (other than gain from prohibited
transactions) from the sale or other disposition of, transferable shares in
other real estate investment trusts; (v) abatements and refunds of taxes on real
property; (vi) income and gain derived from foreclosure property (as defined in
the Code); (vii) amounts (other than amounts the determination of which depend
in whole or in part on the income or profits of any person) received or accrued
as consideration for entering into agreements to make loans secured by mortgages
on real property or interests in real property, or to purchase or lease real
property (including interests in real property and interests in mortgages on
real property); (viii) gain from the sale or other disposition of a real estate
asset which is not a prohibited transaction; and (ix) qualified temporary
investment income.
Second, at least 95% of our gross income (excluding gross income from
certain sales of property held primarily for sale) for each taxable year must be
derived from the sources described above with respect to the 75% test, or from
dividends, interest, or gain from the sale, exchange or other disposition of
stock or securities. Dividends and interest on any obligations not secured by an
interest in real property are included for purposes of the 95% test, but not for
purposes of the 75% test.
Third, short-term gain from the sale or other disposition of stock or
securities, gain from certain sales of property held primarily for sale, and
gain from certain sales of real property held for less than four years (apart
from involuntary conversions and foreclosure property) must represent less than
30% of our gross income for each taxable year.
Interest we may receive generally will not qualify as "interest" in
satisfying the gross income requirements if the amount of interest received is
based in whole or in part on the income or profits of any person. However,
interest based on a fixed percentage or percentages of gross receipts or sales
may qualify as "interest." Generally, if a loan is secured by both personal
property and real property, interest must be allocated between the personal
property and the real property, with only the interest allocable to the real
property qualifying as mortgage interest under the 75% gross income test.
Treasury Regulations provide that if a loan is secured by both personal and real
property and the fair market value of the real property as of the commitment
date equals or exceeds the amount of the loan, the entire interest amount will
qualify under the 75% gross income test. If the amount of the loan exceeds the
fair market value of the real property, the interest income is allocated between
real property and personal property based on the relative fair market value of
each. Under certain circumstances, income from shared appreciation mortgages may
qualify under the REIT gross income requirements.
We believe that interest received under our mortgage loans should qualify as
"interest" for purposes of the REIT gross income requirements and, except for
certain interest receipts, should qualify as mortgage interest for purposes of
the REIT 75% gross income requirement.
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In the case of a real estate investment trust which is a partner in a
partnership, Treasury Regulations provide that the character of gross income of
the partnership shall retain the same character in the hands of the partners for
purposes of Section 856 of the Code, including satisfying the 75% and 95% gross
income tests.
If we fail to satisfy one or both of the 75% or 95% gross income tests for
any taxable year, we may nevertheless qualify as a REIT for such year if we are
entitled to relief under certain provisions of the Code. These relief provisions
may be available if we can establish that our failure to meet such tests was due
to reasonable cause and not due to willful neglect, we attach a schedule of
sources of our income to our return, and any incorrect information was not due
to fraud with intent to evade tax. It is not possible, however, to state whether
in all circumstances we would be entitled to the benefit of these relief
provisions. If these relief provisions apply, a special 100% tax is imposed.
We do not intend to hold any property "primarily for sale to customers in
the ordinary course of our trade or business" and intends to do whatever is
reasonably prudent to avoid so holding any property, consistent with our
investment objectives. However, whether property is held as "dealer property"
depends on the facts and circumstances in effect, including those relating to
a particular property. As a result, complete assurance cannot be given that
we can avoid "dealer" status. If the Internal Revenue Service were to
successfully characterize us as a dealer, sales of our property could be
subject to a 100% excise tax, capital gain treatment on sales of our property
could be unavailable and we could fail to satisfy the 95%, 75% or 30% income
tests.
OWNERSHIP REQUIREMENTS. Our capital stock must be held by 100 or more
persons for at least 335 days of each full taxable year (or proportionate part
of any shorter taxable year). No more than 50% in value of our outstanding
capital stock may be owned, directly or indirectly, by five or fewer individuals
at any time during the last half of our taxable year. To attempt to assure
compliance with this 50% diversity of ownership requirement, our Articles of
Incorporation prohibit any shareholder from acquiring, directly or indirectly,
more than 9.8% of our outstanding capital stock. For purposes of the 50%
ownership test, pension funds and certain other tax-exempt entities are treated
as individuals. In addition, for purposes of the 50% ownership test, certain
attribution rules of the Code are applied to determine whether such test is
satisfied. These attribution rules provide, among other things, that capital
stock owned by a member of a partnership is not attributed to its partners.
Treasury Regulations require a real estate investment trust to maintain records
which demonstrate compliance with stock ownership requirements. In accordance
with these Treasury regulations, we must demand from record shareholders written
statements which disclose information concerning the actual ownership of the
capital stock. Any record shareholder who does not provide us with the required
information concerning actual ownership of the shares is required to include
certain specified information relating thereto on the shareholder's income tax
return.
We use the calendar year as its annual accounting period for federal income
tax purposes. We use the accrual method of accounting for federal income tax and
accounting purposes.
Treasury Regulations require that the directors have continuing exclusive
authority over our management, the conduct of our affairs and, with certain
limitations, the management and disposition of our assets. We intend to meet
these requirements. Absent a ruling from the Internal Revenue Service, there can
be no guarantee that certain shareholder or Advisor rights would not be
considered to violate the "exclusive authority" requirement.
DISTRIBUTION REQUIREMENTS. We, in order to qualify as a real estate
investment trust, are required to distribute to our shareholders, on a
non-preferential basis, an amount at least equal to the sum of 95% of our "real
estate investment trust taxable income" (which is computed without regard to net
capital gains) and 95% of the net income from foreclosure property. Such
distributions must be made in the taxable year to which they relate or, if
declared before the timely filing (including extensions) of our tax return for
such year and paid not later than the first dividend payment made after such
declaration, such distribution may be made in the following taxable year and
still be considered in determining whether we satisfied our minimum distribution
requirements for the preceding year.
To the extent that we do not distribute all of our net long-term capital
gain or distribute at least 95%, but less than 100%, of our "REIT taxable
income," as adjusted, we will be subject to tax thereon at regular corporate tax
rates. Furthermore, if we fail to distribute during each calendar year at least
the sum of (i) 85% of our REIT ordinary income for such year, (ii) 95% of our
REIT capital gain net income for such year, and (iii) any undistributed taxable
income for prior periods, we would be subject to a 4% excise tax on the excess
of such required distribution over the amounts actually distributed. We intend
to make timely distributions sufficient to qualify for tax status as a REIT.
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The distribution requirement is based on taxable income rather than
available cash. While we expect to meet the distribution requirement, our
ability to make the required distributions may be impaired if we have
insufficient cash flow or has excessive non-cash income or nondeductible
expenditures. Our ability to make the required distributions depends on many
factors which are beyond our control. We may arrange for short-term, or possibly
long-term borrowings in order to meet the 95% requirement. Any distributions
reinvested pursuant to the Dividend Reinvestment Plan will be treated as
distributions for purposes of determining compliance with the 95% distribution
requirement.
Under certain circumstances, we may be able to rectify a failure to meet the
distribution requirement for a year by paying "deficiency dividends" to
shareholders in a later year, which may be included in our deduction for
dividends paid for the earlier year. We will be required to pay interest and a
penalty based upon the amount of any deduction taken for deficiency dividends.
THE EFFECT OF FAILURE TO QUALIFY AS A REAL ESTATE INVESTMENT TRUST
If we fail to qualify as a REIT in any taxable year and the relief
provisions described above do not apply, then we will be subject to a tax
(including any applicable minimum tax) on our taxable income computed in the
usual manner for corporate taxpayers without any deduction for dividends paid.
In such event, to the extent of current and accumulated earnings and profits,
all distributions to shareholders will be taxable as ordinary income, and,
subject to certain limitations in the Code, corporate distributees may be
eligible for the dividends received deduction. Unless entitled to relief under
specific statutory provisions, we will also be prohibited from electing to be
taxed as a real estate investment trust for the four taxable years following the
year during which qualification is lost. In order to renew our REIT
qualifications at the end of such a four-year period, we would be required to
distribute all of our current and accumulated earnings and profits before the
end of the period. Any distributions would be taxable as ordinary income to
shareholders. If we fail to qualify as a REIT in any year, we could incur
significant income tax liabilities which could reduce the amount of cash
available for distribution to our shareholders and cause us to incur substantial
indebtedness or liquidate investments in order to pay the resulting taxes.
TAXATION OF OUR SHAREHOLDERS
For any year for which we are treated as a REIT, distributions made to our
shareholders will be treated by them as ordinary income (which will not be
eligible for the dividends received deduction for corporations). Distributions
designated as capital gain dividends will be taxed as long-term capital gains to
the extent they do not exceed our actual net capital gain dividend for the
taxable year. Corporate shareholders may be required to treat up to 20% of any
such capital gain dividend as ordinary income. Distributions in excess of
current or accumulated earnings and profits will not be taxable to a shareholder
to the extent that they do not exceed the adjusted basis of the shareholder's
shares of stock, but rather a return of capital that will reduce the adjusted
basis of such shares of stock. To the extent that such distributions exceed the
adjusted basis of shareholder's shares of stock they will be included in income
as long-term or short-term capital gain assuming the shares are held as a
capital asset in the hands of the shareholder. We will notify shareholders at
the end of each year as to the portions of the distributions which constitute
ordinary income, net capital gain or return of capital.
Any dividend we declare in October, November or December of any year payable
to a shareholder of record on a specified date in any such month are treated as
both paid and received on December 31 of such year, provided that the dividend
is paid during January of the following calendar year. Shareholders may not
include in their individual income tax returns any of our net operating losses
or capital losses.
In general, any gain or loss upon a sale or exchange of shares by a
shareholder who has held such shares as a capital asset will be long-term or
short-term depending on whether the stock was held for more than one year.
However, any loss on the sale or exchange of shares that have been held by such
shareholder for six months or less will be treated as a long-term capital loss
to the extent of our distributions required to be treated by such shareholders
as long-term capital gain.
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TAXATION OF TAX-EXEMPT SHAREHOLDERS
For taxable years beginning in 1994 the Code treats a portion of the
dividends paid by a "pension held REIT" as Unrelated Taxable Business Income
("UBTI") as to any trust which (i) is described in Section 401(a) of the Code,
(ii) is tax-exempt under Section 501(a) of the Code, and (iii) holds more than
10% (by value) of the interests in the REIT. Tax-exempt pension funds that are
described in Section 401(a) of the Code are referred to below as "qualified
trusts."
A real estate investment trust is a "pension held REIT" if (i) it would not
have qualified as a real estate investment trust but for the fact that Section
856(h)(3) of the Code provides that stock owned by qualified trusts shall be
treated, for purposes of the "not closely held" requirement, as owned by the
beneficiaries of the trust (rather than by the trust itself), and (ii) EITHER
(a) at least one such qualified trust holds more than 25% (by value) of the
interests in the REIT, OR (b) one or more such qualified trusts, each of whom
owns more than 10% (by value) of the interests in the REIT, hold in the
aggregate more than 50% (by value) of the interests in the REIT.
TAX CONSEQUENCES FOR FOREIGN INVESTORS
The preceding discussion does not address the federal income tax
consequences to foreign investors of ownership of our shares. Foreign investors
in our shares should consult their own tax advisors concerning those provisions
of the Code which deal with the taxation of foreign taxpayers. In particular,
foreign investors should consider, the impact of the Foreign Investors Real
Property Tax Act of 1980. In addition, various income tax treaties between the
United States and other countries could affect the tax treatment of an
investment in the Shares. The backup withholding and information reporting rules
are under review by the United States Treasury, and their application to the
Common Stock could be changed prospectively or retroactively by future Treasury
Regulations.
BACKUP WITHHOLDING
We will report to our domestic shareholders and the IRS the amount of
dividends paid during each calendar year, and the amount of tax withheld, if
any. Under the backup withholding rules, you may be subject to backup
withholding at the rate of 31% with respect to dividends paid unless you (a) are
a corporation or come within certain other exempt categories and when required,
demonstrates this fact, or (b) provide a correct taxpayer identification number,
certify as to no loss of exemption from backup withholding, and otherwise comply
with applicable requirements of the backup withholding rules. If you do not
provide us with a correct taxpayer identification number, then you may also be
subject to penalties imposed by the IRS. Any amount paid as backup withholding
will be creditable against your income tax liability. We may be required to
withhold a portion of capital gain distributions to shareholders who fail to
certify their non-foreign status to us.
STATE AND LOCAL TAXES
We or you may be subject to state or local taxation in the state or local
jurisdiction in which our investments or loans are located or in which you
reside. You should consult your tax advisor for an explanation of how state and
local tax laws could affect your investment in the shares.
OTHER TAX CONSEQUENCES
If we enter into any joint venture transactions, then special tax risks
might arise. Such risks include possible challenge by the IRS of (i)
allocations of income and expense items, which could affect the computation
of our taxable income and (ii) the status of the joint venture as a
partnership (as opposed to a corporation). If a joint venture were treated as
a corporation, the joint venture would be treated as a taxable entity. If our
ownership interest in the joint venture exceeds 10%, we would cease to
qualify as a REIT. Furthermore, in such a situation even if our ownership
does not exceed 10%, distributions to us from the joint venture would be
treated as dividends, which are not taken into account in satisfying the 75%
gross income test described above and which could therefore make it more
difficult for us to qualify as a REIT for the taxable year in which such
distribution was received. An interest in the joint venture would not qualify
as a "real estate asset" which could make it more difficult for us to meet
the 75% asset test described above. In such a situation, we would not be able
to deduct our share of losses generated by the joint venture in computing our
taxable income. We will not enter into any joint venture unless we have
received from our counsel an opinion to the effect that the joint venture
will be treated for tax purposes as a partnership. Such opinion will not be
binding on the IRS and no assurance can be given that the IRS might not
successfully challenge the status of any such joint venture as a partnership.
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ERISA CONSEQUENCES
The following is a summary of material consequences arising under ERISA and
the prohibited transaction provisions of Internal Revenue Code Section 4975 that
may be relevant to you. This discussion does not deal with all aspects of ERISA
or Code Section 4975 or, to the extent not preempted, state law that may be
relevant to particular employee benefit plans (including plans subject to Title
I of ERISA, other employee benefit plans and IRAs subject to the prohibited
transaction provisions of Code Section 4975, and governmental plans and church
plans that are exempt from ERISA and Code Section 4975 but that may be subject
to state law requirements) in light of their particular circumstances. EMPLOYEE
BENEFIT PLANS SUBJECT TO ERISA AND THE CODE CONSIDERING PURCHASING THE SHARES
SHOULD CONSULT WITH THEIR OWN TAX OR OTHER APPROPRIATE COUNSEL REGARDING THE
APPLICATION OF ERISA AND THE CODE TO THEIR PURCHASE OF THE SHARES.
FIDUCIARY CONSEQUENCES
Certain employee benefit plans and individual retirement accounts and
individual retirement annuities (collectively, "Plans"), are subject to various
provisions of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") and the Internal Revenue Code. Before investing in the shares, a Plan
fiduciary should ensure that such investment is in accordance with ERISA's
fiduciary standards. A Plan fiduciary should ensure that the investment is in
accordance with the governing instruments and the overall policy of the Plan and
that the investment will comply with the diversification and composition
requirements of ERISA. In addition, provisions of ERISA and the Code prohibit
certain transactions in Plan assets that involve persons who have specified
relationships with a Plan. The consequences of such prohibited transactions
include excise taxes, disqualifications of IRAs and other liabilities. A Plan
fiduciary should ensure that any investment in the Shares will not constitute a
prohibited transaction.
PLAN ASSETS ISSUE
A prohibited transaction may occur if our assets are deemed to be Plan
assets. In certain circumstances where a Plan holds an interest in an entity,
the assets of the entity are deemed to be Plan assets (the "look-through rule").
Under such circumstances, any person that exercises authority or control with
respect to the management or disposition of such assets is a Plan fiduciary.
Plan assets are not defined in ERISA or the Code, but the United States
Department of Labor has issued Regulations, effective March 13, 1987 (the
"Regulations"), that outline the circumstances under which a Plan's interest in
an entity will be subject to the look-through rule.
The Regulations apply only to the purchase of a Plan of an "equity interest"
in an entity, such as common stock of a REIT. The term "equity interest" means
any interest in an entity other than an investment that is treated as
indebtedness under applicable local law and which has no substantial equity
features. However, the Regulations provide an exception to the look-through rule
for equity interests that are "publicly-offered securities" and for equity
interests in an "operating company."
Under the Regulations a "publicly-offered security" is a security that is
(1) freely transferable, (2) part of a class of securities that is
widely-held, and (3) part of a class of securities that is registered under
Section 12(b) or 12(g) of the Exchange Act or sold to a Plan as part of an
offering of securities to the public pursuant to an effective registration
statement under the Securities Act and the class of securities of which such
security is a part is registered under the Exchange Act within 120 days (or
such later time as may be allowed by the Securities and Exchange Commission)
after the end of the fiscal year of the issuer during which the offering of
such securities to the public occurred. Whether a security is considered
"freely-transferable" depends on the facts and circumstances of each case.
Generally, if the security is part of an offering in which the minimum
investment is $10,000 or less and any restriction on or prohibition against
any transfer or assignment of such security is for the purposes of preventing
a termination or reclassification of the entity for federal or state tax
purposes, the security will not be prevented from being considered freely
transferable. A class of securities is considered "widely-held" if it is a
class of securities that is owned by 100 or more investors independent of the
issuer and of one another.
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We believe that the shares offered hereby will meet the criteria of the
publicly-offered securities exception to the look-through rule. First, we
anticipate that the shares will be considered to be freely transferable, as the
only restriction upon our transfer are those required under federal tax laws to
maintain our status as a REIT. Second, we believe that the Shares will be held
by 100 or more investors and that at least 100 or more of these investors will
be independent of us and of one another. Third, the shares will be part of an
offering of securities to the public pursuant to an effective registration
statement under the Exchange Act and will be registered under the Exchange Act
within 120 days (or such later time as may be allowed by the Securities and
Exchange Commission) after the end of our fiscal year during which the offering
of such securities to the public occurs. Moreover, we believe that ownership of
our equity by Plans will not be significant as defined by the Regulations.
Accordingly, we believe that if a Plan purchases the shares, our assets should
not be deemed to be Plan assets and, therefore, that any person who exercises
authority or control with respect to our assets should not be a Plan fiduciary.
DESCRIPTION OF CAPITAL STOCK
GENERAL
Our authorized capital stock consists of 50,000,000 undesignated shares, of
which our Board of Directors has established that 30,000,000 shares are Common
Stock, par value of $0.01 per share. Pursuant to our Articles of Incorporation,
our Board of Directors has the authority to divide the balance of the authorized
capital stock into classes and series with relative rights and preferences and
at such par value as the Board of Directors may establish from time to time.
Each share of Common Stock is entitled to participate equally in dividends when
and as declared by the directors and in the distribution of our assets upon
liquidation. Each authorized share is entitled to one vote and will be fully
paid and nonassessable upon issuance and payment therefor. Each authorized share
has no preference, conversion, exchange, preemptive or cumulative voting rights.
There are no cumulative voting rights in electing directors.
WARRANTS AND OPTIONS
We have issued to our directors and the President of the Advisor warrants to
purchase 15,000 Shares each at a purchase price of $10.00 per Share. See
"MANAGEMENT--WARRANTS AND OPTIONS."
REPURCHASE OF SHARES AND RESTRICTIONS ON TRANSFER
Two of the requirements for qualification for the tax benefits accorded by
the real estate investment trust provisions of the Internal Revenue Code are
that (i) during the last half of each taxable year not more than 50% of the
outstanding capital stock may be owned directly or indirectly by five or fewer
individuals and (ii) there must be at least 100 shareholders for at least 335
out of 365 days of each taxable year or the proportionate amount for any partial
taxable year.
Our Articles of Incorporation prohibit any person or group of persons
from holding, directly or indirectly, ownership of a number of Shares in
excess of 9.8% of the outstanding capital stock. Shares owned by a person or
group of persons in excess of such amounts are referred to in the Articles of
Incorporation and herein as "Excess Shares." For this purpose, shares shall
be deemed to be owned by a person if they are constructively owned by such
person under the provisions of Section 544 of the Code (as modified by
Section 856(h) of the Code) or are beneficially owned by such person under
the provisions of Rule 13d-3 promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"). The term "group" has the same meaning
as that term has for purposes of Section 13(d)(3) of the Exchange Act.
Accordingly, shares owned or deemed to be owned by a person who individually
owns less than 9.8% of the outstanding capital stock may nevertheless be
Excess Shares if such person is a member of a group which owns more than 9.8%
of the outstanding capital stock.
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Our Articles of Incorporation provide that in the event any person acquires
Excess Shares, we may redeem such Excess Shares, at the discretion of the Board
of Directors. Except as set forth below, the redemption price for Excess Shares
is the closing price as reported on the NASDAQ System on the last business day
prior to the redemption date or, if the shares are listed on an exchange, the
closing price on the last business day prior to the redemption date or, if
neither listed on an exchange nor quoted on the NASDAQ System, the net asset
value of the Excess Shares as determined in good faith by the Board of
Directors. In no event, however, may the purchase price of the Shares redeemed
be greater than their net asset value as determined by the Board of Directors in
good faith. To redeem Excess Shares, the Board of Directors must give a notice
of redemption to the holder of such Excess Shares not less than 30 days prior to
the date fixed by the Board of Directors for redemption. The redemption price
for Excess Shares will be paid on the redemption date fixed by the Board of
Directors and included in such notice. Excess Shares cease to be entitled to any
distribution and other benefits from and after the date fixed for redemption,
except the right to payment of the redemption price for such shares.
Under our Articles of Incorporation, any transfer of shares that would
result in the disqualification of the Company as a real estate investment trust
under the Code is void to the fullest extent permitted by law. The Board of
Directors is authorized to refuse to transfer shares to a person if, as a result
of the transfer, that person would own Excess Shares. Upon demand by the Board
of Directors, a shareholder is required to provide us with an affidavit setting
forth, as to that shareholder, the information required to be reported in
returns filed by shareholders under the Treasury Regulation Section 1.857-9 and
in reports filed under Sections 13(d) and 16(b) of the Exchange Act. Each
proposed transferee of shares, upon demand of the Board of Directors, also may
be required to provide us with a statement or affidavit setting forth the number
of shares already owned by the transferee and any related persons. The transfer
or sale of shares also are subject to compliance with applicable state "Blue
Sky" laws.
DIVIDEND REINVESTMENT PROGRAM
The Dividend Reinvestment Program (the "DRP") allows our shareholders to
automatically reinvest dividends by purchasing additional shares directly from
us. Purchases under the DRP are not subject to selling commissions or other
distribution-type fees and costs. If a shareholder elects to take part in the
DRP, we will use dividends payable to the shareholder to purchase additional
shares. However, shareholders will not be able to acquire shares under the DRP
to the extent such purchase would cause them to own, directly of indirectly,
more than 9.8% of our outstanding common stock. Only shareholders are eligible
to participate in the DRP.
Participants in the DRP may purchase fractional shares so that 100% of
dividends will be used to acquire shares. Shares will be purchased under the DRP
on the record date for the dividend used to purchase shares. The record date for
dividends for shares acquired under the DRP will be on the first day of the
month subsequent to the month of purchase. Each shareholder electing to
participate in the DRP agrees to promptly notify us in writing if, at any time
prior to listing of the shares on a national securities exchange or market, the
shareholder fails to meet our suitability requirements for making an investment
or cannot make the other representations or warranties set forth in the
Subscription Agreement.
The Dividend Reinvestment Agent will vote all shares held in the your
account in the same way in which you vote shares standing of record in your
name by the regular proxy you return to us. If the Dividend Reinvestment
Agent sends you a separate proxy covering the shares credited to your
dividend reinvestment account, then your shares will be voted as designated
in the separate proxy. If you do not direct the voting of your shares by
regular or separate proxy, then the shares credited to your dividend
reinvestment account will not be voted. Stock dividends or stock splits we
distribute on shares held by the Dividend Reinvestment Agent for you will be
credited to your account.
If we make available to our shareholders rights to purchase additional
shares or other of our securities, the Dividend Reinvestment Agent will sell
rights accruing to shares held by the Dividend Reinvestment Agent for you and
will combine the resultant funds with the next regular dividend for reinvestment
at that time. If a participant desires to exercise such rights, you must request
that certificates be issued for full shares, as described below.
The reinvestment of dividends does not relieve you of income tax payable on
such dividends. The Dividend Reinvestment Agent will report the amount of
dividends credited to your account. Participants in the DRP may not sell,
pledge, hypothecate or otherwise assign or transfer their account, any interest
therein or any cash or shares credited to the participant's account. No attempt
at any such sale, pledge, hypothecation or other assignment or transfer will be
effective.
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During the Offering Period and until such time as a market develops for the
Shares (of which there can be no assurance) you will acquire shares through the
DRP at a fixed price of $10.00 per share. In the event that a secondary market
develops for the shares, shares may be bought and sold on the secondary market
at prices lower or higher than the $10.00 per Share price which will be paid
under the DRP. We will receive no fee for selling shares under the DRP. We do
not warrant or guarantee that you will be acquiring Shares at the lowest
possible price. You may terminate your participation in the DRP at any time
without penalty, by delivering written notice to us a minimum of ten business
days prior to the record date for the next dividend. Upon termination, dividends
will be distributed to you instead of being used to purchase shares under the
DRP.
Within 90 days after the end of our fiscal year, we will provide you with an
individualized report of your investment, including the purchase date(s),
purchase price and number of shares owned, as well as the dates of distribution
and amounts of dividends received during the prior fiscal year. You will also
receive quarterly statements showing activity since the last statement and
current shares in your DRP account. Your individualized statement will include
receipts and purchases relating to your participation in the DRP. The Dividend
Reinvestment Agent will hold the shares purchased until termination of your
participation in the DRP. At your request, certificates for full shares held by
the Dividend Reinvestment Agent may be issued at any time or on a continuous
basis as they are credited to your DRP account. The servicing agent for our DRP
program is Gemisys Corporation, 7103 South Revere Parkway, Englewood, Colorado,
80112, telephone: (303) 705-6000.
REPURCHASE OF SHARES BY US
Although the shares are not redeemable, we may at our complete discretion,
repurchase shares offered to us by shareholders. 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.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our capital stock is Gemisys
Corporation, 7103 South Revere Parkway, Englewood, Colorado 80112, telephone:
(303) 705-6000.
SUMMARY OF THE ORGANIZATIONAL DOCUMENTS
You will be bound by and deemed to have agreed to the terms of the
organizational documents by your election to become a shareholder. The
organizational documents, consisting of Amended and Restated Articles of
Incorporation and Amended and Restated Bylaws, were reviewed and ratified by
our directors (including the Independent Directors) on May 19, 1995. The
following is a summary of certain provisions of these documents. This summary
is qualified in its entirety by specific reference to the organizational
documents filed as Exhibits to the Registration Statement of which this
prospectus is a part.
CERTAIN ARTICLES OF INCORPORATION AND BYLAWS PROVISIONS
Shareholders' rights and related matters are governed by the Minnesota
Business Corporation Act, the Amended and Restated Articles and the Amended and
Restated Bylaws. Certain provisions of the Articles of Incorporation and Bylaws,
which are summarized below, may make it more difficult to change the composition
of our Board and may discourage an attempt by a person or group to obtain
control of us through acquisitions of shares.
SHAREHOLDER MEETINGS
The Bylaws provide for annual meetings of shareholders. Special meetings of
shareholders may be called by (i) the Chief Executive Officer of the Company,
(ii) a majority of the members of the Board of Directors or a majority of the
Independent Directors, or (iii) shareholders holding at least 10% of the
outstanding shares of common stock entitled to vote at the meeting.
BOARD OF DIRECTORS
The Bylaws provide that the Board establishes the number of our directors,
which may not be fewer than three (3) nor more than nine (9), and a majority of
which must be Independent Directors. Any vacancy will be filled by a majority of
the remaining Directors, except that a vacancy of an Independent Director
position must follow a nomination by the remaining Independent Directors. The
directors may leave a vacancy unfilled until the next regular meeting of the
shareholders.
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LIMITATIONS ON DIRECTOR ACTIONS
Without concurrence of a majority of the outstanding shares, the directors
may not: (i) amend the Articles or Bylaws, except for amendments which do not
adversely affect the rights, preferences and privileges of shareholders
including amendments to provisions relating to, director qualifications,
fiduciary duty, liability and indemnification, conflicts of interest, investment
policies or investment restrictions; (ii) sell all or substantially all of our
assets other than in the ordinary course of our business or in connection with
liquidation and dissolution; (iii) cause us to merge with another entity or
otherwise reorganize; or (iv) cause us to dissolve or liquidate.
A majority of the then outstanding shares may, without the necessity for
concurrence by our directors, vote to: (i) amend the Bylaws; (ii) terminate the
corporation; or (iii) remove the directors.
MINNESOTA ANTI-TAKEOVER LAW
We are governed by the provisions of Sections 302A.671 and 302A.673 of the
Minnesota Business Corporation Act. In general, Section 302A.671 provides that
the shares of a corporation acquired in a "control share acquisition" have no
voting rights unless voting rights are approved in a prescribed manner. A
"control share acquisition" is an acquisition, directly or indirectly, of
beneficial ownership of shares that would, when added to all other shares
beneficially owned by the acquiring person, entitle the acquiring person to have
voting power of 20% or more in the election of directors. In general, Section
302A.673 prohibits a public Minnesota corporation from engaging in a "business
combination" with an "interested shareholder" for a period of four years after
the date of the transaction in which the person became an interested
shareholder, unless the business combination is approved in a prescribed manner.
"Business combination" includes mergers, asset sales and other transactions
resulting in a financial benefit to the interested shareholder. An "interested
shareholder" is a person who is the beneficial owner, directly or indirectly, of
10% or more of the corporation's voting stock or who is an affiliate or
associate of the corporation and at any time within four years prior to the date
in question was the beneficial owner, directly or indirectly, of 10% or more of
the corporation's stock.
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RESTRICTIONS ON ROLL-UPS
"Roll-Up" means a transaction involving our acquisition, merger, conversion,
or consolidation (either directly or indirectly) and the issuance of securities
of a Roll-Up Entity. Such term does not include: (i) a transaction involving our
securities that have been for at least 12 months listed on a national securities
exchange or traded through the NASDAQ National Market System; or (ii) a
transaction involving the conversion to corporate, trust, or association form
if, as consequence of the transaction, there will be no significant adverse
change in any of the following: (a) shareholders' voting rights; (b) our term of
existence; (c) Sponsor or Advisor compensation; (d) our investment objectives.
"Roll-Up Entity" means a partnership, real estate investment trust, corporation,
trust, or other entity created or surviving after the completion of a Roll-Up
transaction.
In connection with a Roll-Up, an appraisal of all of our assets would be
required to be obtained from a competent independent expert. The appraiser would
evaluate all relevant information, indicate the value of the assets as of a date
immediately prior to the announcement of the Roll-Up and assume an orderly
liquidation of the assets over a 12-month period. Notwithstanding the foregoing,
we may not participate in any proposed Roll-Up which would:
- result in our shareholders having rights to meeting less frequently or
which are more restrictive to shareholders than those provided in our
Bylaws;
- result in our shareholders having voting rights that are less than those
provided in our Bylaws;
- result in our shareholders having greater liability than as provided in
our Bylaws;
- result in our shareholders having rights to receive reports that are less
than those provided in our Bylaws;
- result in our shareholders having access to records that are more limited
than those provided in our Bylaws;
- include provisions which would operate to materially impede or frustrate
the accumulation of shares by any purchaser of the securities of the
Roll-Up Entity (except to the minimum extent necessary to preserve the tax
status of the Roll-Up Entity);
- limit the ability of an investor to exercise the voting rights of its
securities in the Roll-Up Entity on the basis of the number of the shares
held by that investor;
- result in investors in the Roll-Up Entity having rights of access to the
records of the Roll-Up Entity that are less than those provided in our
Bylaws; or
- place upon us any of the costs of the transaction if the Roll-Up is not
approved by the shareholders.
Nothing prevents our participation in any proposed Roll-Up resulting in
shareholders having rights and restrictions comparable to those contained in our
Bylaws, with the prior approval of a majority of our shareholders.
Shareholders voting against a proposed Roll-Up have the choice of (i)
accepting the securities of the Roll-Up Entity offered in the proposed Roll-Up;
or (ii) one of either: (a) remaining as our shareholders and preserving their
interests therein on the same terms and conditions as previously existed, or (b)
receiving cash in an amount equal to the shareholders' pro rata share of the
appraised value of our net assets. We do not intend to participate in a Roll-Up
transaction.
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LIMITATION ON TOTAL OPERATING EXPENSES
Our Bylaws provide that, subject to the conditions described in this
paragraph, our annual Total Operating Expenses cannot exceed the greater of
2% of our Average Invested Assets or 25% our Net Income. The Independent
Directors have a fiduciary responsibility to limit our annual Total Operating
Expenses to amounts that do not exceed the foregoing limitations. The
Independent Directors may determine that a higher level of Total Operating
Expenses is justified for such period because of unusual and non-recurring
expenses. Any such finding by the Independent Directors and the reasons in
support thereof must be recorded in the minutes of the meeting of the Board
of Directors. We will send a written disclosure to our shareholders within 60
days after the end of any fiscal quarter for which Total Operating Expenses
(for the 12 months then ended) exceed 2% of the Average Invested Assets or
25% of Net Income. In the event the Total Operating Expenses exceed the
limitations described above and if our directors are unable to conclude that
such excess was justified then within 60 days after the end of our fiscal
year, the Advisor must reimburse us for the amount by which the aggregate
annual Total Operating Expenses paid or incurred by us exceed the limitation.
TRANSACTIONS WITH AFFILIATES
Our Bylaws restrict our dealings with the Advisor, Sponsor and any director
or affiliates thereof. In approving any transaction or series of transactions
with such persons or entities, a majority of our directors not otherwise
interested in such transaction, including a majority of the Independent
Directors must determine that:
(a) the transaction as contemplated is fair and reasonable to us and our
shareholders and its terms and conditions are not less favorable to us
than those available from unaffiliated third parties;
(b) if the transaction involves compensation to any Advisor or its
affiliates for services rendered in a capacity other than contemplated
by the advisory arrangements, such compensation is not greater than the
customary charges for comparable services generally available from other
competent unaffiliated persons and is not in excess of compensation paid
to any Advisor and its affiliates for any comparable services;
(c) if the transaction involves the making of loans (other than in the
ordinary course of our business) or the borrowing of money, the
transaction is fair, competitive, and commercially reasonable and no
less favorable to us than loans between unaffiliated lenders and
borrowers under the same circumstances; and
(d) if the transaction involves the investment in a joint venture, the
transaction is fair and reasonable and no less favorable to us than to
other joint venturers.
If the proposed transaction involves a loan to any Advisor, director or any
affiliate thereof, or to a wholly-owned subsidiary of ours, a written appraisal
of the underlying property must be obtained from an independent expert. The
appraisal must be maintained in our records for at least five years and be
available for inspection and duplication by any shareholder. Such loan is
subject to all requirements of our Financing Policy.
We cannot borrow money from any Advisor, director or any affiliate thereof,
unless a majority of our directors (including a majority of the Independent
Directors) not otherwise interested in the transaction approve the transaction
as being fair, competitive, and commercially reasonable and no less favorable to
us than loans between unaffiliated parties under the same circumstances.
We cannot make or invest in any mortgage loans subordinate to any mortgage
or equity interest of the Advisor, directors, Sponsors or any of our affiliates.
RESTRICTIONS ON INVESTMENTS
The investment policies and restrictions set forth in our Bylaws have
been approved by a majority of our Independent Directors. In addition to
other investment restrictions imposed by the directors consistent with our
objective to qualify as a REIT, we will observe the guidelines and
prohibitions on its investments set forth in its Bylaws. These guidelines and
prohibitions are discussed at the section headed "OUR BUSINESS--PROHIBITED
INVESTMENTS AND ACTIVITIES."
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PLAN OF DISTRIBUTION
GENERAL
The Underwriter is offering the shares pursuant to the terms and
conditions of an Underwriting Agreement (a copy of which is filed as an
exhibit to the Registration Statement of which this prospectus is a part).
The Underwriter is offering hereby up to 1,500,000 shares at a price of
$10.00 per share on a "best efforts" basis. "Best efforts" means that the
Underwriter is not obligated to purchase any shares. This is a "no minimum"
offering. As a "no minimum" offering, there is no minimum number of Shares
that must be sold, and we will receive the proceeds from the sale of Shares
as they are sold. There is no assurance as to the number of Shares sold or
proceeds received. This Offering will be conducted on a continuous basis
pursuant to applicable rules of the Securities and Exchange Commission and
will terminate not later than August 26, 2001 (two years from the date
hereof), or upon completion of the sale of all shares, whichever first occurs
(the "OFFERING PERIOD"). We may terminate this Offering at any time.
COMPENSATION
We will pay to the Underwriter a commission of 5.95% of the proceeds from
the sale of the shares sold (up to $892,500). We have agreed to pay the
Underwriter a non-accountable expense allowance of up to $133,000 to reimburse
the Underwriter for certain expenses incurred by it in connection with the offer
and sale of the shares, $35,000 of which is payable upon the sale of $1,000,000
in shares, and the balance ($98,000) is payable ratably based on the number of
shares sold thereafter.
The Underwriter may award sales incentive items to Soliciting Dealers, and
persons associated with it as licensed registered representatives, in connection
with its sales activities. The value of each item will be less than $50. The
Underwriter may pay incentive compensation to regional marketing representatives
for their activities as wholesalers in connection with the distribution of the
shares, subject to the overall restrictions on commissions described herein.
We will not pay or award any commissions or other compensation to any person
engaged by a potential investor for investment advice to induce such person to
advise the investor to purchase our shares. This provision does not prohibit the
normal sales commission payable to a registered broker-dealer or other properly
licensed person for selling our shares.
SUBSCRIPTION PROCESS
Our shares will be offered to the public through the Underwriter and
Soliciting Dealers. The Soliciting Dealer Agreement between the Underwriter and
the Soliciting Dealers require the soliciting broker-dealers to make diligent
inquiries as required by law of all prospective purchasers in order to ascertain
whether a purchase our shares is suitable for such person and transmit promptly
to us the fully completed subscription documentation and any supporting
documentation we reasonably require.
The shares are being sold when, as and if we receive and accept
subscriptions therefor, subject to our satisfaction of certain other conditions
and approval by counsel of certain legal matters. We have the unconditional
right to accept or reject any subscription. We will accept or reject
subscriptions within four business days. If we accept your subscription, we will
mail you a confirmation within two weeks of acceptance of your subscription. If
we reject your subscription, your funds will be returned to the Soliciting
Dealer, without interest. We will not accept initial subscriptions for less than
250 shares (200 shares for IRA accounts).
The Underwriter may offer the shares only through their own registered
representatives and broker-dealers who are members of the NASD ("Soliciting
Dealers"). The Underwriter may re-allow to Soliciting Dealers a portion of their
commissions, fees and reimbursable expenses payable to it under the Underwriting
Agreement. In no event will the compensation re-allowed by the Underwriter to
Soliciting Dealers exceed the total of compensation payable to the Underwriter
under the Underwriting Agreement. The Underwriter may enter into limited
Securities Clearing Agreements with Soliciting Dealers whose minimum net capital
requirements are $25,000 for the sole purpose of clearing transactions in the
Shares.
CLIENTS OF SUCH SOLICITING DEALERS WHO WISH TO PURCHASE SHARES WILL RECEIVE
A CONFIRMATION OF THEIR PURCHASE DIRECTLY FROM THE UNDERWRITER AND MUST REMIT
PAYMENT FOR THE PURCHASE OF SHARES DIRECTLY TO THE UNDERWRITER PAYABLE TO
"AMERICAN INVESTORS GROUP, INC."
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A sale will be deemed to have been made on the date reflected in the written
confirmation. The confirmation will be sent to each purchaser by the Underwriter
on the first business day following the date upon which we advise the
Underwriter in writing that a subscription has been accepted. The Underwriter
must receive payment of the purchase price by the Settlement Date set forth in
the confirmation. No sale of the Shares offered hereby may be completed until at
least five (5) business days after you receive a final prospectus.
The Underwriting Agreement provides for reciprocal indemnification between
us and the Underwriter against certain liabilities in connection with this
Offering, including liabilities under the Securities Act of 1933. Our
indemnification obligations may be limited by our Articles and Bylaws.
The foregoing discussion of the material terms and provisions of the
Underwriting Agreement is qualified in its entirety by reference to the detailed
terms and provisions of the Underwriting Agreement, a copy of which has been
filed as an exhibit to the Registration Statement of which this prospectus is a
part.
There is no market for the shares. We do not expected that a market will
develop during or immediately after the Offering Period. The initial price of
the shares has been determined by negotiations with the Underwriter and is the
same price paid by the initial shareholder of our shares and shareholders who
purchased shares in our first two public offerings. The public offering price is
not an indication of the actual value of the shares.
DETERMINATION OF INVESTOR SUITABILITY
We, the Underwriter and each Soliciting Dealer will make reasonable efforts
to determine that those persons being offered or sold the Shares are appropriate
in light of the suitability standards set forth herein and are appropriate to
such investor's investment objectives and financial situation. The Soliciting
Dealer must ascertain that you can reasonably benefit from an investment in our
shares. The following shall be relevant to such determination: (i) you are
capable of understanding the fundamental aspects of our business, which capacity
may be evidenced by the following: (a) employment experience; (b) educational
level achieved; (c) access to advice from qualified sources, such as attorneys,
accountants, tax advisors, etc.; and (d) prior experience with similar
investments; (ii) the investor has apparent understanding of (a) the fundamental
risk and possible financial hazards of this type of investment; (b) the lack of
liquidity of this investment; (c) the investment will be directed and managed by
the Advisor; and (d) the tax consequences of the investment; and (iii) the
investor has the financial capability to invest in our shares.
By executing your subscription agreement, each Soliciting Dealer
acknowledges its determination that the shares are a suitable investment for
you, and will be required to represent and warrant its compliance with the
applicable laws requiring the determination of the suitability of the Shares
as an investment for you. In addition to the foregoing, we will coordinate
the processes and procedures utilized by the Underwriter and Soliciting
Dealers and, where necessary, implement additional reviews and procedures
deemed necessary to determine that you meet the suitability standards set
forth herein. The Underwriter and/or the Soliciting Dealers must maintain for
at least six (6) years a record of the information obtained to determine that
you meet the suitability standards imposed on the offer and sale of shares
and your representation that you are investing for your own account or, in
lieu of such representation, information indicating that you met the
suitability standards.
SUITABILITY OF THE INVESTMENT
Your investment in our shares involves certain risks. Our shares are
suitable only for long-term investment by persons who have adequate financial
means. Shares will be sold to you only if you meet one of the following
standards: (i) a net worth (excluding home, home furnishings and automobiles) of
at least $45,000 and estimated gross income during the current year (without
regard to investment in our shares) of at least $45,000; or (ii) a net worth
(excluding home, home furnishings and automobiles) of at least $150,000. In the
case of gifts to minors, the suitability standards must be met by the custodian
account or by the donor agreement. By acceptance of the confirmation of purchase
or delivery of the shares, you will represent satisfaction of the applicable
suitability standards.
Custodians or trustees of employee pension benefit plans or IRAs should
review the sections of this prospectus headed "FEDERAL INCOME TAX
CONSEQUENCES--TAXATION OF TAX-EXEMPT STOCKHOLDERS" AND "ERISA CONSEQUENCES."
Suitability standards may be higher in certain states. You must meet all of
the applicable requirements set forth in the Subscription Agreement. Under the
laws of certain states, you may transfer shares only to persons who meet similar
standards, and we may require certain assurances that these standards are met.
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COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons pursuant to our
Bylaws, or otherwise, we have been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act, and is therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than our
payment of expenses incurred or paid by a director, officer or controlling
persons in the successful defense of any action, suit or proceeding) is asserted
by a director, officer or controlling person in connection with the securities
being registered, we will, unless in the opinion of our counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the questions of whether such indemnification is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
LEGAL MATTERS
Certain legal matters, including the legality of the shares being offered
hereby, and certain federal income tax matters as set forth under sections
entitled "RISK FACTORS--FUTURE CHANGES IN TAX LAWS MAY AFFECT OUR REIT
STATUS" and "FEDERAL INCOME TAX CONSEQUENCES," are being passed upon for us
by Maun & Simon, PLC, Minneapolis, Minnesota.
EXPERTS
Our financial statements as of December 31, 1995, 1996, 1997 and 1998
included in this prospectus have been audited by Boulay, Heutmaker, Zibell and
Company, P.L.L.P., independent certified public accountants, as set forth in the
report thereon appearing elsewhere herein, and are included herein in reliance
upon such report given on the authority of said firm as experts in accounting
and auditing.
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REPORTS TO SHAREHOLDERS, AND RIGHTS OF EXAMINATION
The Advisor will keep, or cause to be kept, full and true books of
account on an accrual basis of accounting, in accordance with generally
accepted accounting principles ("GAAP"). All of books of account, together
with a copy of our Articles and any amendments thereto, will be maintained at
our principal office, and will be open to inspection, examination and
duplication at reasonable times by our shareholders or their agents. We will
provide to shareholders, upon request, a list of the names and addresses of
all of our shareholders by mail. The shareholders will also have the right to
inspect our records in the same manner as shareholders of any other Minnesota
corporation. Our shareholders have rights under our Bylaws to inspect our
records that are in addition to those available under applicable federal and
state law.
The Advisor will submit our annual reports to each shareholder within 120
days following the close of each fiscal year. The annual reports will contain
the following:
- audited financial statements
- the ratio of the costs of raising capital during the period to the capital
raised
- the aggregate amount of advisory fees and the aggregate amount of fees we
paid to the Advisor and any affiliate of the Advisor, including fees or
charges paid to the Advisor and any affiliate of the Advisor by third
parties doing business with us
- our Total Operating Expenses, stated as a percentage of our Average
Invested Assets and as a percentage of Net Income
- a report from the Independent Directors that the policies we are following
are in the best interests of our shareholders and the basis for
determination
- full disclosure of all material terms, factors and circumstances of
transactions between us and our directors, the Advisor or any Affiliate
thereof occurring in the year for which the annual report is made.
Independent Directors will examine and comment in the report on the
fairness of such transactions.
Unaudited quarterly reports will be submitted to each shareholder within 60
days after the end of the first three fiscal quarters of each fiscal year.
Within 60 days following the end of any quarter during the Offering Period in
which we have closed a loan, a report will be submitted to each shareholder
containing:
- the location and a description of the general characteristics of each loan
made during the quarter and the property securing the loan
- the material terms of the loan
- a statement that an appraisal and title insurance have been obtained on
the property
A report will be sent to each shareholder and submitted to prospective
investors at such time as the Advisor believes a reasonable probability exists
that a loan will be made: (i) on specified terms; and (ii) involving the use of
10% or more, on a cumulative basis, of the net proceeds of this Offering.
Our regular accountants will prepare our federal and state tax returns. We
will submit tax information to shareholders within 90 days following the end of
each fiscal year. A specific reconciliation between GAAP and income tax
information will not be provided to the shareholders. Reconciling information
will be available in our office for inspection and review by any shareholder.
Concurrent with the dissemination of tax information to shareholders, we will
provide each shareholder with a report on his or her investment, including the
purchase date(s), purchase price and number of shares owned, as well as the
dates of distribution and amounts of dividends received during the prior fiscal
year. The statement will report purchases of shares under the Dividend
Reinvestment Plan. Shareholders requiring reports on a more frequent basis may
request them. We will make a reasonable effort to supply more frequent reports,
as requested. We may require payment of an administrative charge which will be
paid: (i) directly by the shareholder; or (ii) through pre-authorized deductions
from dividends payable to the shareholder making the request.
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ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission in Washington,
D.C., a Registration Statement (as amended) on Form S-11 (of which this
prospectus is a part) under the Securities Act of 1933, as amended, with respect
to the shares offered hereby. This prospectus does not contain all the
information set forth in the Registration Statement. Statements contained in the
prospectus as to the contents of any contract or other document are not
necessarily complete. In each instance reference is made to the copy of such
contract or document filed as an exhibit to the Registration Statement. The
Registration Statement and to the exhibits and schedules thereto contain further
information regarding us.
We are subject to the information requirements of the Exchange Act, and in
accordance therewith file reports and other information with the Commission.
Reports and other information we have filed with the Commission can be inspected
and copied at the public reference facilities maintained by the Commission at
450 Fifth St. N.W., Washington, DC 20549, and at the Commission's regional
offices at Northwestern Atrium Center, 500 West Madison, Suite 1400, Chicago,
Illinois 60661 and 7 World Trade Center, Suite 1300, New York, New York 10048.
Copies of such material may be obtained at prescribed rates from the
Commission's Public Reference Section at 450 Fifth Street, N.W., Washington, DC
20549. The Commission maintains a Web site that contains reports, proxy and
information statements and other materials that are filed through the
Commission's Electronic Data Gathering, Analysis and Retrieval system. This Web
site can be accessed at http://www.sec.gov. In addition, material filed by the
Company can be inspected at the offices of the National Association of
Securities Dealers, Inc., at 1735 K Street, N.W., Washington, D.C. 20006.
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GLOSSARY
Definitions of certain terms used in the prospectus are set forth below:
"ACQUISITION EXPENSES" means expenses including but not limited to legal
fees and expenses, travel and communications expenses, costs of appraisals,
non-refundable option payments on property not acquired, accounting fees and
expenses, title insurance, and miscellaneous expenses related to selection and
acquisition of properties, whether or not acquired.
"ACQUISITION FEE" means the total of all fees and commissions paid by any
party to any party in connection with our making or investing in mortgage loans.
Included in the computation of such fees or commissions shall be any commission,
selection fee, nonrecurring management fee, reinvestment fees, loan fee or
points or origination fee or any fee of a similar nature, however designated.
Excluded shall be development and construction fees paid to persons not
affiliated with our sponsor in connection with the acquisition and funding of
our properties.
"ADVISOR" means, Church Loan Advisors, Inc., or its successors, and
generally, the Person(s) or entity responsible for directing or performing our
day-to-day business affairs, including a Person or entity to which an Advisor
subcontracts substantially all such functions.
"ADVISORY AGREEMENT" means the agreement we have signed with the Advisor
pursuant to which the Advisor will act as our administrator.
"AFFILIATE" an affiliate of another person includes any of the following:
(a) any person directly or indirectly owning, controlling, or holding, with
power to vote ten percent or more of the outstanding voting securities of such
other person; (b) any person ten percent or more of whose outstanding voting
securities are directly or indirectly owned, controlled, or held, with power to
vote, by such other person; (c) any person directly or indirectly controlling,
controlled by, or under common control with such other person; (d) any executive
officer, director, trustee or general partner of such other person; or (e) any
legal entity for which such person acts as an executive officer, director,
trustee or general partner. The term "person" means both natural person and
legal entities.
"AVERAGE INVESTED ASSETS" for any period shall mean the average of the
aggregate book value of our assets invested, directly or indirectly, in loans
(or interests in loans) secured by real estate, and first mortgage bonds, before
reserves for depreciation of 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.
"BEST EFFORTS" means a method of underwriting whereby the Underwriter is
committed to use its best efforts to sell the shares on our behalf, but is not
required to purchase the shares or otherwise guarantee their sale.
"DIVIDEND REINVESTMENT PLAN" means our dividend reinvestment plan for
shareholders pursuant to which any quarterly dividends otherwise payable in cash
are instead applied toward the purchase of additional shares for the
participant.
"DRM HOLDINGS, INC." Means DRM Holdings, Inc., a Minnesota corporation
which is the parent (100% owner) of the Underwriter and an affiliate of the
Advisor.
"INDEPENDENT DIRECTOR(S)" means our directors who are not associated and
have not been associated within the last two years, directly or indirectly, with
the Sponsor or Advisor. A director shall be deemed to be associated with the
Sponsor or Advisor if he or she: (i) owns an interest in the Sponsor, Advisor,
or any of their Affiliates; or (ii) is employed by the Sponsor, Advisor or any
of their Affiliates; or (iii) is an officer or director of the Sponsor, Advisor,
or any of their Affiliates; or (iv) performs services for us, other than as a
director; or (v) is a director for more than three real estate investment trusts
organized by the Sponsor or advised by the Advisor; or (vi) has any material
business or professional relationship with the Sponsor, Advisor, or any of their
affiliates. For purposes of determining whether or not the business or
professional relationship is material, the gross revenue derived by the
prospective Independent Director from the Sponsor and Advisor and Affiliates
shall be deemed material per se if it exceeds 5% of the prospective Independent
Director's: (i) annual gross revenue, derived from all sources, during either of
the last two years; or (ii) net worth, on a fair market value basis. An indirect
relationship shall include circumstances in which a director's spouse, parents,
children, siblings, mothers- or fathers-in-law, sons- or daughters-in-law, or
brothers- or sisters-in-law is or has been associated with the Sponsor, Advisor,
any of their Affiliates, or with American Church Mortgage Company.
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"INDEPENDENT EXPERT" means a person with no material current or prior
business or personal relationship with the Advisor or directors who is engaged
to a substantial extent in the business of rendering opinions regarding the
value of assets of the type we hold.
"LEVERAGE" means the aggregate amount of our indebtedness for money
borrowed (including purchase money mortgage loans) outstanding at any time, both
secured and unsecured.
"NET ASSETS" means the total assets (other than intangibles) at cost before
deducting depreciation or other non-cash reserves less total liabilities,
calculated at least quarterly on a basis consistently applied.
"NET INCOME" for any period shall mean total revenues applicable to such
period, less the expenses applicable to such period, other than additions to
reserves for depreciation, bad debts or other similar non-cash reserves
determined in accordance with generally accepted accounting principles.
"ORGANIZATION AND OFFERING EXPENSES" means all expenses incurred by and
to be paid from our assets in connection with and in preparing our shares for
registration and subsequently offering and distributing them to the public,
including, but not limited to, total underwriting and brokerage discounts and
commissions (including fees of the underwriters' attorneys), warrants to
dealers, expenses for printing, engraving, mailing, salaries of employees
while engaged in sales activity, charges of transfer agents, registrars,
trustees, escrow holders, depositaries, experts, expenses of qualification of
the sale of the securities under Federal and State laws, including tax and
fees, accountants' and attorneys' fees.
"PERMITTED TEMPORARY INVESTMENTS" means money market funds, U.S. government
treasury obligations, certificates of deposit, interest bearing bank accounts
and other similar short-term obligations which can be readily liquidated and
which are determined not to impair our ability to qualify as a REIT.
"SPONSOR" means any person directly or indirectly instrumental in
organizing wholly or in part, a real estate investment trust or any person who
will control, manage or participate in the management of a real estate
investment trust, and any affiliate of such person. Not included is any person
whose only relationship with the real estate investment trust is as that of an
independent property manager of real estate investment trust assets, and whose
only compensation is as such. Sponsor does not include wholly independent third
parties such as attorneys, accountants and underwriters whose only compensation
is for professional services. A person may also be deemed our Sponsor by: (i)
taking the initiative, directly or indirectly, in founding or organizing our
business or enterprise, either alone or in conjunction with one or more other
persons; (ii) receiving a material participation in the REIT entity in
connection with the founding or organizing of our business, in consideration of
services or property, or both services and property; (iii) having a substantial
number of relationships and contacts with us; (iv) possessing significant rights
to control our properties; (v) receiving fees for providing services to us which
are paid on a basis that is not customary in the industry; or (vi) providing
goods or services to us on a basis which was not negotiated with us at
arm's-length.
"TAXABLE REIT INCOME" means the taxable income as computed for a
corporation which is not a REIT: (i) without the deductions allowed by Code
Sections 241 through 247, 249 and 250 (relating generally to the deduction for
dividends received); (ii) excluding amounts equal to (a) the net income from
foreclosure property, and (b) the net income derived from prohibited
transactions; (iii) deducting amounts equal to (a) any net loss derived from
prohibited transactions, and (b) the tax imposed by section 857(b)(5) of the
Code upon a failure to meet the 95% and/or the 75% gross income tests; and (iv)
disregarding the dividends paid, computed without regard to the amount of the
net income from foreclosure property which is excluded from REIT Taxable Income.
"TOTAL OPERATING EXPENSES" means aggregate expenses of every character we
have paid or incurred as determined under Generally Accepted Accounting
Principles, including Advisors' fees but excluding: (a) the expenses of raising
the capital such as Organization and Offering Expenses, legal, audit,
accounting, underwriting, brokerage, listing, registration and other fees,
printing and other such expenses, and tax incurred in connection with the
issuance, distribution, transfer, registration, and stock exchange listing of
our Shares; (b) interest payments; (c) taxes; (d) non-cash expenditures such as
depreciation, amortization and bad debt reserves; (e) incentive fees; (f)
Acquisition Fees, Acquisition Expenses, real estate commissions on resale of
property and other expenses connected with the acquisition, disposition, and
ownership of real estate interests, mortgage loans, or other property, (such as
the costs of foreclosure, insurance premiums, legal services, maintenance,
repair, and improvement of property).
"UBTI" means unrelated business taxable income as described in the Internal
Revenue Code.
62
<PAGE>
AMERICAN CHURCH MORTGAGE COMPANY
Minneapolis, Minnesota
Financial Statements
June 30, 1999 and 1998 (Unaudited)
and December 31, 1998, 1997, 1996 and 1995
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
American Church Mortgage Company
Minneapolis, Minnesota
We have audited the accompanying balance sheet of American Church Mortgage
Company as of December 31, 1998, 1997, 1996 and 1995 and the related statements
of operations, stockholders' equity and cash flows for the years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of American Church Mortgage
Company as of December 31, 1998, 1997, 1996 and 1995 and the results of its
operations and its cash flows for the years then ended, in conformity with
generally accepted accounting principles.
/s/ Boulay, Heutmaker, Zibell & Co. P.L.L.P.
Boulay, Heutmaker, Zibell & Co. P.L.L.P.
Certified Public Accountants
Minneapolis, Minnesota
February 17, 1999
F-1
<PAGE>
AMERICAN CHURCH MORTGAGE COMPANY
Balance Sheet
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
June 30
ASSETS 1999 1998
- ---------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and equivalents $ 1,137,573 $ 1,248,563
Current maturities of loans receivable 171,056 69,723
Current maturities of bonds receivable 15,000 4,933
----------- -----------
Total current assets 1,323,629 1,323,219
LOANS RECEIVABLE, net of current maturities 7,962,561 6,649,312
BONDS RECEIVABLE, net of current maturities 1,918,901 134,334
DEFERRED TAX ASSET 40,000 33,000
DEFERRED OFFERING COSTS 10,841 3,977
ORGANIZATION EXPENSES, net 9 313
----------- -----------
TOTAL ASSETS $11,255,941 $ 8,144,155
----------- -----------
----------- -----------
</TABLE>
Notes to Financial Statements are an integral part of this Statement.
F-2
<PAGE>
AMERICAN CHURCH MORTGAGE COMPANY
Balance Sheet
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
June 30
LIABILITIES AND STOCKHOLDERS' EQUITY 1999 1998
- ---------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 26,180 $ 65,254
Due to loan escrow account 365,087
Deferred income 32,644 14,515
Dividends payable 259,858 174,631
----------- -----------
Total current liabilities 318,682 619,487
DEFERRED INCOME 127,498 91,100
STOCKHOLDERS' EQUITY
Common stock, par value $.01 per share
Authorized, 30,000,000 shares
Issued and outstanding, 1,189,823 as of
June 30, 1999, and 819,722 as of June 30, 1998 11,898 8,197
Additional paid-in capital 10,933,876 7,510,415
Accumulated deficit (136,013) (85,044)
----------- -----------
Total stockholders' equity 10,809,761 7,433,568
----------- -----------
TOTAL LIABILITIES AND EQUITY $11,255,941 $ 8,144,155
----------- -----------
----------- -----------
</TABLE>
Notes to Financial Statements are an integral part of this Statement.
F-3
<PAGE>
AMERICAN CHURCH MORTGAGE COMPANY
Balance Sheet
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
December 31
ASSETS 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash and equivalents $ 2,941,530 $ 291,815 $ 612,744 $ 135,282
Accounts receivable 28,777
Current maturities of loans receivable 237,242 103,505 55,436
Current maturities of bond portfolio 12,000
----------- ----------- ----------- -----------
Total current assets 3,219,549 395,320 668,180 135,282
LOANS RECEIVABLE, net of current maturities 5,994,620 4,808,803 2,605,388
BONDS RECEIVABLE, net of current maturities 1,011,997 125,809 120,640
DEFERRED OFFERING COSTS 107,295
DEFERRED TAX ASSET 40,000 33,000 20,000
ORGANIZATION EXPENSES, net 161 464 769 1,071
----------- ----------- ----------- -----------
TOTAL ASSETS $10,266,327 $ 5,363,396 $ 3,414,977 $ 243,648
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
Notes to Financial Statements are an integral part of this Statement.
F-4
<PAGE>
AMERICAN CHURCH MORTGAGE COMPANY
Balance Sheet
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
December 31
LIABILITIES AND STOCKHOLDERS' EQUITY 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 12,759 $ 15,490 $ 8,482 $ 49,493
Deferred income 21,772 17,301 10,383
Dividends payable 233,004 127,899 80,424
------------ ------------ ------------ ------------
Total current liabilities 267,535 160,690 99,289 49,493
DEFERRED INCOME 92,408 61,127 35,547
STOCKHOLDERS' EQUITY
Common stock, par value $.01 per share
Authorized, 30,000,000 shares
Issued and outstanding, 1,087,646 at December 31,
1998, 571,615 at December 31, 1997, 359,791 at
December 31, 1996 and 20,000 shares at
December 31, 1995 10,876 5,716 3,598 200
Additional paid-in capital 9,973,200 5,184,882 3,306,437 199,800
Accumulated deficit (77,692) (49,019) (29,894) (5,845)
------------ ------------ ------------ ------------
Total stockholders' equity 9,906,384 5,141,579 3,280,141 194,155
------------ ------------ ------------ ------------
TOTAL LIABILITIES AND EQUITY $ 10,266,327 $ 5,363,396 $ 3,414,977 $ 243,648
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
Notes to Financial Statements are an integral part of this Statement.
F-5
<PAGE>
AMERICAN CHURCH MORTGAGE COMPANY
Statement of Operations
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Six Months Ended
June 30
1999 1998
- -----------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
INTEREST INCOME $ 491,366 $ 326,460
OPERATING EXPENSES 72,001 45,110
---------- ---------
OPERATING INCOME (LOSS) 419,365 281,350
PROVISION FOR (BENEFIT FROM)
INCOME TAXES
---------- ---------
NET INCOME (LOSS) $ 419,365 $ 281,350
---------- ---------
---------- ---------
BASIC AND DILUTED INCOME (LOSS) PER COMMON SHARE $ .36 $ .45
---------- ---------
---------- ---------
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 1,174,200 618,740
---------- ---------
---------- ---------
</TABLE>
Notes to Financial Statements are an integral part of this Statement.
F-6
<PAGE>
AMERICAN CHURCH MORTGAGE COMPANY
Statement of Operations
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Years Ended December 31
1998 1997 1996 1995
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 782,013 $ 384,118 $ 217,390 $ 4,436
76,648 36,304 72,004 5,759
--------- --------- --------- ---------
705,365 347,814 145,386 (1,323)
(7,000) (13,000) (20,000) -
--------- --------- --------- ---------
$ 712,365 $ 360,814 $ 165,386 $ (1,323)
--------- --------- --------- ---------
--------- --------- --------- ---------
$ .86 $ .91 $ .79 $ (.07)
--------- --------- --------- ---------
--------- --------- --------- ---------
825,176 398,160 209,072 20,000
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
Notes to Financial Statements are an integral part of this Statement.
F-7
<PAGE>
AMERICAN CHURCH MORTGAGE COMPANY
Statement of Stockholders' Equity
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Common Stock Additional
-------------------------- Paid-In Accumulated
Shares Amount Capital Deficit
- ---------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1994 20,000 $ 200 $ 199,800 $ (4,522)
Net loss (1,323)
---------- -------- ----------- ----------
BALANCE, DECEMBER 31, 1995 20,000 200 199,800 (5,845)
Issuance of 339,791 shares of
common stock, net of
offering costs 339,791 3,398 3,106,637
Net income 165,386
Dividends declared (189,435)
---------- -------- ----------- ----------
BALANCE, DECEMBER 31, 1996 359,791 3,598 3,306,437 (29,894)
Issuance of 211,824 shares of
common stock, net of
offering costs 211,824 2,118 1,878,445
Net income 360,814
Dividends declared (379,939)
---------- -------- ----------- ----------
BALANCE, DECEMBER 31, 1997 571,615 5,716 5,184,882 (49,019)
Issuance of 516,031 shares of
common stock, net of
offering costs 516,031 5,160 4,788,318
Net income 712,365
Dividends declared (741,038)
---------- -------- ----------- ----------
BALANCE, DECEMBER 31, 1998 1,087,646 10,876 9,973,200 (77,692)
Issuance of 102,177 shares of
common stock, net of
offering costs 102,177 1,022 960,676
Net income 419,365
Dividends declared (477,686)
---------- -------- ----------- ----------
BALANCE, JUNE 30, 1999 (unaudited) 1,189,823 $ 11,898 $10,933,876 $ (136,013)
---------- -------- ----------- ----------
---------- -------- ----------- ----------
</TABLE>
Notes to Financial Statements are an integral part of this Statement.
F-8
<PAGE>
AMERICAN CHURCH MORTGAGE COMPANY
Statement of Cash Flows
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Six Months Ended June 30
1999 1998
- ---------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 419,365 $ 281,350
Adjustments to reconcile net income to
net cash from operating activities:
Amortization 152 152
Deferred offering costs (10,841) (3,977)
Change in assets and liabilities
Accounts receivable 28,777
Accounts payable 13,421 414,850
Deferred income 45,962 27,186
----------- -----------
Net cash from operating activities 496,836 719,561
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in mortgage loans (3,031,000) (2,130,000)
Collections on mortgage loans 1,129,245 323,273
Investment in bonds (909,904) (13,458)
----------- -----------
Net cash used for investing activities (2,811,659) (1,820,185)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from stock offering 961,698 2,328,014
Dividends paid (450,832) (270,642)
----------- -----------
Net cash from financing activities 510,866 2,057,372
----------- -----------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS (1,803,957) 956,748
CASH AND EQUIVALENTS - Beginning of Period 2,941,530 291,815
----------- -----------
CASH AND EQUIVALENTS - End of Period $ 1,137,573 $ 1,248,563
----------- -----------
----------- -----------
</TABLE>
- Continued -
Notes to Financial Statements are an integral part of this Statement.
F-9
<PAGE>
AMERICAN CHURCH MORTGAGE COMPANY
Statement of Cash Flows - Continued
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Six Months Ended June 30
1999 1998
- -----------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING
AND INVESTING ACTIVITIES
Dividends declared but not paid $ 259,858 $ 174,631
Dividends reinvested $ 129,012 $ 94,368
Deferred offering costs reclassified to
additional paid-in capital $ 6,983 $ 10,882
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the year for
Interest $ - $ -
Income taxes $ - $ -
</TABLE>
Notes to Financial Statements are an integral part of this Statement.
F-10
<PAGE>
AMERICAN CHURCH MORTGAGE COMPANY
Statement of Cash Flows
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Years Ended December 31
1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 712,365 $ 360,814 $ 165,386 $ (1,323)
Adjustments to reconcile net income (loss) to
net cash from (used for) operating activities:
Deferred income taxes (7,000) (13,000) (20,000)
Amortization 303 303 303 303
Change in assets and liabilities
Accounts receivable (28,777)
Accounts payable (2,731) 7,009 (41,012)
Deferred income 35,752 32,498 45,930
----------- ----------- ----------- ----------
Net cash from (used for) operating activities 709,912 387,624 150,607 (1,020)
CASH FLOWS FROM INVESTING ACTIVITIES
Organization expenses paid (35)
Investment in mortgage loans (2,498,750) (2,315,712) (2,685,288)
Collections on mortgage loans 1,179,196 64,228 24,464
Investment in bonds (931,188) (5,169) (120,640)
Proceeds from bonds called 33,000
----------- ----------- ----------- ----------
Net cash used for investing activities (2,217,742) (2,256,653) (2,781,464) (35)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from stock offering 4,793,478 1,880,563 3,217,330
Dividends paid (635,933) (332,463) (109,011)
Payment of deferred offering costs (12,686)
----------- ----------- ----------- ----------
Net cash from (used for) financing activities 4,157,545 1,548,100 3,108,319 (12,686)
----------- ----------- ----------- ----------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS 2,649,715 (320,929) 477,462 (13,741)
CASH AND EQUIVALENTS - Beginning of Year 291,815 612,744 135,282 149,023
----------- ----------- ----------- ----------
CASH AND EQUIVALENTS - End of Year $ 2,941,530 $ 291,815 $ 612,744 $ 135,282
----------- ----------- ----------- ----------
----------- ----------- ----------- ----------
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING
AND INVESTING ACTIVITIES
Deferred offering costs financed through
accounts payable $ 34,693
-----------
Deferred offering costs reclassified to -----------
additional paid-in capital $ 71,751 $ 118,106 $ 107,295
----------- ----------- -----------
----------- ----------- -----------
Dividends declared but not paid $ 233,004 $ 127,899 $ 80,424
----------- ----------- -----------
----------- ----------- -----------
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the year for
Interest $ 59 $ - $ - $ -
Income taxes $ - $ - $ - $ -
</TABLE>
Notes to Financial Statements are an integral part of this Statement.
F-11
<PAGE>
AMERICAN CHURCH MORTGAGE COMPANY
Notes to Financial Statements
June 30, 1999 and 1998 (Unaudited)
and December 31, 1998, 1997, 1996 and 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
American Church Mortgage Company, a Minnesota corporation, was incorporated on
May 27, 1994. The Company, which was a development stage company until 1996, was
organized to engage in the business of making mortgage loans to churches and
other nonprofit religious organizations throughout the United States, on terms
that it establishes for individual organizations. Loans have been made to
churches located in twelve states as of June 30, 1999. The Company concluded a
public stock offering in November 1996 and commenced its principal business
activities early in 1996.
ACCOUNTING ESTIMATES
Management uses estimates and assumptions in preparing these financial
statements in accordance with generally accepted accounting principles. Those
estimates and assumptions affect the reported amounts of assets and liabilities,
the disclosure of contingent assets and liabilities, and the reported revenues
and expenses. Actual results could differ from those estimates.
CASH
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents. At June 30, 1999 and
December 31, 1998, approximately $1,000,000 and $2,700,000, respectively, of
cash equivalents consisted of investments in money market funds.
The Company maintains some cash in bank deposit accounts which, at times, may
exceed federally insured limits. The Company has not experienced any losses in
such accounts.
MARKETABLE SECURITIES
The Company accounts for its debt securities under Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities."
The Company classifies its marketable debt securities as "held-to-maturity"
because it has the intent and ability to hold the securities to maturity.
Securities classified as held-to-maturity are carried at amortized cost.
F-12
<PAGE>
AMERICAN CHURCH MORTGAGE COMPANY
Notes to Financial Statements
June 30, 1999 and 1998 (Unaudited)
and December 31, 1998, 1997, 1996 and 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
ALLOWANCE FOR LOANS RECEIVABLE
The Company follows a policy of providing an allowance for loans receivable.
However, management believes the loans receivable to be collectible in all
material respects.
DEFERRED OFFERING COSTS
Deferred offering costs represent amounts incurred in connection with the
Company's public offering of common stock. These costs will be offset by
proceeds received from the common stock offering.
ORGANIZATION EXPENSES
Organization expenses are stated at cost and are amortized using the
straight-line method over five years.
DEFERRED INCOME
Deferred income represents loan origination fees which are recognized over the
life of the loan as an adjustment to the yield on the loan.
INCOME TAXES
Income taxes are provided for the tax effects of transactions reported in the
financial statements and consist of taxes currently due plus deferred taxes
related primarily to differences in recognition of income from loan origination
fees for financial and income tax reporting. Deferred taxes are recognized for
operating losses that are available to offset future taxable income.
Beginning in 1996, the Company 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.
F-13
<PAGE>
AMERICAN CHURCH MORTGAGE COMPANY
Notes to Financial Statements
June 30, 1999 and 1998 (Unaudited)
and December 31, 1998, 1997, 1996 and 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
INCOME (LOSS) 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.
The adoption of Statement of Financial Accounting Standards Board No. 128,
"Earnings Per Share" had no effect on previously reported earnings per share.
INTERIM FINANCIAL STATEMENTS
The accompanying unaudited financial statements have been prepared in accordance
with the instructions for interim statements and, therefore, do not include all
information and disclosures necessary for a fair presentation of results of
operations, financial position, and changes in cash flow in conformity with
generally accepted accounting principles. However, in the opinion of management,
such statements reflect all adjustments (which include only normal recurring
adjustments) necessary for a fair presentation of the financial position,
results of operations, and cash flows for the period presented.
The unaudited financial statements of the Company should be read in conjunction
with its December 31, 1998 audited financial statements included in the
Company's Annual Report on Form 10-KSB, as filed with the Securities and
Exchange Commission for the year ended December 31, 1998.
2. MORTGAGE LOANS AND BONDS PORTFOLIO
At June 30, 1999 and December 31, 1998 the Company had mortgage loans receivable
totaling $8,133,617 and $6,231,862, respectively. The loans bear interest
ranging from 9.75% to 12.00% and 9.75% to 15.00% at June 30, 1999 and December
31, 1998, respectively.
The Company also has a portfolio of 23 church bonds, which are carried at cost
plus amortized interest income. At June 30, 1999 and December 31, 1998 the
Company had combined principal of $1,933,901 and 1,023,997, respectively.
Principal amounts are due at various maturity dates between November 1, 1999 and
February 1, 2019. The bonds pay quarterly interest ranging from 6.35% to 10.50%.
Two bond issues comprised of 79% of the total bond portfolio at June 30, 1999.
F-14
<PAGE>
AMERICAN CHURCH MORTGAGE COMPANY
Notes to Financial Statements
June 30, 1999 and 1998 (Unaudited)
and December 31, 1998, 1997, 1996 and 1995
2. MORTGAGE LOANS AND BONDS PORTFOLIO - Continued
The maturity schedule for mortgage loans and bonds receivable as of June 30,
1999 and December 31, 1998 is as follows:
<TABLE>
<CAPTION>
June 30, 1999
(Unaudited) December 31, 1998
--------------------------------- ----------------------------------
Mortgage Loans Bond Portfolio Mortgage Loans Bond Portfolio
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
1999 $ 84,130 $ 7,000 $ 237,242 $ 12,000
2000 180,496 17,000 350,554 17,000
2001 200,790 25,000 172,924 125,000
2002 223,374 11,000 192,953 21,000
2003 248,507 23,000 215,305 23,000
Thereafter 7,196,320 1,863,000 5,062,884 846,000
---------- ---------- ----------- ----------
8,133,617 1,946,000 1,044,000
Less discounts
from par (12,099) (20,003)
---------- ---------- ----------- ----------
Totals $8,133,617 $1,933,901 $ 6,231,862 $1,023,997
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
</TABLE>
3. STOCK OPTION PLAN
The Company has adopted a Stock Option Plan granting each member of the Board of
Directors and the president of the Advisor (Note 4) an option to purchase 3,000
shares of common stock annually upon their re-election. The purchase price of
the stock will be the fair market value at the grant date. On November 15, 1994,
the Company began the annual grant of options to purchase an aggregate of 21,000
shares of common stock at $10 per share. These options became exercisable
November 15, 1995 and expire November 15, 1999. No options have been exercised
as of June 30, 1999.
The Company has chosen to account for stock based compensation in accordance
with APB Opinion 25. Management believes that the disclosure requirements of
Statement of Financial Accounting Standards No. 123 are not material to its
financial statements.
F-15
<PAGE>
AMERICAN CHURCH MORTGAGE COMPANY
Notes to Financial Statements
June 30, 1999 and 1998 (Unaudited)
and December 31, 1998, 1997, 1996 and 1995
4. TRANSACTIONS WITH AFFILIATES
The Company has an Advisory Agreement with Church Loan Advisors, Inc.,
Minnetonka, Minnesota (Advisor). The Advisor is responsible for the day-to-day
operations of the Company and provides administrative services and personnel.
Upon non-renewal or termination of the Advisory Agreement, the Company is
required to pay the Advisor a termination fee equal to two percent of the value
of the average invested assets of the Company as of the date of termination,
subject to limitations set forth in 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 Advisor
and the Company are related through common ownership and common management. See
Note 6.
<TABLE>
<CAPTION>
Advisory and Advisory and
origination origination
fees paid fees waived
------------ -----------
<S> <C> <C>
January 1, 1999 through June 30, 1999 (unaudited) $ 47,764 $ -
January 1, 1998 through June 30, 1998 (unaudited) 62,051 -
1998 101,944 15,223
1997 61,525 23,119
1996 64,680 6,662
1995 - -
</TABLE>
F-16
<PAGE>
AMERICAN CHURCH MORTGAGE COMPANY
Notes to Financial Statements
June 30, 1999 and 1998 (Unaudited)
and December 31, 1998, 1997, 1996 and 1995
5. INCOME TAXES
The income tax expense (benefit) consists of the following components:
<TABLE>
<CAPTION>
June 30 December 31
-------------------- ---------------------------------------------------
1999 1998 1998 1997 1996 1995
-------- -------- --------- --------- --------- ---------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Current $ - $ - $ - $ - $ - $ -
Deferred (7,000) (13,000) (20,000)
-------- -------- --------- --------- --------- ---------
Total tax expense
(benefit) $ - $ - $ (7,000) $ (13,000) $ (20,000) $ -
-------- -------- --------- --------- --------- ---------
-------- -------- --------- --------- --------- ---------
</TABLE>
As discussed in Note 1, a REIT is subject to taxation to the extent that taxable
income exceeds dividends distributions to its shareholders. In order to maintain
its status as a REIT, the Company is required to distribute at least 95% of its
taxable income.
The following reconciles the income tax benefit with the expected provision
obtained by applying statutory rates to pretax income:
<TABLE>
<CAPTION>
June 30 December 31
--------------------- ---------------------------------------------------
1999 1998 1998 1997 1996 1995
--------- --------- --------- --------- --------- ---------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Expected tax expense
(benefit) $ 142,584 $ 95,659 $ 241,524 $ 118,257 $ 45,700 $ (300)
Increase (decrease) in
valuation allowance (1,300) 300
Benefit of REIT
distributions (142,584) (95,659) (248,524) (131,257) (64,400)
--------- --------- --------- --------- --------- ---------
Totals $ - $ - $ (7,000) $ (13,000) $ (20,000) $ -
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
</TABLE>
F-17
<PAGE>
AMERICAN CHURCH MORTGAGE COMPANY
Notes to Financial Statements
June 30, 1999 and 1998 (Unaudited)
and December 31, 1998, 1997, 1996 and 1995
5. INCOME TAXES - Continued
The components of deferred income taxes are as follows:
<TABLE>
<CAPTION>
June 30 December 31
--------------------- --------------------------------------------
1999 1998 1998 1997 1996 1995
-------- -------- -------- -------- -------- --------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Deferred tax assets:
Temporary differences
(loan origination fees) $40,000 $33,000 $40,000 $33,000 $20,000
Net operating loss
carryforward $ 1,300
Valuation allowance - - - - - (1,300)
-------- -------- -------- -------- -------- --------
Net deferred tax asset $40,000 $33,000 $40,000 $33,000 $20,000 $ -
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
</TABLE>
The Company decreased its valuation allowance against deferred tax assets by
$1,300 in fiscal 1996 and increased the valuation allowance by $300 in fiscal
1995.
6. PUBLIC OFFERING OF THE COMPANY'S COMMON STOCK
The Company intends to file a Registration Statement with the Securities and
Exchange Commission for a third public offering of 1,500,000 shares of common
stock at $10 per share in August 1999.
The Company filed a Registration Statement with the Securities and Exchange
Commission for a public offering of its common stock in 1997. The Company
offered to sell 1,500,000 shares of its common stock at a price of $10 per
share. The offering was underwritten by managing underwriter (an affiliate of
the Advisor) and a co-underwriter on a "best efforts" basis, and no minimum sale
of stock was required. The stock sale commenced on September 26, 1997 and
concluded January 22, 1999. A total of 799,759 shares were sold in the Company's
public offering.
The Company filed a Registration Statement with the Securities and Exchange
Commission for a public offering of its common stock in 1995. The Company
offered to sell 2,000,000 shares of its common stock at a price of $10 per
share. The offering was underwritten by an affiliate of the Advisor on a "best
efforts" basis, but required a minimum sale of at least 200,000 shares of common
stock. This minimum amount of shares was sold as of April 15, 1996, whereupon
the Company commenced its principal operating activities. The Company's public
offering of its shares continued through November 8, 1996.
F-18
<PAGE>
AMERICAN CHURCH MORTGAGE COMPANY
Notes to Financial Statements
June 30, 1999 and 1998 (Unaudited)
and December 31, 1998, 1997, 1996 and 1995
6. PUBLIC OFFERING OF THE COMPANY'S COMMON STOCK - Continued
Pursuant to the terms of the Underwriting Agreement, the Company paid the
affiliated broker-dealer referred to above commissions and non-reimbursable
expenses of approximately $331,000, $162,600 and $144,000 during 1998, 1997 and
1996, respectively. The Company paid no commissions or non-reimbursable expenses
during 1995. The Company paid commissions and non-reimbursable expenses of
approximately $60,200 and $57,600 for the six month periods ended June 30, 1999
and 1998, respectively.
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of the Company's financial instruments, none of which
are held for trading purposes, are as follows at June 30, 1999 and 1998 and
December 31, 1998, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
June 30
(Unaudited)
1999 1998
--------------------------- ------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Cash and equivalents $1,137,573 $1,137,573 $1,248,563 $1,248,563
Loans receivable 8,133,617 8,133,617 6,719,035 6,719,035
Bonds receivable 1,933,901 1,933,901 139,267 139,267
<CAPTION>
December 31
1998 1997
--------------------------- ------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Cash and equivalents $2,941,530 $2,941,530 $ 291,815 $ 291,815
Loans receivable 6,231,862 6,231,862 4,912,308 4,912,308
Bonds receivable 1,023,997 1,023,997 125,809 125,809
</TABLE>
F-19
<PAGE>
AMERICAN CHURCH MORTGAGE COMPANY
Notes to Financial Statements
June 30, 1999 and 1998 (Unaudited)
and December 31, 1998, 1997, 1996 and 1995
7. FAIR VALUE OF FINANCIAL INSTRUMENTS - Continued
<TABLE>
<CAPTION>
December 31
1996 1995
--------------------------- ------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Cash and equivalents $ 612,744 $ 612,744 $135,282 $135,282
Loans receivable 2,660,824 2,660,824
Bonds receivable 120,640 120,640
</TABLE>
The carrying value of cash and equivalents approximates fair value. The fair
value of the loans receivable and the bonds receivable are estimated by
discounting future cash flows using current discount rates that reflect the
risks associated with similar types of loans.
8. LINE OF CREDIT
The Company has obtained a $1,000,000 line of credit with its bank on July 22,
1999, subject to certain borrowing base limitations, through August 1, 2000.
Interest is charged at 1% over the prime rate totaling 9% at July 22, 1999. The
line of credit collateralized by the mortgage secured bonds held by the Company.
F-20
<PAGE>
APPENDIX I
PRIOR PERFORMANCE TABLES
The prior performance tables, Appendix I of the Prospectus, contain certain
information about specific church bond mortgage financing projects conducted by
the Managing Underwriter, American Investors Group, Inc., an affiliate of the
Advisor. The purpose of the tables is to provide certain information on the
prior performance of these bond financing programs so as to allow prospective
investors a basis upon which to evaluate the experience of the affiliate of the
Company. However, the programs discussed in this section do not necessarily have
investment objectives and policies similar to those of the Advisor, and the
results of those programs cannot be used or relied upon as being representative
of the returns or yields that can be expected by shareholders of the Company.
The following tables are included herein:
Table I--Experience in Raising and Investing Funds
Table II--Compensation to Sponsor (Managing Underwriter and Affiliates)
Table IIB-- Location of Prior First Mortgage Bond Financings Underwritten by
the Managing Underwriter
Table III---Mortgage Bond Financings by Managing Underwriter
BALANCE OF PAGE INTENTIONALLY LEFT BLANK
<PAGE>
TABLE I--EXPERIENCE IN RAISING AND INVESTING FUNDS
(since January 1991)
Table I summarizes the funds raised and the use of those funds for the public
offerings completed since January 1991 by American Investors Group, Inc., an
affiliate of the Company and the Advisor.
<TABLE>
<CAPTION>
HOPEWELL NEW LIFE TRIUMPH NEW
MISSIONARY CHRISTIAN TESTAMENT
BAPTIST CHURCH MINISTRY CHURCH
------------------- ---------------- ----------------
<S> <C> <C> <C>
DOLLAR AMOUNT OFFERED............................. $3,700,000 $715,000 $850,000
DOLLAR AMOUNT RAISED.............................. $3,700,000 $715,000 $850,000
PERCENTAGE OF FUNDS RAISED........................ 100% 100% 100%
LESS OFFERING EXPENSES:
Selling Commissions & Discounts Retained by
Affiliates.................................... $ 259,000 (7%) $ 50,050 (7%) $ 59,500 (7%)
Organizational Expenses......................... -- -- --
Other Underwriting Expenses..................... $ 46,425 (1.25%) $ 20,000 (2.8%) $ 21,250 (2.5%)
Percent Available to Issuer..................... 91.75% 90.02% 90.05%
TOTAL ACQUISITION COST............................ -- -- --
PERCENT LEVERAGE (mortgage financing divided by
total acquisition cost)......................... -- -- --
DATE OFFERING BEGAN............................... 1/15/91 3/1/91 3/15/91
LENGTH OF OFFERING (mos.)......................... 12 2 3
MONTHS TO INVEST 90% OF AMOUNT AVAILABLE FOR
INVESTMENT (measured from beginning of
offering)....................................... -- -- --
<CAPTION>
MT. MORIAH
AFRICAN METHODIST LAKE TEMPLE
EPISCOPAL CHURCH BAPTIST CHURCH BAPTIST CHURCH
------------------ ------------------- ------------------
<S> <C> <C> <C>
DOLLAR AMOUNT OFFERED............................. $1,290,000 $1,800,000 $1,850,000
DOLLAR AMOUNT RAISED.............................. $1,290,000 $1,800,000 $1,850,000
PERCENTAGE OF FUNDS RAISED........................ 100% 100% 100%
LESS OFFERING EXPENSES:
Selling Commissions & Discounts Retained by
Affiliates.................................... $ 90,300 (7%) $ 108,000 (6%) $ 129,500 (7%)
Organizational Expenses......................... -- -- --
Other Underwriting Expenses..................... $ 24,000 (1.9%) $ 22,500 (1.25%) $ 35,000 (1.9%)
Percent Available to Issuer..................... 91.01% 92.75% 91.1%
TOTAL ACQUISITION COST............................ -- -- --
PERCENT LEVERAGE (mortgage financing divided by
total acquisition cost)......................... -- -- --
DATE OFFERING BEGAN............................... 5/15/91 8/1/91 8/1/91
LENGTH OF OFFERING (mos.)......................... 1 3 2
MONTHS TO INVEST 90% OF AMOUNT AVAILABLE FOR
INVESTMENT (measured from beginning of
offering)....................................... -- -- --
</TABLE>
A-1
<PAGE>
TABLE I--EXPERIENCE IN RAISING AND INVESTING FUNDS (CONTINUED)
<TABLE>
<CAPTION>
NORTH STELTON
AFRICAN SHORTER AFRICAN NEW LIFE
METHODIST METHODIST EPISCOPAL CHRISTIAN
EPISCOPAL CHURCH CHURCH MINISTRY, INC.
----------------- ------------------- -----------------
<S> <C> <C> <C>
DOLLAR AMOUNT OFFERED............................. $725,000 $1,860,000 $110,000
DOLLAR AMOUNT RAISED.............................. $725,000 $1,860,000 $110,000
PERCENTAGE OF FUNDS RAISED........................ 100% 100% 100%
LESS OFFERING EXPENSES:
Selling Commissions & Discounts Retained by
Affiliates.................................... $ 50,750 (7%) $ 130,200 (7%) $ 8,250 (7.5%)
Organizational Expenses......................... -- -- --
Other Underwriting Expenses..................... $ 17,000 (2.3%) $ 34,800 (1.9%) $ 8,000 (7.2%)
Percent Available to Issuer..................... 90.7% 91.1% 85.3%
TOTAL ACQUISITION COST............................ -- -- --
PERCENT LEVERAGE (mortgage financing divided by
total acquisition cost)......................... -- -- --
DATE OFFERING BEGAN............................... 10/15/91 11/1/91 12/1/91
LENGTH OF OFFERING (mos.)......................... 1 1 1
MONTHS TO INVEST 90% OF AMOUNT AVAILABLE FOR
INVESTMENT (measured from beginning of
offering)....................................... -- -- --
<CAPTION>
MACEDONIA
MT. VERNON BAPTIST MISSIONARY BAPTIST FIRST BAPTIST
CHURCH CHURCH CHURCH
------------------- ------------------- -------------------
<S> <C> <C> <C>
DOLLAR AMOUNT OFFERED............................. $1,350,000 $1,195,000 $1,040,000
DOLLAR AMOUNT RAISED.............................. $1,350,000 $1,195,000 $1,040,000
PERCENTAGE OF FUNDS RAISED........................ 100% 100% 100%
LESS OFFERING EXPENSES:
Selling Commissions & Discounts Retained by
Affiliates.................................... $ 94,500 (7%) $ 83,650 (7%) $ 72,800 (7%)
Organizational Expenses......................... -- -- --
Other Underwriting Expenses..................... $ 27,500 (2.0%) $ 12,100 (1.0%) $ 22,200 (2.1%)
Percent Available to Issuer..................... 91.0% 92.0% 90.90%
TOTAL ACQUISITION COST............................ -- -- --
PERCENT LEVERAGE (mortgage financing divided by
total acquisition cost)......................... -- -- --
DATE OFFERING BEGAN............................... 12/15/91 2/15/92 3/1/92
LENGTH OF OFFERING (mos.)......................... 1 1 1
MONTHS TO INVEST 90% OF AMOUNT AVAILABLE FOR
INVESTMENT (measured from beginning of
offering)....................................... -- -- --
</TABLE>
A-2
<PAGE>
TABLE I--EXPERIENCE IN RAISING AND INVESTING FUNDS (CONTINUED)
<TABLE>
<CAPTION>
WORLD MISSIONS BY HIS WORD METROPOLITAN
ASSEMBLY CHRISTIAN CENTER BAPTIST CHURCH
----------------- ------------------- -----------------
<S> <C> <C> <C>
DOLLAR AMOUNT OFFERED............................. $720,000 $1,215,000 $475,000
DOLLAR AMOUNT RAISED.............................. $720,000 $1,215,000 $475,000
PERCENTAGE OF FUNDS RAISED........................ 100% 100% 100%
LESS OFFERING EXPENSES:
Selling Commissions & Discounts Retained by
Affiliates.................................... $ 50,400 (7%) $ 85,050 (7%) $ 33,250 (7%)
Organizational Expenses......................... -- -- --
Other Underwriting Expenses..................... $ 15,100 (2.1%) $ 18,500 (1.5%) $ 13,750 (2.9%)
Percent Available to Issuer..................... 90.9% 91.5% 90.1%
TOTAL ACQUISITION COST............................ -- -- --
PERCENT LEVERAGE (mortgage financing divided by
total acquisition cost)......................... -- -- --
DATE OFFERING BEGAN............................... 3/15/92 4/1/92 4/1/92
LENGTH OF OFFERING (mos.)......................... 2 1 1
MONTHS TO INVEST 90% OF AMOUNT AVAILABLE FOR
INVESTMENT (measured from beginning of
offering)....................................... -- -- --
<CAPTION>
CHRISTIAN HOPE BIBLE MISSIONARY CENTRAL HOLINESS
CENTER BAPTIST CHURCH CHURCH
----------------- ------------------- -----------------
<S> <C> <C> <C>
DOLLAR AMOUNT OFFERED............................. $506,000 $1,300,000 $250,000
DOLLAR AMOUNT RAISED.............................. $506,000 $1,300,000 $250,000
PERCENTAGE OF FUNDS RAISED........................ 100% 100% 100%
LESS OFFERING EXPENSES:
Selling Commissions & Discounts Retained by
Affiliates.................................... $ 35,420 (7%) $ 91,000 (7%) $ 17,500 (7%)
Organizational Expenses......................... -- -- --
Other Underwriting Expenses..................... $ 11,500 (2.3%) $ 32,250 (2.5%) $ 10,000 (4.0%)
Percent Available to Issuer..................... 90.7% 90.5% 89.0%
TOTAL ACQUISITION COST............................ -- -- --
PERCENT LEVERAGE (mortgage financing divided by
total acquisition cost)......................... -- -- --
DATE OFFERING BEGAN............................... 5/1/92 5/15/92 6/15/92
LENGTH OF OFFERING (mos.)......................... 1 1 1
MONTHS TO INVEST 90% OF AMOUNT AVAILABLE FOR
INVESTMENT (measured from beginning of
offering)....................................... -- -- --
</TABLE>
A-3
<PAGE>
TABLE I--EXPERIENCE IN RAISING AND INVESTING FUNDS (CONTINUED)
<TABLE>
<CAPTION>
ST. JAMES EPISCOPAL CHURCH OF JESUS TEMPLE BAPTIST
CHURCH CHRIST CHURCH
-------------------- ------------------- -----------------
<S> <C> <C> <C>
DOLLAR AMOUNT OFFERED............................. $1,430,000 $1,280,000 $380,000
DOLLAR AMOUNT RAISED.............................. $1,430,000 $1,280,000 $380,000
PERCENTAGE OF FUNDS RAISED........................ 100% 100% 100%
LESS OFFERING EXPENSES:
Selling Commissions & Discounts Retained by
Affiliates.................................... $ 85,085 (5.95%) $ 89,600 (7%) $ 26,700 (7%)
Organizational Expenses......................... -- -- --
Other Underwriting Expenses..................... $ 12,215 (.8%) $ 17,000 (1.3%) $ 11,900 (3.1%)
Percent Available to Issuer..................... 93.2% 91.7% 89.9%
TOTAL ACQUISITION COST............................ -- -- --
PERCENT LEVERAGE (mortgage financing divided by
total acquisition cost)......................... -- -- --
DATE OFFERING BEGAN............................... 6/24/92 7/1/92 8/1/92
LENGTH OF OFFERING (mos.)......................... 2 1 1
MONTHS TO INVEST 90% OF AMOUNT AVAILABLE FOR
INVESTMENT (measured from beginning of
offering)....................................... -- -- --
<CAPTION>
MT. ZION AFRICAN
METHODIST CALVARY TEMPLE OF BETHEL BAPTIST
EPISCOPAL CHURCH ALLENTOWN, PA CHURCH
----------------- ------------------- -----------------
<S> <C> <C> <C>
DOLLAR AMOUNT OFFERED............................. $875,000 $1,820,000 $525,000
DOLLAR AMOUNT RAISED.............................. $875,000 $1,820,000 $525,000
PERCENTAGE OF FUNDS RAISED........................ 100% 100% 100%
LESS OFFERING EXPENSES:
Selling Commissions & Discounts Retained by
Affiliates.................................... $ 61,250 (7%) $ 127,400 (7%) $ 36,750 (7%)
Organizational Expenses......................... -- -- --
Other Underwriting Expenses..................... $ 16,000 (1.8%) $ 37,500 (2.1%) $ 12,250 (2.3%)
Percent Available to Issuer..................... 91.2% 90.9% 90.7%
TOTAL ACQUISITION COST............................ -- -- --
PERCENT LEVERAGE (mortgage financing divided by
total acquisition cost)......................... -- -- --
DATE OFFERING BEGAN............................... 8/15/92 9/1/92 9/15/92
LENGTH OF OFFERING (mos.)......................... 1 1 1
MONTHS TO INVEST 90% OF AMOUNT AVAILABLE FOR
INVESTMENT (measured from beginning of
offering)....................................... -- -- --
</TABLE>
A-4
<PAGE>
TABLE I--EXPERIENCE IN RAISING AND INVESTING FUNDS (CONTINUED)
<TABLE>
<CAPTION>
UNITY PALO ALTO CHRISTIAN LOVE TABERNACLE BAPTIST
COMMUNITY CHURCH BAPTIST CHURCH CHURCH
-------------------- ----------------- -------------------
<S> <C> <C> <C>
DOLLAR AMOUNT OFFERED............................. $2,180,000 $500,000 $1,550,000
DOLLAR AMOUNT RAISED.............................. $2,180,000 $500,000 $1,550,000
PERCENTAGE OF FUNDS RAISED........................ 100% 100% 100%
LESS OFFERING EXPENSES:
Selling Commissions & Discounts Retained by
Affiliates.................................... $ 147,150 (6.75%) $ 35,000 (7%) $ 108,500 (7%)
Organizational Expenses......................... -- -- --
Other Underwriting Expenses..................... $ 20,000 (.92%) $ 13,000 (2.6%) $ 22,000 (1.4%)
Percent Available to Issuer..................... 92.3% 90.4% 91.6%
TOTAL ACQUISITION COST............................ -- -- --
PERCENT LEVERAGE (mortgage financing divided by
total acquisition cost)......................... -- -- --
DATE OFFERING BEGAN............................... 10/1/92 11/15/92 11/15/92
LENGTH OF OFFERING (mos.)......................... 2 1 1
MONTHS TO INVEST 90% OF AMOUNT AVAILABLE FOR
INVESTMENT (measured from beginning of
offering)....................................... -- -- --
<CAPTION>
LEE MEMORIAL CHRISTIAN
AFRICAN METHODIST NAZARETH BAPTIST PENTECOSTAL
EPISCOPAL CHURCH CHURCH CHURCH
------------------- ----------------- -------------------
<S> <C> <C> <C>
DOLLAR AMOUNT OFFERED............................. $1,225,000 $390,000 $1,600,000
DOLLAR AMOUNT RAISED.............................. $1,225,000 $390,000 $1,600,000
PERCENTAGE OF FUNDS RAISED........................ 100% 100% 100%
LESS OFFERING EXPENSES:
Selling Commissions & Discounts Retained by
Affiliates.................................... $ 85,750 (7%) $ 27,300 (7%) $ 112,000 (7%)
Organizational Expenses......................... -- -- --
Other Underwriting Expenses..................... $ 21,000 (1.7%) $ 9,700 (2.5%) $ 24,000 (1.5%)
Percent Available to Issuer..................... 91.3% 90.5% 91.5%
TOTAL ACQUISITION COST............................ -- -- --
PERCENT LEVERAGE (mortgage financing divided by
total acquisition cost)......................... -- -- --
DATE OFFERING BEGAN............................... 12/15/92 1/15/93 2/1/93
LENGTH OF OFFERING (mos.)......................... 1 1 1
MONTHS TO INVEST 90% OF AMOUNT AVAILABLE FOR
INVESTMENT (measured from beginning of
offering)....................................... -- -- --
</TABLE>
A-5
<PAGE>
TABLE I--EXPERIENCE IN RAISING AND INVESTING FUNDS (CONTINUED)
<TABLE>
<CAPTION>
MOUNT ZION ST. MARKS
CHRISTIAN BAPTIST LAKE BAPTIST MISSIONARY BAPTIST
CHURCH CHURCH CHURCH
------------------ ----------------- -------------------
<S> <C> <C> <C>
DOLLAR AMOUNT OFFERED............................. $750,000 $365,000 $1,500,000
DOLLAR AMOUNT RAISED.............................. $750,000 $365,000 $1,500,000
PERCENTAGE OF FUNDS RAISED........................ 100% 100% 100%
LESS OFFERING EXPENSES:
Selling Commissions & Discounts Retained by
Affiliates.................................... $ 52,500 (7%) $ 25,550 (7%) $ 105,000 (7%)
Organizational Expenses......................... -- -- --
Other Underwriting Expenses..................... $ 14,500 (2.75%) $ 8,000 (2.2%) $ 23,000 (1.5%)
Percent Available to Issuer..................... 90.25% 90.8% 91.5%
TOTAL ACQUISITION COST............................ -- -- --
PERCENT LEVERAGE (mortgage financing divided by
total acquisition cost)......................... -- -- --
DATE OFFERING BEGAN............................... 1/15/93 2/1/93 2/1/93
LENGTH OF OFFERING (mos.)......................... 1 1 1
MONTHS TO INVEST 90% OF AMOUNT AVAILABLE FOR
INVESTMENT (measured from beginning of
offering)....................................... -- -- --
<CAPTION>
FRIENDSHIP
MISSIONARY CHRISTIAN FAITH RALEIGH CHRISTIAN
BAPTIST CHURCH CENTER COMMUNITY CHURCH
----------------- -------------------- --------------------
<S> <C> <C> <C>
DOLLAR AMOUNT OFFERED............................. $700,000 $1,765,000 $1,425,000
DOLLAR AMOUNT RAISED.............................. $700,000 $1,765,000 $1,425,000
PERCENTAGE OF FUNDS RAISED........................ 100% 100% 100%
LESS OFFERING EXPENSES:
Selling Commissions & Discounts Retained by
Affiliates.................................... $ 49,000 (7%) $ 119,138 (6.75%) $ 90,750 (6.25%)
Organizational Expenses......................... -- -- --
Other Underwriting Expenses..................... $ 15,000 (2.1%) $ 17,000 (1.0%) $ 14,000 (1.0%)
Percent Available to Issuer..................... 90.9% 92.25% 92.75%
TOTAL ACQUISITION COST............................ -- -- --
PERCENT LEVERAGE (mortgage financing divided by
total acquisition cost)......................... -- -- --
DATE OFFERING BEGAN............................... 4/1/93 5/15/93 6/1/93
LENGTH OF OFFERING (mos.)......................... 1 1 1
MONTHS TO INVEST 90% OF AMOUNT AVAILABLE FOR
INVESTMENT (measured from beginning of
offering)....................................... -- -- --
</TABLE>
A-6
<PAGE>
TABLE I--EXPERIENCE IN RAISING AND INVESTING FUNDS (CONTINUED)
<TABLE>
<CAPTION>
PORTERS DAY
CARE AND EVERGREEN
EDUCATION OUTREACH CHRISTIAN MISSIONARY
CENTER CENTER BAPTIST CHURCH
----------------- ------------------ -----------------
<S> <C> <C> <C>
DOLLAR AMOUNT OFFERED............................. $350,000 $575,000 $345,000
DOLLAR AMOUNT RAISED.............................. $350,000 $575,000 $345,000
PERCENTAGE OF FUNDS RAISED........................ 100% 100% 100%
LESS OFFERING EXPENSES:
Selling Commissions & Discounts Retained by
Affiliates.................................... $ 25,500 (7%) $ 39,963 (6.95%) $ 24,150 (7%)
Organizational Expenses......................... -- -- --
Other Underwriting Expenses..................... $ 14,000 (3.1%) $ 12,000 (1.7%) $ 11,000 (3.2%)
Percent Available to Issuer..................... 89.9% 91.35% 89.8%
TOTAL ACQUISITION COST............................ -- -- --
PERCENT LEVERAGE (mortgage financing divided by
total acquisition cost)......................... -- -- --
DATE OFFERING BEGAN............................... 5/15/93 5/15/93 6/1/93
LENGTH OF OFFERING (mos.)......................... 2 1 1
MONTHS TO INVEST 90% OF AMOUNT AVAILABLE FOR
INVESTMENT (measured from beginning of
offering)....................................... -- -- --
<CAPTION>
ST. PAUL AFRICAN
FAITH SOUTHWEST METHODIST EPISCOPAL
BAPTIST CHURCH CORNERSTONE CHURCH CHURCH
------------------ -------------------- --------------------
<S> <C> <C> <C>
DOLLAR AMOUNT OFFERED............................. $700,000 $4,355,000 $1,000,000
DOLLAR AMOUNT RAISED.............................. $700,000 $4,355,000 $1,000,000
PERCENTAGE OF FUNDS RAISED........................ 100% 100% 100%
LESS OFFERING EXPENSES:
Selling Commissions & Discounts Retained by
Affiliates.................................... $ 48,650 (6.95%) $ 293,963 (6.75%) $ 67,500 (6.75%)
Organizational Expenses......................... -- -- --
Other Underwriting Expenses..................... $ 14,000 (2.0%) $ 37,250 (.85%) $ 19,000 (1.9%)
Percent Available to Issuer..................... 91.05% 92.4% 91.35%
TOTAL ACQUISITION COST............................ -- -- --
PERCENT LEVERAGE (mortgage financing divided by
total acquisition cost)......................... -- -- --
DATE OFFERING BEGAN............................... 6/15/93 7/15/93 8/15/93
LENGTH OF OFFERING (mos.)......................... 1 1 1
MONTHS TO INVEST 90% OF AMOUNT AVAILABLE FOR
INVESTMENT (measured from beginning of
offering)....................................... -- -- --
</TABLE>
A-7
<PAGE>
TABLE I--EXPERIENCE IN RAISING AND INVESTING FUNDS (CONTINUED)
<TABLE>
<CAPTION>
PEACEFUL ZION
WINDSOR VILLAGE MISSIONARY
UNITED METHODIST BAPTIST CHURCH
CHURCH FIRST BAPTIST CHURCH MIAMI, FL
-------------------- -------------------- -----------------
<S> <C> <C> <C>
DOLLAR AMOUNT OFFERED............................. $3,100,000 $2,600,000 $750,000
DOLLAR AMOUNT RAISED.............................. $3,100,000 $2,600,000 $750,000
PERCENTAGE OF FUNDS RAISED........................ 100% 100% 100%
LESS OFFERING EXPENSES:
Selling Commissions & Discounts Retained by
Affiliates.................................... $ 193,750 (6.25%) $ 175,500 (6.75%) $ 52,500 (7%)
Organizational Expenses......................... -- -- --
Other Underwriting Expenses..................... $ 32,000 (1.0%) $ 30,500 (1.2%) $ 17,500 (2.3%)
Percent Available to Issuer..................... 92.75% 92.05% 90.7%
TOTAL ACQUISITION COST............................ -- -- --
PERCENT LEVERAGE (mortgage financing divided by
total acquisition cost)......................... -- -- --
DATE OFFERING BEGAN............................... 9/1/93 10/1/93 10/15/93
LENGTH OF OFFERING (mos.)......................... 2 1 1
MONTHS TO INVEST 90% OF AMOUNT AVAILABLE FOR
INVESTMENT (measured from beginning of
offering)....................................... -- -- --
<CAPTION>
CENTRAL HOLINESS APOSTOLIC FAITH NEW LIFE CHRISTIAN
CHURCH HOME ASSEMBLY MINISTRY
-------------------- ------------------- --------------------
<S> <C> <C> <C>
DOLLAR AMOUNT OFFERED............................. $1,405,000 $2,600,000 $2,000,000
DOLLAR AMOUNT RAISED.............................. $1,405,000 $2,600,000 $2,000,000
PERCENTAGE OF FUNDS RAISED........................ 100% 100% 100%
LESS OFFERING EXPENSES:
Selling Commissions & Discounts Retained by
Affiliates.................................... $ 87,813 (6.25%) $ 169,000 (6.5%) $ 130,000 (6.5%)
Organizational Expenses......................... -- -- --
Other Underwriting Expenses..................... $ 12,000 (.85%) $ 36,500 (1.4%) $ 23,000 (1.15%)
Percent Available to Issuer..................... 92.8% 92.1% 92.0%
TOTAL ACQUISITION COST............................ -- -- --
PERCENT LEVERAGE (mortgage financing divided by
total acquisition cost)......................... -- -- --
DATE OFFERING BEGAN............................... 11/15/93 12/15/93 2/15/94
LENGTH OF OFFERING (mos.)......................... 1 9 2
MONTHS TO INVEST 90% OF AMOUNT AVAILABLE FOR
INVESTMENT (measured from beginning of
offering)....................................... -- -- --
</TABLE>
A-8
<PAGE>
TABLE I--EXPERIENCE IN RAISING AND INVESTING FUNDS (CONTINUED)
<TABLE>
<CAPTION>
CALVARY TEMPLE OF FIRST BAPTIST WOODINVILLE CHURCH
ALLENTOWN, PA CHURCH OF CHRIST
-------------------- ------------------ ------------------
<S> <C> <C> <C>
DOLLAR AMOUNT OFFERED............................. $1,950,000 $740,000 $440,000
DOLLAR AMOUNT RAISED.............................. $1,950,000 $740,000 $440,000
PERCENTAGE OF FUNDS RAISED........................ 100% 100% 100%
LESS OFFERING EXPENSES:
Selling Commissions & Discounts Retained by
Affiliates.................................... $ 121,875 (6.25%) $ 46,250 (6.25%) $ 27,500 (6.25%)
Organizational Expenses......................... -- -- --
Other Underwriting Expenses..................... $ 18,000 (.9%) $ 11,200 (1.5%) $ 12,000 (2.27%)
Percent Available to Issuer..................... 92.85% 92.25% 91.48%
TOTAL ACQUISITION COST............................ -- -- --
PERCENT LEVERAGE (mortgage financing divided by
total acquisition cost)......................... -- -- --
DATE OFFERING BEGAN............................... 2/15/94 4/1/94 5/15/94
LENGTH OF OFFERING (mos.)......................... 1 2 1
MONTHS TO INVEST 90% OF AMOUNT AVAILABLE FOR
INVESTMENT (measured from beginning of
offering)....................................... -- -- --
<CAPTION>
RESURRECTION CHURCH OF JESUS BY HIS WORD
LIFE MINISTRIES CHRIST CHRISTIAN CENTER
---------------- -------------------- --------------------
<S> <C> <C> <C>
DOLLAR AMOUNT OFFERED............................. $620,000 $1,735,000 $1,665,000
DOLLAR AMOUNT RAISED.............................. $620,000 $1,735,000 $1,665,000
PERCENTAGE OF FUNDS RAISED........................ 100% 100% 100%
LESS OFFERING EXPENSES:
Selling Commissions & Discounts Retained by
Affiliates.................................... $ 90,300 (7%) $ 103,233 (5.95%) $ 71,595 (5.95%)
Organizational Expenses......................... -- -- --
Other Underwriting Expenses..................... $ 3,000 (.5%) $ 21,000 (1.2%) $ 17,000 (1.0%)
Percent Available to Issuer..................... 95.0% 92.85% 93.05%
TOTAL ACQUISITION COST............................ -- -- --
PERCENT LEVERAGE (mortgage financing divided by
total acquisition cost)......................... -- -- --
DATE OFFERING BEGAN............................... 5/15/94 6/1/94 8/28/94
LENGTH OF OFFERING (mos.)......................... 2 3 2
MONTHS TO INVEST 90% OF AMOUNT AVAILABLE FOR
INVESTMENT (measured from beginning of
offering)....................................... -- -- --
</TABLE>
A-9
<PAGE>
TABLE I--EXPERIENCE IN RAISING AND INVESTING FUNDS (CONTINUED)
<TABLE>
<CAPTION>
MORNINGSTAR GATES OF HEAVEN
LIBERTY CHURCH BAPTIST CHURCH CHURCH
------------------ ------------------ --------------------
<S> <C> <C> <C>
DOLLAR AMOUNT OFFERED............................. $900,000 $800,000 $3,400,000
DOLLAR AMOUNT RAISED.............................. $900,000 $800,000 $3,400,000
PERCENTAGE OF FUNDS RAISED........................ 100% 100% 100%
LESS OFFERING EXPENSES:
Selling Commissions & Discounts Retained by
Affiliates.................................... $ 53,550 (5.95%) $ 47,600 (5.95%) $ 202,300 (5.95%)
Organizational Expenses......................... -- -- --
Other Underwriting Expenses..................... $ 11,000 (1.2%) $ 10,000 (1.25%) $ 30,000 (1.00%)
Percent Available to Issuer..................... 93.05% 92.80% 93.05%
TOTAL ACQUISITION COST............................ -- -- --
PERCENT LEVERAGE (mortgage financing divided by
total acquisition cost)......................... -- -- --
DATE OFFERING BEGAN............................... 7/1/94 9/15/94 11/15/94
LENGTH OF OFFERING (mos.)......................... 5 3 10
MONTHS TO INVEST 90% OF AMOUNT AVAILABLE FOR
INVESTMENT (measured from beginning of
offering)....................................... -- -- --
<CAPTION>
WINDSOR VILLAGE HOPEWELL ST. AGNES
UNITED METHODIST MISSIONARY BAPTIST MISSIONARY BAPTIST
CHURCH CHURCH CHURCH
------------------ -------------------- --------------------
<S> <C> <C> <C>
DOLLAR AMOUNT OFFERED............................. $725,000 $6,350,000 $3,200,000
DOLLAR AMOUNT RAISED.............................. $725,000 $6,350,000 $3,200,000
PERCENTAGE OF FUNDS RAISED........................ 100% 100% 100%
LESS OFFERING EXPENSES:
Selling Commissions & Discounts Retained by
Affiliates.................................... $ 45,313 (6.25%) $ 377,825 (5.95%) $ 190,400 (5.95%)
Organizational Expenses......................... -- -- --
Other Underwriting Expenses..................... $ 7,000 (1.00%) $ 45,000 (.71%) $ 27,000 (.84%)
Percent Available to Issuer..................... 92.75% 94.05% 94.05%
TOTAL ACQUISITION COST............................ -- -- --
PERCENT LEVERAGE (mortgage financing divided by
total acquisition cost)......................... -- -- --
DATE OFFERING BEGAN............................... 1/1/95 1/15/95 3/15/95
LENGTH OF OFFERING (mos.)......................... 2 10 6
MONTHS TO INVEST 90% OF AMOUNT AVAILABLE FOR
INVESTMENT (measured from beginning of
offering)....................................... -- -- --
</TABLE>
A-10
<PAGE>
TABLE I--EXPERIENCE IN RAISING AND INVESTING FUNDS (CONTINUED)
<TABLE>
<CAPTION>
ST. MARK'S
CHURCH OF THE GREAT ZION EVANGELISTIC MISSIONARY BAPTIST
COMMISSION TEMPLE CHURCH
-------------------- -------------------- ------------------
<S> <C> <C> <C>
DOLLAR AMOUNT OFFERED............................. $2,200,000 $4,375,000 $360,000
DOLLAR AMOUNT RAISED.............................. $2,200,000 $4,375,000 $360,000
PERCENTAGE OF FUNDS RAISED........................ 100% 100% 100%
LESS OFFERING EXPENSES:
Selling Commissions & Discounts Retained by
Affiliates.................................... $ 130,900 (5.95%) $ 260,313 (5.95%) $ 24,300 (6.25%)
Organizational Expenses......................... -- -- --
Other Underwriting Expenses..................... $ 25,500 (1.20%) $ 39,000 (.89%) $ 14,500 (4.02%)
Percent Available to Issuer..................... 93.00% 93.00% 89.00%
TOTAL ACQUISITION COST............................ -- -- --
PERCENT LEVERAGE (mortgage financing divided by
total acquisition cost)......................... -- --
DATE OFFERING BEGAN............................... 4/1/95 4/15/95 04/01/95
LENGTH OF OFFERING (mos.)......................... 6 6 6
MONTHS TO INVEST 90% OF AMOUNT AVAILABLE FOR
INVESTMENT (measured from beginning of
offering)....................................... -- -- --
<CAPTION>
EMMANUEL BAPTIST THE COMMUNITY ABUNDANT LIFE CHURCH
CHURCH PROTESTANT CHURCH OF CHRIST
-------------------- -------------------- --------------------
<S> <C> <C> <C>
DOLLAR AMOUNT OFFERED............................. $1,655,000 $1,500,000 $1,425,000
DOLLAR AMOUNT RAISED.............................. $1,655,000 $1,500,000 $1,425,000
PERCENTAGE OF FUNDS RAISED........................ 100% 100% 100%
LESS OFFERING EXPENSES:
Selling Commissions & Discounts Retained by
Affiliates.................................... $ 98,475 (5.95%) $ 89,250 (5.95%) $ 80,888 (5.68%)
Organizational Expenses......................... -- -- --
Other Underwriting Expenses..................... $ 20,000 (1.21%) $ 24,000 (1.6%) $ 30,000 (2.10%)
Percent Available to Issuer..................... 92.84% 92.45% 92.22%
TOTAL ACQUISITION COST............................ -- -- --
PERCENT LEVERAGE (mortgage financing divided by
total acquisition cost).........................
DATE OFFERING BEGAN............................... 07/15/95 08/15/95 10/15/95
LENGTH OF OFFERING (mos.)......................... 6 7 3
MONTHS TO INVEST 90% OF AMOUNT AVAILABLE FOR
INVESTMENT (measured from beginning of
offering)....................................... -- -- --
</TABLE>
A-11
<PAGE>
TABLE I--EXPERIENCE IN RAISING AND INVESTING FUNDS (CONTINUED)
<TABLE>
<CAPTION>
TWELFTH AVENUE
GREELEY CHURCH OF GENERAL BAPTIST
CHRIST CHURCH, INC. THE HOLDEN CHAPEL
------------------ -------------------- ------------------
<S> <C> <C> <C>
DOLLAR AMOUNT OFFERED............................. $500,000 $1,195,000 $500,000
DOLLAR AMOUNT RAISED.............................. $500,000 $1,195,000 $500,000
PERCENTAGE OF FUNDS RAISED........................ 100% 100% 100%
LESS OFFERING EXPENSES:
Selling Commissions & Discounts Retained by
Affiliates.................................... $ 41,500 (8.30%) $ 83,650 (7.00%) $ 29,750 (5.95%)
Organizational Expenses......................... -- -- --
Other Underwriting Expenses..................... $ 5,000 (1.00%) $ 5,000 (0.41%) $ 5,000 (1.00%)
Percent Available to Issuer..................... 90.70% 92.58% 93.05%
TOTAL ACQUISITION COST............................ -- -- --
PERCENT LEVERAGE (mortgage financing divided by
total acquisition cost)......................... -- -- --
DATE OFFERING BEGAN............................... 10/15/95 10/15/95 11/01/95
LENGTH OF OFFERING (mos.)......................... 2 1 1
MONTHS TO INVEST 90% OF AMOUNT AVAILABLE FOR
INVESTMENT (measured from beginning of
offering)....................................... -- -- --
<CAPTION>
PEMBROKE PARK
HOUSE OF PRAISE CHURCH OF CHRIST, FAITH COMMUNITY
MINISTRIES, INC. INC. CHURCH, INC.
------------------ ------------------ ------------------
<S> <C> <C> <C>
DOLLAR AMOUNT OFFERED............................. $675,000 $600,000 $950,000
DOLLAR AMOUNT RAISED.............................. $675,000 $600,000 $950,000
PERCENTAGE OF FUNDS RAISED........................ 100% 100% 100%
LESS OFFERING EXPENSES:
Selling Commissions & Discounts Retained by
Affiliates.................................... $ 40,163 (5.95%) $ 35,700 (5.95%) $ 64,800 (7.20%)
Organizational Expenses......................... -- -- --
Other Underwriting Expenses..................... $ 20,837 (3.08%) $ 6,000 (1.00%) $ 13,000 (1.37%)
Percent Available to Issuer..................... 90.96% 92.85% 91.81%
TOTAL ACQUISITION COST............................ -- -- --
PERCENT LEVERAGE (mortgage financing divided by
total acquisition cost)......................... -- -- --
DATE OFFERING BEGAN............................... 10/01/95 11/15/95 12/01/95
LENGTH OF OFFERING (mos.)......................... 10 9 1
MONTHS TO INVEST 90% OF AMOUNT AVAILABLE FOR
INVESTMENT (measured from beginning of
offering)....................................... -- -- --
</TABLE>
A-12
<PAGE>
TABLE I--EXPERIENCE IN RAISING AND INVESTING FUNDS (CONTINUED)
<TABLE>
<CAPTION>
CHRIST CHURCH OF OASIS CHRISTIAN CENTENNIAL STAR OF
KIRKLAND CENTER BETHLEHEM
-------------------- ------------------ --------------------
<S> <C> <C> <C>
DOLLAR AMOUNT OFFERED............................. $2,785,000 $825,000 $1,195,000
DOLLAR AMOUNT RAISED.............................. $2,785,000 $825,000 $1,195,000
PERCENTAGE OF FUNDS RAISED........................ 100% 100% 100%
LESS OFFERING EXPENSES:
Selling Commissions & Discounts Retained by
Affiliates.................................... $ 192,165 (6.90%) $ 49,088 (5.95%) $ 71,103 (5.95%)
Organizational Expenses......................... -- -- --
Other Underwriting Expenses..................... $ 8,400 (0.30%) $ 12,000 (1.45%) $ 14,000 (1.17%)
Percent Available to Issuer..................... 92.78% 92.60% 92.88%
TOTAL ACQUISITION COST............................ -- -- --
PERCENT LEVERAGE (mortgage financing divided by
total acquisitions costs)....................... -- -- --
DATE OFFERING BEGAN............................... 12/29/95 02/15/96 02/01/96
LENGTH OF OFFERING (mos.)......................... 7 10 8
MONTHS TO INVEST 90% OF AMOUNT AVAILABLE FOR
INVESTMENT (measured from beginning of
offering)....................................... -- -- --
<CAPTION>
ST. AGNES
MISSIONARY BAPTIST LAKE BAPTIST CORNERSTONE
CHURCH CHURCH CHURCH
------------------ -------------------- --------------------
<S> <C> <C> <C>
DOLLAR AMOUNT OFFERED............................. $875,000 $1,840,000 $6,600,000
DOLLAR AMOUNT RAISED.............................. $875,000 $1,840,000 $6,600,000
PERCENTAGE OF FUNDS RAISED........................ 100% 100% 100%
LESS OFFERING EXPENSES:
Selling Commissions & Discounts Retained by
Affiliates.................................... $ 52,063 (5.95%) $ 109,480 (5.95%) $ 412,500 (6.25%)
Organizational Expenses......................... -- -- --
Other Underwriting Expenses..................... $ 15,000 (1.71%) $ 12,520 (1.06%) $ 32,000 (0.48%)
Percent Available to Issuer..................... 92.33% 89.70% 93.26%
TOTAL ACQUISITION COST............................ -- -- --
PERCENT LEVERAGE (mortgage financing divided by
total acquisitions costs)....................... -- -- --
DATE OFFERING BEGAN............................... 03/15/96 03/15/96 05/15/96
LENGTH OF OFFERING (mos.)......................... 5 6 3
MONTHS TO INVEST 90% OF AMOUNT AVAILABLE FOR
INVESTMENT (measured from beginning of
offering)....................................... -- -- --
</TABLE>
A-13
<PAGE>
TABLE I--EXPERIENCE IN RAISING AND INVESTING FUNDS (CONTINUED)
<TABLE>
<CAPTION>
ABUNDANT LIFE
FAMILY WORSHIP VOLLINTINE BAPTIST ALOHA CHRISTIAN LIFE
CTR., INC. CHURCH, INC. CENTER
-------------------- ------------------ --------------------
<S> <C> <C> <C>
DOLLAR AMOUNT OFFERED............................. $2,025,000 $425,000 $1,380,000
DOLLAR AMOUNT RAISED.............................. $2,025,000 $425,000 $1,380,000
PERCENTAGE OF FUNDS RAISED........................ 100% 100% 100%
LESS OFFERING EXPENSES:
Selling Commissions & Discounts Retained by
Affiliates.................................... $ 120,488 (5.95%) $ 25,288 (5.95%) $ 84,850 (6.15%)
Organizational Expenses......................... -- -- --
Other Underwriting Expenses..................... $ 21,000 (1.03%) $ 8,000 (1.88%) $ 15,000 (1.08%)
Percent Available to Issuer..................... 93.02% 92.17% 92.76%
TOTAL ACQUISITION COST............................ -- -- --
PERCENT LEVERAGE (mortgage financing divided by
total acquisitions costs)....................... -- -- --
DATE OFFERING BEGAN............................... 08/15/96 08/15/96 09/01/96
LENGTH OF OFFERING (mos.)......................... 5 4 7
MONTHS TO INVEST 90% OF AMOUNT AVAILABLE FOR
INVESTMENT (measured from beginning of
offering)....................................... -- -- --
<CAPTION>
CENTENNIAL STAR OF
NEW LIFE BAPTIST BETHLEHEM BAPTIST
CHURCH OF THURSTON CHURCH OF
COUNTY OSSINING, NEW YORK CORNERSTONE CHURCH
-------------------- ------------------ --------------------
<S> <C> <C> <C>
DOLLAR AMOUNT OFFERED............................. $1,300,000 $450,000 $4,680,000
DOLLAR AMOUNT RAISED.............................. $1,300,000 $450,000 $4,680,000
PERCENTAGE OF FUNDS RAISED........................ 100% 100% 100%
LESS OFFERING EXPENSES:
Selling Commissions & Discounts Retained by
Affiliates.................................... $ 77,350 (5.95%) $ 29,250 (6.50%) $ 278,460 (5.95%)
Organizational Expenses......................... -- -- --
Other Underwriting Expenses..................... $ 14,000 (1.08%) $ 13,000 (2.89%) $ 36,540 (.78%)
Percent Available to Issuer..................... 92.97% 90.61% 93.27%
TOTAL ACQUISITION COST............................ -- -- --
PERCENT LEVERAGE (mortgage financing divided by
total acquisitions costs)....................... -- -- --
DATE OFFERING BEGAN............................... 10/15/96 11/15/96 12/15/96
LENGTH OF OFFERING (mos.)......................... 5 4 4
MONTHS TO INVEST 90% OF AMOUNT AVAILABLE FOR
INVESTMENT (measured from beginning of
offering)....................................... -- -- --
</TABLE>
A-14
<PAGE>
TABLE I--EXPERIENCE IN RAISING AND INVESTING FUNDS (CONTINUED)
<TABLE>
<CAPTION>
UNITED BAPTIST SPRING LAKE CHURCH
CHURCH OF CHRIST NEW JERUSALEM CHURCH
-------------------- ------------------ --------------------
<S> <C> <C> <C>
DOLLAR AMOUNT OFFERED............................. $1,525,000 $600,000 $2,300,000
DOLLAR AMOUNT RAISED.............................. $1,525,000 $600,000 $2,300,000
PERCENTAGE OF FUNDS RAISED........................ 100% 100% 100%
LESS OFFERING EXPENSES:
Selling Commissions & Discounts Retained by
Affiliates.................................... $ 90,738 (5.95%) $ 52,800 (8.80%) $ 136,850 (5.95%)
Organizational Expenses......................... -- -- --
Other Underwriting Expenses..................... $ 19,000 (1.24%) $ 10,000 (1.66%) $ 24,000 (1.04%)
Percent Available to Issuer..................... 92.81% 89.54% 93.01%
TOTAL ACQUISITION COST............................ -- -- --
PERCENT LEVERAGE (mortgage financing divided by
total acquisitions costs)....................... -- -- --
DATE OFFERING BEGAN............................... 12/15/96 02/15/97 03/15/97
LENGTH OF OFFERING (mos.)......................... 4 2 3
MONTHS TO INVEST 90% OF AMOUNT AVAILABLE FOR
INVESTMENT (measured from beginning of
offering)....................................... -- -- --
<CAPTION>
ORIGINAL HOLY ARK
ALOHA CHRISTIAN BETHANY BAPTIST MISSIONARY BAPTIST
LIFE CENTER CHURCH CHURCH
------------------ -------------------- ------------------
<S> <C> <C> <C>
DOLLAR AMOUNT OFFERED............................. $490,000 $1,750,000 $675,000
DOLLAR AMOUNT RAISED.............................. $490,000 $1,750,000 $675,000
PERCENTAGE OF FUNDS RAISED........................ 100% 100% 100%
LESS OFFERING EXPENSES:
Selling Commissions & Discounts Retained by
Affiliates.................................... $ 44,100 (9.00%) $ 104,125 (5.95%) $ 42,188 (6.25%)
Organizational Expenses......................... -- -- --
Other Underwriting Expenses..................... $ 7,000 (1.43%) $ 22,000 (1.25%) $ 14,000 (2.24%)
Percent Available to Issuer..................... 89.57% 92.80% 91.51%
TOTAL ACQUISITION COST............................ -- -- --
PERCENT LEVERAGE (mortgage financing divided by
total acquisitions costs)....................... -- -- --
DATE OFFERING BEGAN............................... 04/01/97 04/01/97 04/15/97
LENGTH OF OFFERING (mos.)......................... 1 3 2
MONTHS TO INVEST 90% OF AMOUNT AVAILABLE FOR
INVESTMENT (measured from beginning of
offering)....................................... -- -- --
</TABLE>
A-15
<PAGE>
TABLE I--EXPERIENCE IN RAISING AND INVESTING FUNDS (CONTINUED)
<TABLE>
<CAPTION>
BETHLEHEM TEMPLE CENTRO DE
COMMUNITY CHURCH OF CAPACITIACION TEEN MANIA
RIALTO CRISTIANA MINISTRIES, INC.
-------------------- ------------------ --------------------
<S> <C> <C> <C>
DOLLAR AMOUNT OFFERED............................. $1,200,000 $650,000 $2,300,000
DOLLAR AMOUNT RAISED.............................. $1,200,000 $650,000 $2,300,000
PERCENTAGE OF FUNDS RAISED........................ 100% 100% 100%
LESS OFFERING EXPENSES:
Selling Commissions & Discounts Retained by
Affiliates.................................... $ 75,000 (6.25%) $ 45,050 (6.93%) $ 139,150 (6.05%)
Organizational Expenses......................... -- -- --
Other Underwriting Expenses..................... $ 19,000 (1.58%) $ 15,250 (2.35%) $ 29,000 (1.26%)
Percent Available to Issuer..................... 92.17% 90.72% 92.69%
TOTAL ACQUISITION COST............................ -- -- --
PERCENT LEVERAGE (mortgage financing divided by
total acquisitions costs)....................... -- -- --
DATE OFFERING BEGAN............................... 05/01/97 05/15/97 07/01/97
LENGTH OF OFFERING (mos.)......................... 7 3 9
MONTHS TO INVEST 90% OF AMOUNT AVAILABLE FOR
INVESTMENT (measured from beginning of
offering)....................................... -- -- --
<CAPTION>
GREATER MT. ZION
FULL GOSPEL MISSIONARY BAPTIST CHURCH OF THE GREAT
CHRISTIAN ASSEMBLY CHURCH COMMISSION
-------------------- -------------------- --------------------
<S> <C> <C> <C>
DOLLAR AMOUNT OFFERED............................. $1,525,000 $1,185,000 $1,100,000
DOLLAR AMOUNT RAISED.............................. $1,525,000 $1,185,000 $1,100,000
PERCENTAGE OF FUNDS RAISED........................ 100% 100% 100%
LESS OFFERING EXPENSES:
Selling Commissions & Discounts Retained by
Affiliates.................................... $ 95,313 (6.25%) $ 74,063 (6.25%) $ 65,450 (5.95%)
Organizational Expenses......................... -- -- --
Other Underwriting Expenses..................... $ 23,000 (1.51%) $ 16,500 (1.39%) $ 15,000 (1.36%)
Percent Available to Issuer..................... 92.24% 92.36% 92.69%
TOTAL ACQUISITION COST............................ -- -- --
PERCENT LEVERAGE (mortgage financing divided by
total acquisitions costs)....................... -- -- --
DATE OFFERING BEGAN............................... 07/01/97 07/15/97 08/01/97
LENGTH OF OFFERING (mos.)......................... 8 9 9
MONTHS TO INVEST 90% OF AMOUNT AVAILABLE FOR
INVESTMENT (measured from beginning of
offering)....................................... -- -- --
</TABLE>
A-16
<PAGE>
TABLE I--EXPERIENCE IN RAISING AND INVESTING FUNDS (CONTINUED)
<TABLE>
<CAPTION>
NEW HOPE
SHARON BAPTIST MISSIONARY BAPTIST
CITY CHURCH CHURCH CHURCH
-------------------- -------------------- --------------------
<S> <C> <C> <C>
DOLLAR AMOUNT OFFERED............................. $1,600,000 $6,200,000 $2,300,000
DOLLAR AMOUNT RAISED.............................. $1,600,000 $6,200,000 $2,300,000
PERCENTAGE OF FUNDS RAISED........................ 100% 100% 100%
LESS OFFERING EXPENSES:
Selling Commissions & Discounts Retained by
Affiliates.................................... $ 111,360 (6.96%) $ 368,900 (5.95%) $ 139,150 (6.05%)
Organizational Expenses......................... -- -- --
Other Underwriting Expenses..................... $ 10,000 (.63%) $ 36,000 (0.58%) $ 29,000 (1.26%)
Percent Available to Issuer..................... 92.42% 93.47% 92.69%
TOTAL ACQUISITION COST............................ -- -- --
PERCENT LEVERAGE (mortgage financing divided by
total acquisitions costs)....................... -- -- --
DATE OFFERING BEGAN............................... 09/01/97 10/15/97 10/15/97
LENGTH OF OFFERING (mos.)......................... 9 10 9
MONTHS TO INVEST 90% OF AMOUNT AVAILABLE FOR
INVESTMENT (measured from beginning of
offering)....................................... -- -- --
<CAPTION>
THE COMMUNITY
THE HOLY WAY CHURCH, SWOPE PARKWAY CHURCH PROTESTANT CHURCH OF
INC. OF CHRIST CO-OP CITY
-------------------- -------------------- --------------------
<S> <C> <C> <C>
DOLLAR AMOUNT OFFERED............................. $1,500,000 $1,200,000 $1,000,000
DOLLAR AMOUNT RAISED.............................. $1,500,000 $1,200,000 $1,000,000
PERCENTAGE OF FUNDS RAISED........................ 100% 100% 100%
LESS OFFERING EXPENSES:
Selling Commissions & Discounts Retained by
Affiliates.................................... $ 89,250 (5.95%) $ 96,000 (8.00%) $ 59,500 (5.95%)
Organizational Expenses......................... -- -- --
Other Underwriting Expenses..................... $ 21,000 (1.40%) $ 6,000 (.50%) $ 18,000 (1.80%)
Percent Available to Issuer..................... 92.65% 91.50% 92.25%
TOTAL ACQUISITION COST............................ -- -- --
PERCENT LEVERAGE (mortgage financing divided by
total acquisitions costs)....................... -- -- --
DATE OFFERING BEGAN............................... 10/15/97 11/01/97 11/15/97
LENGTH OF OFFERING (mos.)......................... 8 7 9
MONTHS TO INVEST 90% OF AMOUNT AVAILABLE FOR
INVESTMENT (measured from beginning of
offering)....................................... -- -- --
</TABLE>
A-17
<PAGE>
TABLE I--EXPERIENCE IN RAISING AND INVESTING FUNDS (CONTINUED)
<TABLE>
<CAPTION>
THE NEW YORK
GOSPEL TABERNACLE DONG YANG FIRST NEW LIFE BAPTIST
CHURCH CHURCH CHURCH
-------------------- ------------------ ------------------
<S> <C> <C> <C>
DOLLAR AMOUNT OFFERED............................. $3,550,000 $735,000 $495,000
DOLLAR AMOUNT RAISED.............................. $3,550,000 $735,000 $495,000
PERCENTAGE OF FUNDS RAISED........................ 100% 100% 100%
LESS OFFERING EXPENSES:
Selling Commissions & Discounts Retained by
Affiliates.................................... $ 211,225 (5.95%) $ 43,733 (5.95%) $ 29,453 (5.95%)
Organizational Expenses......................... -- -- --
Other Underwriting Expenses..................... $ 30,000 (.85%) $ 10,000 (1.36%) $ 10,000 (2.02%)
Percent Available to Issuer..................... 93.20% 92.69% 92.03%
TOTAL ACQUISITION COST............................ -- -- --
PERCENT LEVERAGE (mortgage financing divided by
total acquisitions costs)....................... -- -- --
DATE OFFERING BEGAN............................... 02/01/98 03/15/98 03/15/98
LENGTH OF OFFERING (mos.)......................... 9 7 2
MONTHS TO INVEST 90% OF AMOUNT AVAILABLE FOR
INVESTMENT (measured from beginning of
offering)....................................... -- -- --
<CAPTION>
CHURCH OF THE GREAT SPIRITUAL LIFE THE LEE MEMORIAL
COMMISSION MINISTRIES, INC. A.M.E. CHURCH
-------------------- -------------------- --------------------
<S> <C> <C> <C>
DOLLAR AMOUNT OFFERED............................. $1,900,000 $1,985,000 $1,000,000
DOLLAR AMOUNT RAISED.............................. $1,900,000 $1,985,000 $1,000,000
PERCENTAGE OF FUNDS RAISED........................ 100% 100% 100%
LESS OFFERING EXPENSES:
Selling Commissions & Discounts Retained by
Affiliates.................................... $ 113,050 (5.95%) $ 118,108 (5.95%) $ 59,500 (5.95%)
Organizational Expenses......................... -- -- --
Other Underwriting Expenses..................... $ 19,000 (1.00%) $ 15,000 (0.76%) $ 12,000 (1.20%)
Percent Available to Issuer..................... 93.05% 93.29% 92.85%
TOTAL ACQUISITION COST............................ -- -- --
PERCENT LEVERAGE (mortgage financing divided by
total acquisitions costs)....................... -- -- --
DATE OFFERING BEGAN............................... 04/01/98 05/15/98 06/01/98
LENGTH OF OFFERING (mos.)......................... 2 6 5
MONTHS TO INVEST 90% OF AMOUNT AVAILABLE FOR
INVESTMENT (measured from beginning of
offering)....................................... -- -- --
</TABLE>
A-18
<PAGE>
TABLE I--EXPERIENCE IN RAISING AND INVESTING FUNDS (CONTINUED)
<TABLE>
<CAPTION>
NEW VISION FULL
HARVEST COMMUNITY GOSPEL BAPTIST UNITED BAPTIST
CHURCH CHURCH CHURCH
-------------------- -------------------- ------------------
<S> <C> <C> <C>
DOLLAR AMOUNT OFFERED............................. $2,400,000 $1,125,000 $755,000
DOLLAR AMOUNT RAISED.............................. $2,400,000 $1,125,000 $755,000
PERCENTAGE OF FUNDS RAISED........................ 100% 100% 100%
LESS OFFERING EXPENSES:
Selling Commissions & Discounts Retained by
Affiliates.................................... $ 117,120 (5.95%) $ 66,938 (5.95%) $ 44,923 (5.95%)
Organizational Expenses......................... -- -- --
Other Underwriting Expenses..................... $ 5,000 (0.21%) $ 11,000 (0.98%) $ 11,000 (1.46%)
Percent Available to Issuer..................... 94.91% 93.07% 92.59%
TOTAL ACQUISITION COST............................ -- -- --
PERCENT LEVERAGE (mortgage financing divided by
total acquisitions costs)....................... -- -- --
DATE OFFERING BEGAN............................... 06/01/98 07/15/98 07/15/98
LENGTH OF OFFERING (mos.)......................... 8 4 6
MONTHS TO INVEST 90% OF AMOUNT AVAILABLE FOR
INVESTMENT (measured from beginning of
offering)....................................... -- -- --
<CAPTION>
RALEIGH CHRISTIAN TEEN MANIA LINCONIA TABERNACLE
COMMUNITY MINISTRIES CHRISTIAN CENTER
-------------------- -------------------- --------------------
<S> <C> <C> <C>
DOLLAR AMOUNT OFFERED............................. $3,420,000 $1,650,000 $1,100,000
DOLLAR AMOUNT RAISED.............................. $3,420,000 $1,650,000 $1,100,000
PERCENTAGE OF FUNDS RAISED........................ 100% 100% 100%
LESS OFFERING EXPENSES:
Selling Commissions & Discounts Retained by
Affiliates.................................... $ 196,650 (5.95%) $ 99,825 (5.95%) $ 65,450 (5.95%)
Organizational Expenses......................... -- -- --
Other Underwriting Expenses..................... $ 19,000 (0.55%) $ 17,000 (1.03%) $ 13,000 (1.18%)
Percent Available to Issuer..................... 93.70% 92.92% 92.87%
TOTAL ACQUISITION COST............................ -- -- --
PERCENT LEVERAGE (mortgage financing divided by
total acquisitions costs)....................... -- -- --
DATE OFFERING BEGAN............................... 08/01/98 09/15/98 08/15/98
LENGTH OF OFFERING (mos.)......................... 6 5 4
MONTHS TO INVEST 90% OF AMOUNT AVAILABLE FOR
INVESTMENT (measured from beginning of
offering)....................................... -- -- --
</TABLE>
A-19
<PAGE>
TABLE I--EXPERIENCE IN RAISING AND INVESTING FUNDS (CONTINUED)
<TABLE>
<CAPTION>
SHARON BAPTIST
NEW GENERATION CHURCH OF FULL GOSPEL
MINISTRIES PHILADELPHIA PENTECOSTAL CHURCH
-------------------- -------------------- --------------------
<S> <C> <C> <C>
DOLLAR AMOUNT OFFERED............................. $1,285,000 $1,325,000 $2,670,000
DOLLAR AMOUNT RAISED.............................. $1,285,000 $1,325,000 $2,670,000
PERCENTAGE OF FUNDS RAISED........................ 100% 100% 100%
LESS OFFERING EXPENSES:
Selling Commissions & Discounts Retained by
Affiliates.................................... $ 76,458 (5.95%) $ 78,838 (5.95%) $ 210,930 (5.95%)
Organizational Expenses......................... -- -- --
Other Underwriting Expenses..................... $ 14,000 (1.09%) $ 12,000 (0.91%) $ 24,000 (0.90%)
Percent Available to Issuer..................... 92.96% 93.14% 91.20%
TOTAL ACQUISITION COST............................ -- -- --
PERCENT LEVERAGE (mortgage financing divided by
total acquisitions costs)....................... -- -- --
DATE OFFERING BEGAN............................... 09/15/98 10/15/98 10/15/98
LENGTH OF OFFERING (mos.)......................... 4 7 5
MONTHS TO INVEST 90% OF AMOUNT AVAILABLE FOR
INVESTMENT (measured from beginning of
offering)....................................... -- -- --
<CAPTION>
ST. AGNES GREATER OPEN DOOR
CENTENNIAL STAR OF MISSIONARY BAPTIST CHURCH OF GOD IN
BETHLEHEM CHURCH CHURCH CHRIST
-------------------- -------------------- ------------------
<S> <C> <C> <C>
DOLLAR AMOUNT OFFERED............................. $1,845,000 $4,575,000 $900,000
DOLLAR AMOUNT RAISED.............................. $1,845,000 $4,575,000 $900,000
PERCENTAGE OF FUNDS RAISED........................ 100% 100% 100%
LESS OFFERING EXPENSES:
Selling Commissions & Discounts Retained by
Affiliates.................................... $ 109,778 (5.95%) $ 272,213 (5.95%) $ 53,550 (5.95%)
Organizational Expenses......................... -- -- --
Other Underwriting Expenses..................... $ 19,000 (1.00%) $ 29,000 (0.63%) $ 10,000 (1.11%)
Percent Available to Issuer..................... 93.02% 93.42% 92.94%
TOTAL ACQUISITION COST............................ -- -- --
PERCENT LEVERAGE (mortgage financing divided by
total acquisitions costs)....................... -- -- --
DATE OFFERING BEGAN............................... 11/15/98 12/15/98 11/01/98
LENGTH OF OFFERING (mos.)......................... 4 3 1
MONTHS TO INVEST 90% OF AMOUNT AVAILABLE FOR
INVESTMENT (measured from beginning of
offering)....................................... -- -- --
</TABLE>
A-20
<PAGE>
TABLE I--EXPERIENCE IN RAISING AND INVESTING FUNDS (CONTINUED)
<TABLE>
<CAPTION>
ST. AGNES
SOUTHERN CALIFORNIA SPIRITUAL LIFE MISSIONARY BAPTIST
WORD OF FAITH MINISTRIES CHURCH
-------------------- ------------------ --------------------
<S> <C> <C> <C>
DOLLAR AMOUNT OFFERED............................. $5,275,000 $255,000 $5,350,000
DOLLAR AMOUNT RAISED.............................. $4,708,000(1) $255,000 $2,092,000(1)
PERCENTAGE OF FUNDS RAISED........................ 89% 100% 39%
LESS OFFERING EXPENSES:
Selling Commissions & Discounts Retained by
Affiliates.................................... $ 313,863 (5.95%) $ 15,173 (5.95%) $ 318,325 (5.95%)
Organizational Expenses......................... -- -- --
Other Underwriting Expenses..................... $ 37,000 (0.70%) $ 6,000 (2.35%) $ 34,000 (0.64%)
Percent Available to Issuer..................... 93.35% 91.70% 94.41%
TOTAL ACQUISITION COST............................ -- -- --
PERCENT LEVERAGE (mortgage financing divided by
total acquisitions costs)....................... -- -- --
DATE OFFERING BEGAN............................... 02/01/99 02/15/99 03/15/99
LENGTH OF OFFERING (mos.)......................... Open 1 Open
MONTHS TO INVEST 90% OF AMOUNT AVAILABLE FOR
INVESTMENT (measured from beginning of
offering)....................................... -- -- --
<CAPTION>
GREATER ST.
HOLMAN STREET INTEGRITY CHURCH MATTHEW BAPTIST
BAPTIST CHURCH INTERNATIONAL, INC. CHURCH
-------------------- -------------------- --------------------
<S> <C> <C> <C>
DOLLAR AMOUNT OFFERED............................. $4,335,000 $1,875,000 $1,850,000
DOLLAR AMOUNT RAISED.............................. $4,316,000(1) $1,590,000(1) $1,801,000
PERCENTAGE OF FUNDS RAISED........................ 99% 85% 97%
LESS OFFERING EXPENSES:
Selling Commissions & Discounts Retained by
Affiliates.................................... $ 257,933 (5.95%) $ 111,563 (5.95%) $ 110,075 (5.95%)
Organizational Expenses......................... -- -- --
Other Underwriting Expenses..................... $ 32,000 (0.74%) $ 18,000 (0.96%) $ 18,000 (0.97%)
Percent Available to Issuer..................... 93.31% 93.09% 93.08%
TOTAL ACQUISITION COST............................ -- -- --
PERCENT LEVERAGE (mortgage financing divided by
total acquisitions costs)....................... -- -- --
DATE OFFERING BEGAN............................... 04/01/99 04/15/99 04/15/99
LENGTH OF OFFERING (mos.)......................... Open Open Open
MONTHS TO INVEST 90% OF AMOUNT AVAILABLE FOR
INVESTMENT (measured from beginning of
offering)....................................... -- -- --
</TABLE>
- ------------------------------
(1) Offering still in progress. Figures reflect bond sales through June 30,
1999.
A-21
<PAGE>
TABLE I--EXPERIENCE IN RAISING AND INVESTING FUNDS (CONTINUED)
<TABLE>
<CAPTION>
SHARON BAPTIST CHURCH
---------------------
<S> <C>
DOLLAR AMOUNT OFFERED............................. $2,075,000
DOLLAR AMOUNT RAISED.............................. $1,673,000(1)
PERCENTAGE OF FUNDS RAISED........................ 81%
LESS OFFERING EXPENSES:
Selling Commissions & Discounts Retained by
Affiliates $ 123,463 (5.95%)
Organizational Expenses......................... --
Other Underwriting Expenses..................... $ 19,000 (0.92%)
Percent Available to Issuer..................... 93.13%
TOTAL ACQUISITION COST............................ --
PERCENT LEVERAGE (mortgage financing divided by
total acquisitions costs)....................... --
DATE OFFERING BEGAN............................... 04/15/99
LENGTH OF OFFERING (mos.)......................... Open
MONTHS TO INVEST 90% OF AMOUNT AVAILABLE FOR
INVESTMENT (measured from beginning of
offering)....................................... --
</TABLE>
- ------------------------------
(1) Offering still in progress. Figures reflect bond sales through June 30,
1999.
A-22
<PAGE>
TABLE II--COMPENSATION TO SPONSOR AND AFFILIATES
For Program Offerings Concluded Since January 1991
<TABLE>
<CAPTION>
MT. MORIAH
AFRICAN
HOPEWELL NEW LIFE TRIUMPH NEW METHODIST
MISSIONARY CHRISTIAN TESTAMENT EPISCOPAL LAKE BAPTIST TEMPLE BAPTIST
BAPTIST CHURCH MINISTRY CHURCH CHURCH CHURCH CHURCH
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Date Offering Commenced........... 1/15/91 3/1/91 3/15/91 5/15/91 8/1/91 8/1/91
Dollar Amount Raised.............. $3,700,000 $ 715,000 $ 850,000 $1,290,000 $1,800,000 $1,850,000
Amount Paid to Sponsor from
Proceeds of Offering:
Underwriting Fees(1) $ 259,000 $ 50,050 $ 59,500 $ 90,300 $ 108,000 $ 129,500
Acquisition Fees
--real estate fees............ -- -- -- -- -- --
--advisory fees............... -- -- -- -- -- --
--other (type & amount)(2).... $ 46,425 $ 20,000 $ 21,250 $ 24,000 $ 22,500 $ 35,000
Dollar Amount of Cash Generated
from Operations before Deducting
Payments to Sponsor............. -- -- -- -- -- --
Amount Paid to Sponsor from
Operations:
Property Management Fees........ -- -- -- -- -- --
Partnership Management Fees..... -- -- -- -- -- --
Reimbursements.................. -- -- -- -- -- --
Leasing Commissions............. -- -- -- -- -- --
Annual Advisor Fee earned to
date(3)....................... $ 24,574 $ 5,000 $ 6,411 $ 9,751 $ 10,206 $ 7,333
Other (identify & quantify)..... -- -- -- -- -- --
Dollar Amount of Property Sales
and Refinancing before Deducting
Payments to Sponsor:
Cash............................ -- -- -- -- -- --
Notes........................... -- -- -- -- -- --
Amount Paid to Sponsor from
Property Sales & Refinancing:
Real Estate Commissions......... -- -- -- -- -- --
Incentive Fees.................. -- -- -- -- -- --
Other (identify & quantify)..... -- -- -- -- -- --
</TABLE>
- ------------------------------
(1) Represents Broker-Dealer discounts paid to American Investors Group, Inc.,
Underwriter, an affiliate of the Advisor and the Managing Underwriter of the
Company's offering of its shares.
(2) Represent direct expense reimbursements for expenses incurred by American
Investors Group, Inc., in connection with the offer and sale of the
respective issuers' first mortgage bonds.
(3) Represents the aggregate quarterly administrative fees paid by the issuers
to American Investors Group, Inc., through 06/30/99. These fees payable for
the duration for which each issuer's first mortgage bonds are outstanding.
B-1
<PAGE>
TABLE II--COMPENSATION TO SPONSOR AND AFFILIATES (CONTINUED)
For Program Offerings Concluded Since January 1991
<TABLE>
<CAPTION>
NORTH STELTON SHORTER
AFRICAN AFRICAN
METHODIST METHODIST NEW LIFE MACEDONIA MACEDONIA
EPISCOPAL EPISCOPAL CHRISTIAN MT. VERNON MISSIONARY MISSIONARY
CHURCH CHURCH MINISTRY, INC. BAPTIST CHURCH BAPTIST CHURCH BAPTIST CHURCH
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Date Offering Commenced........... 10/15/91 11/1/91 12/1/91 12/15/91 2/15/92 3/1/92
Dollar Amount Raised.............. $ 725,000 $1,860,000 $ 110,000 $1,350,000 $1,195,000 $1,040,000
Amount Paid to Sponsor from
Proceeds of Offering:
Underwriting Fees(1)............ $ 50,750 $ 130,200 $ 8,250 $ 94,500 $ 83,650 $ 72,800
Acquisition Fees
--real estate fees............ -- -- -- -- -- --
--advisory fees............... -- -- -- -- -- --
--other (type & amount)(2).... $ 17,000 $ 34,800 $ 8,000 $ 27,500 $ 12,100 $ 22,200
Dollar Amount of Cash Generated
from Operations before Deducting
Payments to Sponsor............. -- -- -- -- -- --
Amount Paid to Sponsor from
Operations:
Property Management Fees........ -- -- -- -- -- --
Partnership Management Fees..... -- -- -- -- -- --
Reimbursements.................. -- -- -- -- -- --
Leasing Commissions............. -- -- -- -- -- --
Annual Advisory Fee earned to
date(3)....................... $ 5,196 $ 19,220 $ 358 $ 5,060 $ 14,302 $ 12,957
Other (identify & quantify)..... -- -- -- -- -- --
Dollar Amount of Property Sales
and Refinancing before Deducting
Payments to Sponsor:
Cash............................ -- -- -- -- -- --
Notes........................... -- -- -- -- -- --
Amount Paid to Sponsor from
Property Sales & Refinancing:
Real Estate Commissions......... -- -- -- -- -- --
Incentive Fees.................. -- -- -- -- -- --
Other (identify & quantify)..... -- -- -- -- -- --
</TABLE>
- ------------------------------
(1) Represents Broker-Dealer discounts paid to American Investors Group, Inc.,
Underwriter, an affiliate of the Advisor and the Managing Underwriter of the
Company's offering of its shares.
(2) Represent direct expense reimbursements for expenses incurred by American
Investors Group, Inc., in connection with the offer and sale of the
respective issuers' first mortgage bonds.
(3) Represents the aggregate quarterly administrative fees paid by the issuers
to American Investors Group, Inc., through 06/30/99. These fees remain
payable for the duration for which each issuer's first mortgage bonds are
outstanding.
B-2
<PAGE>
TABLE II--COMPENSATION TO SPONSOR AND AFFILIATES (CONTINUED)
For Program Offerings Concluded Since January 1991
<TABLE>
<CAPTION>
BY HIS WORD BIBLE CENTRAL
WORLD MISSIONS CHRISTIAN METROPOLITAN CHRISTIAN HOPE MISSIONARY HOLINESS
ASSEMBLY CENTER BAPTIST CHURCH CENTER BAPTIST CHURCH CHURCH
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Date Offering Commenced........... 3/15/92 4/1/92 4/1/92 5/1/92 5/15/92 6/15/92
Dollar Amount Raised.............. $ 720,000 $1,215,000 $ 475,000 $ 506,000 $1,300,000 $ 250,000
Amount Paid to Sponsor from
Proceeds of Offering:
Underwriting Fees(1)............ $ 50,400 $ 85,050 $ 33,250 $ 35,420 $ 91,000 $ 17,500
Acquisition Fees
--real estate fees............ -- -- -- -- -- --
--advisory fees............... -- -- -- -- -- --
--other (type & amount)(2).... $ 15,100 $ 18,500 $ 13,750 $ 11,500 $ 32,250 $ 10,000
Dollar Amount of Cash Generated
from Operations before Deducting
Payments to Sponsor............. -- -- -- -- -- --
Amount Paid to Sponsor from
Operations:
Property Management Fees........ -- -- -- -- -- --
Partnership Management Fees..... -- -- -- -- -- --
Reimbursements.................. -- -- -- -- -- --
Leasing Commissions............. -- -- -- -- -- --
Annual Advisory Fee earned to
date(3)....................... $ 2,554 $ 4,828 $ 5,747 $ 8,208 $ 14,924 $ 7,596
Other (identify & quantify)..... -- -- -- -- -- --
Dollar Amount of Property Sales
and Refinancing before Deducting
Payments to Sponsor:
Cash............................ -- -- -- -- -- --
Notes........................... -- -- -- -- -- --
Amount Paid to Sponsor from
Property Sales & Refinancing:
Real Estate Commissions......... -- -- -- -- -- --
Incentive Fees.................. -- -- -- -- -- --
Other (identify & quantify)..... -- -- -- -- -- --
</TABLE>
- ------------------------------
(1) Represents Broker-Dealer discounts paid to American Investors Group, Inc.,
Underwriter, an affiliate of the Advisor and the Managing Underwriter of the
Company's offering of its shares.
(2) Represent direct expense reimbursements for expenses incurred by American
Investors Group, Inc., in connection with the offer and sale of the
respective issuers' first mortgage bonds.
(3) Represents the aggregate quarterly administrative fees paid by the issuers
to American Investors Group, Inc., through 06/30/99. These fees remain
payable for the duration for which each issuer's first mortgage bonds are
outstanding.
B-3
<PAGE>
TABLE II--COMPENSATION TO SPONSOR AND AFFILIATES (CONTINUED)
For Program Offerings Concluded Since January 1991
<TABLE>
<CAPTION>
MT. ZION
AFRICAN
ST. JAMES METHODIST CALVARY TEMPLE
EPISCOPAL CHURCH OF TEMPLE BAPTIST EPISCOPAL OF ALLENTOWN, BETHEL BAPTIST
CHURCH JESUS CHRIST CHURCH CHURCH PA CHURCH
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Date Offering Commenced........... 6/24/92 7/1/92 8/1/92 8/15/92 9/1/92 9/15/92
Dollar Amount Raised.............. $1,430,000 $1,280,000 $ 380,000 $ 875,000 $1,820,000 $ 525,000
Amount Paid to Sponsor from
Proceeds of Offering:
Underwriting Fees(1)............ $ 85,085 $ 89,600 $ 26,700 $ 61,250 $ 127,400 $ 36,750
Acquisition Fees
--real estate fees............ -- -- -- -- -- --
--advisory fees............... -- -- -- -- -- --
--other (type & amount)(2).... $ 12,215 $ 17,000 $ 11,900 $ 16,000 $ 37,500 $ 12,250
Dollar Amount of Cash Generated
from Operations before Deducting
Payments to Sponsor............. -- -- -- -- -- --
Amount Paid to Sponsor from
Operations:
Property Management Fees........ -- -- -- -- -- --
Partnership Management Fees..... -- -- -- -- -- --
Reimbursements.................. -- -- -- -- -- --
Leasing Commissions............. -- -- -- -- -- --
Annual Advisory Fee earned to
date(3)....................... $ 10,369 $ 4,022 $ 765 $ 2,243 $ 5,356 $ 5,372
Other (identify & quantify)..... -- -- -- -- -- --
Dollar Amount of Property Sales
and Refinancing before Deducting
Payments to Sponsor:
Cash............................ -- -- -- -- -- --
Notes........................... -- -- -- -- -- --
Amount Paid to Sponsor from
Property Sales & Refinancing:
Real Estate Commissions......... -- -- -- -- -- --
Incentive Fees.................. -- -- -- -- -- --
Other (identify & quantify)..... -- -- -- -- -- --
</TABLE>
- ------------------------------
(1) Represents Broker-Dealer discounts paid to American Investors Group, Inc.,
Underwriter, an affiliate of the Advisor and the Managing Underwriter of the
Company's offering of its shares.
(2) Represent direct expense reimbursements for expenses incurred by American
Investors Group, Inc., in connection with the offer and sale of the
respective issuers' first mortgage bonds.
(3) Represents the aggregate quarterly administrative fees paid by the issuers
to American Investors Group, Inc., through 06/30/99. These fee remain
payable for the duration for which each issuer's first mortgage bonds are
outstanding.
B-4
<PAGE>
TABLE II--COMPENSATION TO SPONSOR AND AFFILIATES (CONTINUED)
For Program Offerings Concluded Since January 1991
<TABLE>
<CAPTION>
LEE MEMORIAL
AFRICAN
UNITY PALO METHODIST CHRISTIAN
ALTO COMMUNITY CHRISTIAN LOVE TABERNACLE EPISCOPAL NAZARETH PENTECOSTAL
CHURCH BAPTIST CHURCH BAPTIST CHURCH CHURCH BAPTIST CHURCH CHURCH
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Date Offering Commenced........... 10/1/92 11/15/92 11/15/92 12/15/92 1/15/93 2/1/93
Dollar Amount Raised.............. $2,180,000 $ 500,000 $1,550,000 $1,225,000 $ 390,000 $1,600,000
Amount Paid to Sponsor from
Proceeds of Offering:
Underwriting Fees(1)............ $ 147,150 $ 35,000 $ 108,500 $ 85,750 $ 27,300 $ 112,000
Acquisition Fees
--real estate fees............ -- -- -- -- -- --
--advisory fees............... -- -- -- -- -- --
--other (type & amount)(2).... $ 20,000 $ 13,000 $ 22,000 $ 21,000 $ 9,700 $ 24,000
Dollar Amount of Cash Generated
from Operations before Deducting
Payments to Sponsor............. -- -- -- -- -- --
Amount Paid to Sponsor from
Operations:
Property Management Fees........ -- -- -- -- -- --
Partnership Management Fees..... -- -- -- -- -- --
Reimbursements.................. -- -- -- -- -- --
Leasing Commissions............. -- -- -- -- -- --
Annual Advisory Fee earned to
date(3)....................... $ 15,383 $ 5,511 $ 11,888 $ 8,502 $ 5,447 $ 9,535
Other (identify & quantify)..... -- -- -- -- -- --
Dollar Amount of Property Sales
and Refinancing before Deducting
Payments to Sponsor:
Cash............................ -- -- -- -- -- --
Notes........................... -- -- -- -- -- --
Amount Paid to Sponsor from
Property Sales & Refinancing:
Real Estate Commissions......... -- -- -- -- -- --
Incentive Fees.................. -- -- -- -- -- --
Other (identify & quantify)..... -- -- -- -- -- --
</TABLE>
- ------------------------------
(1) Represents Broker-Dealer discounts paid to American Investors Group, Inc.,
Underwriter, an affiliate of the Advisor and the Managing Underwriter of the
Company's offering of its shares.
(2) Represent direct expense reimbursements for expenses incurred by American
Investors Group, Inc., in connection with the offer and sale of the
respective issuers' first mortgage bonds.
(3) Represents the aggregate quarterly administrative fees paid by the issuers
to American Investors Group, Inc., through 06/30/99. These fees remain
payable for the duration for which each issuer's first mortgage bonds are
outstanding.
B-5
<PAGE>
TABLE II--COMPENSATION TO SPONSOR AND AFFILIATES (CONTINUED)
For Program Offerings Concluded Since January 1991
<TABLE>
<CAPTION>
MOUNT ZION ST. MARKS FRIENDSHIP RALEIGH
CHRISTIAN LAKE BAPTIST MISSIONARY MISSIONARY CHRISTIAN CHRISTIAN
BAPTIST CHURCH CHURCH BAPTIST CHURCH BAPTIST CHURCH FAITH CENTER COMMUNITY
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Date Offering Commenced........... 1/15/93 2/1/93 2/1/93 4/1/93 5/15/93 6/1/93
Dollar Amount Raised.............. $ 750,000 $ 365,000 $1,500,000 $ 700,000 $1,765,000 $1,425,000
Amount Paid to Sponsor from
Proceeds of Offering:
Underwriting Fees(1)............ $ 52,500 $ 25,550 $ 105,000 $ 49,000 $ 119,138 $ 90,750
Acquisition Fees
--real estate fees............ -- -- -- -- -- --
--advisory fees............... -- -- -- -- -- --
--other (type & amount)(2).... $ 14,500 $ 8,000 $ 23,000 $ 15,000 $ 17,000 $ 14,000
Dollar Amount of Cash Generated
from Operations before Deducting
Payments to Sponsor............. -- -- -- -- -- --
Amount Paid to Sponsor from
Operations:
Property Management Fees........ -- -- -- -- -- --
Partnership Management Fees..... -- -- -- -- -- --
Reimbursements.................. -- -- -- -- -- --
Leasing Commissions............. -- -- -- -- -- --
Annual Advisory Fee earned to
date(3)....................... $ 8,586 $ 1,540 $ 9,395 $ 7,838 $ 9,096 $ 10,600
Other (identify & quantify)..... -- -- -- -- -- --
Dollar Amount of Property Sales
and Refinancing before Deducting
Payments to Sponsor:
Cash............................ -- -- -- -- -- --
Notes........................... -- -- -- -- -- --
Amount Paid to Sponsor from
Property Sales & Refinancing:
Real Estate Commissions......... -- -- -- -- -- --
Incentive Fees.................. -- -- -- -- -- --
Other (identify & quantify)..... -- -- -- -- -- --
</TABLE>
- ------------------------------
(1) Represents Broker-Dealer discounts paid to American Investors Group, Inc.,
Underwriter, an affiliate of the Advisor and the Managing Underwriter of the
Company's offering of its shares.
(2) Represent direct expense reimbursements for expenses incurred by American
Investors Group, Inc., in connection with the offer and sale of the
respective issuers' first mortgage bonds.
(3) Represents the aggregate quarterly administrative fees paid by the issuers
to American Investors Group, Inc., through 06/30/99. These fees remain
payable for the duration for which each issuer's first mortgage bonds are
outstanding.
B-6
<PAGE>
TABLE II--COMPENSATION TO SPONSOR AND AFFILIATES (CONTINUED)
For Program Offerings Concluded Since January 1991
<TABLE>
<CAPTION>
ST. PAUL
PORTERS DAY AFRICAN
CARE AND OUTREACH FAITH METHODIST
EDUCATIONAL CHRISTIAN EVERGREEN SOUTHWEST CORNERSTONE EPISCOPAL
CENTER CENTER BAPTIST CHURCH BAPTIST CHURCH CHURCH CHURCH
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Date Offering Commenced........... 5/15/93 5/15/93 6/1/93 6/15/93 7/15/93 8/15/93
Dollar Amount Raised.............. $ 350,000 $ 575,000 $ 345,000 $ 700,000 $4,355,000 $1,000,000
Amount Paid to Sponsor from
Proceeds of Offering:
Underwriting Fees(1)............ $ 25,500 $ 39,963 $ 24,150 $ 48,650 $ 293,963 $ 67,500
Acquisition Fees
--real estate fees............ -- -- -- -- -- --
--advisory fees............... -- -- -- -- -- --
--other (type & amount)(2).... $ 14,000 $ 12,000 $ 11,000 $ 14,000 $ 37,250 $ 19,000
Dollar Amount of Cash Generated
from Operations before Deducting
Payments to Sponsor............. -- -- -- -- -- --
Amount Paid to Sponsor from
Operations:
Property Management Fees........ -- -- -- -- -- --
Partnership Management Fees..... -- -- -- -- -- --
Reimbursements.................. -- -- -- -- -- --
Leasing Commissions............. -- -- -- -- -- --
Annual Advisory Fee earned to
date(3)....................... $ 3,646 $ 5,119 $ 966 $ 4,819 $ 10,468 $ 7,558
Other (identify & quantify)..... -- -- -- -- -- --
Dollar Amount of Property Sales
and Refinancing before Deducting
Payments to Sponsor:
Cash............................ -- -- -- -- -- --
Notes........................... -- -- -- -- -- --
Amount Paid to Sponsor from
Property Sales & Refinancing:
Real Estate Commissions......... -- -- -- -- -- --
Incentive Fees.................. -- -- -- -- -- --
Other (identify & quantify)..... -- -- -- -- -- --
</TABLE>
- ------------------------------
(1) Represents Broker-Dealer discounts paid to American Investors Group, Inc.,
Underwriter, an affiliate of the Advisor and the Managing Underwriter of the
Company's offering of its shares.
(2) Represent direct expense reimbursements for expenses incurred by American
Investors Group, Inc., in connection with the offer and sale of the
respective issuers' first mortgage bonds.
(3) Represents the aggregate quarterly administrative fees paid by the issuers
to American Investors Group, Inc., through 06/30/99. These fees remain
payable for the duration for which each issuer's first mortgage bonds are
outstanding.
B-7
<PAGE>
TABLE II--COMPENSATION TO SPONSOR AND AFFILIATES (CONTINUED)
For Program Offerings Concluded Since January 1991
<TABLE>
<CAPTION>
WINDSOR
VILLAGE UNITED PEACEFUL ZION CENTRAL APOSTOLIC NEW LIFE
METHODIST FIRST BAPTIST MISSIONARY HOLINESS FAITH HOME CHRISTIAN
CHURCH CHURCH BAPTIST CHURCH CHURCH ASSEMBLY MINISTRY
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Date Offering Commenced........... 9/1/93 10/1/93 10/15/93 11/15/93 12/15/93 2/15/94
Dollar Amount Raised.............. $3,100,000 $2,600,000 $ 750,000 $1,405,000 $2,600,000 $2,000,000
Amount Paid to Sponsor from
Proceeds of Offering:
Underwriting Fees(1)............ $ 193,750 $ 175,500 $ 52,500 $ 87,813 $ 169,000 $ 130,000
Acquisition Fees
--real estate fees............ -- -- -- -- -- --
--advisory fees............... -- -- -- -- -- --
--other (type & amount)(2).... $ 32,000 $ 30,500 $ 17,500 $ 12,000 $ 36,500 $ 23,000
Dollar Amount of Cash Generated
from Operations before Deducting
Payments to Sponsor............. -- -- -- -- -- --
Amount Paid to Sponsor from
Operations:
Property Management Fees........ -- -- -- -- -- --
Partnership Management Fees..... -- -- -- -- -- --
Reimbursements.................. -- -- -- -- -- --
Leasing Commissions............. -- -- -- -- -- --
Annual Advisory Fee earned to
date(3)....................... $ 23,181 $ 18,962 $ 7,553 $ 13,319 $ 19,512 $ 18,713
Other (identify & quantify)..... -- -- -- -- -- --
Dollar Amount of Property Sales
and Refinancing before Deducting
Payments to Sponsor:
Cash............................ -- -- -- -- -- --
Notes........................... -- -- -- -- -- --
Amount Paid to Sponsor from
Property Sales & Refinancing:
Real Estate Commissions......... -- -- -- -- -- --
Incentive Fees.................. -- -- -- -- -- --
Other (identify & quantify)..... -- -- -- -- -- --
</TABLE>
- ------------------------------
(1) Represents Broker-Dealer discounts paid to American Investors Group, Inc.,
Underwriter, an affiliate of the Advisor and the Managing Underwriter of the
Company's offering of its shares.
(2) Represent direct expense reimbursements for expenses incurred by American
Investors Group, Inc., in connection with the offer and sale of the
respective issuers' first mortgage bonds.
(3) Represents the aggregate quarterly administrative fees paid by the issuers
to American Investors Group, Inc., through 06/30/99. These fees remain
payable for the duration for which each issuer's first mortgage bonds are
outstanding.
B-8
<PAGE>
TABLE II--COMPENSATION TO SPONSOR AND AFFILIATES (CONTINUED)
For Program Offerings Concluded Since January 1991
<TABLE>
<CAPTION>
CALVARY TEMPLE WOODINVILLE RESURRECTION BY HIS WORD
OF ALLENTOWN, FIRST BAPTIST CHURCH OF LIFE CHURCH OF CHRISTIAN
PA CHURCH CHRIST MINISTRIES JESUS CHRIST CENTER
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Date Offering Commenced........... 2/15/94 4/1/94 5/15/94 5/15/94 6/1/94 8/28/94
Dollar Amount Raised.............. $1,950,000 $ 740,000 $ 440,000 $ 620,000 $1,735,000 $1,665,000
Amount Paid to Sponsor from
Proceeds of Offering:
Underwriting Fees(1)............ $ 121,875 $ 46,250 $ 27,500 $ 90,300 $ 103,233 $ 71,595
Acquisition Fees
--real estate fees............ -- -- -- -- -- --
--advisory fees............... -- -- -- -- -- --
--other (type & amount)(2).... $ 18,000 $ 11,200 $ 12,000 $ 3,000 $ 21,000 $ 17,000
Dollar Amount of Cash Generated
from Operations before Deducting
Payments to Sponsor............. -- -- -- -- -- --
Amount Paid to Sponsor from
Operations:
Property Management Fees........ -- -- -- -- -- --
Partnership Management Fees..... -- -- -- -- -- --
Reimbursements.................. -- -- -- -- -- --
Leasing Commissions............. -- -- -- -- -- --
Annual Advisory Fee earned to
date(3)....................... $ 9,724 $ 13,221 $ 3,042 $ 21,518 $ 18,806 $ 17,664
Other (identify & quantify)..... -- -- -- -- -- --
Dollar Amount of Property Sales
and Refinancing before Deducting
Payments to Sponsor:
Cash............................ -- -- -- -- -- --
Notes........................... -- -- -- -- -- --
Amount Paid to Sponsor from
Property Sales & Refinancing:
Real Estate Commissions......... -- -- -- -- -- --
Incentive Fees.................. -- -- -- -- -- --
Other (identify & quantify)..... -- -- -- -- -- --
</TABLE>
- ------------------------------
(1) Represents Broker-Dealer discounts paid to American Investors Group, Inc.,
Underwriter, an affiliate of the Advisor and the Managing Underwriter of the
Company's offering of its shares.
(2) Represent direct expense reimbursements for expenses incurred by American
Investors Group, Inc., in connection with the offer and sale of the
respective issuers' first mortgage bonds.
(3) Represents the aggregate quarterly administrative fees paid by the issuers
to American Investors Group, Inc., through 06/30/99. These fees remain
payable for the duration for which each issuer's first mortgage bonds are
outstanding.
B-9
<PAGE>
TABLE II--COMPENSATION TO SPONSOR AND AFFILIATES (CONTINUED)
For Program Offerings Concluded Since January 1991
<TABLE>
<CAPTION>
WINDSOR
VILLAGE UNITED HOPEWELL ST. AGNES
MORNINGSTAR GATES OF METHODIST MISSIONARY MISSIONARY
LIBERTY CHURCH BAPTIST CHURCH HEAVEN CHURCH BAPTIST CHURCH BAPTIST CHURCH
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Date Offering Commenced........... 7/1/94 9/15/94 11/15/94 1/1/95 1/15/95 3/15/95
Dollar Amount Raised.............. $ 900,000 $ 800,000 $3,400,000 $ 725,000 $6,350,000 $3,200,000
Amount Paid to Sponsor from
Proceeds of Offering:
Underwriting Fees(1)............ $ 53,550 $ 47,600 $ 202,300 $ 45,313 $ 377,825 $ 190,400
Acquisition Fees
--real estate fees............ -- -- -- -- -- --
--advisory fees............... -- -- -- -- -- --
--other (type & amount)(2).... $ 11,000 $ 10,000 $ 30,000 $ 7,000 $ 45,000 $ 27,000
Dollar Amount of Cash Generated
from Operations before Deducting
Payments to Sponsor............. -- -- -- -- -- --
Amount Paid to Sponsor from
Operations:
Property Management Fees........ -- -- -- -- -- --
Partnership Management Fees..... -- -- -- -- -- --
Reimbursements.................. -- -- -- -- -- --
Leasing Commissions............. -- -- -- -- -- --
Annual Advisor Fee earned to
date(3)....................... $ 8,269 $ 10,255 $ 23,054 $ 3,946 $ 24,556 $ 14,803
Other (identify & quantify)..... -- -- -- -- -- --
Dollar Amount of Property Sales
and Refinancing before Deducting
Payments to Sponsor:
Cash............................ -- -- -- -- -- --
Notes........................... -- -- -- -- -- --
Amount Paid to Sponsor from
Property Sales & Refinancing:
Real Estate Commissions......... -- -- -- -- -- --
Incentive Fees.................. -- -- -- -- -- --
Other (identify & quantify)..... -- -- -- -- -- --
</TABLE>
- ------------------------------
(1) Represents Broker-Dealer discounts paid to American Investors Group, Inc.,
Underwriter, an affiliate of the Advisor and the Managing Underwriter of the
Company's offering of its shares.
(2) Represent direct expense reimbursements for expenses incurred by American
Investors Group, Inc., in connection with the offer and sale of the
respective issuers' first mortgage bonds.
(3) Represents the aggregate quarterly administrative fees paid by the issuers
to American Investors Group, Inc., through 06/30/99. These fees remain
payable for the duration for which each issuer's first mortgage bonds are
outstanding.
B-10
<PAGE>
TABLE II--COMPENSATION TO SPONSOR AND AFFILIATES (CONTINUED)
For Program Offerings Concluded Since January 1991
<TABLE>
<CAPTION>
CHURCH OF THE ZION ST. MARK'S THE COMMUNITY ABUNDANT LIFE
GREAT EVANGELISTIC MISSIONARY EMMANUEL PROTESTANT CHURCH OF
COMMISSION TEMPLE BAPTIST CHURCH BAPTIST CHURCH CHURCH CHRIST
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Date Offering Commenced........... 4/1/95 4/15/95 04/01/95 07/15/95 08/15/95 10/15/95
Dollar Amount Raised.............. $2,200,000 $4,375,000 $ 360,000 $1,655,000 $1,500,000 $1,425,000
Amount Paid to Sponsor from
Proceeds of Offering:
Underwriting Fees(1)............ $ 130,900 $ 260,313 $ 24,300 $ 98,475 $ 89,250 $ 80,888
Acquisition Fees
--real estate fees............ -- -- -- -- -- --
--advisory fees............... -- -- -- -- -- --
--other (type & amount)(2).... $ 25,500 $ 39,000 $ 14,500 $ 20,000 $ 24,000 $ 30,000
Dollar Amount of Cash Generated
from Operations before Deducting
Payments to Sponsor............. -- -- -- -- -- --
Amount Paid to Sponsor from
Operations:
Property Management Fees........ -- -- -- -- -- --
Partnership Management Fees..... -- -- -- -- -- --
Reimbursements.................. -- -- -- -- -- --
Leasing Commissions............. -- -- -- -- -- --
Annual Advisor Fee earned to
date(3)....................... $ 16,118 $ 18,005 $ 2,858 $ 15,388 $ 11,801 $ 11,423
Other (identify & quantify)..... -- -- -- -- -- --
Dollar Amount of Property Sales
and Refinancing before Deducting
Payments to Sponsor:
Cash............................ -- -- -- -- -- --
Notes........................... -- -- -- -- -- --
Amount Paid to Sponsor from
Property Sales & Refinancing:
Real Estate Commissions......... -- -- -- -- -- --
Incentive Fees.................. -- -- -- -- -- --
Other (identify & quantify)..... -- -- -- -- -- --
</TABLE>
- ------------------------------
(1) Represents Broker-Dealer discounts paid to American Investors Group, Inc.,
Underwriter, an affiliate of the Advisor and the Managing Underwriter of the
Company's offering of its shares.
(2) Represent direct expense reimbursements for expenses incurred by American
Investors Group, Inc., in connection with the offer and sale of the
respective issuers' first mortgage bonds.
(3) Represents the aggregate quarterly administrative fees paid by the issuers
to American Investors Group, Inc., through 06/30/99. These fees remain
payable for the duration for which each issuer's first mortgage bonds are
outstanding.
B-11
<PAGE>
TABLE II--COMPENSATION TO SPONSOR AND AFFILIATES (CONTINUED)
For Program Offerings Concluded Since January 1991
<TABLE>
<CAPTION>
TWELFTH AVENUE HOUSE OF
GENERAL PRAISE PEMBROKE PARK FAITH
GREELEY CHURCH BAPTIST THE HOLDEN MINISTRIES, CHURCH OF COMMUNITY
OF CHRIST CHURCH, INC. CHAPEL INC. CHRIST, INC. CHURCH, INC.
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Date Offering Commenced........... 10/15/95 10/15/95 11/01/95 10/01/95 11/15/95 12/01/95
Dollar Amount Raised.............. $ 500,000 $1,195,000 $ 500,000 $ 675,000 $ 600,000 $ 950,000
Amount Paid to Sponsor from
Proceeds of Offering:
Underwriting Fees(1)............ $ 41,500 83,650 29,750 $ 40,163 $ 35,700 $ 84,800
Acquisition Fees
--real estate fees............ -- -- -- -- -- --
--advisory fees............... -- -- -- -- -- --
--other (type & amount)(2).... $ 5,000 $ 5,000 $ 5,000 $ 20,837 $ 6,000 $ 13,000
Dollar Amount of Cash Generated
from Operations before Deducting
Payments to Sponsor............. -- -- -- -- -- --
Amount Paid to Sponsor from
Operations:
Property Management Fees........ -- -- -- -- -- --
Partnership Management Fees..... -- -- -- -- -- --
Reimbursements.................. -- -- -- -- -- --
Leasing Commissions............. -- -- -- -- -- --
Annual Advisor Fee earned to
date(3)....................... -- -- $ 1,845 $ 4,862 $ 2,234 --
Other (identify & quantify)..... -- -- -- -- -- --
Dollar Amount of Property Sales
and Refinancing before Deducting
Payments to Sponsor:
Cash............................ -- -- -- -- -- --
Notes........................... -- -- -- -- -- --
Amount Paid to Sponsor from
Property Sales & Refinancing:
Real Estate Commissions......... -- -- -- -- -- --
Incentive Fees.................. -- -- -- -- -- --
Other (identify & quantify)..... -- -- -- -- -- --
</TABLE>
- ------------------------------
(1) Represents Broker-Dealer discounts paid to American Investors Group, Inc.,
Underwriter, an affiliate of the Advisor and the Managing Underwriter of the
Company's offering of its shares.
(2) Represent direct expense reimbursements for expenses incurred by American
Investors Group, Inc., in connection with the offer and sale of the
respective issuers' first mortgage bonds.
(3) Represents the aggregate quarterly administrative fees paid by the issuers
to American Investors Group, Inc., through 06/30/99. These fees remain
payable for the duration for which each issuer's first mortgage bonds are
outstanding.
B-12
<PAGE>
TABLE II--COMPENSATION TO SPONSOR AND AFFILIATES (CONTINUED)
For Program Offerings Concluded Since January 1991
<TABLE>
<CAPTION>
OASIS CENTENNIAL ST. AGNES
CHRIST CHURCH CHRISTIAN STAR OF MISSIONARY LAKE BAPTIST CORNERSTONE
OF KIRKLAND CENTER BETHLEHEM BAPTIST CHURCH CHURCH CHURCH
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Date Offering Commenced........... 12/29/95 02/15/96 02/01/96 03/15/96 03/15/96 05/15/96
Dollar Amount Raised.............. $2,785,000 $ 825,000 $1,195,000 $ 875,000 $1,840,000 $6,600,000
Amount Paid to Sponsor from
Proceeds of Offering:
Underwriting Fees(1)............ $ 192,165 $ 49,088 $ 71,103 $ 52,063 $ 109,480 $ 412,500
Acquisition Fees
--real estate fees............ -- -- -- -- -- --
--advisory fees............... -- -- -- -- -- --
--other (type & amount)(2).... $ 8,400 $ 12,000 $ 14,000 $ 15,000 $ 12,520 $ 32,000
Dollar Amount of Cash Generated
from Operations before Deducting
Payments to Sponsor............. -- -- -- -- -- --
Amount Paid to Sponsor from
Operations:
Property Management Fees........ -- -- -- -- -- --
Partnership Management Fees..... -- -- -- -- -- --
Reimbursements.................. -- -- -- -- -- --
Leasing Commissions............. -- -- -- -- -- --
Annual Advisor Fee earned to
date(3)....................... $ 17,496 $ 6,393 $ 6,499 $ 15,212 $ 15,333 $ 7,079
Other (identify & quantify)..... -- -- -- -- -- --
Dollar Amount of Property Sales
and Refinancing before Deducting
Payments to Sponsor:
Cash............................ -- -- -- -- -- --
Notes........................... -- -- -- -- -- --
Amount Paid to Sponsor from
Property Sales & Refinancing:
Real Estate Commissions......... -- -- -- -- -- --
Incentive Fees.................. -- -- -- -- -- --
Other (identify & quantify)..... -- -- -- -- -- --
</TABLE>
- ------------------------------
(1) Represents Broker-Dealer discounts paid to American Investors Group, Inc.,
Underwriter, an affiliate of the Advisor and the Managing Underwriter of the
Company's offering of its shares.
(2) Represent direct expense reimbursements for expenses incurred by American
Investors Group, Inc., in connection with the offer and sale of the
respective issuers' first mortgage bonds.
(3) Represents the aggregate quarterly administrative fees paid by the issuers
to American Investors Group, Inc., through 06/30/99. These fees remain
payable for the duration for which each issuer's first mortgage bonds are
outstanding.
B-13
<PAGE>
TABLE II--COMPENSATION TO SPONSOR AND AFFILIATES (CONTINUED)
For Program Offerings Concluded Since January 1991
<TABLE>
<CAPTION>
CENTENNIAL
STAR OF
NEW LIFE BETHLEHEM
ABUNDANT LIFE VOLLINTINE ALOHA BAPTIST CHURCH BAPTIST CHURCH
FAMILY WORSHIP BAPTIST CHRISTIAN LIFE OF THURSTON OF OSSINING, CORNERSTONE
CTR. INC. CHURCH, INC. CENTER COUNTY NEW YORK CHURCH
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Date Offering Commenced........... 08/15/96 08/15/96 09/01/96 10/15/96 11/15/96 12/15/96
Dollar Amount Raised.............. $2,025,000 $ 425,000 $1,380,000 $1,300,000 $ 450,000 $4,680,000
Amount Paid to Sponsor from
Proceeds of Offering:
Underwriting Fees(1)............ $ 120,488 $ 25,288 $ 84,850 $ 77,350 $ 29,250 $ 278,460
Acquisition Fees
--real estate fees............ -- -- -- -- -- --
--advisory fees............... -- -- -- -- -- --
--other (type & amount)(2).... $ 21,000 $ 8,000 $ 15,000 $ 14,000 $ 13,000 $ 36,540
Dollar Amount of Cash Generated
from Operations before Deducting
Payments to Sponsor............. -- -- -- -- -- --
Amount Paid to Sponsor from
Operations:
Property Management Fees........ -- -- -- -- -- --
Partnership Management Fees..... -- -- -- -- -- --
Reimbursements.................. -- -- -- -- -- --
Leasing Commissions............. -- -- -- -- -- --
Annual Advisor Fee earned to
date(3)....................... $ 10,413 $ 2,273 $ 1,887 $ 6,951 $ 837 $ 25,245
Other (identify & quantify)..... -- -- -- -- -- --
Dollar Amount of Property Sales
and Refinancing before Deducting
Payments to Sponsor:
Cash............................ -- -- -- -- -- --
Notes........................... -- -- -- -- -- --
Amount Paid to Sponsor from
Property Sales & Refinancing:
Real Estate Commissions......... -- -- -- -- -- --
Incentive Fees.................. -- -- -- -- -- --
Other (identify & quantify)..... -- -- -- -- -- --
</TABLE>
- ------------------------------
(1) Represents Broker-Dealer discounts paid to American Investors Group, Inc.,
Underwriter, an affiliate of the Advisor and the Managing Underwriter of the
Company's offering of its shares.
(2) Represent direct expense reimbursements for expenses incurred by American
Investors Group, Inc., in connection with the offer and sale of the
respective issuers' first mortgage bonds.
(3) Represents the aggregate quarterly administrative fees paid by the issuers
to American Investors Group, Inc., through 06/30/99. These fees remain
payable for the duration for which each issuer's first mortgage bonds are
outstanding.
B-14
<PAGE>
TABLE II--COMPENSATION TO SPONSOR AND AFFILIATES (CONTINUED)
For Program Offerings Concluded Since January 1991
<TABLE>
<CAPTION>
SPRING LAKE ALOHA ORIGINAL HOLY
UNITED BAPTIST CHURCH OF NEW JERUSALEM CHRISTIAN LIFE BETHANY ARK MISSIONARY
CHURCH CHRIST CHURCH CENTER BAPTIST CHURCH BAPTIST CHURCH
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Date Offering Commenced........... 12/15/96 02/15/97 03/15/97 04/01/97 04/01/97 04/15/97
Dollar Amount Raised.............. $1,525,000 $ 600,000 $2,300,000 $ 490,000 $1,750,000 $ 675,000
Amount Paid to Sponsor from
Proceeds of Offering:
Underwriting Fees(1)............ $ 90,738 $ 52,800 $ 136,850 $ 44,100 $ 104,125 $ 42,188
Acquisition Fees
--real estate fees............ -- -- -- -- -- --
--advisory fees............... -- -- -- -- -- --
--other (type & amount)(2).... $ 19,000 $ 10,000 $ 24,000 $ 7,000 $ 22,000 $ 14,000
Dollar Amount of Cash Generated
from Operations before Deducting
Payments to Sponsor............. -- -- -- -- -- --
Amount Paid to Sponsor from
Operations:
Property Management Fees........ -- -- -- -- -- --
Partnership Management Fees..... -- -- -- -- -- --
Reimbursements.................. -- -- -- -- -- --
Leasing Commissions............. -- -- -- -- -- --
Annual Advisor Fee earned to
date(3)....................... $ 6,294 $ 3,276 $ 6,881 $ 3,165 $ 9,361 $ 3,536
Other (identify & quantify)..... -- -- -- -- -- --
Dollar Amount of Property Sales
and Refinancing before Deducting
Payments to Sponsor:
Cash............................ -- -- -- -- -- --
Notes........................... -- -- -- -- -- --
Amount Paid to Sponsor from
Property Sales & Refinancing:
Real Estate Commissions......... -- -- -- -- -- --
Incentive Fees.................. -- -- -- -- -- --
Other (identify & quantify)..... -- -- -- -- -- --
</TABLE>
- ------------------------------
(1) Represents Broker-Dealer discounts paid to American Investors Group, Inc.,
Underwriter, an affiliate of the Advisor and the Managing Underwriter of the
Company's offering of its shares.
(2) Represent direct expense reimbursements for expenses incurred by American
Investors Group, Inc., in connection with the offer and sale of the
respective issuers' first mortgage bonds.
(3) Represents the aggregate quarterly administrative fees paid by the issuers
to American Investors Group, Inc., through 06/30/99. These fees remain
payable for the duration for which each issuer's first mortgage bonds are
outstanding.
B-15
<PAGE>
TABLE II--COMPENSATION TO SPONSOR AND AFFILIATES (CONTINUED)
For Program Offerings Concluded Since January 1991
<TABLE>
<CAPTION>
GREATER MT.
BETHLEHEM CENTRO DE FULL GOSPEL ZION CHURCH OF THE
TEMPLE OF CAPACITIACION TEEN MANIA CHRISTIAN MISSIONARY GREAT
RIALTO CRISTIANA MINISTRIES ASSEMBLY BAPTIST CHURCH COMMISSION
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Date Offering Commenced........... 05/01/97 05/15/97 07/01/97 07/01/97 07/15/97 08/01/97
Dollar Amount Raised.............. $1,200,000 $ 650,000 $2,300,000 $1,525,000 $1,185,000 $1,100,000
Amount Paid to Sponsor from
Proceeds of Offering:
Underwriting Fees(1)............ $ 75,000 $ 45,050 $ 139,150 $ 95,313 $ 74,063 $ 65,450
Acquisition Fees
--real estate fees............ -- -- -- -- -- --
--advisory fees............... -- -- -- -- -- --
--other (type & amount)(2).... $ 19,000 $ 15,250 $ 29,000 $ 23,000 $ 16,500 $ 15,000
Dollar Amount of Cash Generated
from Operations before Deducting
Payments to Sponsor............. -- -- -- -- -- --
Amount Paid to Sponsor from
Operations:
Property Management Fees........ -- -- -- -- -- --
Partnership Management Fees..... -- -- -- -- -- --
Reimbursements.................. -- -- -- -- -- --
Leasing Commissions............. -- -- -- -- -- --
Annual Advisor Fee earned to
date(3)....................... $ 5,500 $ 3,570 $ 10,504 $ 11,435 $ 4,957 $ 4,602
Other (identify & quantify)..... -- -- -- -- -- --
Dollar Amount of Property Sales
and Refinancing before Deducting
Payments to Sponsor:
Cash............................ -- -- -- -- -- --
Notes........................... -- -- -- -- -- --
Amount Paid to Sponsor from
Property Sales & Refinancing:
Real Estate Commissions......... -- -- -- -- -- --
Incentive Fees.................. -- -- -- -- -- --
Other (identify & quantify)..... -- -- -- -- -- --
</TABLE>
- ------------------------------
(1) Represents Broker-Dealer discounts paid to American Investors Group, Inc.,
Underwriter, an affiliate of the Advisor and the Managing Underwriter of the
Company's offering of its shares.
(2) Represent direct expense reimbursements for expenses incurred by American
Investors Group, Inc., in connection with the offer and sale of the
respective issuers' first mortgage bonds.
(3) Represents the aggregate quarterly administrative fees paid by the issuers
to American Investors Group, Inc., through 06/30/99. These fees remain
payable for the duration for which each issuer's first mortgage bonds are
outstanding.
B-16
<PAGE>
TABLE II--COMPENSATION TO SPONSOR AND AFFILIATES (CONTINUED)
For Program Offerings Concluded Since January 1991
<TABLE>
<CAPTION>
THE COMMUNITY
NEW HOPE SWOPE PARKWAY PROTESTANT
SHARON BAPTIST MISSIONARY THE HOLY WAY CHURCH OF CHURCH OF
CITY CHURCH CHURCH BAPTIST CHURCH CHURCH, INC. CHRIST CO-OP CITY
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Date Offering Commenced........... 09/01/97 10/15/97 10/15/97 10/15/97 11/01/97 11/15/97
Dollar Amount Raised.............. $1,563,000 $5,864,000 $2,300,000 $1,500,000 $1,200,000 $ 995,000
Amount Paid to Sponsor from
Proceeds of Offering:
Underwriting Fees(1)............ $ 108,785 $ 348,908 $ 139,150 $ 89,250 $ 96,000 $ 59,203
Acquisition Fees
--real estate fees............ -- -- -- -- -- --
--advisory fees............... -- -- -- -- -- --
--other (type & amount)(2).... $ 10,000 $ 36,000 $ 29,000 $ 21,000 $ 6,000 $ 18,000
Dollar Amount of Cash Generated
from Operations before Deducting
Payments to Sponsor............. -- -- -- -- -- --
Amount Paid to Sponsor from
Operations:
Property Management Fees........ -- -- -- -- -- --
Partnership Management Fees..... -- -- -- -- -- --
Reimbursements.................. -- -- -- -- -- --
Leasing Commissions............. -- -- -- -- -- --
Annual Advisor Fee earned to
date(3)....................... $ 6,867 $ 26,030 $ 7,826 $ 5,147 $ 0 $ 3,562
Other (identify & quantify)..... -- -- -- -- -- --
Dollar Amount of Property Sales
and Refinancing before Deducting
Payments to Sponsor:
Cash............................ -- -- -- -- -- --
Notes........................... -- -- -- -- -- --
Amount Paid to Sponsor from
Property Sales & Refinancing:
Real Estate Commissions......... -- -- -- -- -- --
Incentive Fees.................. -- -- -- -- -- --
Other (identify & quantify)..... -- -- -- -- -- --
</TABLE>
- ------------------------------
(1) Represents Broker-Dealer discounts paid to American Investors Group, Inc.,
Underwriter, an affiliate of the Advisor and the Managing Underwriter of the
Company's offering of its shares.
(2) Represent direct expense reimbursements for expenses incurred by American
Investors Group, Inc., in connection with the offer and sale of the
respective issuers' first mortgage bonds.
(3) Represents the aggregate quarterly administrative fees paid by the issuers
to American Investors Group, Inc., through 06/30/99. These fees remain
payable for the duration for which each issuer's first mortgage bonds are
outstanding.
B-17
<PAGE>
TABLE II--COMPENSATION TO SPONSOR AND AFFILIATES (CONTINUED)
For Program Offerings Concluded Since January 1991
<TABLE>
<CAPTION>
THE LEE
GOSPEL NEW YORK DONG CHURCH OF THE MEMORIAL
TABERNACLE YANG FIRST NEW LIFE GREAT SPIRITUAL LIFE A.M.E. CHURCH,
CHURCH CHURCH BAPTIST COMMISSION. MINISTRIES INC.
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Date Offering Commenced........... 02/01/98 03/15/98 03/15/98 04/01/98 05/15/98 06/01/98
Dollar Amount Raised.............. $2,871,000 $ 735,000 $ 495,000 $1,900,000 $1,985,000 $1,000,000
Amount Paid to Sponsor from
Proceeds of Offering:
Underwriting Fees(1)............ $ 170,825 $ 43,733 $ 29,453 $ 113,050 $ 118,108 $ 59,500
Acquisition Fees
--real estate fees............ -- -- -- -- -- --
--advisory fees............... -- -- -- -- -- --
--other (type & amount)(2).... $ 30,000 $ 10,000 $ 10,000 $ 19,000 $ 15,000 $ 12,000
Dollar Amount of Cash Generated
from Operations before Deducting
Payments to Sponsor............. -- -- -- -- -- --
Amount Paid to Sponsor from
Operations:
Property Management Fees........ -- -- -- -- -- --
Partnership Management Fees..... -- -- -- -- -- --
Reimbursements.................. -- -- -- -- -- --
Leasing Commissions............. -- -- -- -- -- --
Annual Advisor Fee earned to
date(3)....................... $ 8,528 $ 2,640 $ 1,485 $ 6,650 $ 4,023 $ 2,592
Other (identify & quantify)..... -- -- -- -- -- --
Dollar Amount of Property Sales
and Refinancing before Deducting
Payments to Sponsor:
Cash............................ -- -- -- -- -- --
Notes........................... -- -- -- -- -- --
Amount Paid to Sponsor from
Property Sales & Refinancing:
Real Estate Commissions......... -- -- -- -- -- --
Incentive Fees.................. -- -- -- -- -- --
Other (identify & quantify)..... -- -- -- -- -- --
</TABLE>
- ------------------------------
(1) Represents Broker-Dealer discounts paid to American Investors Group, Inc.,
Underwriter, an affiliate of the Advisor and the Managing Underwriter of the
Company's offering of its shares.
(2) Represent direct expense reimbursements for expenses incurred by American
Investors Group, Inc., in connection with the offer and sale of the
respective issuers' first mortgage bonds.
(3) Represents the aggregate quarterly administrative fees paid by the issuers
to American Investors Group, Inc., through 06/30/99. These fees remain
payable for the duration for which each issuer's first mortgage bonds are
outstanding.
B-18
<PAGE>
TABLE II--COMPENSATION TO SPONSOR AND AFFILIATES (CONTINUED)
For Program Offerings Concluded Since January 1991
<TABLE>
<CAPTION>
LINCONIA
HARVEST NEW VISION RALEIGH TABERNACLE
COMMUNITY FULL GOSPEL UNITED BAPTIST CHRISTIAN TEEN MANIA CHRISTIAN
CHURCH BAPTIST CHURCH CHURCH COMMUNITY MINISTRIES CENTER
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Date Offering Commenced........... 06/01/98 07/15/98 07/`5/98 08/01/98 09/15/98 08/15/98
Dollar Amount Raised.............. $2,400,000 $1,125,000 $ 755,000 $3,420,000 $1,650,000 $1,100,000
Amount Paid to Sponsor from
Proceeds of Offering:
Underwriting Fees(1)............ $ 117,120 $ 66,938 $ 44,923 $ 196,650 $ 99,825 $ 65,450
Acquisition Fees
--real estate fees............ -- -- -- -- -- --
--advisory fees............... -- -- -- -- -- --
--other (type & amount)(2).... $ 5,000 $ 11,000 $ 11,000 $ 19,000 $ 17,000 $ 13,000
Dollar Amount of Cash Generated
from Operations before Deducting
Payments to Sponsor............. -- -- -- -- -- --
Amount Paid to Sponsor from
Operations:
Property Management Fees........ -- -- -- -- -- --
Partnership Management Fees..... -- -- -- -- -- --
Reimbursements.................. -- -- -- -- -- --
Leasing Commissions............. -- -- -- -- -- --
Annual Advisor Fee earned to
date(3)....................... $ 270 $ 2,623 $ 1,812 $ 3,828 $ 3,952 $ 2,400
Other (identify & quantify)..... -- -- -- -- -- --
Dollar Amount of Property Sales
and Refinancing before Deducting
Payments to Sponsor:
Cash............................ -- -- -- -- -- --
Notes........................... -- -- -- -- -- --
Amount Paid to Sponsor from
Property Sales & Refinancing:
Real Estate Commissions......... -- -- -- -- -- --
Incentive Fees.................. -- -- -- -- -- --
Other (identify & quantify)..... -- -- -- -- -- --
</TABLE>
- ------------------------------
(1) Represents Broker-Dealer discounts paid to American Investors Group, Inc.,
Underwriter, an affiliate of the Advisor and the Managing Underwriter of the
Company's offering of its shares.
(2) Represent direct expense reimbursements for expenses incurred by American
Investors Group, Inc., in connection with the offer and sale of the
respective issuers' first mortgage bonds.
(3) Represents the aggregate quarterly administrative fees paid by the issuers
to American Investors Group, Inc., through 06/30/99. These fees remain
payable for the duration for which each issuer's first mortgage bonds are
outstanding.
B-19
<PAGE>
TABLE II--COMPENSATION TO SPONSOR AND AFFILIATES (CONTINUED)
For Program Offerings Concluded Since January 1991
<TABLE>
<CAPTION>
CENTENNIAL
SHARON BAPTIST FULL GOSPEL STAR OF ST. AGNES GREATER OPEN
NEW GENERATION CHURCH OF PENTECOSTAL BETHLEHEM MISSIONARY DOOR CHURCH OF
MINISTRIES PHILADELPHIA CHURCH CHURCH BAPTIST CHURCH GOD IN CHRIST
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Date Offering Commenced........... 09/15/98 10/15/98 10/15/98 11/15/98 12/15/98 11/01/98
Dollar Amount Raised.............. $1,285,000 $1,325,000 $2,670,000 $1,845,000 $4,575,000 $ 900,000
Amount Paid to Sponsor from
Proceeds of Offering:
Underwriting Fees(1)............ $ 76,458 $ 78,838 $ 210,930 $ 109,778 $ 272,213 $ 53,350
Acquisition Fees
--real estate fees............ -- -- -- -- -- --
--advisory fees............... -- -- -- -- -- --
--other (type & amount)(2).... $ 14,000 $ 12,000 $ 24,000 $ 19,000 $ 29,000 $ 10,000
Dollar Amount of Cash Generated
from Operations before Deducting
Payments to Sponsor............. -- -- -- -- -- --
Amount Paid to Sponsor from
Operations:
Property Management Fees........ -- -- -- -- -- --
Partnership Management Fees..... -- -- -- -- -- --
Reimbursements.................. -- -- -- -- -- --
Leasing Commissions............. -- -- -- -- -- --
Annual Advisor Fee earned to
date(3)....................... $ 2,660 $ 1,586 $ 0 $ 2,214 $ 9,200 $ 1,519
Other (identify & quantify)..... -- -- -- -- -- --
Dollar Amount of Property Sales
and Refinancing before Deducting
Payments to Sponsor:
Cash............................ -- -- -- -- -- --
Notes........................... -- -- -- -- -- --
Amount Paid to Sponsor from
Property Sales & Refinancing:
Real Estate Commissions......... -- -- -- -- -- --
Incentive Fees.................. -- -- -- -- -- --
Other (identify & quantify)..... -- -- -- -- -- --
</TABLE>
- ------------------------------
(1) Represents Broker-Dealer discounts paid to American Investors Group, Inc.,
Underwriter, an affiliate of the Advisor and the Managing Underwriter of the
Company's offering of its shares.
(2) Represent direct expense reimbursements for expenses incurred by American
Investors Group, Inc., in connection with the offer and sale of the
respective issuers' first mortgage bonds.
(3) Represents the aggregate quarterly administrative fees paid by the issuers
to American Investors Group, Inc., through 06/30/99. These fees remain
payable for the duration for which each issuer's first mortgage bonds are
outstanding.
B-20
<PAGE>
TABLE II--COMPENSATION TO SPONSOR AND AFFILIATES (CONTINUED)
For Program Offerings Concluded Since January 1991
<TABLE>
<CAPTION>
INTEGRITY
SOUTHERN ST. AGNES CHURCH GREATER ST.
CALIFORNIA SPIRITUAL LIFE MISSIONARY HOLMAN STREET INTERNATIONAL, MATTHEW
WORD OF FAITH MINISTRIES BAPTIST CHURCH BAPTIST CHURCH INC. BAPTIST CHURCH
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Date Offering Commenced........... 02/01/99 02/15/99 03/15/99 04/01/99 04/15/99 04/15/99
Dollar Amount Raised.............. $5,275,000 $ 255,000 $5,350,000 $4,335,000 $1,875,000 $1,850,000
Amount Paid to Sponsor from
Proceeds of Offering:
Underwriting Fees(1)............ $ 313,863 $ 15,173 $ 318,325 $ 257,933 $ 111,563 $ 110,075
Acquisition Fees
--real estate fees............ -- -- -- -- -- --
--advisory fees............... -- -- -- -- -- --
--other (type & amount)(2).... $ 37,000 $ 6,000 $ 34,000 $ 32,000 $ 18,000 $ 18,000
Dollar Amount of Cash Generated
from Operations before Deducting
Payments to Sponsor............. -- -- -- -- -- --
Amount Paid to Sponsor from
Operations:
Property Management Fees........ -- -- -- -- -- --
Partnership Management Fees..... -- -- -- -- -- --
Reimbursements.................. -- -- -- -- -- --
Leasing Commissions............. -- -- -- -- -- --
Annual Advisor Fee earned to
date(3)....................... $ 6,588 $ 0 $ 0 $ 0 $ 0 $ 0
Other (identify & quantify)..... -- -- -- -- -- --
Dollar Amount of Property Sales
and Refinancing before Deducting
Payments to Sponsor:
Cash............................ -- -- -- -- -- --
Notes........................... -- -- -- -- -- --
Amount Paid to Sponsor from
Property Sales & Refinancing:
Real Estate Commissions......... -- -- -- -- -- --
Incentive Fees.................. -- -- -- -- -- --
Other (identify & quantify)..... -- -- -- -- -- --
</TABLE>
- ------------------------------
(1) Represents Broker-Dealer discounts paid to American Investors Group, Inc.,
Underwriter, an affiliate of the Advisor and the Managing Underwriter of the
Company's offering of its shares.
(2) Represent direct expense reimbursements for expenses incurred by American
Investors Group, Inc., in connection with the offer and sale of the
respective issuers' first mortgage bonds.
(3) Represents the aggregate quarterly administrative fees paid by the issuers
to American Investors Group, Inc., through 06/30/99. These fees remain
payable for the duration for which each issuer's first mortgage bonds are
outstanding.
B-21
<PAGE>
TABLE II--COMPENSATION TO SPONSOR AND AFFILIATES (CONTINUED)
For Program Offerings Concluded Since January 1991
<TABLE>
<CAPTION>
SHARON BAPTIST
CHURCH
--------------
<S> <C>
Date Offering Commenced........... 04/15/99
Dollar Amount Raised.............. $2,075,000
Amount Paid to Sponsor from
Proceeds of Offering:
Underwriting Fees(1)............ $ 123,463
Acquisition Fees
--real estate fees............ --
--advisory fees............... --
--other (type & amount)(2).... $ 19,000
Dollar Amount of Cash Generated
from Operations before Deducting
Payments to Sponsor............. --
Amount Paid to Sponsor from
Operations:
Property Management Fees........ --
Partnership Management Fees..... --
Reimbursements.................. --
Leasing Commissions............. --
Annual Advisor Fee earned to
date(3)....................... $ 0
Other (identify & quantify)..... --
Dollar Amount of Property Sales
and Refinancing before Deducting
Payments to Sponsor:
Cash............................ --
Notes........................... --
Amount Paid to Sponsor from
Property Sales & Refinancing:
Real Estate Commissions......... --
Incentive Fees.................. --
Other (identify & quantify)..... --
</TABLE>
- ------------------------------
(1) Represents Broker-Dealer discounts paid to American Investors Group, Inc.,
Underwriter, an affiliate of the Advisor and the Managing Underwriter of the
Company's offering of its shares.
(2) Represent direct expense reimbursements for expenses incurred by American
Investors Group, Inc., in connection with the offer and sale of the
respective issuers' first mortgage bonds.
(3) Represents the aggregate quarterly administrative fees paid by the issuers
to American Investors Group, Inc., through 06/30/99. These fees remain
payable for the duration for which each issuer's first mortgage bonds are
outstanding.
B-22
<PAGE>
TABLE II B
LOCATION OF PRIOR MORTGAGE LOANS TO CHURCHES
MADE BY AFFILIATE* OF ADVISOR
1987 to June 30, 1999
<TABLE>
<CAPTION>
TOTAL ORIGINAL
PRINCIPAL LOANS MADE IN EACH
NUMBER OF AMOUNT OF LOANS STATE AS PERCENTAGE
LOANS** MADE MADE IN EACH STATE OF TOTAL LOANS MADE
----------------- ---------------------- -------------------
<S> <C> <C> <C>
Arizona.............................................. 2 $ 1,600,000 0.69 %
California........................................... 11 21,215,000 9.13 %
Colorado............................................. 3 2,820,000 1.21 %
Connecticut.......................................... 1 1,655,000 0.71 %
District of Columbia................................. 4 5,510,000 2.37 %
Florida.............................................. 6 6,860,000 2.95 %
Georgia.............................................. 5 12,770,000 5.49 %
Illinois............................................. 7 6,680,000 2.87 %
Indiana.............................................. 1 1,195,000 0.51 %
Kansas............................................... 1 475,000 0.20 %
Maryland............................................. 7 10,265,000 4.42 %
Massachusetts........................................ 1 500,000 0.22 %
Michigan............................................. 2 6,675,000 2.87 %
Minnesota............................................ 6 7,605,000 3.27 %
Missouri............................................. 1 1,200,000 0.52 %
New Jersey........................................... 9 9,315,000 4.01 %
New York............................................. 17 15,090,000 6.49 %
North Carolina....................................... 4 6,897,000 2.97 %
Ohio................................................. 2 2,225,000 0.96 %
Oklahoma............................................. 2 1,470,000 0.63 %
Oregon............................................... 8 11,695,000 5.03 %
Pennsylvania......................................... 7 14,820,000 6.38 %
Tennessee............................................ 8 7,440,000 3.20 %
Texas................................................ 24 59,950,000 25.79 %
Virginia............................................. 4 5,271,000 2.27 %
Washington........................................... 8 11,240,000 4.84 %
--- ---------------------- ------
151 $ 232,438,000 100.00 %
</TABLE>
- ------------------------
* Loans were made through first mortgage bond underwritings conducted by the
Managing Underwriter, American Investors Group, Inc., which is an affiliate
of the Advisor.
** Data includes refinancings of prior bond underwriting programs underwritten
by American Investors Group, Inc.
<PAGE>
TABLE III
MORTGAGE BOND FINANCINGS BY MANAGING UNDERWRITER
The purpose of this summary is to provide information on the prior
performance of the first mortgage church financing programs underwritten by
American Investors Group, Inc., so as to provide a basis to evaluate the
experience of the Advisor's affiliate--American, which is owned and controlled
by the principals of the Advisor. Notwithstanding the foregoing, although many
of the financing guidelines and principles applicable to the Company's
investment and business plan are applied in American's bond underwriting
procedures, there can be no assurance that the results of financings
underwritten by American, or the yields represented thereby, can or will be
achieved by the Company, and the data herein is presented for information
purposes only.
MATERIAL FACTORS COMMON TO ALL OF THE CHURCH BOND FINANCING PROJECTS LISTED
BELOW INCLUDE:
- Secured by first mortgages with loan-to-value ratios of 75% or less, based
on written appraisals issued by a Member of the Appraisal Institute
("MAI") or a state-certified appraiser.
- Fixed interest rate loans with level or limited graduated payments.
- ALTA or equivalent mortgagee title insurance policy required.
- Borrower's total long-term debt (including the financing) limited to a
multiple of four (4) times gross income for its most recent 12 months.
- Borrower required to furnish audited financial statements for its most
recent complete fiscal year, and reviewed or compiled financial statements
for the two complete fiscal years prior to the most recent and, on a
comparative basis, for the current period within 90 days of the financing
date.
- A security interest in all personal property of the borrower is required.
- Key-man life insurance and automatic weekly loan payments are required.
<TABLE>
<CAPTION>
RATIO OF
MORTGAGE
DEBT TO
DATE PRINCIPAL LOAN-TO- HIGH BOND(2) AVERAGE ANNUAL
FINANCING AMOUNT OF VALUE YIELD/LAST INTEREST SUPPORT & TERM IN
ISSUER NAME EFFECTIVE FINANCING RATIO(1) MATURITY DATE RATE(3) PAYMENT STATUS REVENUE(4) YEARS
--------------- ---------- ---------- ---------- ------------- ---------- -------------- ---------- ---------
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C>
1. Deeper Life 5/87 $1,038,000 51% 11.00%/May 10.63% Current 1.13 15 yrs
Christian 2002
Fellowship,
Inc.
2. Israelite 5/87 460,000 71% 11.25%/May 11.00% Repaid 2.13 15 yrs
Church of God 1998
in Christ, Inc.
3. Speak the Word 7/87 3,650,000 70% 10.50%/July 10.25% Current 2.57 12 yrs
Church and 1999
World Outreach
4. Raleigh 9/87 1,425,000 62% 11.25%/Sept 11.00% Repaid 3.24 13 yrs
Christian 2000
Community
5. Palm Beach 1/88 1,425,000 75% 11.25%/Jan 11.00% Restructured 3.13 13 yrs
Cathedral AOG, 2001
Inc.
6. Windsor Village 4/88 1,570,000 75% 12.2%/Apr 12.00% Repaid 1.78 12 yrs
United 2000
Methodist
7. Deeper Life 6/88 332,000 67% 11.0%/Nov 10.80% Repaid 1.85 11 yrs
Christian 1996
Fellowship,
Inc.
8. Macedonia 9/88 750,000 71% 12.25%/Sept 12.15% Repaid 2.85 15 yrs
Missionary 2003
Baptist Church
9. St. Agnes 9/88 900,000 58% 12.25%/Sept 12.15% Repaid 2.45 14 yrs
Missionary 2002
Baptist Church
10. Way of the 11/88 895,000 39% 11.0%/July 10.85% Repaid 1.32 11 yrs
Cross Church 2000
11. Grace Community 1/89 750,000 71% 12.25%/July 12.10% Repaid 2.50 13.5 yrs
Fellowship 2002
12. Faith Outreach 4/89 1,720,000 75% 12.40%/Apr 12.25% Repaid 1.52 15 yrs
International 2004
d/b/a Christian
Faith Centre
13. By His Word 5/89 1,040,000 75% 12.50%/May 12.50% Repaid 1.92 15 yrs
Christian 2004
Center
</TABLE>
- ------------------------
(1) Ratio (expressed as a percentage of the principal amount of the loan to the
appraised value of the real property serving as
collateral for the loan.
(2) Represents the highest interest rate payable on the longest maturing bonds
issued by the borrowing church in the financing.
(3) Represents the average interest payable by the borrowing church assuming the
loan remains outstanding through its full term.
(4) Multiple of principal amount of bond loan times the borrower's total support
and revenues in the most recently completed fiscal
year prior to the bond underwriting.
C-1
<PAGE>
<TABLE>
<CAPTION>
RATIO OF
MORTGAGE
DEBT TO
DATE PRINCIPAL LOAN-TO- HIGH BOND(2) AVERAGE ANNUAL
FINANCING AMOUNT OF VALUE YIELD/LAST INTEREST SUPPORT & TERM IN
ISSUER NAME EFFECTIVE FINANCING RATIO(1) MATURITY DATE RATE(3) PAYMENT STATUS REVENUE(4) YEARS
--------------- ---------- ---------- ---------- ------------- ---------- -------------- ---------- ---------
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C>
14. Minneapolis 6/89 200,000 36% 12.50%/June 12.15% Current 1.33 15 yrs
Church of God 2000
15. Austin Church 9/89 960,000 75% 12.50%/Sept 12.40% Current 2.80 15 yrs
on the Rock 2004
16. Macedonia 9/89 390,000 71% 12.50%/Sept 12.25% Repaid 3.45 15 yrs
Missionary 2004
Baptist Church
17. Reid Temple 12/89 1,350,000 75% 12.40%/Dec 12.00% Current 4.27 15 yrs
A.M.E. Church 2004
18. Unity Palo Alto 2/90 2,000,000 38% 12.25%/Feb 12.00% Repaid 2.40 15 yrs
Church 1990
19. Bishop Pickens 3/90 340,000 54% 12.40%/Mar 12.20% Repaid 3.00 15 yrs
Memorial Temple 2005
20. Greater New 5/90 570,000 59% 12.40%/May 12.20% Current 2.93 15 yrs
Zion Baptist 2005
Church
21. St. Stephen's 6/90 1,100,000 63% 12.40%/June 12.30% Repaid 3.10 15 yrs
Missionary 2005
Baptist Church
22. Church of the 6/90 1,145,000 64% 12.40%/June 12.20% Current 2.49 15 yrs
Living God 2004
23. Bethlehem 8/90 675,000 55% 12.25%/Aug 12.20% Current 2.44 15 yrs
Missionary 2005
Church
24. Central 10/90 1,065,000 70% 12.30%/Oct 12.00% Repaid 2.76 15 yrs
Holiness Church 2005
25. Hopewell 1/91 3,700,000 64% 12.30%/Jan 11.90% Repaid 4.08 15 yrs
Missionary 2006
Baptist Church
26. New Life 3/91 715,000 65% 12.30%/Mar 11.90% Repaid 2.19 15 yrs
Christian 2006
Ministry
27. Triumph New 3/91 850,000 53% 12.20%/Mar 11.90% Repaid 1.55 15 yrs
Testament 2006
Church
28. Mount Moriah 5/91 1,290,000 69% 12.00%/May 11.80% Repaid 8.05 15 yrs
A.M.E. Church 2006
29. Temple Baptist 8/91 1,850,000 58% 12.20%/Aug 12.10% Repaid 2.92 15 yrs
Church 2006
30. Lake Baptist 8/91 1,800,000 51% 12.00%/Aug 11.80% Repaid 2.94 15 yrs
Church 2006
31. North Stelton 10/91 725,000 53% 12.00%/Oct 11.80% Current 2.81 15 yrs
A.M.E. Church 2006
32. Shorter 11/91 1,860,000 53% 12.00%/Nov 11.80% Repaid 2.83 15 yrs
Community 2006
A.M.E. Church
33. New Life 12/91 110,000 72% 12.00%/Mar 11.80% Repaid 2.53 15 yrs
Christian 2007
Ministry
34. Mount Vernon 12/91 1,350,000 65% 11.90%/Dec 11.75% Repaid 1.84 15 yrs
Baptist Church 2006
35. Macedonia 2/92 1,195,000 75% 11.20%/Feb 11.00% Current 3.37 15 yrs
Missionary 2007
Baptist Church
36. First Baptist 3/92 1,040,000 40% 11.20%/Mar 11.00% Current 2.47 15 yrs
Church of 2007
Corona
37. World Missions 3/92 720,000 64% 11.20%/Mar 11.00% Default 2.04 15 yrs
Assembly 2007
38. By His Word 4/92 1,215,000 74% 11.00%/Apr 10.60% Repaid 2.03 15 yrs
Christian 2007
Center
39. Metropolitan 4/92 475,000 75% 11.20%/Apr 10.90% Current 1.73 15 yrs
Baptist Church 2007
40. Christian Hope 5/92 506,000 70% 11.00%/May 10.60% Repaid 2.89 15 yrs
Center, Ltd. 2007
41. Bible 5/92 1,300,000 62% 11.00%/May 10.50% Current 2.55 15 yrs
Missionary 2007
Baptist
Church-Miami
42. Central 6/92 250,000 69% 11.20%/June 11.20% Repaid 3.42 15 yrs
Holiness Church 2007
43. St. James 6/92 1,430,000 45% 10.00%/June 9.25% Repaid 1.86 17 yrs
Episcopal 2009
Church
44. Church of Jesus 7/92 1,280,000 55% 11.00%/July 10.50% Repaid 3.00 15 yrs
Christ 2007
45. Temple Baptist 8/92 380,000 65% 11.20%/Feb 11.50% Repaid 3.00 15 yrs
Church of 2008
Nashville
46. Mount Zion 8/92 875,000 38% 10.00%/Aug 9.50% Repaid 3.30 13 yrs
A.M.E. Church 2005
47. Calvary Temple 9/92 1,820,000 38% 11.00%/Sept 10.25% Repaid 2.23 15 yrs
of Allentown, 2007
PA
</TABLE>
- ------------------------
(1) Ratio (expressed as a percentage of the principal amount of the loan to the
appraised value of the real property serving as
collateral for the loan.
(2) Represents the highest interest rate payable on the longest maturing bonds
issued by the borrowing church in the financing.
(3) Represents the average interest payable by the borrowing church assuming the
loan remains outstanding through its full term.
(4) Multiple of principal amount of bond loan times the borrower's total support
and revenues in the most recently completed fiscal
year prior to the bond underwriting.
C-2
<PAGE>
<TABLE>
<CAPTION>
RATIO OF
MORTGAGE
DEBT TO
DATE PRINCIPAL LOAN-TO- HIGH BOND(2) AVERAGE ANNUAL
FINANCING AMOUNT OF VALUE YIELD/LAST INTEREST SUPPORT & TERM IN
ISSUER NAME EFFECTIVE FINANCING RATIO(1) MATURITY DATE RATE(3) PAYMENT STATUS REVENUE(4) YEARS
--------------- ---------- ---------- ---------- ------------- ---------- -------------- ---------- ---------
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C>
48. Bethel Baptist 9/92 525,000 56% 11.00%/Sept 10.75% Repaid 2.40 15 yrs
Church 2007
49. Palo Alto 10/92 2,180,000 41% 10.25%/Oct 9.40% Current 1.93 15 yrs
Community 2007
Church
50. Christian Love 11/92 500,000 44% 10.30%/Nov 9.80% Current 1.02 15 yrs
Baptist Church 2007
51. Tabernacle 11/92 1,550,000 63% 10.75%/Nov 10.40% Repaid 2.55 15 yrs
Baptist Church 2007
52. Lee Memorial 12/92 1,225,000 63% 10.30%/Dec 9.90% Repaid 3.94 15 yrs
A.M.E. Church 2007
53. Nazareth 1/93 390,000 24% 10.30%/Jan 10.20% Current 3.14 15 yrs
Baptist Church 2008
54. Christian 2/93 1,600,000 46% 10.30%/Feb 9.80% Current 3.28 15 yrs
Pentecostal 2008
Church of
Christ
55. Mt. Zion 1/93 750,000 59% 10.30%/Jan 9.80% Current 3.30 15 yrs
Christian 2008
Baptist Church
56. Lake Baptist 2/93 365,000 60% 10.00%/Aug 10.00% Repaid 2.66 14.5 yrs
Church 2007
57. St. Mark's 2/93 1,500,000 67% 10.30%/Feb 9.90% Current 2.90 15 yrs
Missionary 2008
Baptist Church
58. Friendship 4/93 700,000 48% 10.00%/Apr 9.90% Current 1.77 15 yrs
Missionary 2008
Baptist Church
59. Christian Faith 5/93 1,765,000 66% 10.00%/May 9.50% Repaid 1.86 15 yrs
Centre 2008
60. Raleigh 6/93 1,452,000 70% 10.00%/June 9.50% Repaid 1.19 15 yrs
Christian 2008
Community
61. Porter's Day 5/93 350,000 51% 10.00%/May 9.80% Current .65 15 yrs
Care and 2008
Educational
Ctr.
62. Outreach 5/93 575,000 46% 10.00%/May 9.60% Repaid 1.86 15 yrs
Christian 2008
Center
63. Evergreen 6/93 345,000 36% 10.00%/June 9.80% Repaid 1.73 15 yrs
Baptist Church 2008
64. Faith Southwest 6/93 700,000 66% 10.00%/Jun 9.70% Default 2.07 15 yrs
Baptist Church 2008
65. Cornerstone 7/93 4,355,000 66% 10.00%/July 9.70% Current 1.92 15 yrs
Church 2008
66. St. Paul A.M.E. 8/93 1,000,000 29% 9.80%/Aug 9.50% Repaid 2.25 15 yrs
Church 2008
67. Windsor Village 9/93 3,100,000 37% 9.65%/Sept 9.25% Repaid 1.03 15 yrs
United 2008
Methodist
68. First Baptist 10/93 2,600,000 55% 9.70%/Oct 9.35% Repaid 2.86 15 yrs
Church of 2008
Hampton
69. Peaceful Zion 10/93 750,000 59% 9.70%/Oct 9.65% Current 2.72 15 yrs
Missionary 2008
Baptist
70. Central 11/93 1,405,000 67% 9.65%/Nov 9.25% Current 3.18 15 yrs
Holiness Church 2008
71. The Apostolic 12/93 2,600,000 45% 9.50%/Dec 9.20% Current 1.75 15 yrs
Faith Home 2008
Assembly
72. New Life 2/94 2,000,000 70% 9.75%/Feb 9.45% Current 2.60 18 yrs
Christian 20012
Ministry
73. Calvary Temple 2/94 1,950,000 41% 10.00%/Dec 9.50% Repaid 2.34 20 yrs
of Allentown 20014
74. First Baptist 4/94 740,000 54% 9.55%/Oct 9.50% Repaid 3.31 16.5 yrs
Church of 2010
Hampton
75. Woodinville 5/94 440,000 58% 9.75%/May 9.38% Current 2.03 20 yrs
Church of 2014
Christ
76. Resurrection 5/94 620,000 72% 8.50%/May 8.40% Current 2.50 7 yrs
Life Ministries 2001
77. Church of Jesus 6/94 1,735,000 75% 9.80%/June 9.38% Current 3.96 20 yrs
Christ 2014
78. Liberty Church 7/94 900,000 75% 8.55%/July 8.45% Repaid 2.14 7 yrs
2001
79. By His Word 9/94 1,665,000 75% 9.80%/Aug 9.40% Current 2.39 20 yrs
Christian 2014
Center
80. Morningstar 9/94 800,000 57% 9.80%/Sept 9.60% Current 1.45 20 yrs
Missionary 2014
Baptist Church
81. Iglesia Puerta 11/94 3,400,000 62% 10.00%/Nov 9.75% Current 1.70 20 yrs
Del Cielo 2014
82. Hopewell 1/95 6,350,000 68% 10.20%/Jan 9.90% Repaid 4.00 20 yrs
Missionary 2015
Baptist Church
</TABLE>
- ------------------------
(1) Ratio (expressed as a percentage of the principal amount of the loan to the
appraised value of the real property serving as
collateral for the loan.
(2) Represents the highest interest rate payable on the longest maturing bonds
issued by the borrowing church in the financing.
(3) Represents the average interest payable by the borrowing church assuming the
loan remains outstanding through its full term.
(4) Multiple of principal amount of bond loan times the borrower's total support
and revenues in the most recently completed fiscal
year prior to the bond underwriting.
C-3
<PAGE>
<TABLE>
<CAPTION>
RATIO OF
MORTGAGE
DEBT TO
DATE PRINCIPAL LOAN-TO- HIGH BOND(2) AVERAGE ANNUAL
FINANCING AMOUNT OF VALUE YIELD/LAST INTEREST SUPPORT & TERM IN
ISSUER NAME EFFECTIVE FINANCING RATIO(1) MATURITY DATE RATE(3) PAYMENT STATUS REVENUE(4) YEARS
--------------- ---------- ---------- ---------- ------------- ---------- -------------- ---------- ---------
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C>
83. Windsor Village 1/95 725,000 58% 10.00%/Sept 10.00% Repaid 1.14 15.5 yrs
United 2010
Methodist
84. St. Agnes 3/95 3,200,000 59% 10.20%/Mar 10.00% Repaid 2.22 20 yrs
Missionary 2015
Baptist Church
85. Church of the 4/95 2,200,000 57% 10.20%/Mar 10.00% Current 1.50 20 yrs
Great 2015
Commission
86. Zion 4/95 4,375,000 46% 10.20%/Apr 10.00% Repaid 2.40 20 yrs
Evangelistic 2015
Temple
87. St. Mark's 4/95 360,000 72% 10.20%/Feb 10.20% Repaid 2.04 15 yrs
Missionary 2010
Baptist Church
88. Emmanuel 7/95 1,655,000 47% 10.20%/July 9.85% Current 1.88 20 yrs
Baptist Church 2015
89. The Community 8/95 1,500,000 50% 10.20%/Aug 9.75% Current 2.20 20 yrs
Protestant 2015
Church
90. Abundant Life 10/95 1,425,000 67% 10.20%/Oct 9.75% Current 2.58 20 yrs
Church of 2015
Christ
91. Greeley Church 10/95 500,000 33% 10.20%/Oct 9.75% Current 1.98 20 yrs
of Christ 2015
92. Twelfth Ave. 10/95 1,195,000 55% 9.90%/Oct 9.50% Current 1.41 15 yrs
General Baptist 2010
Church
93. Holden Chapel 11/95 500,000 42% 10.20%/Nov 9.80% Repaid .65 20 yrs
2015
94. House of Praise 10/95 675,000 38% 10.20%/Oct 9.75% Current 1.42 20 yrs
Ministries 2015
95. Pembroke Park 11/95 600,000 68% 10.20%/Nov 9.75% Current 3.25 20 yrs
Church of 2015
Christ
96. Faith Community 12/95 950,000 40% 10.00%/Dec 9.60% Current .78 15 yrs
Church 2010
97. Christ Church 12/95 2,785,000 65% 10.20%/Jan 9.75% Current 2.96 20 yrs
of Kirkland 2016
98. Oasis Christian 02/96 825,000 69% 10.20%/Feb 9.75% Current 1.55 20 yrs
Center 2016
99. Centennial Star 02/96 1,195,000 52% 10.20%/Feb 9.75% Repaid 3.28 20 yrs
of Bethlehem 2016
Church
100. St. Agnes 03/96 875,000 67% 10.20%/Mar 10.05% Repaid 2.82 20 yrs
Missionary 2016
Baptist Church
101. Lake Baptist 03/96 1,840,000 63% 10.05%/Sept 9.95% Current 2.83 15 yrs
Church 2011
102. Cornerstone 05/96 6,600,000 68% 10.00%/May 9.70% Current 1.59 15 yrs
Church 2011
103. Abundant Life 08/96 2,025,000 70% 10.20%/Aug 9.85% Current 2.68 20 yrs
Family Worship 2016
Ctr, Inc.
104. Vollintine 08/96 425,000 65% 10.35%/Aug 9.85% Repaid 1.68 20 yrs
Baptist Church, 2016
Inc.
105. Aloha Christian 09/96 1,380,000 48% 10.20%/Sept 9.85% Repaid 3.30 20 yrs
Life Center 2016
106. New Life 10/96 1,300,000 59% 10.20%/Oct 9.85% Current 3.58 20 yrs
Baptist Church 2016
of Thurston Cty
107. Centennial Star 11/96 450,000 59% 10.30%/Nov 9.85% Current 3.59 20 yrs
of Bethlehem 2016
Baptist
108. Cornerstone 12/96 4,680,000 69% 10.00%/Dec 9.85% Current 1.58 15 yrs
Church 2011
109. United Baptist 12/96 1,525,000 61% 10.20%/Dec 9.85% Current 2.55 20 yrs
Church 2016
110. Spring Lake 02/97 600,000 67% 10.20%/Feb 9.85% Current 3.84 20 yrs
Church of 2017
Christ
111. New Jerusalem 03/97 2,300,000 67% 10.20%/Mar 9.85% Default 2.69 20 yrs
Church 2017
112. Aloha Christian 04/97 490,000 52% 10.20%/Apr 9.90% Repaid 2.34 20 yrs
Life Center 2017
113. Bethany Baptist 04/97 1,750,000 36% 10.20%/Apr 9.80% Current 2.67 20 yrs
Church 2017
114. Original Holy 04/97 675,000 52% 10.10% /Apr 9.84% Current 1.26 20 yrs
Ark Missionary 2017
Baptist Church
115. Bethlehem 05/97 1,200,000 51% 10.10%/May 9.84% Current 1.05 20 yrs
Temple 2017
Community
Church of
Rialto
116. Centro de 05/97 650,000 65% 10.10%/Jun 9.80% Current 1.98 20 yrs
Capacitiacion 2017
Christiana
</TABLE>
- ------------------------
(1) Ratio (expressed as a percentage of the principal amount of the loan to the
appraised value of the real property serving as
collateral for the loan.
(2) Represents the highest interest rate payable on the longest maturing bonds
issued by the borrowing church in the financing.
(3) Represents the average interest payable by the borrowing church assuming the
loan remains outstanding through its full term.
(4) Multiple of principal amount of bond loan times the borrower's total support
and revenues in the most recently completed fiscal
year prior to the bond underwriting.
C-4
<PAGE>
<TABLE>
<CAPTION>
RATIO OF
MORTGAGE
DEBT TO
DATE PRINCIPAL LOAN-TO- HIGH BOND(2) AVERAGE ANNUAL
FINANCING AMOUNT OF VALUE YIELD/LAST INTEREST SUPPORT & TERM IN
ISSUER NAME EFFECTIVE FINANCING RATIO(1) MATURITY DATE RATE(3) PAYMENT STATUS REVENUE(4) YEARS
--------------- ---------- ---------- ---------- ------------- ---------- -------------- ---------- ---------
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C>
117. Teen Mania 07/97 2,300,000 65% 10.10%/July 9.81% Current 4.34 20 yrs
Ministries, 2017
Inc.
118. Full Gospel 07/97 1,525,000 71% 10.10%/July 9.84% Current 1.48 20 yrs
Christian 2017
Assembly
119. Greater Mt. 07/97 1,185,000 75% 10.10%/July 9.84% Current 1.75 20 yrs
Zion Missionary 2017
Baptist Church
120. Church of the 08/97 1,100,000 55% 10.10%/July 9.94% Current 1.06 20 yrs
Great 2017
Commission
121. City Church 09/97 1,600,000 48% 10.10%/Sept. 9.81% Current 1.04 20 yrs
2017
122. Sharon Baptist 10/97 6,200,000 61% 10.10%/Oct. 9.81% Current 1.19 20 yrs
2017
123. New Hope 10/97 2,300,000 53% 10.10%/Oct. 9.79% Current 1.07 20 yrs
Missionary 2017
Baptist Church
124. The Holy Way 10/97 1,500,000 68% 10.10%/Oct 9.80% Default 1.49 20 yrs
Church, Inc. 2017
125. Swope Parkway 11/97 1,200,000 63% 10.10%/Nov 9.78% Current 1.14 20 yrs
Church of 2017
Christ
126. The Community 11/97 1,000,000 60% 10.10%/Nov 9.94% Current 1.03 20 yrs
Protestant 2017
Church Co-op
City
127. Gospel 02/98 3,550,000 59% 10.10%/Feb. 9.78% Current 1.63 20 yrs
Tabernacle 2018
Church
128. New York Dong 03/98 735,000 53% 10.00%/Mar. 9.73% Current 2.02 20 yrs
Yang First 2018
Church
129. New Life 03/98 495,000 75% 10.10%/Mar. 10.01% Current 1.28 20 yrs
Baptist 2018
130. Church of the 04/98 1,900,000 60% 10.10%/Apr. 9.84% Current 1.09 20 yrs
Great 2018
Commission
131. Spiritual Life 05/98 1,985,000 75% 9.85%/May 9.68% Current 1.88 15 yrs
Ministries, 2013
Inc.
132. The Lee 06/98 1,000,000 63% 9.80%/Jun 9.64% Current 2.00 15 yrs
Memorial A.M.E. 2013
Church, Inc.
133. Harvest 06/98 2,400,000 72% 10.00%/Jun 9.52% Current 2.32 20 yrs
Community 2018
Church
134. New Vision Full 07/98 1,125,000 70% 9.95%/Jul 9.67% Current 1.39 20 yrs
Gospel Baptist 2018
Church, Inc.
135. United Baptist 07/98 755,000 68% 9.95%/Jul 9.95% Current 1.14 20 yrs
Church 2018
136. Raleigh 08/98 3,420,000 75% 9.85%/Aug 9.57% Current 1.09 20 yrs
Christian 2018
Community, Inc.
137. Teen Mania 09/98 1,650,000 67% 9.75%/Sept 9.52% Current 5.43 20 yrs
Ministries, 2018
Inc.
138. Linconia 08/98 1,100,000 67% 9.80%/Aug 9.51% Current 1.18 20 yrs
Tabernacle 2018
Christian
Center
139. New Generation 09/98 1,285,000 68% 9.70%/Sept 9.41% Current 1.23 20 yrs
Ministries, 2018
Inc.
140. Sharon Baptist 10/98 1,325,000 74% 9.65%/Oct 9.52% Current 1.13 20 yrs
Church of 2018
Philadelphia,
Inc.
141. Full Gospel 10/98 2,670,000 68% 9.70%/Oct 9.38% Current 1.30 20 yrs
Pentecostal 2018
Church
142. Centennial Star 11/98 1,845,000 64% 9.35%/Nov 9.14% Current 2.62 20 yrs
of Bethlehem 2018
Church
143. St. Agnes 12/98 4,575,000 75% 9.30%/Dec 9.12% Current 3.96 20 yrs
Missionary 2018
Baptist Church
144. Greater Open 11/98 900,000 75% 9.80%/Nov 9.54% Current 1.56 20 yrs
Door Church of 2018
God in Christ
145. Southern 02/99 5,275,000 60% 9.25%/Feb 9.08% Current 1.88 20 yrs
California Word 2019
of Faith
146. Spiritual Life 02/99 255,000 71% 9.50%/Feb 9.50% Current 1.66 15 yrs
Ministries 2014
147. St. Agnes 03/99 5,350,000 75% 9.20%/Mar 9.02% Current 1.96 20 yrs
Missionary 2019
Baptist Church
148. Holman Street 04/99 4,335,000 67% 9.20%/Apr 9.01% Current 1.49 20 yrs
Baptist Church 2019
149. Integrity 04/99 1,875,000 71% 9.20%/Apr 9.01% Current 1.92 20 yrs
Church 2019
International,
Inc.
150. Greater St. 04/99 1,850,000 72% 9.20%/Apr 9.01% Current 1.95 20 yrs
Matthew Baptist 2019
Church
151. Sharon Baptist 04/99 2,075,000 73% 9.20%/Apr 9.07% Current 1.51 20 yrs
Church 2019
</TABLE>
- ------------------------
(1) Ratio (expressed as a percentage of the principal amount of the loan to the
appraised value of the real property serving as
collateral for the loan.
(2) Represents the highest interest rate payable on the longest maturing bonds
issued by the borrowing church in the financing.
(3) Represents the average interest payable by the borrowing church assuming the
loan remains outstanding through its full term.
(4) Multiple of principal amount of bond loan times the borrower's total support
and revenues in the most recently completed fiscal
year prior to the bond underwriting.
C-5
<PAGE>
In January 1988, American, including the principals of the Advisor,
underwrote the offering of $1,425,000 principal amount of insured first mortgage
bonds issued by Palm Beach Cathedral Assembly of God, Inc., Lake Park, Florida
("Palm Beach"). In approximately July 1990, Palm Beach defaulted in its
obligation to make weekly sinking fund payments, thus interest payments to
bondholders ceased. Palm Beach filed for reorganization under Chapter 11 of the
United States Bankruptcy Code, and in early 1994, its Plan of Reorganization
(the "Plan") was confirmed by the bankruptcy court. Pursuant to the Plan,
holders of the bonds received a ratable distribution of $550,000 cash,
representing a return of approximately 39% of their principal investment. In
addition, the holders of the bonds retained their first mortgage interest in the
real estate and improvements, and Palm Beach is required to repay the balance of
the principal in its entirety over 18 years, plus interest accrued to the
confirmation date of the Plan, subject to earlier repayment in certain
circumstances. The $550,000 distribution to the holders of the bonds was derived
from a portion of a $700,000 loan made by the bond insurance company to Palm
Beach in consideration of a complete release of further obligations, if any, of
the insurer in connection with the bond default. The balance currently owed to
bondholders is approximately $1.2 million (including accrued interest).
In March 1992, American, including the principals of the Advisor, underwrote
the offering of $720,000 principal amount of first mortgage bonds issued by
World Missions Assembly, Inc., Brooklyn, New York ("World"). In September 1993,
the bond trustee declared World's bonds in default due to World's failure to
make all payments of principal and interest with respect to the bonds as due.
Shortly thereafter, the bond trustee filed an action in New York State Supreme
Court to enforce the bondholders' rights under the trust indenture governing the
bonds and to foreclose upon World's real property and improvements securing the
bonds. The outstanding principal balance of the bonds at the time of default was
$687,000. Interest accrues on the remaining principal balance at a rate of
approximately 11% per annum. The foreclosure action has been completed on behalf
of the bondholders and the bond trustee listed the real estate and improvements
for sale on behalf and for the benefit of the bondholders. On June 30, 1999 the
property securing the Bonds was sold to an organization known as the Black
Veterans of Social Justice. The property was sold for $499,990. From that
amount, expenses were deducted including the broker's commission and closing
costs. In addition, the trustee has been reimbursed for legal fees and expenses
associated with this matter. After expenses, the amount to be distributed to the
bondholders is approximately $295,000. There are $687,000 in principal bonds
outstanding. Therefore, each $1,000 face value bond of World Missions will
receive $430. The payment to the bondholders represents the final action taken
by the trustee on the bonds.
In June 1993, American, including the principals of the Advisor, underwrote
the offering of $700,000 principal amount of first mortgage bonds issued by
Faith Southwest Baptist Church, Houston, Texas ("Faith"). In June 1997, Faith
failed to make its quarterly interest and principal payment to bondholders.
Based on information currently available through counsel and the bond trustee,
Faith ceased making sinking fund payments in the spring of 1997. As of June 1,
1998 Faith has re-commenced its sinking fund payments and is in the process of
negotiating with the bond trustee and its legal counsel to abate the trustee's
foreclosure action provided that Faith remains current on its sinking fund
payments, and supplements each payment by an amount scheduled to recover the
current interest arrearage of approximately $87,000 over a four-year period.
There can be no assurance that such a definitive agreement between Faith and the
bond trustee will be reached, and, if reached, that Faith will be able to make
all such scheduled payments. In such event, the bond trustee expects to proceed
with its foreclosure action and sell the church property for the benefit of
bondholders.
In March 1997, American, including the principals of the Advisor, underwrote
the offering of $2,300,000 principal amount of first mortgage bonds issued by
New Jerusalem Church, Lansing Michigan ("New Jerusalem"). In March 1999, New
Jerusalem failed to make its quarterly interest and principal payment to
bondholders. Based on information currently available through counsel and the
bond trustee, New Jerusalem has represented its inability to meet its obligation
due to cash flow problems caused by an excess of expenses of tithes and
offerings, and by periodic reductions in support and revenues. The Church is
optimistic that it can overcome this problem once it opens its new "Charter
School" in September 1999, for which the Lansing School District and/or State of
Michigan will compensate the Church at a projected annual rate of $6,600 per
student. The Church maintains that it can attract close to its authorized
maximum of 300 students to the Charter School, which will then be operated by an
independent school management company. The Church projects that its net income
will range from $150,000 to $350,000 per year thorough the Charter School
revenue. In addition, the Church will make weekly payments of $4,000 rather than
their current $5,300 and continue these payments uninterrupted until September
15, 1999, when the Charter School is scheduled to be operating and generating
cash flow to the Church. Commencing the week of September 15(th), 1999 the
Church's weekly payment will be elevated back to $5,300 per week, and adjusted
incrementally upward thereafter at six-month intervals until all missed interest
is recovered by the trustee and paid back to the bondholders. There can be no
assurance that this effort to mitigate the Church's cash flow problem until the
Charter School is opened will be successful. If the Church does not make its
adjusted payments, the Trustee will then initiate foreclosure or take whatever
other appropriate measures are necessary to protect bondholder's investment.
In October 1997, American, including the principals of the Advisor,
underwrote the offering of $1,500,000 principal amount of first mortgage bonds
issued by The Holy Way Church, Inc. ("Holy Way"). In March 1999, the trustee
notified the bondholders that Holy Way had failed to make their required weekly
sinking fund (mortgage) payments since January 28, 1999 and under the terms of
the trust indenture an "Event of Default" existed and the trustee intends to
take appropriate actions to protect the interest of bondholders. The bonds were
issued to provide funds for Holy Way to acquire two parcels of real estate, the
first ("Parcel A") for the sum of $400,000 and the second ("Parcel B") for the
sum of $1,000,000. Parcel A was acquired by the Church shortly after the bonds
were issued. The Church has not completed the purchase of Parcel B and the
trustee was holding approximately $1,000,000 of bond and other proceeds
earmarked originally for the purchase of Parcel B, together with interest
earnings on these proceeds. The trustee has exercised its rights under the trust
indenture to apply these funds to the Church's obligations under the indenture.
On April 15, 1999 the trustee returned 64.75% of the principal amount
outstanding to each bondholder along with interest entitled to each bondholder
through this date. An "Event of Default" still exists and the trustee will
initiate foreclosure or take whatever other appropriate measures are necessary
to protect the remaining bondholder's investment.
The Company makes no representations as to the status of first mortgage bond
offerings underwritten by American after the date of this prospectus. The status
of first mortgage bond offerings may change during this Offering and the Company
will not undertake to amend & supplement this Prospectus to reflect any such
changes.
C-6
<PAGE>
EXHIBIT A
AMERICAN CHURCH MORTGAGE COMPANY
Subscription Agreement
Amount $ ________________________ Number of Shares __________________
Dividend Reinvestment Options ______ yes ______ no
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------------------------------------------
OWNERSHIP Name(s)
------------------------------------------------------------------------------------
REGISTRATION: (investor(s) names)
Address
------------------------------------------------------------------------------------
City State Zip
------------------------------------------------------- --------------- --------
Social Security # - - or Tax I.D.# Date(s) of Birth
---- ---- ---- ---- ---- ---- / ---- / ----
- -
---- ---- ---- ---- / ---- / ----
Under penalties of perjury, the undersigned certifies (1) that the number shown as his taxpayer identification
number is his correct taxpayer identification number and (2) that he is not subject to back up withholding
either because he has not been notified that he is subject to backup withholding as a result of a failure to
report all interest and dividends or because the Internal Revenue Service has notified him that he is no longer
subject to backup withholding.
- ----------------------------------------------------------------------------------------------------------------
MAILING ADDRESS Name(s)
FOR CORRESPONDENCE -------------------------------------------------------------------------------------
AND CASH Address
DISTRIBUTIONS: -------------------------------------------------------------------------------------
(If different from City State Zip
above) ------------------------------------------------------- --------------- --------
- ----------------------------------------------------------------------------------------------------------------
TITLE TO ----- Individual ----- Tenants in Common ----- IRA ----- Partnership
BE HELD: ----- Joint Tenants/Rights ----- Corporation ----- Trust ----- Pension Plan
of Survivorship ----- Transfer on Death (TOD) ----- Custodian ----- Profit Sharing
- ----------------------------------------------------------------------------------------------------------------
SIGNATURES: The undersigned hereby represents and warrants that:
(i) he/she is or will be in a financial position appropriate to enable him/her to
realize, to a significant extent, the benefits discussed in the Prospectus;
(ii) he/she has a fair market net worth sufficient to sustain the risks inherent in
the Shares, including loss of investment and lack of liquidity;
(iii) the Shares are otherwise suitable for the above-named investor based on the
factors set forth in the Prospectus; and
(iv) a copy of the Prospectus, as amended and/or supplemented to date, has been
delivered to me, and I acknowledge that such Prospectus was received.
Executed this day of , 199 at (city) (state)
---- ------------ --- --------------------- --------------
Signature (investor's, otherwise Trustee of IRA, Pension Plan, etc.)
----------------------------
Additional Signature (if joint tenant)
----------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
On the basis of the foregoing representations and warranties, the Soliciting Dealer believes that the Shares
are suitable for the above-named investor(s) and we have informed the investor(s) of the illiquidity of the
Shares, and the investor(s) has a fair market net worth sufficient to sustain the risks inherent in the Shares.
SOLICITING Firm
DEALER --------------------------------------------------------------------------------------------
ENDORSEMENT:
Registered Representative Phone
---------------------------------------- -----------------------
Address
-----------------------------------------------------------------------------------------
Dealer Authorized Signature
---------------------------------------------------------------------
NOTE: CHECKS TO BE MADE PAYABLE TO: AMERICAN INVESTORS GROUP, INC., 10237 Yellow Circle Drive,
Minnetonka, MN 55343
- ----------------------------------------------------------------------------------------------------------------
Accepted by: AMERICAN CHURCH MORTGAGE CORPORATION
By: Church Loan Advisors, Inc. Date
-------------------------------------------------------------- -------------------------
(Advisor) (Officer)
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
WHITE--ISSUER YELLOW--INVESTOR PINK--BROKER-DEALER GOLD--BROKER
<PAGE>
EXHIBIT B
1,500,000 COMMON SHARES
AMERICAN CHURCH MORTGAGE COMPANY
SUITABILITY CERTIFICATE
(to be returned with Subscription Agreement)
TO: American Church Mortgage Company
10237 Yellow Circle Drive
Minnetonka, Minnesota 55343
I certify that: (please check one)
_______ I (either individually or with my spouse) had an annual gross income of
at least $45,000 during the previous calendar year, have a net worth of
at least $45,000 (exclusive of my (our) principal residence and its
furnishings and automobiles), and am purchasing Common Shares for my
(our) own account or for my (our) retirement plan or trust.
_______ I (either individually or with my spouse) have a net worth of at least
$150,000 (exclusive of my (our) principal residence and its furnishings
and automobiles) and am purchasing Common Shares for my (our) own
account or for my (our) retirement plan or trust.
In the case of sales to fiduciary accounts, these minimum standards shall
be met by the beneficiary, the fiduciary account, or by the donor or
grantor who directly or indirectly supplies the funds to purchase the
Shares if the donor or grantor is the fiduciary.
Dated: __________________________
______________________________________
(Signature)
______________________________________
(Print or type name)
If the purchaser is an entity:
______________________________________
(Print or type name of entity)
______________________________________
(Print or type title or position of
signatory)
NOTE: The person signing this
Certificate warrants, by his
signature above, that he or she
is fully authorized and empowered
by the entity named above to make
the representations contained
herein with respect to such
entity.
Note: The Underwriters will forward to the Company subscription agreements and
checks by noon the next business day following receipt thereof in compliance
with SEC Rule 15c2-4. Subscriptions may be rejected for any reason. If a
subscription is rejected, the Company will promptly refund to the investor the
consideration paid for the Shares without deduction or interest. Subscriptions
will be accepted or rejected within four (4) business days. If a subscription is
accepted, a confirmation will be mailed within two weeks of acceptance of the
investor as a Shareholder.
WHITE--ISSUER YELLOW--INVESTOR PINK--BROKER-DEALER GOLD--BROKER
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROSPECTIVE INVESTORS MAY RELY ONLY ON THE INFORMATION CONTAINED IN THIS
PROSPECTUS. NEITHER AMERICAN CHURCH MORTGAGE COMPANY NOR THE UNDERWRITER HAS
AUTHORIZED ANYONE TO PROVIDE ANY OTHER INFORMATION. THIS PROSPECTUS ISN'T AN
OFFER TO SELL TO--NOR IS IT SEEKING AN OFFER TO BUY THESE SHARES FROM--ANY
PERSON IN ANY JURISDICTION IN WHICH IT IS ILLEGAL TO MAKE AN OFFER OR
SOLICITATION. THE INFORMATION HERE IS CORRECT ONLY ON THE DATE OF THIS
PROSPECTUS, REGARDLESS OF THE TIME OF THE DELIVERY OF THIS PROSPECTUS OR ANY
SALE OF THESE SECURITIES.
------------------------
DEALERS EFFECTING TRANSACTIONS IN THE SHARES OFFERED BY THIS PROSPECTUS, WHETHER
OR NOT PARTICIPATING IN THE OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS
UNTIL 45 DAYS AFTER COMPLETION OF THIS OFFERING. DEALERS MAY ALSO BE REQUIRED TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND FOR THEIR UNSOLD ALLOTMENTS
OR SUBSCRIPTIONS.
1,500,000 SHARES
AMERICAN CHURCH
MORTGAGE COMPANY
COMMON STOCK
---------------------
PROSPECTUS
---------------------
AMERICAN INVESTORS GROUP, INC.
August 26, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 31. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
SEC Registration Fee.............................................. $ 5,000
NASD Filing Fee................................................... 2,150
*Blue Sky Qualification Fees and Expenses......................... 15,000
*Fees of Transfer Agent........................................... 4,000
*Printing and Engraving........................................... 15,000
**Underwriter's Expense Allowance................................. 133,000
*Legal Fees and Expenses.......................................... 12,850
*Accounting Fees and Expenses..................................... 6,000
*Miscellaneous.................................................... 10,000
---------
Total......................................................... $ 203,000
---------
---------
</TABLE>
- ------------------------
* The amount has been estimated.
** Assumes all Shares are sold. The Company has agreed to pay the
non-accountable expense allowance in the amount of $35,000 on the first
100,000 Shares sold and $7,000 on each increment of 100,000 Shares sold
thereafter.
ITEM 34. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article 7 of the Registrant's Amended and Restated Articles of
Incorporation, and Article 5 of the Registrant's Amended and Restated Bylaws,
included as Exhibits 3.1 and 3.2 respectively, provide for indemnification of
the Directors and Officers of the Registrant against liability to the full
extent permitted under Minnesota law, as limited by the NASAA Statement of
Policy Regarding REITs, adopted September 29, 1993. Subject to any limitations
contained below, the Company shall indemnify and hold harmless the Directors,
Advisors or Affiliates who are performing services on behalf of the Company and
acting within the scope of the Director's authority against any and all losses
or liabilities reasonably incurred by them and connection with or by reason of
any act performed or omitted to be performed by them and that (i) the Directors,
Advisors or Affiliates have determined, in good faith, that the course of
conduct which caused the loss or liability was in the best interests of the
Company, (ii) such liability or loss was not the result of: (a) negligence or
misconduct by the Directors, excluding the Independent Directors, Advisors or
Affiliates, or (b) gross negligence or willful misconduct by the Independent
Trustees, and (iii) such indemnification or agreement to hold harmless is
recoverable only out of the assets of the Company and not from the shareholders.
The Company shall not indemnify any Person, including any person acting
as a broker-dealer, for any liability imposed by the judgment, and costs
associated therewith, including attorney's fees, arising from or out of a
violation of state or federal securities laws associated with the offer and
sale of Shares. Notwithstanding anything to the contrary in the preceding
paragraph, however, the Company may indemnify a Director, Advisor or
Affiliate for any losses, liabilities, or expenses arising from or out of an
alleged violation of federal or state securities laws provided one or more of
the following conditions are met: (a) there has been a successful
adjudication on the merits of each count involving alleged securities law
violations as to the particular indemnity, or (b) such claims have been
dismissed with prejudice on the merits by a court of competent jurisdiction
as to the particular indemnity, or (c) a court of competent jurisdiction
approves a settlement or the claims against a particular indemnity and finds
that indemnification of the settlement and the related costs should be made,
and the court considering the request for indemnification has been advised of
the position of the Securities and Exchange Commission and of the published
position of any state securities regulatory authority in which the Company's
Shares were offered and sold as to indemnification for violations of
securities laws.
The indemnification provided by the provisions of the Amended and
Restated Articles of Incorporation shall continue for the period of time of
service or for any matter arising out of the term of service as to an
indemnified party and shall inure to the benefit of the heirs, executors and
administrators of such a person.
The Company shall not pay for any insurance covering liability of the
indemnified party for actions or omissions for which indemnification is not
permitted hereunder; provided, however, that nothing contained herein shall
preclude the Company from purchasing and paying for such types of insurance,
including extended coverage liability and casualty and workers' compensation, as
would be customary for any person owning comparable assets and engaged
II-1
<PAGE>
in a similar business, or from naming an indemnified party or a party
potentially entitled to indemnification hereunder as an additional insured
party thereunder. Nothing contained in the Amended and Restated Articles of
Incorporation shall constitute a waiver by any person entitled to
indemnification of any right which he or she may have against any party under
federal or state securities laws.
The Company may not advance funds to a Director, Advisor or Affiliate for
legal expenses and other costs incurred as a result of a legal action for which
indemnification is being sought unless all of the following conditions are
satisfied: (1) The legal action relates to acts or omissions with respect to the
performance of duties or services on behalf of the Company; (2) The legal action
is initiated by a third party who is not a Shareholder or the legal action is
initiated by a Shareholder acting in his or her capacity as such and a court of
competent jurisdiction specifically approves such advancement; and (3) The
Directors, Advisors or Affiliates undertake to repay the advanced funds to the
Company, together with the applicable legal rate of interest thereon, in cases
in which such Directors, Advisors or Affiliates are found not to be entitled to
indemnification.
Section 6 of the form of Underwriting Agreement, included as Exhibit 1.0
hereto provides for the indemnification by the Underwriter of the Registrant's
Directors and Officers who have signed or will sign any Registration Statement
of the Company against certain civil liabilities arising in connection with the
offer and sale of the Shares, including liabilities under the Securities Act of
1933, as amended. Such indemnification is limited by the above provisions.
ITEM 36. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS
Audited Financial Statement:
Report of Independent Auditors
Balance Sheet at June 30, 1998 and 1999
(unaudited)
Balance Sheet at December 31, 1995, 1996,
1997 and 1998
Statements of Operations for the Years
Ended December 31, 1995, 1996, 1997 and
1998 and for the Six Months Ended June
30, 1998 and 1999 (unaudited)
Statement of Stockholders' Equity for the
Years Ended December 31, 1995, 1996, 1997
and 1998 and for the Six Months Ended
June 30, 1999 (unaudited)
Statements of Cash Flows for the Years
Ended December 31, 1995, 1996, 1997 and
1998 and for the Six Months Ended June
30, 1998 and 1999 (unaudited)
SCHEDULES
None
II-2
<PAGE>
(b) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT METHOD OF
NUMBER TITLE FILING
- ----------- --------------------------------------------------------------------------------------- ---------------
<C> <S> <C>
1 Forms of Underwriting Agreement, Soliciting Dealer Agreement and Agreement Between
Underwriters......................................................................... (5)
3.1 Amended & Restated Articles of Incorporation of the Company............................ (1)
3.2 Amended & Restated By-laws of the Company.............................................. (1)
4 Specimen Certificate of Common Stock, $0.1 par value................................... (1)
5 Opinion Letter of Maun & Simon, PLC as to the legality of the securities............... (5)
8 Opinion Letter of Maun & Simon, PLC as to certain tax matters relating to the
securities........................................................................... (5)
10.1 Supplement and Amendment to Advisory Agreement Between the Company and Church Loan
Advisors, Inc........................................................................ (2)
10.2 Amendment No. 1 to Amended Advisory Agreement between the Company and Church Loan
Advisors, Inc........................................................................ (5)
10.3 Dividend Reinvestment Plan of the Company.............................................. (5)
10.4 Stock Option Plan for Directors and Advisor (includes form of Stock Option Agreement
Exhibit "A")......................................................................... (5)
10.5 Gemisys Corporation Agreement to act as Transfer Agent, Registrar and Dividend
Reinvestment Agent................................................................... (5)
10.6 $1,000,000 Promissory Note payable to Beacon Bank, Shorewood, MN dated July 22, 1999... *
10.7 Security Agreement between the Company and Beacon Bank dated July 22, 1999............. *
23 Consent of Auditor..................................................................... *
23.2 Consent of Counsel..................................................................... (3)
24 Power of Attorney...................................................................... (4)
</TABLE>
- ------------------------
* File herewith
(1) Incorporated by reference to the Registrant's filing on Form 8-A dated April
30, 1999.
(2) Incorporated by reference to the Registrant's filing on Form S-11/A filed
August 18, 1997 for Registration Number 333-27601.
(3) Included within Exhibit 5 to the Registrant's filing on Form S-11 filed June
29, 1999 for Registration Number 333-81819.
(4) Included within signature page to the Registrant's filing on Form S-11 filed
June 29, 1999 for Registration Number 333-81819.
(5) Incorporated by reference to the Registrant's filing on Form S-11 filed June
29, 1999 for Registration Number 333-81819.
II-3
<PAGE>
ITEM 37. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to provide to the Underwriter
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriter to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to directors, officers and controlling
persons of the Registrant, the Registrant has been advised that, in the opinion
of the Securities and Exchange Commission, such indemnification is against
public policy as expressed in such Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action
suite or proceeding) is asserted by such director, officer of controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in such Act and
will be governed by the final adjudication of such issue.
The undersigned Registrant hereby further undertakes:
(1) To remove from registration by means of a post-effective amendment
any of the securities being registered for sale to the public pursuant to the
prospectus (part I) which remain unsold at the termination of the offering.
(2) That all post-effective amendments will comply with the applicable
forms, rules and regulations of the Securities and Exchange Commission in
effect at the time such post-effective amendments are filed.
(3) To send to each shareholder at least on an annual basis a detailed
statement of all transactions with the Advisor or its affiliates, and of
fees, commissions, compensation and other benefits paid, or accrued to the
Advisor or its affiliates for the fiscal year completed, showing the amount
paid or accrued to each recipient and the services performed.
(4) To file a sticker supplement pursuant to Rule 424(c) under the
Securities Act of 1933, during the distribution period describing each
property involving the use of 10% or more (on a cumulative basis) of the
total assets of the Registrant, and which has not been identified in the
prospectus, and to consolidate all such stickers into a post-effective
amendment filed at least once every three months, with the information
contained in such amendment provided simultaneously to the shareholders. Each
sticker supplement shall disclose all compensation and fees received by the
Advisor and/or its affiliates in connection with any such acquisition. The
post-effective amendment shall include audited financial statements meeting
the requirements of Rule 3-14 Regulation S-X for such properties acquired
during the distribution period.
(5) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement: (i) to include any
prospectus required by 10(a)(3) of the Securities Act of 1933; (ii) to
reflect in the prospectus any fact or events arising after the effective date
of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental
change in the information set forth in the registration statement; and (iii)
to include any material information with respect to the plan of distribution
not previously disclosed in the registration statement or any liability under
the Securities Act of 1933, each such post- effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to
be the initial bond fide offering thereof.
(6) The Registrant undertakes to provide to the shareholders the
financial statements required by Form 10-KSB for each full fiscal year of the
Registrant's operations.
(7) That, for the purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of a registration statement in reliance upon Rule 430A and
contained in the form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed
to be part of the registration statement as of the time it was declared
effective.
II-4
<PAGE>
(8) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at the time
shall be deemed to be the initial bona fide offering thereof.
The Registrant also undertakes to file, after the end of the distribution
period, a current report on Form 8-K containing the financial statements and
any additional information required by Rule 3-14 of Regulation S-X, to
reflect each commitment (i.e., the signing of a binding purchase agreement)
made after the end of the distribution period involving the use of 10% of
more (on a cumulative basis) of the net proceeds of the offering and to
provide the information contained in such report to the shareholders at least
once each quarter after the distribution period of the offering has ended.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 the Registrant
hereby certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-11 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized in the City of Minneapolis, State of Minnesota, on
the 26th day of August, 1999.
AMERICAN CHURCH MORTGAGE COMPANY
By: /s/ DAVID G. REINHART
-----------------------------------------
David G. Reinhart,
PRESIDENT AND TREASURER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons in
the capacities and on the dates set forth below opposite their respective names:
SIGNATURE CAPACITY DATE
- ------------------------------ -------------------------- -------------------
/s/ DAVID G. REINHART
- ------------------------------ President and Treasurer August 26, 1999
David G. Reinhart
/s/ V. JAMES DAVIS
- ------------------------------ Vice President and August 26, 1999
V. James Davis Secretary
/s/ KIRBYJON H. CALDWELL*
- ------------------------------ Director August 26, 1999
Kirbyjon H. Caldwell
/s/ ROBERT O. NAEGELE, JR.*
- ------------------------------ Director August 26, 1999
Robert O. Naegele, Jr.
/s/ DENNIS J. DOYLE*
- ------------------------------ Director August 26, 1999
Dennis J. Doyle
/s/ JOHN M. CLAREY*
- ------------------------------ Director August 26, 1999
John M. Clarey
* By David G. Reinhart and V. James Davis, Attorneys-in-Fact.
II-5
<PAGE>
AMERICAN CHURCH MORTGAGE COMPANY
10237 YELLOW CIRCLE DRIVE
MINNETONKA, MN 55343
BORROWER'S NAME AND ADDRESS
"I", "me" and "my" means each borrower above, together and separately.
BEACON BANK
19765 HIGHWAY SEVEN
SHOREWOOD, MN 55311
LENDER'S NAME AND ADDRESS
"You" and "your" means the lender, its successors and assigns.
Loan Number 1037068
Date JULY 22, 1999
Maturity Date AUGUST 1, 2000
Loan Amount $1,000,000.00
Renewal of
-------------------
TAX ID #: 411793975
I promise to pay you, at your address listed above, the PRINCIPAL sum of ONE
MILLION AND NO/100***************Dollars $1,000,000.00
/ / SINGLE ADVANCE: I will receive all of the loan amount on _______________.
There will be no additional advances under this note.
/x/ MULTIPLE ADVANCE: The loan amount shown above is the maximum shown above
is the maximum amount I can borrow under this note. On JULY 22, 1999
I will receive $_______________ and future principal advances are
permitted.
CONDITIONS: The conditions for future advances are MINIMUM ADVANCES OF
$10,000.00, NO MORE FREQUENTLY THAN ONCE A WEEK.
/x/ OPEN END CREDIT: You and I agree that I may borrow up to the maximum
amount more than one time. All other conditions of this note apply to
this feature. This feature expires on AUGUST 1, 2000
/ / CLOSED END CREDIT: You and I agree that I may borrow up to the
maximum only one time (and subject to all other conditions).
INTEREST: I agree to pay interest on the outstanding principal balance from
JULY 22, 1999 at the rate of 9.000% per year until FIRST CHANGE DATE
/x/ VARIABLE RATE: This rate may then change as stated below.
/x/ INDEX RATE: The future rate will be 1.000% OVER the following index
rate: WALL STREET PRIME RATE OF INTEREST
/ / NO INDEX: The future rate will not be subject to any internal or
external index. It will be entirely in your control.
/ / FREQUENCY AND TIMING: The rate on this note may change as often as
DAILY
A change in the interest rate will take effect ON THE SAME DAY
/ / LIMITATIONS: During the term of this loan, the applicable annual
interest rate will not be more than __________% or less than __________%.
The rate may not change more than ___________% each __________.
EFFECT OF VARIABLE RATE: A change in the interest rate will have the
following effect on the payments:
/x/ The amount of each scheduled payment will change.
/x/ The amount of the final payment will change.
/ / _____________________________________________________________________
ACCRUAL METHOD: You will calculate interest on a ACTUAL/360 basis.
POST MATURITY RATE: I agree to pay interest on the unpaid balance of this note
owing after maturity, and until paid in full, as stated below:
/x/ on the same fixed or variable rate basis in effect before maturity
(as indicated above).
/ / at a rate equal to __________________________________________________
/x/ LATE CHARGE: If I make a payment more than 10 days after it is due, I
agree to pay a late charge of 5.000% OF THE LATE PAYMENT.
/x/ ADDITIONAL CHARGES: In addition to interest, I agree to pay the
following charges which / / are /x/ are not Included in the principal
amount above: 0.5% LOAN FEE.
/ / AUTHORITY: The interest rate and other charges for this loan are
authorized by____________________________________________________________
PAYMENTS: I agree to pay this note as follows:
/x/ INTEREST: I agree to pay accrued Interest ON DEMAND, BUT IF NO DEMAND
IS MADE THEN ON THE 1ST DAY OF EACH MONTH BEGINNING SEPTEMBER 1, 1999
/x/ PRINCIPAL: I agree to pay the principal ON DEMAND, BUT IF NO DEMAND IS
MADE THEN ON AUGUST 1, 2000
/ / INSTALLMENTS: I agree to pay this note in ___________payments. The
first payment will be $_____________ and will be due
___________________. The final payment of the entire unpaid balance of
principal and interest will be due__________________________ of
ADDITIONAL TERMS
- ------------------------------------------------------------------------------
/x/ SECURITY: This note is separately secured by (describe separate document
by type and date): SECURITY AGREEMENT DATED 07/22/99 GRANTING AN
ASSIGNMENT OF LISTED REGISTERED BONDS, AND THE BOND POWERS.
(This section is for your internet use. Failure to list a separate security
document does not mean the agreement will not secure this note.)
- ------------------------------------------------------------------------------
Signature for Lender
X
- ---------------------------------------
TERRY KELLER
- ---------------------------------------
PURPOSE: The purpose of this loan is BUSINESS: LINE OF CREDIT FOR INTERIM
MORTGAGE FUNDING
SIGNATURES: I AGREE TO THE TERMS OF THIS NOTE (INCLUDING THOSE ON PAGE 2). I
have received a copy on today's date.
AMERICAN CHURCH MORTGAGE COMPANY
BY: /s/ DAVID G. REINHART
------------------------------------
DAVID G. REINHART, PRESIDENT
- ---------------------------------------
- ---------------------------------------
(Page 1 of 2)
<PAGE>
DEFINITIONS: As used on page 1, "/x/" means the terms that apply to this
loan. "I", "me" or "my" means each Borrower who signs this note and each
other person or legal entity (including guarantors, endorsers, and
sureties) who agrees to pay this note (together referred to a "us"), "You" or
"your" means the Lender and its successors and assigns.
APPLICABLE LAW: Minnesota law controls this note. Any term of this note
which violates Minnesota law is not effective, unless the law permits you
and me to agree to a variation.
If any provision of this agreement is unenforceable, the rest of the
agreement remains in force. I may not change this agreement without your
express written consent. Time is of the essence in this agreement.
PAYMENTS: You will apply each payment I make on this note first to any amount
I owe you for charges which are neither interest nor principal. You will
apply the rest of each payment to any unpaid interest, and then to the unpaid
principal. If you and I agree to a different application of payments, we will
describe our agreement on this note.
I may prepay all or part of this loan without penalty unless we agree to
something different on this note. Any partial prepayment I make will not
excuse or reduce any later scheduled payment until this note is paid in full
(unless, when I make the prepayment, you and I agree in writing to the
contrary).
INTEREST: Interest accrues on the principal remaining unpaid from time to
time, until paid in full. If you give me my loan money in more than one
advance, each advance will start to earn interest only when I receive it.
The interest rate in effect on this note at any time will apply to all the
money you advance at that time. Regardless of anything in this document that
might imply otherwise, I will not pay and you will not charge a rate of
interest that is higher than the maximum rate of interest you could charge
under applicable law for the credit you give me (before or after maturity).
If you send any erroneous notice of interest, we mutually agree to correct
it. If you collect more interest than the law and this agreement allow, you
agree to refund it to me.
INDEX RATE: The index will serve only as a device for setting the rate on
this note. You do not guarantee by selecting this index, or the margin that
the rate on this note will be the same rate you charge on any other loans or
class of loans to me or other borrowers.
ACCRUAL METHOD: You will calculate the amount of interest I will pay on this
loan using the interest rate and accrual method on page 1 of this note. When
calculating interest, you will use the accrual method to determine the number
of days in a "year." If you do not state an accrual method, you may use any
reasonable accrual method to calculate interest.
POST MATURITY RATE: In deciding when the "Post Maturity Rate" (on page 1)
applies, "maturity" means: 1.) The date of the last scheduled payment
indicated on page 1 of this note, or; 2.) The date you accelerate payment on
the note, whichever is earlier.
SINGLE ADVANCE LOANS: If this is a single advance loan, you and I expect
that you will make only one advance of principal. However, you may add other
amounts to the principal if you make any payments described in the "PAYMENTS
BY LENDER" paragraph below.
MULTIPLE ADVANCE LOANS: If this is multiple advance loan, you and I expect
that you will make more than one advance of principal. if this is closed-end
credit, I am not entitled to additional credit if I repay a part of the
principal.
PAYMENTS BY LENDER: If you are authorized to pay, on my behalf, charges I am
obligated to pay (such as property insurance premiums), then you may treat
those payments made by you as advances and add them to the unpaid principal
under this note. Or, you may demand immediate payment of the charges.
SET-OFF: You may set off any amount due and payable under this note against
any right I have to receive money from you.
"Right to receive money from you" means:
(1) any deposit account balance I have with you;
(2) any money owed to me on an Item presented to you or in your possession
for collection or exchange; and
(3) any repurchase agreement or other nondeposit obligation.
Any amount due and payable under this note" means the total amount of which
you are entitled to demand payment under the terms of this note at the time
you set off. This total includes any balance the due date for which you
properly accelerate under this note.
If someone who has not agreed to pay this note also owns my right to receive
money from you, your set-off right will apply to my interest in the
obligation, and to any other amounts I could withdraw on my sole request or
endorsement.
Your set-off right does not apply to an account or other obligation where my
rights are only as representative. It also does not apply to any Individual
Retirement Account or other tax deferred retirement account.
You will not be liable for this dishonor of any check when the dishonor
occurs because you set off this debt against one of my accounts. I will
assume the liability and relieve you of all responsibility for any such claim
that occurs If you set off this debt against one of my accounts.
REAL ESTATE OR RESIDENCE SECURITY: If I am giving you any real estate or a
residence that is personal property, as security for this note, I have signed
a separate security agreement. Default and your remedies for default are
determined by applicable law and by the security agreement. Default and your
remedies may also be determined by the "Default" and "Remedies" paragraphs
below, to the extent they are not prohibited by law or contrary to the
security agreement.
DEFAULT: I will be in default if any of the following happen:
(1) I fail to make a payment on time or in the amount due;
(2) I fail to keep the property insured, if required;
(3) I fail to pay, or keep any promise, on any debt or agreement I have
with you;
(4) any other creditors of mine try to collect any debt I owe them
through court proceedings;
(5) I die, am declared incompetent, make an assignment for the benefit
of creditors, or become insolvent (either because my liabilities
exceed my assets or I am unable to pay my debts as they become due);
(6) I make any written statement or provide any financial information
that is untrue or inaccurate when it was provided;
(7) I do or fail to do something which causes you to believe that you
will have difficulty collecting the amount I owe you;
(8) any collateral securing this note is used in a manner or for a
purpose which threatens confiscation by a legal authority.
(9) I change my name or assume an additional name without first notifying
you;
(10) I fail to plant, cultivate and harvest crops in due season;
(11) any loan proceeds are used for a purpose that will contribute to
excessive erosion of highly erodible lend, or to the conversion of
wetlands to produce an agricultural commodity, as explained in 7
C.F.R. Part 1940, Subpart G, Exhibit M.
REMEDIES: If I am in default on this note, you have, but are not limited to
the following remedies:
(1) You may demand immediate payment of everything I owe under this
note;
(2) You may set off this debt against any right I have to the payment of
money from you, subject to the terms of the "SET-OFF" paragraph.
(3) You may demand security, additional security, or additional parties
to be obligated to pay this note as a condition for not using any
other remedy;
(4) You may refuse to make advances to me or allow me to make credit
purchases;
(5) You may use any remedy you have under state or federal law.
If you choose one of these remedies, you do not give up your right to use any
other remedy later. By waiving your right to declare an event to be a
default, you do not waive your right to later consider the event as a default
if it continues or happens again.
COLLECTION COSTS AND ATTORNEY'S FEES: I will pay all costs of collection,
replevin (an action for the recovery of property wrongfully taken or
detained, or any other or similar type of cost if I am in default.
In addition, if you hire an attorney to collect this note, I will pay
attorney's fees plus court costs (except where prohibited by law). To the
extent permitted by the United States Bankruptcy Code, I will also pay the
reasonable attorney's fees and costs you are charged to collect this debt as
award by any court under the Bankruptcy Code's jurisdiction.
WAIVER: I give up my rights to require you to:
(1) demand payment of amounts due (presentment);
(2) obtain official certification of nonpayment (protest);
(3) give notice that amounts due have not been paid (notice of
dishonor).
I waive any defenses I have based on suretyship or impairment of collateral.
OBLIGATIONS INDEPENDENT: I must pay this note even if someone else has
also agreed to pay it (by, for example, signing this form or a separate
guarantee or endorsement).
You may sue me alone, anyone else obligated on this note, or any number of us
together, to collect this note. You may do so without any notice that it has
not not been paid (notice of dishonor).
You may, without notice, release any party to the agreement without releasing
any other party.
If you give up any of your rights, with or without notice, it will not affect
my duty to pay this note.
Any extension of new credit to any of us, or renewal of this note by all or
less than all of us, will not release me from my duty to pay it. (Of course
you are entitled to only one payment in full.) You may extend this note or
the debt represented by this note, or any portion of the note or debt, from
time to time without limit or notice. You may do this without affecting my
liability for payment of the note.
I will not assign my obligation under this agreement without your prior
written approval.
CREDIT INFORMATION: I authorize you to obtain credit information about me
from time to time (for example, by requesting a credit report) and to report
to others your credit experience with me (such as a credit reporting agency),
I will provide you, at your request, accurate, correct and complete financial
statements or information you need.
NOTICE: Unless otherwise required by law, you will give any notice to me by
delivering it or mailing it by first class mail to my last known address. My
current address is on page 1. I will inform you in writing of any change in
my address. I will give any notice to you by mailing it first class to your
address stated on page 1 of this agreement, or to any other address you give
me.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
BORROWER'S INTEREST
DATE OF PRINCIPAL INITIALS PRINCIPAL PRINCIPAL INTEREST INTEREST PAID
TRANSACTION ADVANCE (not required) PAYMENTS BALANCE RATE PAYMENTS THROUGH
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
/ / $ $ $ % $ / /
- --------------------------------------------------------------------------------------------------------------------------------
/ / $ $ $ % $ / /
- --------------------------------------------------------------------------------------------------------------------------------
/ / $ $ $ % $ / /
- --------------------------------------------------------------------------------------------------------------------------------
/ / $ $ $ % $ / /
- --------------------------------------------------------------------------------------------------------------------------------
/ / $ $ $ % $ / /
- --------------------------------------------------------------------------------------------------------------------------------
/ / $ $ $ % $ / /
- --------------------------------------------------------------------------------------------------------------------------------
/ / $ $ $ % $ / /
- --------------------------------------------------------------------------------------------------------------------------------
/ / $ $ $ % $ / /
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/ / $ $ $ % $ / /
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/ / $ $ $ % $ / /
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/ / $ $ $ % $ / /
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(Page 2 of 2)
----- -----
<PAGE>
AMERICAN CHURCH MORTGAGE COMPANY
10237 YELLOW CIRCLE DRIVE
MINNETONKA, MN 55343
BORROWER'S NAME AND ADDRESS
"I" include each borrower above, jointly and severally.
BEACON BANK
19765 HIGHWAY SEVEN
SHOREWOOD, MN 55311
LENDER'S NAME AND ADDRESS
"You" means the lender, its successors and assigns.
Line of Credit No. 1037068
Date JULY 22, 1999
Max. Credit Amt. $1,000,000.00
Loan Ref. No. 1037068
- -------------------------------------------------------------------------------
You have extended to me a line of credit in the
AMOUNT of ONE MILLION AND NO/100
----------------------------------------------
$1,000,000.00. You will make loans to me from time to time until 3:00
Pm on AUGUST 1, 2000. Although the line of credit expires on that date, I
will remain obligated to perform all my duties under this agreement so long as
I owe you any money advanced according to the terms of this agreement, as
evidenced by any note or notes I have signed promising to repay these amounts.
This line of credit is in agreement between you and me. It is not intended
that any third party receive any benefit from this agreement, whether by
direct payment, reliance for future payment or in any other manner. This
agreement is not a letter of credit.
1. AMOUNT: This line of credit is:
/x/ OBLIGATORY: You may not refuse to make a loan to me under
this line of credit unless one of the following occurs:
a. I have borrowed the maximum amount available to me;
b. This line of credit has expired;
c. I have defaulted on the note (or notes) which show my
indebtedness under this line of credit;
d. I have violated any term of this line of credit or any note
or other agreement entered into in connection with this line
of credit;
e._______________________________________________________________
_______________________________________________________________
_______________________________________________________________
/ / DISCRETIONARY: You may refuse to make a loan to me under this
line of credit once the aggregate outstanding advances equal or exceed
__________________ $_______________________.
Subject to the obligatory or discretionary limitations above, this line of
credit is:
/x/ OPEN-END (Business or Agricultural only): I may borrow up to
the maximum amount of principal more than one time.
/ / CLOSED-END: I may borrow up to the maximum only one time.
2. PROMISSORY NOTE: I will repay any advances made according to this line
of credit agreement as set out in the promissory note, I signed on JULY
22, 1999, or any note(s) I sign at a later time which represent advances
under this agreement. The note(s) set(s) out the terms relating to
maturity, Interest rate, repayment and advances. If indicated on the
promissory note, the advances will be made as follows: MINIMUM OF
$10,000, NO MORE FREQUENTLY THAN ONCE A WEEK.
--------------------------------------------------------------------------
--------------------------------------------------------------------------
--------------------------------------------------------------------------
3. RELATED DOCUMENTS: I have signed the following documents in connection
with this line of credit and note(s) entered into in accordance with this
line of credit:
/x/ security agreement dated JULY 22, 1999 / /______________________
/ / mortgage dated________________________
/ / guaranty dated________________________ / /______________________
/ / ______________________________________
/ / ______________________________________ / /______________________
/ / ______________________________________
4. REMEDIES: If I am in default on the note(s) you may:
a. take any action as provided in the related documents.
b. without notice to me, terminate this line of credit.
By selecting any of these remedies you do not give up your
right to later use any other remedy. By deciding not to use
any remedy should I default, you do not waive your right to
later consider the event a default, if it happens again.
5. COSTS AND FEES: If you hire an attorney to enforce this agreement I
will pay your reasonable attorney's fees, where permitted by law. I will
also pay your court costs and costs of collection, where permitted by
law.
6. COVENANTS: For as long as this line of credit is in effect or I owe you
money for advances made in accordance with the line of credit, I will do
the following:
a. maintain books and records of my operations relating to the
need for this line of credit;
b. permit you or any of your representatives to inspect and or
copy these records;
c. provide to you any documentation requested by you which
support the reason for making any advance under this line of
credit;
d. permit you to make any advance payable to the seller (or
seller and me) of any items being purchased with that
advance;
e. _____________________________________________________________
_____________________________________________________________
_____________________________________________________________
7. NOTICES: All notices or other correspondence with me should be sent to
my address stated above. The notice or correspondence shall be effective
when deposited in the mail, first class, or delivered to me in person.
8. MISCELLANEOUS: This line of credit may not be changed except by a
written agreement signed by you and me. The law of the state in which you are
located will govern this agreement. Any term of this agreement which is
contrary to applicable law will not be effective, unless the law permits you
and me to agree to such a variation.
FOR THE LENDER SIGNATURES: I AGREE TO THE TERMS OF THIS
LINE OF CREDIT, I HAVE RECEIVED A COPY ON
TODAY'S DATE.
TERRY KELLER AMERICAN CHURCH MORTGAGE COMPANY
- --------------------------------- -----------------------------------------
Title ASSISTANT VICE PRESIDENT BY: /s/ David G. Reinhart
---------------------------- --------------------------------------
DAVID G. REINHART, PRESIDENT
--------------------------------------
(page 1 of 1)
<PAGE>
SECURITY AGREEMENT
(COLLATERAL PLEDGE AGREEMENT)
DATE JULY 22, 1999
DEBTOR AMERICAN CHURCH MORTGAGE COMPANY
BUSINESS OR RESIDENCE ADDRESS 10237 YELLOW CIRCLE DRIVE
CITY, STATE & ZIP CODE MINNETONKA, MN 55343
SECURED PARTY BEACON BANK
ADDRESS 19765 HIGHWAY SEVEN
CITY, STATE & ZIP CODE SHOREWOOD, MN 55331
1. SECURITY INTEREST AND COLLATERAL. To secure (check one):
/ / the payment and performance of each and every debt, liability and
obligation of every type and description which Debtor may now or at any
time hereafter owe to Secured Party (whether such debt, liability or
obligation now exists or is hereafter created or incurred, and whether it
is or may be direct or indirect, due or to become due, absolute or
contingent, primary or secondary, liquidated or unliquidated, or joint,
several or joint and several; all such debts, liabilities and obligations
being herein collectively referred to as the "Obligations"),
/x/ the debt, liability or obligation of the Debtor to secured party
evidenced by the following: NOTE 1037068 DATED 7/22/99 FOR $1,000,000
BTWN ACMC & BB, and any extensions, renewals or replacements thereof
(herein referred to as the "Obligations").
Debtor hereby grants Secured Party a security interest (herein called the
"Security Interest") in (check one):
/ / all property of any kind now or at any time hereafter owned by
Debtor, or in which Debtor may now or hereafter have an interest, which
may now be or may at any time hereafter come into the possession or
control of Secured Party or into the possession or control of Secured
Party's agents or correspondents, whether such possession or control is
given for collateral purposes or for safekeeping, together with all
rights in connection with such property (herein called the
"Collateral"),
/x/ the property owned by Debtor and held by Secured Party that is
described as follows: MORTGAGE SECURED CHURCH BONDS IDENTIFIED ON
ATTACHED EXHIBIT "A" together with all rights in connection with such
property (herein called the "Collateral").
2. REPRESENTATIONS, WARRANTIES AND COVENANTS. Debtor represents, warrants
and covenants that,
(a) Debtor will duly endorse, in blank, each and every instrument
constituting Collateral by signing on said instrument or by signing a separate
document of assignment or transfer, if required by Secured Party.
(b) Debtor is the owner of the Collateral free and clear of all liens,
encumbrances, security interests and restrictions, except the Security
Interest and any restrictive legend appearing on any instrument constituting
Collateral.
(c) Debtor will keep the Collateral free and clear of all liens,
encumbrances and security interests, except the Security Interest.
(d) Debtor will pay, when due, all taxes and other governmental charges
levied or assessed upon or against any Collateral.
(e) At any time, upon request by Secured Pary, Debtor will deliver to
Secured Party all notices, financial statements, reports or other
communications received by Debtor as an owner or holder of the Collateral.
(f) Debtor will upon receipt deliver to Secured Party in pledge as
additional Collateral all securities distributed on account of the Collateral
such as stock dividends and securities resulting from stock splits,
reorganizations and recapitalizations.
THIS AGREEMENT CONTAINS ADDITIONAL PROVISIONS SET FORTH ON PAGE 2
HEREOF, ALL OF WHICH ARE MADE A PART HEREOF.
AMERICAN CHURCH MORTGAGE COMPANY
---------------------------------------
Debtor's Name
By /s/ David G. Reinhart
-------------------------------------
DAVID G. REINHART
Title: PRESIDENT
---------------------------------
By
-------------------------------------
Title:
---------------------------------
(page 1 of 2)
<PAGE>
ADDITIONAL PROVISIONS
3. RIGHTS OF SECURED PARTY. Debtor agrees that Secured Party may at any
time, whether before or after the occurrence of an Event of Default and
without notice or demand of any kind, (i) notify the obligor on or issuer of
any Collateral to make payment to Secured Party of any amounts due or
distributable thereon, (ii) in Debtor's name or Secured Party's name enforce
collection of any Collateral by suit or otherwise, or surrender, release or
exchange all or any part of it, or compromise, extend or renew for any period
any obligation evidenced by the Collateral, (iii) receive all proceeds of the
Collateral, and (iv) hold any increase or profits received from the
Collateral as additional security for the Obligations, except that any money
received from the Collateral shall, at Secured Party's option, be applied in
reduction of the Obligations, in such order of application as Secured Party may
determine, or be remitted to Debtor.
4. EVENTS OF DEFAULT. Each of the following occurrences shall constitute an
event of default under this Agreement (herein called "Event of Default"):
(i) Debtor shall fail to pay any or all of the Obligations when due or (if
payable on demand) on demand, or shall fail to observe or perform any
covenant or agreement herein binding on it; (ii) any representation or
warranty by Debtor set forth in this Agreement or made to Secured Party in
any financial statements or reports submitted to Secured Party by or on
behalf of Debtor shall prove materially false or misleading; (iii) a
garnishment summons or a writ of attachment shall be issued against or served
upon the Secured Party for the attachment of any property of the Debtor or
any indebtedness owing to Debtor; (iv) Debtor or any guarantor of any
Obligation shall (A) be or become insolvent (however defined); (B)
voluntarily file, or have filed against it involuntarily, a petition under
the United States Bankruptcy Code; or (C) if a corporation, partnership or
organization, be dissolved or liquidated or, if a partnership, suffer the
death of a partner or, if an individual, die; or (D) go out of business; (v)
Secured Party shall in good faith believe that the value then realizable by
collection or disposition of the Collateral, after deduction of expenses of
collection and disposition, is less than the aggregate unpaid balance of all
Obligations then outstanding; (vi) Secured Party shall in good faith believe
that the prospect of due and punctual payment of any or all of the
Obligations is impaired.
5. REMEDIES UPON EVENT OF DEFAULT. Upon the occurrence of an Event of
Default and at any time thereafter, Secured Party may exercise any one or
more of the following rights or remedies: (i) declare all unmatured
Obligations to be immediately due and payable, and the same shall thereupon
be immediately due and payable, without presentment or other notice or
demand; (ii) exercise all voting and other rights as a holder of the
Collateral; (iii) exercise and enforce any or all rights and remedies
available upon default to a secured party under the Uniform Commercial Code,
including the right to offer and sell the Collateral privately to purchasers
who will agree to take the Collateral for investment and not with a view to
distribution and who will agree to the imposition of restrictive legends on
the certificates representing the Collateral, and the right to arrange for a
sale which would otherwise qualify as exempt from registration under the
Securities Act of 1933; and if notice to Debtor of any intended disposition of
the Collateral or any other intended action is required by law in a
particular instance, such notice shall be deemed commercially reasonable if
given at least 10 calendar days prior to the date of intended disposition or
other action; (iv) exercise or enforce any or all other rights or remedies
available to Secured Party by law or agreement against the Collateral,
against Debtor or against any other person or property. Upon the occurrence
of the Event of Default described in Section 4 (iv) (B), all Obligations shall
be immediately due and payable without demand or notice thereof.
6. MISCELLANEOUS. Any disposition of the Collateral in the manner provided
in Section 5 shall be deemed commercially reasonable. This Agreement can be
waived, modified, amended, terminated or discharged, and the Security
Interest can be released, only explicitly in a writing signed by Secured
Party. A waiver signed by Secured Party shall be effective only in the
specific instance and for the specific purpose given. Mere delay or failure
to act shall not preclude the exercise or enforcement of any of Secured
Party's rights or remedies. All rights and remedies of Secured Party shall
be cumulative and may be exercised singularly or concurrently, at Secured
Party's option, and the exercise or enforcement of any one such right or
remedy shall neither be a condition to nor bar the exercise or enforcement of
any other. All notices to be given to Debtor shall be deemed sufficiently
given if delivered or mailed by registered or certified mail, postage
prepaid, to Debtor at its address set forth above or at the most recent
address shown on Secured Party's records. Secured Party's duty of care with
respect to Collateral in its possession (as imposed by law) shall be deemed
fulfilled if Secured Party exercises reasonable care in physically
safekeeping such Collateral or, in the case of Collateral in the custody or
possession of a bailee or other third person, exercises reasonable care in
the selection of the bailee or other third person, and Secured Party need not
otherwise preserve, protect, insure or care for any Collateral. Secured
Party shall not be obligated to preserve any rights Debtor may have against
prior parties, to exercise at all or in any particular manner any voting
rights which may be available with respect to any Collateral, to realize on
the Collateral at all or in any particular manner or order, or to apply any
cash proceeds of Collateral in any particular order of application. Debtor
will reimburse Secured Party for all expenses (including reasonable
attorney's fees and legal expenses) incurred by Secured Party in the
protection, defense or enforcement of the Security Interest, including
expenses incurred in any litigation or bankruptcy or insolvency proceedings.
This Agreement shall be binding upon and inure to the benefit of Debtor and
Secured Party and their respective heirs, representatives, successors and
assigns and shall take effect when signed by Debtor and delivered to Secured
Party, and Debtor waives notice of Secured Party's acceptance hereof. This
Agreement shall be governed by laws of the state in which it is executed and,
unless the context otherwise requires, all terms used herein which are
defined in Articles 1 and 9 of the Uniform Commercial Code, as in effect in
said state, shall have the meanings therein stated. If any provision or
application of this Agreement is held unlawful or unenforceable in any
respect, such illegality or unenforceability shall not affect other
provisions or applications which can be given effect, and this Agreement
shall be construed as if the unlawful or unenforceable provision or
application had never been contained herein or prescribed hereby. All
representations and warranties contained in this Agreement shall survive the
execution, delivery and performance of this Agreement and the creation and
payment of the Obligations. If this Agreement is signed by more than one
person as Debtor, the term "Debtor" shall refer to each of them separately
and to both or all of them jointly, all such persons shall be bound both
severally and jointly with the other(s); and the Obligations shall include
all debts, liabilities and obligations owed to Secured Party by a Debtor
solely or by both or several or all Debtors jointly or jointly and severally,
and all property described in Section 1 shall be included as part of the
Collateral, whether it is owned jointly by both or all Debtors or is owned in
whole or in part by one (or more) of them.
(page 2 of 2)
<PAGE>
Exhibit 23
We consent to the incorporation by reference in this Registration Statement
of American Church Mortgage Company on Form S-11/A of our report dated
February 17, 1999 appearing in (or incorporated by reference in) to the
Registration Statement Form S-11/A of American Church Mortgage Company for
the years ended December 31, 1998, 1997, 1996, and 1995. We consent to the
reference to our Firm under the caption "Experts" in the Prospectus included
therein.
/s/ Boulay, Heutmaker, Zibell & Co. P.L.L.P.
Boulay, Heutmaker, Zibell & Co. P.L.L.P.
Certified Public Accountants
Minneapolis, Minnesota
August 24, 1999
