##### Table of Contents



U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

(MARK ONE)

|    |  |                                                                               
|--- |  | ------------------------------------------------------------------------------
|[X] |  | ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

|      |  |                                                                                   
|----- |  | ----------------------------------------------------------------------------------
|[   ] |  | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM ______ TO ______.

COMMISSION FILE NUMBER 333-32800

VESTIN FUND II, LLC

(NAME OF BUSINESS ISSUER IN ITS CHARTER)

|                                |  |                    
|------------------------------- |  | -------------------
|NEVADA                          |  | 88-0481336         
|(STATE OR OTHER JURISDICTION OF |  | (I.R.S. EMPLOYER   
|INCORPORATION OR ORGANIZATION)  |  | IDENTIFICATION NO.)

2901 EL CAMINO AVENUE, LAS VEGAS, NEVADA 89102
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

ISSUERS TELEPHONE NUMBER: 702.227.0965

SECURITIES REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT:
NONE

SECURITIES REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE ACT:
NONE

Indicate by check mark whether the registrant (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [   ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained in this form, and will not be contained, to
the best of registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was sold, or the average bid and asked price of such common equity, as
of a specified date within the past 60 days. Not applicable.





---

TABLE OF CONTENTS



|              |                                                                                               |                               |  |  |  |  |  | 
|------------- | --------------------------------------------------------------------------------------------- | ----------------------------- |  |  |  |  |  | 
|PART I       
|              | ITEM 1. BUSINESS                                                                             
|              | ITEM 2. PROPERTIES                                                                           
|              | ITEM 3. LEGAL PROCEEDINGS                                                                    
|              | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|PART II      
|              | ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                
|              | ITEM 6. SELECTED FINANCIAL DATA                                                              
|              | ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|              | ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                          
|              | ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                          
|              |                                                                                               | BALANCE SHEETS               
|              |                                                                                               | STATEMENTS OF INCOME         
|              |                                                                                               | STATEMENTS OF MEMBERS EQUITY
|              |                                                                                               | STATEMENTS OF CASH FLOWS     
|              |                                                                                               | NOTES TO FINANCIAL STATEMENTS
|              | ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 
|PART III     
|              | ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT                                      
|              | ITEM 11. EXECUTIVE COMPENSATION                                                              
|              | ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                      
|              | ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                      
|PART IV      
|              | ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K                    
|EXHIBIT INDEX
|SIGNATURES   



---



##### Table of Contents



TABLE OF CONTENTS

|                      |                                                                                              |                               |  |  |  | 
|--------------------- | -------------------------------------------------------------------------------------------- | ----------------------------- |  |  |  | 
|PART I               
|                      | ITEM 1. BUSINESS                                                                            
|                      | ITEM 2. PROPERTIES                                                                          
|                      | ITEM 3. LEGAL PROCEEDINGS                                                                   
|                      | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                 
|PART II              
|                      | ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER                       
|MATTERS              
|                      | ITEM 6. SELECTED FINANCIAL DATA                                                             
|                      | ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND                     
|RESULTS OF OPERATIONS
|                      | ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                         
|                      | ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                         
|                      |                                                                                              | BALANCE SHEETS               
|                      |                                                                                              | STATEMENTS OF INCOME         
|                      |                                                                                              | STATEMENTS OF MEMBERS EQUITY
|                      |                                                                                              | STATEMENTS OF CASH FLOWS     
|                      |                                                                                              | NOTES TO FINANCIAL STATEMENTS
|                      | ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|PART III             
|                      | ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT                                     
|                      | ITEM 11. EXECUTIVE COMPENSATION                                                             
|                      | ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                     
|                      | ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                     
|PART IV              
|                      | ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K                   
|EXHIBIT INDEX        
|SIGNATURES           

2



---



##### Table of Contents






PART I

Note Regarding Forward Looking Statements

This annual report and other written reports and oral statements made from time
to time by us may contain forward looking statements. Such forward looking
statements may be identified by the use of such words as expects, plans,
estimates, forecasts, projects, anticipates, believes and words of
similar meaning. Forward looking statements are likely to address such matters
as our business strategy, future operating results, future sources of funding
for mortgage loans brokered by us, future economic conditions and pending
litigation involving us. Some of the factors which could affect future results
are set forth in the discussion under Managements Discussion and Analysis of
Financial Condition and Results of Operations  Factors Affecting Our Operating
Results.




ITEM 1. BUSINESS

General

We were organized in December 2000 as a Nevada limited liability company
for the purpose of investing in mortgage loans. We invest in loans secured by
real estate through deeds of trust and mortgages. We commenced our business
operations in June 2001. From June 2001 through December 2001, we raised
approximately $128,000,000 through a public offering of our Units. The public
offering for up to $500,000,000 is continuing; as of March 15, 2002, we have
raised approximately $175,031,000. Our manager is Vestin Mortgage, Inc., a
licensed mortgage company in the State of Nevada (Vestin Mortgage, our
Manager). Vestin Mortgage is a wholly-owned subsidiary of Vestin Group, Inc.,
a Delaware corporation, whose common stock is publicly held and traded on the
NASDAQ under the ticker symbol VSTN.

We invest in mortgage loans throughout the areas in which Vestin Mortgage
and its correspondents have experience, primarily Arizona, California, Hawaii,
Nevada and Texas. The loans we invest in are selected for us by Vestin Mortgage
from among loans originated by Vestin Mortgage or non-affiliated mortgage
brokers. When Vestin Mortgage or someone else originates a loan for us, that
person identifies the borrower, processes the loan application, makes or
invests in the loan, and brokers or sells the loan to us. We believe that our
loans are attractive to borrowers because of the expediency of Vestin
Mortgages loan approval process, which takes about 10 to 20 days.

As a non-conventional lender, we are more willing to invest in mortgage
loans to borrowers that conventional lenders would not deem to be creditworthy.
Because of our increased willingness to fund riskier loans and borrowers,
borrowers are willing to pay us an interest rate that is 2-3 points above the
rates charged by conventional lenders. We invest a significant amount of our
funds in loans in which the real property being developed is not generating any
income to the borrower. The balloon payment loans and bridge loans in which
we invest are riskier because the borrowers repayment depends on its ability
to refinance the loan or develop the property so it can refinance the loan.

Our principal investment objectives are to:



| |  |  | Produce revenues from the interest income on our mortgage loans;                                                                    
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Provide monthly cash distributions from the net income earned on our mortgage loans;                                                
|
| |  |  | Preserve capital contributions; and                                                                                                 
|
| |  |  | Reinvest to the extent permissible payments of principal and proceeds
of prepayments, sales and insurance proceeds, net of expenses.

Acquisition and Investment Policies

We seek to invest about 97% of our assets in mortgage loans. At least 3%
will be held as a working capital cash reserve.

The majority of our collateral on our mortgage loans are the real property
that the borrower is purchasing or developing with the funds that we make
available. We sometimes refer to these real properties as the security
properties. While we may invest in other

3



---



##### Table of Contents



types of loans, most of the loans in which we invest have been made to
real estate developers with a lesser proportion of loans involving land loans
and bridge financing.

Our mortgage investments are not insured or guaranteed by any government
agency.

Vestin Mortgage continuously evaluates prospective investments, selects
the mortgages in which we invest and makes all investment decisions on our
behalf in its sole discretion. In evaluating prospective mortgage loan
investments, Vestin Mortgage considers such factors as the following:



| |  |  | the ratio of the amount of the investment to the value of the property by which it is secured; 
| | - |  | -----------------------------------------------------------------------------------------------
|
| |  |  | the potential for capital appreciation or depreciation of the property securing the investment;
|
| |  |  | expected levels of rental and occupancy rates (if applicable);                                 
|
| |  |  | potential for rental increases (if applicable);                                                
|
| |  |  | current and projected revenues from the property (if applicable);                              
|
| |  |  | the status and condition of the record title of the property securing the investment;          
|
| |  |  | geographic location of the property securing the investment; and                               
|
| |  |  | the financial condition of the borrowers and their principals, if any, who guarantee the loan. 

Vestin Mortgage may obtain our loans from non-affiliated mortgage brokers
and previous borrowers, and by solicitation of new borrowers in those states
where permissible. We may purchase existing loans that were originated by third
party lenders and acquired by Vestin Mortgage to facilitate our purchase of the
loans. Vestin Mortgage will sell the loans to us for no greater than Vestin
Mortgages cost, not including its service fees and compensation. There are no
specific requirements or guidelines governing Vestin Mortgages discretion in
determining which mortgage loans it will place with us and which it will place
with other funding sources.

When selecting mortgage loans for us, Vestin Mortgage adheres to the
following guidelines, which are intended to control the quality of the
collateral given for our loans:

1. Priority of Mortgages.Generally, our assets are secured by first
mortgages. First mortgages are mortgages secured by a full or divided interest
in a first deed of trust secured by the property. Other mortgages that we
invest in on the security property will not be junior to more than one other
mortgage. As of December 31, 2001, more than 99% of the principal amount of our
outstanding interest in loans was secured by first mortgages.

2. Loan-to-Value Ratio.We do not anticipate that the amount of our loan
combined with the outstanding debt secured by a senior mortgage on a security
property will exceed the following percentage of the appraised value of the
security property:

|                                             |  |                     |     |                                        
|-------------------------------------------- |  | ------------------- | --- | ---------------------------------------
|Type of Secured Property                     |  | Loan-to-Value Ratio
|                                             |  |                    
|Residential                                  |  |                     | 75  | %                                      
|Unimproved Land                              |  |                     | 60  | %                                      
|Commercial                                   |  |                     | 75  | %                                      
|Property under
Development/Construction Loan |  |                     | 75% | (of anticipated post-development value)
|Leasehold Interest                           |  |                     | 75% | (of value of leasehold interest)       

Vestin Mortgage, in its discretion, may increase any of the above
loan-to-value ratios if a given loan is supported by credit adequate to justify
a higher loan-to-value ratio, including personal guarantees. Occasionally, our
collateral may include personal property as well as real property. We do not
have specific requirements with respect to the projected income or occupancy
levels of a property securing our investment in a particular loan. These
loan-to-value ratios will not apply to financing offered by us to the purchaser
of any real estate acquired through foreclosure, or to refinance an existing
loan that is in default when it matures. In those cases, Vestin Mortgage, in
its sole discretion, shall be free to accept any reasonable financing terms it
deems to be in our best interest.

4



---



##### Table of Contents



Nevertheless, in no event will the loan-to-value ratio on any loan exceed
80% of the independently appraised completed value of the property. The target
loan-to-value ratio for our loan portfolio as a whole is approximately 70%. As
of December 31, 2001, our average loan-to-value ratio was 60.58%.

We initially receive an independent appraisal for each property to be
security for our investment. We retain appraisers who are licensed or qualified
as independent appraisers and certified by or hold designations from one or
more of the following organizations: the Federal National Mortgage Association,
the Federal Home Loan Mortgage Corporation, the National Association of Review
Appraisers, the Appraisal Institute, the Society of Real Estate Appraisers,
M.A.I., Class IV Savings and Loan appraisers or from among appraisers with
other qualifications acceptable to Vestin Mortgage. However, appraisals are
only estimates of value and cannot be relied on as measures of realizable
value. An employee or agent of Vestin Mortgage reviews each appraisal report
and conducts a physical inspection for each property. A physical inspection
includes an assessment of the subject property, the adjacent properties and the
neighborhood but does not include entering any structures on the property.

3. Construction Mortgage Loans. We invest in construction loans other than
home improvement loans on residential property, subject to the following
guidelines:

We do not anticipate that the loan-to-value ratio on construction loans in
which we invest will exceed 75% of the independently appraised, completed value
of the security property.

4. Terms of Mortgage Loans.Our loans in 2001 ranged from a two month term
to a five year term. Most of our loans are for a term of 12 months. Our
original loan agreements, however, permit extensions to the term of the loan by
mutual consent. Such extensions are generally provided on loans where the
original term was 12 months or less and where a borrower requires additional
time to complete a construction project or negotiate take out financing.

Currently all of our loans provide for payments of interest only with a balloon
payment of principal payable in full at the end of the term. In addition, we
invest in mortgage loans which require borrowers to maintain interest reserves
funded from the principal amount of the loan for a period of time. At December
31, 2001, we had outstanding principal on mortgage loans that had interest
reserves of approximately $35,700,000 and interest reserves in the amount of
approximately $912,000.

5. Escrow Conditions.Our loans will often be funded by us through an
escrow account held by a title insurance company, subject to the following
conditions:



| |  |  | Borrowers will obtain title insurance coverage for all loans, with
the title insurance policy naming us as the insured and providing title
insurance in an amount at least equal to the principal amount of the
loan. Title insurance insures only the validity and priority of our deed
of trust, and does not insure us against loss by other causes, such as
diminution in the value of the security property.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Borrowers will obtain fire and casualty insurance for all loans
secured by improved real property, naming us as loss payee in an amount
sufficient to cover the replacement cost of improvements.                                                                                                                                                                                                                
|
| |  |  | All insurance policies, notes, deeds of trust or mortgages, escrow
agreements, and any other loan documents for a particular transaction
will name us as payee and beneficiary. Mortgage loans will not be
written in the name of Vestin Mortgage or any other nominee.                                                                                                                                          

6. Purchase of Mortgage Investments from Affiliates.We may acquire
mortgage loans from our affiliates, including Vestin Mortgage, for a price not
in excess of the par value of the note or its fair market value, whichever is
lower, plus allowable fees and expenses, but without the allowance of any other
compensation for the loans.

7. Note Hypothecation.We may also acquire mortgage loans secured by
assignments of secured promissory notes. These mortgage loans must satisfy our
stated investment standards, including our loan-to-value ratios, and also may
not exceed 80% of the principal amount of the assigned note. For example, if
the property securing a note we acquire is commercial property, the total
amount of outstanding debts secured by the property must not exceed 75% of the
appraised value of the property, and the mortgage loan will not exceed 80% of
the principal amount of the assigned note. For mortgage loans secured by
promissory notes, we will rely on the appraised value of the underlying
property, as determined by an independent written appraisal which was conducted
within the then-preceding twelve months. If an appraisal was not conducted
within that period, then we will arrange for a new appraisal to be prepared for
the property.

5



---



##### Table of Contents



8. Participation.We participate in loans with other lenders, including
affiliates as permitted by the North American Securities Administrators
Association guidelines (NASAA Guidelines), by providing funds for or
purchasing an undivided interest in a loan meeting our investment guidelines
described above. Typically, we participate in loans if:



| |  |  | we did not have sufficient funds to invest in an entire loan.        
| | - |  | ---------------------------------------------------------------------
|
| |  |  | we are seeking to increase the diversification of our loan portfolio.

As of December 31, 2001, 87% of our loans were loans in which we
participated with other lenders.

9. Diversification.The NASAA Guidelines provide that we neither invest in
or make mortgage loans on any one property which would exceed, in the
aggregate, an amount equal to 20% of our capital nor may we invest in or make
mortgage loans to or from any one borrower which would exceed, in the
aggregate, an amount greater than 20% of our capital. As of December 31, 2001,
we had one mortgage loan which accounted for approximately 11% of our total
assets. The loan was made to Malibu Bay Suites, and the outstanding balance of
the loan was $12,995,000. The loan matures on December 11, 2002.

10. Reserve Fund.We have established contingency working capital reserves
of at least 3% of our capital to cover our unexpected cash needs.

11. Credit Evaluations.Before making a loan, Vestin Mortgage must first
determine that a borrower has sufficient equity in the security property to
meet the loan-to-value ratios described above. Vestin Mortgage may also
consider the income level and creditworthiness of a borrower to determine its
ability to repay the mortgage loan.

Mortgage Loans to Affiliates

We will not invest in mortgage loans made to Vestin Mortgage, Vestin Group
or any of our affiliates. However, we may acquire an investment in a mortgage
loan payable by Vestin Mortgage when Vestin Mortgage has assumed by foreclosure
the obligations of the borrower under that loan.

Purchase of Loans from Vestin Mortgage and its Affiliates

In addition to those loans Vestin Mortgage selects for us, we purchase
loans that were originated by Vestin Mortgage or other parties and first held
for Vestin Mortgages own portfolio, as long as the loan is not in default and
otherwise satisfies all of our lending criteria. This requirement also applies
to any loan originated by an affiliate of Vestin Mortgage, such as Vestin
Group, Michael Shustek, Chief Executive officer of Vestin Group or another
principal of Vestin Mortgage. However, we will not acquire a loan from or sell
a loan to a mortgage program in which Vestin Mortgage has an interest except in
compliance with NASAA Guidelines.

Types of Loans We Invest In

We primarily invest in loans which are secured by first or second
mortgages on real property. Such loans fall into the following categories: raw
and unimproved land, acquisition and development, construction, commercial,
residential and bridge loans.

Raw And Unimproved Land Loans

Generally, we determine whether to invest in these loans based upon the
90-day quick sale value of the property and the borrowers actual capital
investment in the property. The 90-day quick sale value is the highest price
for which the land could actually be sold within the next 90 days, as
determined by local real estate brokers. We believe that this 90-day period
approximates the time required for a foreclosure. The value is generally the
same as the cost of the land to the borrower. Typically, we will invest in
loans with a face value which is less than 60% of the 90-day quick sale
value, and we usually require that the borrower have invested in the property
actual capital expenditures of at least 25% of the propertys value. As of
December 31, 2001, approximately 13% of our loans were in this category.

6



---



##### Table of Contents



Acquisition and Development Loans

These loans enable borrowers to complete the basic infrastructure and
development of their property prior to the construction of buildings or
structures. Such development may include installing utilities, sewers, water
pipes, and/or streets. Generally, we will invest in loans with a face value of
up to 60% of the appraised value of the property. As of December 31, 2001,
approximately 15% of our loans were in this category.

Construction Loans

A construction loan provides funds for the construction of one or more
structures on developed land. Funds under this type of loan will generally not
be forwarded to the borrower until work in the previous phase of the project
has been completed and an independent inspector has verified certain aspects of
the construction and its costs. We will typically require material and labor
lien releases by the borrower per completed phase of the project. We will
review the appraisal of the value of the property and proposed improvements,
and will arrange loans for up to 75% of the appraised value. As of December 31,
2001, approximately 22% of our loans were in this category.

Commercial Property Loans

Commercial property loans provide funds to allow commercial borrowers to
make improvements or renovations to the property in order to increase the net
operating income of the property so that it may qualify for institutional
refinancing. We will review the appraisal of the value of the property and will
invest in loans for up to 75% of such appraised value. As of December 31, 2001,
approximately 43% of our loans were in this category.

Residential Loans

Such loans facilitate the purchase or refinance of one to four family
residential property units provided the borrower uses one of the units on the
property as such borrowers principal residence. We will invest in loans for up
to 75% of the value of the property. As of December 31, 2001, less than 1% of
our loans were in this category.

Bridge Loans

Such loans provide interim financing (up to six months) to enable
commercial borrowers to qualify for permanent refinancing. We will review the
appraisal of the value of the property and will generally invest in loans of up
to 75% of that value. As of December 31, 2001, approximately 7% of our loans
were in this category.

Collateral

The types of collateral that will secure the loans brokered by us include
a first deed of trust, a second deed of trust or a leasehold interest.

First Deed of Trust

All of our loans are secured by a first deed of trust. Thus the applicable
lender will have rights as a first mortgage lender of the collateralized
property. As of December 31, 2001, more than 99% of our loans were secured by
a first deed of trust.

Second Deed of Trust

In the future, up to 10% of our loans may be secured by second deeds of
trust. In a second mortgage loan, the rights of the lender (such as the right
to receive payment on foreclosure) will be subject to the rights of the first
mortgage lender. In a wraparound loan, the lenders rights will be comparably
subject to the rights of a first mortgage lender, but the aggregate
indebtedness evidenced by the loan documentation will be the first mortgage
loan plus the new funds the lender invests. The lender would receive all
payments from the borrower and forward to the senior lender its portion of the
payments the lender receives. As of December 31, 2001, less than 1% of our
loans were secured by a second deed of trust.

7



---



##### Table of Contents



Leasehold Interest

Such loans are loans where the collateral is an interest in a lease. As
of December 31, 2001, we did not have any loans secured by a leasehold
interest.

Prepayment Penalties and Exit Fees

Generally, the loans we invest in will not contain prepayment penalties or
exit fees.

Balloon Payment

Currently all of the loans we invest in or purchase will require the
borrower to make a balloon payment on the principal amount upon maturity of
the loan. There are no specific criteria used in evaluating the credit quality
of borrowers for mortgage loans requiring balloon payments. Furthermore, a
substantial period of time may elapse between the review of the financial
statements of the borrower and the date when the balloon payment is due. As a
result, there is no assurance that a borrower will have sufficient resources to
make a balloon payment when due. To the extent that a borrower has an
obligation to pay mortgage loan principal in a large lump sum payment, its
ability to repay the loan may be dependent upon its ability to sell the
property, obtain suitable refinancing or otherwise raise a substantial amount
of cash. As a result, these loans involve a higher risk of default than loans
where the principal is paid at the same time as the interest payments.

Repayment of Mortgages on Sale of Properties

We may require a borrower to repay a mortgage loan upon the sale of the
mortgaged property rather than allow the buyer to assume the existing loan. We
will require repayment if we determine that repayment appears to be
advantageous to us based upon then-current interest rates, the length of time
that the loan has been held by us, the creditworthiness of the buyer and our
objectives.

Variable Rate Loans

Most of the loans we invest in are fixed rate loans. Occasionally we may
acquire variable rate loans. Variable rate loans originated by Vestin Mortgage
may use as indices the one and five year Treasury Constant Maturity Index, the
Prime Rate Index and the Monthly Weighted Average Cost of Funds Index for
Eleventh District Savings Institutions (Federal Home Loan Bank Board). Vestin
Mortgage may negotiate spreads over these indices of 2.5% to 5.5%, depending
upon market conditions when the loan is made.

It is possible that the interest rate index used in a variable rate loan
will rise (or fall) more slowly than the interest rate of other loan
investments available to us. Vestin Mortgage attempts to minimize this interest
rate differential by tying variable rate loans to indices that are sensitive to
fluctuations in market rates. Additionally, most variable rate loans originated
by Vestin Mortgage contain provisions under which the interest rate cannot fall
below the initial rate.

Variable rate loans generally have interest rate caps. We anticipate that
the interest rate cap will be a ceiling that is 2-4% above the starting rate
with a floor rate equal to the starting rate. For these loans there is the risk
that the market rate may exceed the interest cap rate.

Variable rate loans of five to ten year maturities are not assumable
without the prior consent of Vestin Mortgage. We do not expect to invest in or
purchase a significant amount of other assumable loans. To minimize our risk,
any borrower assuming an existing mortgage loan will be subject to the same
underwriting criteria as the original borrower.

Borrowing

We may incur indebtedness:



| |  |  | to finance our investments in mortgage loans,                                                               
| | - |  | ------------------------------------------------------------------------------------------------------------
|
| |  |  | to prevent a default under mortgage loans that are senior to our mortgage loans,                            
|
| |  |  | to discharge senior mortgage loans if this becomes necessary to protect our investment in mortgage loans, or

8



---



##### Table of Contents





| |  |  | to operate or develop a property that we acquired under a defaulted loan.
| | - |  | -------------------------------------------------------------------------

Our indebtedness will not exceed 70% of the fair market value of our mortgage
loans. This indebtedness may be with recourse to our assets.

In addition, we may enter into structured arrangements with lenders in
order to provide them with a senior position in mortgage loans which we might
jointly fund. For example, we might establish a wholly-owned special purpose
corporation which would borrow funds from an institutional lender under an
arrangement where the resulting mortgage loans would be assigned to a trust,
and the trust would issue a senior certificate to the institutional lender and
a junior certificate to the special purpose corporation. This would assure the
institutional lender of repayment in full prior to our receipt of any repayment
on the jointly funded mortgage loans.

Competition and General Economic Conditions

There are hundreds of commercial banks, insurance companies, mortgage
brokers, pension funds and other institutional lenders competing to make the
type of loans in which we invest. No particular competitor dominates the
market. We anticipate substantial competition for investments in mortgages
secured by commercial properties, which creates pressure on lenders to lower
interest rates. Consequently, we may not be able to obtain as high interest
rates on mortgage investments as we would otherwise obtain, which would affect
our revenues and the distributions made to our investors.

Regulation

Our operations are conducted by Vestin Mortgage. Vestin Mortgages
operations as a mortgage company are subject to extensive regulation by
federal, state and local laws and governmental authorities. Vestin Mortgage
conducts its real estate mortgage business under a license issued by the State
of Nevada Financial Institutions Division. Under applicable Nevada law, the
division has broad discretionary authority over Vestin Mortgages activities,
including the authority to conduct periodic regulatory audits of all aspects of
Vestin Mortgages operations.

We and Vestin Mortgage are also subject to the Equal Credit Opportunity
Act of 1974, which prohibits creditors from discriminating against loan
applicants on the basis of race, color, sex, age or marital status, and the
Fair Credit Reporting Act of 1970, which requires lenders to supply applicants
with the name and address of the reporting agency if the applicant is denied
credit. We are also subject to various other federal and state securities laws
regulating the issuance and sale of securities, as well as the Employee
Retirement Income Security Act of 1974.




ITEM 2. PROPERTIES

Our Manager, Vestin Mortgage, operates from its executive offices at 2901 El
Camino Avenue, Las Vegas, Nevada 89102. We do not have any separate offices.




ITEM 3. LEGAL PROCEEDINGS

There is no litigation pending or threatened by or against us.




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

None.

9



---



##### Table of Contents






PART II




ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information



| | a. |  | There is no established public trading market for the trading of
Units.                                                                                                                                                                                                                                                       
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | As of December 31, 2001, approximately 1,800 Unit holders held
12,844,106 Units of interest in the Company.                                                                                                                                                                                                                   
|
| | c. |  | We generally distribute all net income generated by us to Unit
holders on a monthly basis. We made distributions of net income to our
Unit holders of approximately $2,866,933 (prior to reinvested
distributions) during 2001. It is our intention to continue to
distribute all net income earned by us to the Unit holders.




ITEM 6. SELECTED FINANCIAL DATA

|                                                                            |  |      |             | 
|--------------------------------------------------------------------------- |  | ---- | ----------- | 
|Vestin Fund II, LLC                                                         |  |      |             | 
|As of and for the year ended December 31,                                   |  | 2001
|                                                                            |  |     
|Investments in mortgage loans                                               |  | $    | 117,236,471 | 
|Cash, cash equivalents, certificates of deposits and short-term investments |  | $    | 10,012,601  | 
|Interest and other receivables                                              |  | $    | 1,066,369   | 
|Other assets                                                                |  | $    | 142,448     | 
|Total assets                                                                |  | $    | 128,457,889 | 
|Liabilities                                                                 |  | $    | 269,078     | 
|Members capital                                                            |  | $    | 128,188,811 | 
|Total liabilities and Members capital                                      |  | $    | 128,457,889 | 
|Revenues                                                                    |  | $    | 3,801,649   | 
|Expenses                                                                    |  | $    | 86,959      | 
|Net income                                                                  |  | $    | 3,714,690   | 
|Net income allocated to Members                                             |  | $    | 3,714,690   | 
|Net income allocated to Members per weighted average membership units       |  | $    | 0.67        | 
|Weighted average membership units                                           |  |      | 5,548,510   | 

The information in this table should be read in conjunction with the
accompanying audited financial statements and notes to financial statements
included elsewhere in this document.




ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Prior to June 14, 2001, we were a development stage company with no operational
activities. We commenced the offering of our Units in June 2001; that offering
continues. Our financial results reflect the amount of capital we had for
investment in mortgage loans. Our past performance may not be indicative of
future results. This discussion should be read in conjunction with our
financial statements and accompanying notes and other detailed information
regarding the Company appearing elsewhere in this Form 10-K.

OVERVIEW

Our primary business objective is to generate current income by investing in
mortgage loans. We believe there is a significant market opportunity to make
mortgage loans to owners and developers of real property whose financing needs
are not met by traditional mortgage lenders. Generally speaking, the loan
underwriting standards our Manager utilizes are less strict than traditional
mortgage lenders. In addition, one of our competitive advantages is our ability
to approve loan applications more quickly than traditional lenders. As a
result, in certain cases, we may make mortgage loans which are riskier than
mortgage loans made by commercial banks. However, in return we seek a higher
interest rate and our Manager takes steps to mitigate the lending risks such as
imposing a lower loan to value ratio. While we may assume more risk than
traditional mortgage lenders, in return we seek to generate higher yields from
our mortgage loans.

10



---



##### Table of Contents



Our operating results are affected primarily by: (i) the amount of capital we
have to invest in mortgage loans, (ii) the level of real estate lending
activity in the markets we service, (iii) our ability to identify and work with
suitable borrowers, (iv) the interest rates we are able to charge on our loans
and (v) the level of foreclosures and related loan losses which we experience.
In June 2001, we commenced the sale of our Units, raising approximately $128
million by December 31, 2001. That offering will continue until the earlier of
June 2003 or such time as we raise $500 million. These funds, subject to a 3%
reserve, will constitute the bulk of the funds we have available for investment
in mortgage loans. We do not have any arrangements in place to increase
materially the funds we will have available to invest from any other sources.
See the discussion below under Capital and Liquidity.

The US economy is currently suffering from a mild recession which began in
2001. However, we have not experienced a material slowdown in commercial real
estate lending in the markets which we service. To some extent, more
conservative lending practices implemented by some traditional mortgage lenders
to cope with the recession have had the result of increasing the pool of
potential borrowers willing to pay the higher rates which we charge. This trend
has also enabled us to continue to earn yields of more than 13% per annum,
notwithstanding the decline in interest rates in the general economy. However,
this trend has been off-set by the continuing decline in interest rates which
is putting downward pressure on the yields we can generate for Members. As of
December 31, 2001, the weighted average yield on our outstanding mortgage loan
investments was 13.22%.

While our business has not been significantly impacted by the current
recession, if the recession deepens or is prolonged, we would face a number of
potential risks. A prolonged recession will likely dampen real estate
development activity, thereby diminishing the market for our loans. In
addition, if interest rates remain low for an extended period, it will be more
difficult for us to continue to generate yields of 13% or better. Moreover, a
deepening of the recession, or poor credit decisions by our Manager, may
increase the default rate on our loans. To the extent that the efforts of our
borrowers to develop and sell commercial real estate projects are adversely
impacted by the status of the economy, we may experience an increase in loan
defaults. In this regard, it should be noted that the weighted average maturity
of our outstanding loans as of December 31, 2001 was 11 months.

Accordingly, adverse economic conditions during the next year could have a
material impact on the collectibility of our loans. Recognizing this risk, we
seek to maintain low loan to value ratios which, as of December 31, 2001
averaged 60.58% on a weighted average basis. In this manner, we hope to retain
sufficient cushion in the underlying equity position to protect the value of
our loan in the event of a default. Nevertheless, no assurances can be given
that a marked increase in loan defaults accompanied by a rapid decline in real
estate values will not have a material adverse effect upon our financial
condition and operating results.

Historically, our Manager has focused its operations on Nevada and certain
Western states. Because our Manager has a significant degree of knowledge with
respect to the real estate markets in such states, it is likely most of our
loans will be concentrated in such states. As of December 31, 2001, 39.23% of
the principal amount of our loans were secured by real estate in Nevada, while
26.29%, 12.72%, 11.46%, and 10.26% were secured by real estate in Texas,
Hawaii, Arizona, and California, respectively. Such geographical concentration
creates greater risk that any downturn in such local real estate markets could
have a significant adverse effect upon our results of operations. Commercial
real estate markets in Nevada have continued to prosper, with significant
borrowing activity, throughout the current recession. However, the rate of
growth appears to be slowing. The commercial real estate markets in Texas,
Arizona and California also appear to be relatively unaffected by the
recession. Hawaii has been adversely affected by the downturn in tourism after
September 11, 2001. Continued weakness in the tourism market may have
significant adverse effects on real estate lending in Hawaii. As noted above,
if the recession continues for an extended period or deepens, particularly in
any of the identified states, our operating results could be adversely
affected.

RESULTS OF OPERATIONS

|                                                                      |  |                    |           |  
|--------------------------------------------------------------------- |  | ------------------ | --------- | -
|                                                                      |  | FOR THE YEAR ENDED
|                                                                      |  | DECEMBER 31, 2001 
|                                                                      |  |                   
|Total revenues                                                        |  | $                  | 3,801,649 |  
|Total expenses                                                        |  | $                  | 86,959    |  
|Net income                                                            |  | $                  | 3,714,690 |  
|Earnings per unit                                                     |  | $                  | 0.67      |  
|Net income allocated to members per weighted average
membership units |  | $                  | 0.67      |  
|Annualized net interest yield to members(b)                           |  |                    | 12.37     | %
|Weighted average membership units(a)                                  |  |                    | 5,548,510 |  

(a)  The weighted average number of outstanding units is calculated based upon
the daily number of outstanding units beginning on June 14, 2001.

11



---



##### Table of Contents



(b)  The annualized net interest yield to unit holders for the year ended
December 31, 2001 is calculated based upon the net income allocated to unit
holders per weighted average units as of December 31, 2001 divided by 6.5
(number of months from June 14, 2001 through December 31, 2001) and multiplied
by 12 months, then divided by ten (the $10 cost per unit).

Investment in Mortgage Loans Secured by Real Estate Portfolio

The following is a summary of our investment in mortgage loans as of December
31, 2001:

|                            |  |   |             |  |  |  |        |  
|--------------------------- |  | - | ----------- |  |  |  | ------ | -
|Commercial                  |  | $ | 50,135,497  |  |  |  | 42.76  | %
|Construction                |  |   | 25,210,571  |  |  |  | 21.50  | %
|Acquisition and development |  |   | 18,156,395  |  |  |  | 15.49  | %
|Bridge                      |  |   | 8,030,064   |  |  |  | 6.85   | %
|Land                        |  |   | 15,610,554  |  |  |  | 13.32  | %
|Residential                 |  |   | 93,390      |  |  |  | 0.08   | %
|                            |  |   |             |  |  |  |        |  
|                            |  | $ | 117,236,471 |  |  |  | 100.00 | %
|                            |  |   |             |  |  |  |        |  
|First mortgages             |  | $ | 117,106,471 |  |  |  | 99.89  | %
|Second mortgages            |  |   | 130,000     |  |  |  | 0.11   | %
|                            |  |   |             |  |  |  |        |  
|                            |  | $ | 117,236,471 |  |  |  | 100.00 | %
|                            |  |   |             |  |  |  |        |  

The following is a schedule of maturities of investment in mortgage loans as of
December 31, 2001:

|                         |  |   |             | 
|------------------------ |  | - | ----------- | 
|2001 (past due maturity) |  | $ | 5,675,873   | 
|2002                     |  | $ | 99,933,312  | 
|2003                     |  |   | 11,627,286  | 
|                         |  |   |             | 
|                         |  | $ | 117,236,471 | 
|                         |  |   |             | 

The following is a schedule by geographic location of investment in mortgage
loans as of December 31, 2001:

|           |  |   |             |  |  |  |        |  
|---------- |  | - | ----------- |  |  |  | ------ | -
|Arizona    |  | $ | 13,429,333  |  |  |  | 11.46  | %
|California |  |   | 12,030,072  |  |  |  | 10.26  | %
|Hawaii     |  |   | 14,915,681  |  |  |  | 12.72  | %
|Nevada     |  |   | 45,993,741  |  |  |  | 39.23  | %
|New Mexico |  |   | 42,495      |  |  |  | 0.04   | %
|Texas      |  |   | 30,825,149  |  |  |  | 26.29  | %
|           |  |   |             |  |  |  |        |  
|           |  | $ | 117,236,471 |  |  |  | 100.00 | %
|           |  |   |             |  |  |  |        |  

Asset Quality and Loan Reserves

Some losses are normal when lending money and the amounts of losses vary as the
loan portfolio is affected by changing economic conditions and the financial
position of borrowers. There is no precise method of predicting specific losses
or amounts that ultimately may be charged off on particular segments of the
loan portfolio.

The conclusion that a mortgage loan is uncollectible or that collectibility is
doubtful is a matter of judgment. Although lenders such as banks and savings
and loans are subject to regulations that require them to perform ongoing
analyses of their loan portfolios (including analyses of loan to value ratios,
reserves, etc.), and to obtain current information regarding borrowers and the
securing properties, we are not subject to these regulations and have not
adopted these practices. Rather, our Manager, in connection with the quarterly
closing of our accounting records and the preparation of our financial
statements, evaluates our mortgage loan portfolio to determine if any
outstanding loans are uncollectible or impaired and, in such event, whether a
loss is probable. The fact that a loan is past due does not necessarily mean
that the loan is uncollectible or impaired. Rather, all relevant circumstances
are considered by our Manager to determine the probability of loan losses. Such
evaluation, which includes a review of all loans on which full collectibility
may not be reasonably assured, considers among other matters:
12Table of Contents



| |  |  | prevailing economic conditions;                                                                         
| | - |  | --------------------------------------------------------------------------------------------------------
|
| |  |  | historical experience;                                                                                  
|
| |  |  | the nature and volume of the loan portfolio;                                                            
|
| |  |  | the borrowers financial condition and adverse situations that may affect the borrowers ability to pay;
|
| |  |  | evaluation of industry trends;                                                                          
|
| |  |  | review and evaluation of loans identified as having loss potential; and                                 
|
| |  |  | estimated net realizable value of any underlying collateral.                                            

Based upon this evaluation, a determination is made as to whether the allowance
for loan losses is adequate to cover any potential losses. Additions to the
allowance for loan losses are made by charges to the provision for loan losses.
Loan losses deemed to be uncollectible are charged against the allowance for
loan losses. Recoveries of previously charged off amounts are credited to the
allowance for loan losses. As of December 31, 2001, our Manager concluded that
no provision for loan losses was deemed necessary. There were no actual losses
incurred on loans by us during the year ended December 31, 2001. At December
31, 2001, none of our loans were non-performing (more than 90 days past due on
interest payments). However, we had one loan totaling $5,675,873 on which
payment of principal was past due. Our loan to value ratio on that loan is 33%.
Our Manager evaluated the loan and concluded that the underlying equity was
sufficient to protect us against a loss of principal or interest. Accordingly,
no reserve was recorded.

In addition to the above-mentioned loan, at December 31, 2001, our Manager had
granted extensions on 7 loans pursuant to the terms of the original loan
agreements which permit extensions by mutual consent. Such extensions are
generally provided on loans where the original term was 12 months or less and
where a borrower requires additional time to complete a construction project or
negotiate take out financing. The aggregate amount due to us from borrowers
whose loans had been extended as of December 31, 2001 was approximately
$21,043,000. At December 31, 2001, all such loans were current in payments of
interest. The average loan to value ratio on such loans is 33%. Accordingly,
our Manager concluded that no reserve was necessary with respect to such loans.

Subsequent to year end, with regard to the one loan which was past due at
December 31, 2001, the Company is currently in negotiation with the borrower
and anticipates full repayment of the loan in April 2002. However,
there can be no assurance that this will occur.

Because of the fact that any decision regarding reserves for loan losses
reflects a judgment about the probability of future events, there is an
inherent risk that such judgments will prove incorrect. In such event, actual
losses may exceed (or be less than) the amount of any reserve. To the extent
that we experience losses greater than the amount of our reserves, we may incur
a charge to our earnings that will adversely affect our operating results and
the amount of any distributions payable to our Members.

CAPITAL AND LIQUIDITY

Liquidity is a measure of a companys ability to meet potential cash
requirements, including ongoing commitments to fund lending activities and for
general operation purposes. Subject to a 3% reserve, we use all of our
available funds to invest in mortgage loans. Income generated from such loans
is paid out to our Members unless they have elected to reinvest their
dividends. Approximately 500 of our Members currently reinvest their dividends.
We do not anticipate the need for hiring any employees, acquiring fixed assets
such as office equipment or furniture, or incurring material office expenses
during the next twelve months because Vestin Mortgage will manage our affairs.
We may pay Vestin Mortgage an annual management fee of up to 0.25% of our
aggregate capital contributions.

As the offering of our Units is continuing, we currently rely upon the sale of
Units, loan repayments and dividend reinvestments to provide the cash necessary
to carry on our business. Our ability to attract investors to purchase Units
depends upon a number of factors, some of which are beyond our control. The
key factors in this regard include general economic conditions, the conditions
of commercial real estate markets, the availability and attractiveness of
alternative investment opportunities, our operating performance and the track
record and reputation of our Manager. We believe our ability to attract
investors has been enhanced by the high historical yields generated by our
mortgage investments and by comparable yields earned by Vestin Fund I which is
managed by our Manager. These yields may prove particularly attractive to the
extent that equity markets are viewed as risky or volatile and to the extent
that most fixed income investments provide a lower yield. Notwithstanding our
high historical yields, our ability to raise additional funds from investors
may be impaired by our relatively small size and our limited operating history.
In addition, the

13



---



##### Table of Contents



mortgage loans in which we invest are not federally insured as are certain bank
deposits and are generally illiquid as compared to government and certain
corporate bonds. Thus, our ability to generate high yields is critical to
offsetting some of these disadvantages. Our ability to raise additional funds
would suffer if the performance of our loan portfolio declines or if
alternative investment vehicles offering comparable yields and greater safety
and/or liquidity become available.

Any significant level of defaults on outstanding loans could reduce the funds
we have available for investment in new loans. Resulting foreclosure
proceedings may not generate full repayment of our loans and may result in
significant delays in the return of invested funds. This would diminish our
capital resources and would impair our ability to invest in new loans. See the
discussion above under Asset Quality and Loan Reserves. In addition,
withdrawals by our Members would reduce the capital we have available for
investment. Such withdrawals are limited by the terms of our Operating
Agreement to not more than 10% per year and are subject to other conditions.

As of December 31, 2001, we have only one revolving line of credit, which is
from First Hawaiian Bank in the amount of $2,000,000. There was no outstanding
balance as of December 31, 2001 for that line of credit.

We may seek to expand our capital resources through borrowings from
institutional lenders or through securitization of our loan portfolio or
similar arrangements. Other than the line of credit mentioned above, we
currently do not have in place any commitments to borrow any funds or
securitize any of our assets. No assurance can be given that, if we should seek
to borrow funds or to securitize our assets we would be able to do so on
commercially attractive terms. Our ability to expand our capital resources in
this manner is subject to many factors, some of which are beyond our control,
including the state of the economy, the state of the capital markets and the
perceived quality of our loan portfolio.

We do not currently have any interest in any special purpose entities nor do we
have any commitments or obligations which are not reflected on our balance
sheet. We do not have any interest in non-exchange traded derivative contracts.

We maintain working capital reserves of at least 3% of aggregate members
capital accounts in cash and cash equivalents, certificates of deposits and
short-term investments. This reserve is available to pay expenses in excess of
revenues, satisfy obligations of underlying security properties, expend money
to satisfy our unforeseen obligations and for other permitted uses of the
working capital. At December 31, 2001, we had an amount totaling $1,675,000
invested in certificates of LTD, Inc., an investment fund owned by the Chief
Executive Officer of Vestin Group, Inc. LTD, Inc. is an investment fund
offering 2001-Prime Plus One Certificates (Certificates) earning 5.75% at
December 31, 2001. The terms of the Certificates provide the subscriber
repayment of their funds in full or in part upon a thirty (30) day written
request from the subscriber and accordingly, subsequent to year end, we
liquidated our investment in these Certificates. The Certificates have been
recorded on our balance sheet as short-term investments  related party.

FACTORS AFFECTING OUR OPERATING RESULTS

Our business is subject to numerous factors affecting our operating results. In
addition to the factors discussed above, our operating results may be affected
by:

Risks of Investing in Mortgage Loans.



| |  |  | Our underwriting standards and procedures are more lenient than
conventional lenders in that we will invest in loans to borrowers who
will not be required to meet the credit standards of conventional
mortgage lenders.                                                                                                                                                                                                            
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | We approve mortgage loans more quickly then other mortgage lenders.
Due to the nature of loan approvals, there is a risk that the credit
inquiry our Manager performs will not reveal all material facts
pertaining to the borrower and the security.                                                                                                                                                                                
|
| |  |  | Our results of operations will vary with changes in interest rates
and with the performance of the relevant real estate markets.                                                                                                                                                                                                                                                                                                     
|
| |  |  | If the economy is healthy, we expect that more people will be
borrowing money to acquire, develop or renovate real property. However,
if the economy grows too fast, interest rates may increase too much and
the cost of borrowing may become too expensive. This could result in a
slowdown in real estate lending which may mean we will have fewer loans
to acquire, thus reducing our revenues and the distributions to Members.

14



---



##### Table of Contents





| |  |  | One of the results of interest rate fluctuations is that borrowers
may seek to extend their low-interest-rate mortgage loans after market
interest rates have increased. Generally, our loan documents permit us
to raise the interest rate we charge on extended loans anywhere from
between 3/4% to 3% from the then-current rate on the loan. This creates
two risks for us:                                                                                                                                                                                                                                
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |   |  | There is no assurance that this permitted rate increase will be adequate
if interest rates have increased beyond the range contemplated by our
loan documents.                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |   |  | If interest rates rise, borrowers under loans with monthly or quarterly
principal payments may be compelled to extend their loans to decrease the
principal paid with each payment because the interest component has
increased. If this happens, there is higher risk of the borrower
defaulting on the extended loans, and the increase in the interest rate
on the loan may not be adequate compensation for the increased risk.
Distributions on mortgage loans placed by us will decline if lenders are
unable to reinvest at higher rates or if an increasing number of
borrowers default on their loans.
|
| |   |  | If, at a time of relatively low interest rates, a borrower should prepay
obligations that have a higher interest rate from an earlier period,
investors will likely not be able to reinvest the funds in mortgage loans
earning that higher rate of interest. In the absence of a prepayment fee,
the investors will receive neither the anticipated revenue stream at the
higher rate nor any compensation for their loss. This in turn could harm
the Companys reputation and make it more difficult for us to attract
investors willing to acquire interest in mortgage loans.                             

Risk of Defaults

Our performance will be directly impacted by any defaults on the loans in our
portfolio. As noted above, we may experience a higher rate of defaults than
conventional mortgage lenders. We seek to mitigate the risk by estimating the
rate of the underlying collateral and insisting on low loan to value ratios.
However, no assurance can be given that these efforts will fully protect us
against losses on defaulted loans. Moreover, during the period of time when a
defaulted loan is the subject of foreclosure proceedings, it is likely that we
will earn less (if any) income from such loans, thereby reducing our earnings.

Competition for Borrowers.

We consider our competitors for borrowers to be the providers of
non-conventional mortgage loans, that is, lenders who offer short-term,
equity-based loans on an expedited basis for higher fees and rates than those
charged by conventional lenders and mortgage loans investors, such as
commercial banks, thrifts, conduit lenders, insurance companies, mortgage
brokers, pension funds and other financial institutions that offer conventional
mortgage loans. Many of the companies against which we compete have
substantially greater financial, technical and other resources than we do.
Competition in our market niche depends upon a number of factors including
price and interest rates of the loan, speed of loan processing, cost of
capital, reliability, quality of service and support services.

Effect of Fluctuations in the Economy.

Our sole business, making loans secured by real estate, is particularly
vulnerable to changes in macroeconomic conditions. Any significant decline in
economic activity, particularly in the geographical markets in which we
concentrate our loans, could result in a decline in the demand for real estate
development loans. In order to stay fully invested during a period of declining
demand for real estate loans, we may be required to make loans on terms less
favorable to us or to make loans involving greater risk to us. Declines in
economic activity are often accompanied by a decline in prevailing interest
rates. Although our lending rates are not directly tied to the Federal Reserve
Boards discount rate, a sustained and widespread decline in interest rates
will impact the interest we are able to earn on our loans. Since our loans
generally do not have prepayment penalties, declining interest rates may also
cause our borrowers to prepay their loans and we may not be able to reinvest
the amounts prepaid in loans generating a comparable yield. Moreover, any
significant decline in economic activity could adversely impact the ability of
our borrowers to complete their projects and obtain take out financing. This in
turn could increase the level of defaults we may experience.




ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk, primarily from changes in interest rates. We do
not deal in any foreign currencies and do not own any options, futures or other
derivative instruments. We do not have any significant debt.

15



---



##### Table of Contents



Most of our assets consist of investments in mortgage loans. At December 31,
2001, our aggregate investment in mortgage loans was approximately $117,236,000
with a weighted average effective interest rate of 13.22%. These mortgage loans
have a term of 12 months; the weighted average term of outstanding loans at
December 31, 2001 was 11 months. All of the outstanding mortgage loans at
December 31, 2001 were fixed rate loans. All of the mortgage loans are held for
investment purposes; none are held for sale. We intend to hold such mortgage
loans to maturity. Most of the mortgage loans do not have prepayment penalties.

Changes in interest rates would not affect the carrying value of our investment
in mortgage loans. However, a significant change in interest rates could affect
our operating results. If interest rates decline significantly, some of the
borrowers could prepay their loans with the proceeds of a refinancing at lower
interest rates. This would reduce our earnings and funds available for
distribution to Members. On the other hand, a significant increase in interest
rates could result in a slowdown in real estate development activity which
would reduce the demand for commercial mortgage loans. As a result, we might
encounter greater difficulty in identifying appropriate borrowers. We are not
in a position to quantify the potential impact on our operating results from a
material change in interest rates.

At December 31, 2001, we also had approximately $10,000,000 invested in cash
and cash equivalents, certificates of deposit and short term investments. At
least 3% of our assets will be held in such accounts as a cash reserve;
additional deposits in such accounts will be made as funds are received from
new investors and repayment of loans pending the deployment of such funds in
new mortgage loans. We believe that these financial assets do not give rise to
significant interest rate risk due to their short term nature.

16



---



##### Table of Contents






ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

C O N T E N T S

|                                                                                          |                                                                     |  |    |    |      |  | 
|----------------------------------------------------------------------------------------- | ------------------------------------------------------------------- |  | -- | -- | ---- |  | 
|                                                                                          |                                                                     |  |    |    | Page
|                                                                                          |                                                                     |  |    |    |     
|REPORT
          OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS                              |                                                                     |  | 18 |   
|FINANCIAL STATEMENTS                                                                     
|Balance
          Sheets                                                                  |                                                                     |  | 19 |   
|Statements
          of Income                                                            |                                                                     |  | 20 |   
|Statements
          of Members Equity                                                   |                                                                     |  | 21 |   
|Statements
          of Cash Flows                                                        |                                                                     |  | 22 |   
|Notes
          to Financial Statements                                                   |                                                                     |  | 23 |   
|SUPPLEMENTARY INFORMATION                                                                
|Report
          of Independent Certified Public Accountants on Supplementary Information |                                                                     |  | 33 |   
|MORTGAGE
          LOANS ON REAL ESTATE:                                                  |                                                                     |  |    |   
|                                                                                          | Mortgage
          Loan Rollforward                                 |  |    | 34 |     
|                                                                                          | Mortgage
          Loans by Type of Property                        |  |    | 35 |     
|                                                                                          | Mortgage
          Loans by Lien Position                           |  |    | 36 |     
|                                                                                          | Mortgage
          Loans that Exceed Three Percent of the Portfolio |  |    | 37 |     

17



---



##### Table of Contents



Report of Independent Certified Public Accountants

Vestin Group, Inc.
Manager
Vestin Fund II, LLC

We have audited the accompanying balance sheets of Vestin Fund II, LLC as of
December 31, 2001 and 2000, and the related statements of income, members
equity, and cash flows for the year ended December 31, 2001 and for the period
from December 7, 2000 (date of inception) through December 31, 2000. These
financial statements are the responsibility of the Companys management and
Board of Directors of Vestin Group, Inc. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Vestin Fund II, LLC, as of
December 31, 2001 and 2000, and the results of its operations and its cash
flows for the year ended December 31, 2001 and for the period from December 7,
2000 (date of inception) through December 31, 2000, in conformity with
accounting principles generally accepted in the United States of America.

Reno, Nevada
February 8, 2002

18



---



##### Table of Contents



Vestin Fund II, LLC




BALANCE SHEETS

December 31,

ASSETS

|                                                                                                                                                                                               |                                           |                                                 |             |           |             |      |         |   |         | 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------- | ----------------------------------------------- | ----------- | --------- | ----------- | ---- | ------- | - | ------- | 
|                                                                                                                                                                                               |                                           |                                                 |             | 2001      |             | 2000
|                                                                                                                                                                                               |                                           |                                                 |             |           |             |     
|Cash                                                                                                                                                                                           |                                           | $                                               | 5,936,951   |           |             | $    |        |  
|Short-term
          investments  related party                                                                                                                                               |                                           |                                                 | 1,675,000   |           |             |      |        |  
|                                                                                                                                                                                               |                                           |                                                 |             |           |             |      |         |  
|                                                                                                                                                                                               | Total
          Cash and cash equivalents |                                                 |             | 7,611,951 |             |      | $       |  |        
|Certificates
          of deposit                                                                                                                                                              |                                           |                                                 | 2,400,650   |           |             |      |        |  
|Interest
          and other receivables                                                                                                                                                       |                                           |                                                 | 1,066,369   |           |             |      |        |  
|Investment
          in mortgage loans                                                                                                                                                         |                                           |                                                 | 117,236,471 |           |             |      |        |  
|Other
          assets                                                                                                                                                                         |                                           |                                                 | 142,448     |           |             |      | 264,275 |  
|                                                                                                                                                                                               |                                           |                                                 |             |           |             |      |         |  
|                                                                                                                                                                                               |                                           | $                                               | 128,457,889 |           |             | $    | 264,275 |  
|                                                                                                                                                                                               |                                           |                                                 |             |           |             |      |         |  
|LIABILITIES AND MEMBERS
            EQUITY                                                                                                                                                   
|Liabilities                                                                                                                                                                                    |                                           |                                                 |             |           |             |      |         |  
|                                                                                                                                                                                               | Due to
          Managing Member          |                                                 | $           | 269,078   |             |      | $       |  |        
|                                                                                                                                                                                               |                                           |                                                 |             |           |             |      |         |  
|                                                                                                                                                                                               |                                           | Total
          liabilities                     |             |           | 269,078     |      |         |   |        | 
|                                                                                                                                                                                               |                                           |                                                 |             |           |             |      |         |  
|Members
          equity  authorized 50,000,000 units; 12,844,106 and 26,428 units
          issued and outstanding at $10 per unit at December 31, 2001 and December 31, 2000, respectively |                                           |                                                 | 128,188,811 |           |             |      | 264,275 |  
|                                                                                                                                                                                               |                                           |                                                 |             |           |             |      |         |  
|                                                                                                                                                                                               |                                           | Total
          members equity                 |             |           | 128,188,811 |      |         |   | 264,275 | 
|                                                                                                                                                                                               |                                           |                                                 |             |           |             |      |         |  
|                                                                                                                                                                                               |                                           | Total
          liabilities and members equity |             | $         | 128,457,889 |      |         | $ | 264,275 | 
|                                                                                                                                                                                               |                                           |                                                 |             |           |             |      |         |  

The accompanying notes are an integral part of these statements.

19



---



##### Table of Contents



Vestin Fund II, LLC




STATEMENTS OF INCOME

|                                                                      |                                                   |                          |            |           |                   |           |                     |   |                     |   | 
|--------------------------------------------------------------------- | ------------------------------------------------- | ------------------------ | ---------- | --------- | ----------------- | --------- | ------------------- | - | ------------------- | - | 
|                                                                      |                                                   |                          |            |           |                   |           |                     |   | FOR THE PERIOD FROM
|                                                                      |                                                   |                          |            |           |                   |           |                     |   | DECEMBER 7, 2000   
|                                                                      |                                                   |                          |            |           | FOR               |           | (DATE OF INCEPTION)
|                                                                      |                                                   |                          |            |           | YEAR ENDED        |           | THROUGH            
|                                                                      |                                                   |                          |            |           | DECEMBER 31, 2001 |           | DECEMBER 31, 2000  
|                                                                      |                                                   |                          |            |           |                   |           |                    
|Revenues                                                              |                                                   |                          |            |           |                   |           |                     |  
|                                                                      | Interest income from investment in
mortgage loans |                          | $          | 3,801,649 |                   |           | $                   |  |                    
|                                                                      |                                                   |                          |            |           |                   |           |                     |  
|                                                                      |                                                   | Total revenues           |            |           | 3,801,649         |           |                     |   |                    |  
|                                                                      |                                                   |                          |            |           |                   |           |                     |  
|Operating expenses                                                    |                                                   |                          |            |           |                   |           |                     |  
|                                                                      | Management fees to Managing Member                |                          |            | 86,832    |                   |           |                     |  |                    
|                                                                      | Other                                             |                          |            | 127       |                   |           |                     |  |                    
|                                                                      |                                                   |                          |            |           |                   |           |                     |  
|                                                                      |                                                   | Total operating expenses |            |           | 86,959            |           |                     |   |                    |  
|                                                                      |                                                   |                          |            |           |                   |           |                     |  
|                                                                      |                                                   |                          | NET INCOME |           | $                 | 3,714,690 |                     |   |                     |  | 
|                                                                      |                                                   |                          |            |           |                   |           |                     |  
|Net income allocated to members                                       |                                                   | $                        | 3,714,690  |           |                   |           |                    |  
|                                                                      |                                                   |                          |            |           |                   |           |                     |  
|Net income allocated to members per weighted
average membership units |                                                   | $                        | 0.67       |           |                   |           |                    |  
|                                                                      |                                                   |                          |            |           |                   |           |                     |  
|Weighted average membership units                                     |                                                   |                          | 5,548,510  |           |                   |           |                    |  
|                                                                      |                                                   |                          |            |           |                   |           |                     |  

The accompanying notes are an integral part of these statements.

20



---



##### Table of Contents



Vestin Fund II, LLC




STATEMENTS OF MEMBERS EQUITY

|                                          |  |       |            |        |  |   |             |  
|----------------------------------------- |  | ----- | ---------- | ------ |  | - | ----------- | -
|                                          |  | Units |            | Amount
|                                          |  |       |            |       
|Inception, December 7, 2000               |  |       |           |        |  | $ |            |  
|Issuance of units                         |  |       | 26,428     |        |  |   | 264,275     |  
|                                          |  |       |            |        |  |   |             |  
|Members equity at December 31, 2000      |  |       | 26,428     |        |  |   | 264,275     |  
|Issuance of units (net of offering costs) |  |       | 12,771,595 |        |  |   | 126,615,950 |  
|Distributions                             |  |       |           |        |  |   | (2,866,933  | )
|Reinvestments of distributions            |  |       | 47,092     |        |  |   | 470,920     |  
|Members withdrawals                      |  |       | (1,009     | )      |  |   | (10,091     | )
|Net income                                |  |       |           |        |  |   | 3,714,690   |  
|                                          |  |       |            |        |  |   |             |  
|Members equity at December 31, 2001      |  |       | 12,844,106 |        |  | $ | 128,188,811 |  
|                                          |  |       |            |        |  |   |             |  

The accompanying notes are an integral part of these statements.

21



---



##### Table of Contents



Vestin Fund II, LLC




STATEMENTS OF CASH FLOWS

|                                                    |                                                                                   |                                                           |                      |                                           |            |                   |              |                     |         |                     |   | 
|--------------------------------------------------- | --------------------------------------------------------------------------------- | --------------------------------------------------------- | -------------------- | ----------------------------------------- | ---------- | ----------------- | ------------ | ------------------- | ------- | ------------------- | - | 
|                                                    |                                                                                   |                                                           |                      |                                           |            |                   |              |                     |         | FOR THE PERIOD FROM
|                                                    |                                                                                   |                                                           |                      |                                           |            |                   |              |                     |         | DECEMBER 7, 2000   
|                                                    |                                                                                   |                                                           |                      |                                           |            | FOR               |              | (DATE OF INCEPTION)
|                                                    |                                                                                   |                                                           |                      |                                           |            | YEAR ENDED        |              | THROUGH            
|                                                    |                                                                                   |                                                           |                      |                                           |            | DECEMBER 31, 2001 |              | DECEMBER 31, 2000  
|                                                    |                                                                                   |                                                           |                      |                                           |            |                   |              |                    
|Cash flows from operating activities:               |                                                                                   |                                                           |                      |                                           |            |                   |              |                    
|                                                    | Net income                                                                        |                                                           | $                    | 3,714,690                                 |            |                   | $            |                    |        
|                                                    | Adjustments to reconcile net income to net cash provided
by operating activities: |                                                           |                      |                                           |            |                   |              |                     |        
|                                                    |                                                                                   | Increase in interest and other receivables                |                      |                                           | (1,066,369 | )                 |              |                     |        |                    
|                                                    |                                                                                   |                                                           |                      |                                           |            |                   |              |                    
|                                                    |                                                                                   |                                                           |                      | Net cash provided by operating activities |            |                   | 2,648,321    |                     |         |                     |  | 
|                                                    |                                                                                   |                                                           |                      |                                           |            |                   |              |                    
|Cash flows from investing activities:               |                                                                                   |                                                           |                      |                                           |            |                   |              |                    
|                                                    | Purchase of investments in mortgage loans                                         |                                                           |                      | (133,379,244                              | )          |                   |              |                    |        
|                                                    | Purchase of investments in mortgage loans from Vestin
Fund I, LLC                 |                                                           |                      | (21,289,763                               | )          |                   |              |                    |        
|                                                    | Proceeds from loan payoff                                                         |                                                           |                      | 22,405,938                                |            |                   |              |                    |        
|                                                    | Proceeds received from sale of mortgage loans                                     |                                                           |                      | 15,026,598                                |            |                   |              |                    |        
|                                                    | Investment in certificates of deposit                                             |                                                           |                      | (2,400,650                                | )          |                   |              |                    |        
|                                                    |                                                                                   |                                                           |                      |                                           |            |                   |              |                    
|                                                    |                                                                                   |                                                           |                      | Net cash used in investing activities     |            |                   | (119,637,121 | )                   |         |                     |  | 
|                                                    |                                                                                   |                                                           |                      |                                           |            |                   |              |                    
|Cash flows from financing activities:               |                                                                                   |                                                           |                      |                                           |            |                   |              |                    
|                                                    | Proceeds from issuance of membership units                                        |                                                           |                      | 126,880,225                               |            |                   |              |                    |        
|                                                    | Members distributions, net of reinvestments                                      |                                                           |                      | (2,349,383                                | )          |                   |              |                    |        
|                                                    | Members withdrawals                                                              |                                                           |                      | (10,091                                   | )          |                   |              |                    |        
|                                                    | Advance from Manager                                                              |                                                           |                      | 80,000                                    |            |                   |              |                    |        
|                                                    |                                                                                   |                                                           |                      |                                           |            |                   |              |                    
|                                                    |                                                                                   |                                                           |                      | Net cash provided by financing activities |            |                   | 124,600,751  |                     |         |                     |  | 
|                                                    |                                                                                   |                                                           |                      |                                           |            |                   |              |                    
|                                                    |                                                                                   |                                                           | NET INCREASE IN CASH |                                           |            | 7,611,951         |              |                     |         |                    |  
|Cash and cash equivalents, beginning                |                                                                                   |                                                           |                     |                                           |            |                   |             |                    
|                                                    |                                                                                   |                                                           |                      |                                           |            |                   |              |                    
|Cash and cash equivalents, ending                   |                                                                                   | $                                                         | 7,611,951            |                                           |            |                   |             |                    
|                                                    |                                                                                   |                                                           |                      |                                           |            |                   |              |                    
|Supplemental disclosures of cash flows information: |                                                                                   |                                                           |                      |                                           |            |                   |              |                    
|                                                    | Non-cash financing activities:                                                    |                                                           |                      |                                           |            |                   |              |                     |        
|                                                    |                                                                                   | Conversion of deferred offering costs to membership
units |                      | $                                         | 835,725    |                   |              | $                   | 264,275 |                    
|                                                    |                                                                                   |                                                           |                      |                                           |            |                   |              |                    
|                                                    |                                                                                   | Reinvestment of members distributions                    |                      | $                                         | 470,920    |                   |              |                     |        |                    
|                                                    |                                                                                   |                                                           |                      |                                           |            |                   |              |                    
|                                                    |                                                                                   | Deferred debt offering costs paid by Manager              |                      | $                                         | 142,448    |                   |              |                     |        |                    
|                                                    |                                                                                   |                                                           |                      |                                           |            |                   |              |                    
|                                                    |                                                                                   | Distributions payable to Manager                          |                      | $                                         | 46,630     |                   |              |                     |        |                    
|                                                    |                                                                                   |                                                           |                      |                                           |            |                   |              |                    

The accompanying notes are an integral part of these statements.

22



---



##### Table of Contents



Vestin Fund II, LLC




NOTES TO FINANCIAL STATEMENTS

December 31, 2001 and 2000

NOTE A  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



| |  | 1. Organization                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Vestin Fund II, LLC, a Nevada Limited Liability Company, (the Company) is
primarily engaged in the business of mortgage lending. The Company invests
in loans secured by real estate through deeds of trust and mortgages. The
Company was organized on December 7, 2000 (date of inception) and will
continue until December 31, 2020 unless dissolved prior or extended thereto
under the provisions of the Operating Agreement.                                                                                                                                                                                                                                                                                                            
|
| |  | Prior to June 14, 2001, the Company was a development stage company. On
June 13, 2001, the Companys Form S-11/A filed with the Securities and
Exchange Commission became effective for the initial public offering of
50,000,000 units at $10 per unit. Consequently, the Company commenced
operations on June 14, 2001. As of December 31, 2001, the Company had sold
12,734,106 units of the total 50,000,000 units offered. Additionally, the
Company issued 110,000 units to its Manager for offering costs paid by them
to unrelated third parties on the Companys behalf. The Company will
continue to offer its remaining unsold units to the public for a period of
up to two years following the effective date of its Form S-11/A.
|
| |  | The Manager of the Company is Vestin Mortgage, Inc., a Nevada corporation
engaged in the business of brokerage, placement and servicing of commercial
loans secured by real property. The Manager is a wholly-owned subsidiary of
Vestin Group, Inc., a Delaware Corporation, whose common stock is publicly
held and is traded on the NASDAQ under the symbol VSTN. The Operating
Agreement provides that the Manager has exclusive control over the business
of the Company; including the power to assign duties, to determine how to
invest the Companys assets, to sign bills of sale, title documents, leases,
notes, security agreements, mortgage investments and contracts, and to
assume direction of the business operations.   
|
| |  | Vestin Mortgage, Inc. is also the Manager of Vestin Fund I, LLC, an entity
in the same business as the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | For the period from December 7, 2000 (date of inception) through June 14,
2001, the only transactions were the accrual of deferred offering costs
which were paid by the Manager on behalf of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |  | See Note F for detail of transactions with the Manager.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  | 2. Management Estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  | The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ form those estimates.                                                                                                                                                                                                                                                                                             
|
| |  | 3. Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | Income tax effects resulting from the Companys operations pass through to
the members individually and, accordingly, no provision for income taxes is
included in the financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

23



---



##### Table of Contents



Vestin Fund II, LLC

NOTES TO FINANCIAL STATEMENTS  CONTINUED

December 31, 2001 and 2000

NOTE A  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES- Continued



| |  | 4. Cash and Cash Equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Cash and cash equivalents include interest-bearing and noninterest-bearing
bank deposits, money market accounts, short-term certificates of deposit
with original maturities of three months or less, and short-term investments
with liquidation provisions of one month or less (see Note F).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  | 5. Revenue Recognition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |  | Interest is recognized as revenue when earned according to the terms of the
loan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| |  | 6. Investment in Mortgage Loans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  | Investment in mortgage loans secured by trust deeds and mortgages are
originated by the Manager in accordance with terms contained in the
Operating Agreement. Substantially all of the mortgage loans are fixed rate
loans with maturities ranging from one to two years, secured by first and
second deeds of trust on properties securing commercial, land, construction,
residential, bridge, and acquisition and development loans. Bridge loans
provide interim financing (up to six months) to enable commercial borrowers
to attempt to qualify for permanent financing. Currently, all of the
Companys mortgage loans require interest only payments with a balloon
payment of the principal at maturity. The Company has both the intent and
ability to hold mortgage loans until maturity and, therefore, mortgage loans
are classified and accounted for as held for investment and are carried at
cost. Interest income on loans is accrued by the effective interest method.
The Company does not recognize interest income on loans once they are
determined to be impaired. A loan is impaired when, based on current
information and events, it is probable that the Company will be unable to
collect all amounts due according to the contractual terms of the loan
agreement or when the payment of principal or interest is 90 days past due.
Cash receipts will be allocated to interest income, except when such
payments are specifically designated by the terms of the loan as principal
reduction or when management does not believe the Companys investment in
the loan is fully recoverable.
|
| |  | The Company also invests in mortgage loans that have interest reserves.
Loans with interest reserves require the borrowers to maintain interest
reserves funded from the principal amount of the loan for a period of time.
At December 31, 2001, the Company had outstanding principal on mortgage
loans that had interest reserves of approximately $35,700,000 and interest
reserves in the amount of approximately $912,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | The Company also sells full or partial interests in loans to related and
third parties at the discretion of the Manager. During the year ended
December 31, 2001, the Company sold loans to third parties in the amount of
$5,026,598. During the year ended December 31, 2001, the Company sold loans
to related parties in the amount of $10,000,000. The sale of all loans
resulted in no gain or loss in the accompanying financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

24



---



##### Table of Contents



Vestin Fund II, LLC

NOTES TO FINANCIAL STATEMENTS  CONTINUED

December 31, 2001 and 2000

NOTE A  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES- Continued



| |  | 7. Allowance for Loan Losses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The Company establishes an allowance for possible credit losses on mortgage
loans as losses are estimated to have occurred. Additions to the reserve
are based on an assessment of certain factors including, but not limited to,
estimated future losses on the loans, and general economic conditions.
Additions to the reserve are provided through a charge to earnings. Actual
losses on loans are recorded as a charge-off or a reduction to the loan loss
reserve. Subsequent recoveries of amounts previously charged off are added
back to the reserve.
|
| |  | 8. Fair Value of Financial Instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | The Financial Accounting Standards Boards Statement No. 107, Disclosures
about Fair Value of Financial Instruments, requires the disclosure of fair
value of certain financial instruments held by the Company. The following
methods and assumptions were used to estimate the fair value of financial
instruments included in the following categories:                                                                                                                                                                                                      



| | (a) |  | Certificate of Deposits and Short Term Investments: The carrying
amount of these instruments are at amortized cost which approximates
fair value.                                                                                                      
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | Investment in Mortgage Loans: The carrying value of these
instruments approximates the fair value. The fair value is estimated
based upon projected cash flows discounted at the estimated current
interest rates at which similar loans would be made.



| |  | 9. Net Income Allocated to Members                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Net income allocated to members is computed by dividing income available to
members by the weighted average number of membership units outstanding for
the year.                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | 10. Segments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | The Company operates as one business segment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | 11. New Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  | On July 20, 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) 141, Business
Combinations,and SFAS 142, Goodwill and Intangible Assets. SFAS 141 is
effective for all business combinations completed after June 30, 2001. SFAS
142 is effective for fiscal years beginning after December 15, 2001;
however, certain provisions of this Statement apply to goodwill and other
intangible assets acquired between July 1, 2001 and the effective date of
SFAS 142. Major provisions of these Statements and their effective dates
for the Company are as follows:



| |  |  | All business combinations initiated after June 30, 2001 must use
the purchase method of accounting. The pooling of interest method of
accounting is prohibited except for transactions initiated before July
1, 2001.                                                                                                               
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Intangible assets acquired in a business combination must be
recorded separately from goodwill if they arise from contractual or
other legal rights or are separable from the acquired entity and can be
sold, transferred, licensed, rented or exchanged, either individually
or as part of a related contract, asset or liability.

25



---



##### Table of Contents



Vestin Fund II, LLC

NOTES TO FINANCIAL STATEMENTS  CONTINUED

December 31, 2001 and 2000

NOTE A  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES- Continued



| |  | 11. New Accounting Pronouncements- Continued
| |  | --------------------------------------------



| |  |  | Goodwill, as well as intangible assets with indefinite lives,
acquired after June 30, 2001, will not be amortized. Effective January
1, 2002, all previously recognized goodwill and intangible assets with
indefinite lives will no longer be subject to amortization.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Effective January 1, 2002, goodwill and intangible assets with
indefinite lives will be tested for impairment annually and whenever
there is an impairment indicator.                                                                                                  
|
| |  |  | All acquired goodwill must be assigned to reporting units for
purposes of impairment testing and segment reporting.                                                                                                                                                    



| |  | The adoption of these standards will not have a material impact on the
Companys financial position or results of operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | In August 2001, the Financial Accounting Standards Board issued SFAS 144,
Accounting for the Impairment or Disposition of Long Lived Assets. This
Statement supersedes SFAS 121, Accounting for the Impairment of Long-lived
Assets and for Long-lived Assets to be Disposed of,and the Accounting and
Reporting Provisions of Accounting Principles Board Opinion No. 30,
Reporting Results of Operations  Reporting the Effect of Disposals on a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions for the Disposal of a Segment of the Business. This
Statement retains the fundamental provisions of SFAS 121 for recognition and
measurement of impairment, but amends the accounting and reporting standards
for segments of business to be disposed of. The provisions of this
Statement are required to be adopted no later than fiscal years beginning
after December 31, 2001, with early adoption encouraged. We are currently
evaluating the impact of the adoption of SFAS 144 but do not expect its
impact to be material to the Companys financial position or results of
operations.

NOTE B  FINANCIAL INSTRUMENTS AND CONCENTRATIONS OF CREDIT RISK



| |  | Financial instruments with concentrations of credit and market risk include
cash and investments in mortgage loans.                                                                                                                                                                                                                                            
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The Company maintains cash deposit accounts and certificates of deposit
which, at times, may exceed federally insured limits. The Company has not
experienced any losses in such accounts and believes it is not exposed to
any significant credit risk on cash. As of December 31, 2001, the Company
had $7,837,602 in excess of the federally insured limits.
|
| |  | Concentration of mortgage loans exist in Nevada and Texas with approximately
39.2% and 26.3% of mortgage loan balances as of December 31, 2001. As such,
the Company has a significant geographic concentration of credit risk that
may be adversely affected by periods of economic decline.                                                                  

26



---



##### Table of Contents



Vestin Fund II, LLC

NOTES TO FINANCIAL STATEMENTS  CONTINUED

December 31, 2001 and 2000

NOTE B  FINANCIAL INSTRUMENTS AND CONCENTRATIONS OF CREDIT RISK- Continued



| |  | Concentrations of mortgage loans exist at December 31, 2001, in commercial,
construction, acquisition and development, and land loans. Concentrations
of mortgage loans also exist with the three largest borrowers which
represent approximately 30% of the total investment in mortgage loans at
December 31, 2001. Theses mortgage loans consist of acquisition and
development and commercial loans, located in Arizona, California, and
Hawaii, with a first lien position, earning between 10% and 14%, outstanding
balances of $35,658,375 and maturing from November 2001 through October
2003. As such, the Company has a significant product concentration and
concentration of credit risk with a few borrowers that may be adversely
affected by periods of economic decline.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | All of the Companys mortgage loans will require the borrower to make a
balloon payment of the principal at maturity. To the extent that a borrower
has an obligation to pay a mortgage loan in a large lump sum payment, its
ability to satisfy this obligation may be dependent upon its ability to
refinance the loan with another lender or raise a substantial amount of
cash. An increase in interest rates over the mortgage rate applicable at
origination of the loan may have an adverse effect on the borrowers ability
to refinance the loan.                                                                                                                                                                                                                               

NOTE C  INVESTMENT IN MORTGAGE LOANS



| |  | Investment in mortgage loans (are as follows) as of December 31, 2001:
| |  | ----------------------------------------------------------------------

|                            |  |   |             |  |  |  |       |  
|--------------------------- |  | - | ----------- |  |  |  | ----- | -
|Commercial                  |  | $ | 50,135,497  |  |  |  | 42.76 | %
|Construction                |  |   | 25,210,571  |  |  |  | 21.50 | %
|Acquisition and development |  |   | 18,156,395  |  |  |  | 15.49 | %
|Bridge                      |  |   | 8,030,064   |  |  |  | 6.85  | %
|Land                        |  |   | 15,610,554  |  |  |  | 13.32 | %
|Residential                 |  |   | 93,390      |  |  |  | 0.08  | %
|                            |  |   |             |  |  |  |       |  
|                            |  | $ | 117,236,471 |  |  |  | 100   | %
|                            |  |   |             |  |  |  |       |  
|First mortgages             |  | $ | 117,106,471 |  |  |  | 99.89 | %
|Second mortgages            |  |   | 130,000     |  |  |  | 0.11  | %
|                            |  |   |             |  |  |  |       |  
|                            |  | $ | 117,236,471 |  |  |  | 100   | %
|                            |  |   |             |  |  |  |       |  



| |  | Mortgages are secured by a full or divided interest in first and second
deeds of trust secured by the property.
| |  | ---------------------------------------------------------------------------------------------------------------
|
| |  | The following is a schedule of maturities of investment in mortgage loans as
of December 31, 2001:             

|                     |  |   |             | 
|-------------------- |  | - | ----------- | 
|2001 (past maturity) |  | $ | 5,675,873   | 
|2002                 |  |   | 99,933,312  | 
|2003                 |  |   | 11,627,286  | 
|                     |  |   |             | 
|                     |  | $ | 117,236,471 | 
|                     |  |   |             | 

27



---



##### Table of Contents



Vestin Fund II

NOTES TO FINANCIAL STATEMENTS  CONTINUED

December 31, 2001 and 2000

NOTE C  INVESTMENT IN MORTGAGE LOANS- Continued



| |  | The following is a schedule by geographic location of investment in mortgage
loans as of December 31, 2001:
| |  | -----------------------------------------------------------------------------------------------------------

|           |  |   |             |  |  |  |       |  
|---------- |  | - | ----------- |  |  |  | ----- | -
|Arizona    |  | $ | 13,429,333  |  |  |  | 11.45 | %
|California |  |   | 12,030,072  |  |  |  | 10.26 | %
|Hawaii     |  |   | 14,915,681  |  |  |  | 12.72 | %
|Nevada     |  |   | 45,993,741  |  |  |  | 39.23 | %
|New Mexico |  |   | 42,495      |  |  |  | 0.04  | %
|Texas      |  |   | 30,825,149  |  |  |  | 26.29 | %
|           |  |   |             |  |  |  |       |  
|           |  | $ | 117,236,471 |  |  |  | 100   | %
|           |  |   |             |  |  |  |       |  



| |  | At December 31, 2001, the Company did not have any loans with payments that
were delinquent over 90 days in regards to interest. At December 31, 2001,
the Company had one loan totaling $5,675,873 past the scheduled maturity, of
which the Company was in the process of foreclosure on this loan subsequent
to year end. The Company is currently in negotiation with the borrower and
anticipates full repayment of that loan in April 2002. However, there
can be no assurance that this will occur. In addition, our
Manager has granted extensions on seven loans pursuant to the terms of the
original loan agreements which permit extensions by mutual consent. Such
extensions are generally provided on loans where the original term was
twelve months or less and where a borrower requires additional time to
complete a construction project or negotiate take out financing. The
aggregate amount due to us from borrowers whose loans had been extended and
are in good standing as of December 31, 2001 was approximately $21,043,261.
As of December 31, 2001, these loans and all other mortgage loan payments
were current and performing according to their terms. Management has
evaluated the collectibility of the loans in light of the types and dollar
amounts of loans in the portfolio, adverse situations that may effect the
borrowers ability to repay, prevailing economic conditions and the
underlying collateral securing the loan. Accordingly, the Companys
management estimates that an allowance for loan losses is not necessary.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The Company has six mortgage loan products consisting of land, construction,
commercial building, bridge, residential, and acquisition and development
loans. Substantially all mortgage loans have effective interest rates
ranging from 10% to 16% at December 31, 2001. Revenue by product will
fluctuate based upon relative balances during the period. Due to the
similar nature of the effective interest rates, the Company does not report
revenues by product type.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

28



---



##### Table of Contents



Vestin Fund II, LLC

NOTES TO FINANCIAL STATEMENTS  CONTINUED

December 31, 2001 and 2000

NOTE D  REVOLVING LINE OF CREDIT



| |  | The Company has a revolving line of credit with a financial institution,
which provides for borrowing up to $2,000,000. There was no outstanding
balance as of December 31, 2001. The line of credit, which is secured by
the Companys certificates of deposit with First Hawaiian Bank, is payable
in monthly installments of interest only at 1.50% over the weighted average
interest rate paid on the First Hawaiian Bank certificates of deposit (3.75%
at December 31, 2001), maturing October 31, 2002. The interest rate will be
reset upon the occurrence of either a new drawing on the revolving line of
credit or at the maturity of the certificate of deposit. The agreement
contains covenants which the Company was in compliance with or received
waivers as of December 31, 2001.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE E  MEMBERS EQUITY



| |  | 1. Membership Units                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The Manager (in its Capacity as the Initial Member) shall contribute to the
capital of the Company such amount as it deems appropriate; provided that
the Manager shall be deemed to have contributed to the capital of the
Company an amount equal to expenses of the Company incurred in connection
with the Offering up to a maximum of $1,100,000, to the extent such expenses
are paid by the Manager to non-affiliated parties (offering expenses). As
defined in the Operating Agreement, offering expenses included legal and
accounting fees, registration expenses, printing fees and promotional and
marketing expenses. As of December 31, 2001, the Manager has contributed to
the capital of the Company $1,100,000 in connection with offering costs
incurred. The members shall contribute to the capital of the Company an
amount equal to $10.00 for each unit subscribed for by each member, with a
minimum subscription of 200 units per member. The total Capital
contribution of the members will not exceed $500,000,000 not including
reinvested distributions.
|
| |  | 2. Allocations and Distributions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  | In accordance with the Operating Agreement, the Companys profits, gains and
losses are to be credited to and charged against each member in proportion to
their respective capital accounts as of the close of business on the last day
of each calendar month.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  | Interest received on mortgage loans is distributed monthly to members,
members may elect to reinvest their distributions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | Distributions of proceeds from the repayment of principal on a mortgage loan
will be made to the members pro rata based on their capital accounts.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

29



---



##### Table of Contents



Vestin Fund II, LLC

NOTES TO FINANCIAL STATEMENTS  CONTINUED

December 31, 2001 and 2000

NOTE E  MEMBERS EQUITY- Continued



| |  | 3. Working Capital Reserves                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The Company is required by the Operating Agreement to maintain working
capital reserves of at least 3% of the aggregate capital accounts of the
members. This reserve is available to pay any future expenses in excess of
revenues, satisfy obligations of underlying security properties, expend money
to satisfy the Companys unforeseen obligations and for other permitted uses
of its working capital. Working capital reserves of up to 3% in cash or cash
equivalents, short-term investments and certificates of deposit are excluded
from the funds committed to mortgage investments in determining what
proportion of the offering proceeds and reinvested distributions have been
invested in mortgage loans. As of December 31, 2001, the Company had
$10,012,601 for its working capital reserves.

NOTE F  TRANSACTIONS WITH THE MANAGER AND ITS AFFILIATES



| |  | 1. Fees Paid by the Company
| |  | ---------------------------



| | a. |  | The Companys Manager is entitled to receive
      from the Company a management fee of up to 0.25% on an annual basis of the
      aggregate capital contributions, paid monthly in arrears. As of December 31,
      2001, management fees to the Manager totaled $86,832. The maximum amount
      of management fees were paid as of December 31, 2001.
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | The Manager will receive fees for reselling
      properties foreclosed upon. These fees are to be not greater than 3.00%
      of the proceeds where substantial service has been performed by the Manager.
      As of December 31, 2001, no such services were required, accordingly,
      no payments were paid to the Manager.                       



| |  | 2. Fees Paid by Borrowers
| |  | -------------------------



| | a. |  | The Manager receives fees of up to 5.00% of
      the principal amount of each loan as compensation for loan evaluation and
      processing fees. These fees shall be reasonable and shall be payable only
      for services actually rendered. As of December 31, 2001, the Manager
      earned loan evaluation and processing fees paid by borrowers in the amount
      of $65,000.                                        
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | The Manager will originate all loans the Company
      invests in. The Manager acts as broker for which it generally charges loan
      brokerage and origination fees of approximately 2.00% to 6.00% of the principal
      amount of each mortgage investment made during the year. As of December 31,
      2001, the Manager earned loan brokerage and origination fees paid by borrowers
      in the amount of $3,100,000.
|
| | c. |  | All of the Companys loans are to be serviced
      by the Manager, in consideration for which the Manager will receive up to
      0.25% annually of the total unpaid principal balance of each mortgage loan
      serviced. As of December 31, 2001, the Manager earned servicing fees
      paid by borrowers in the amount of $7,300.                                                                                       



| |  | The Manager will receive loan extension fees of 2.00% to 5.00% of the
outstanding principal as permitted by local law and local market conditions.
As of December 31, 2001, the Manager earned loan extension fees paid by the
borrowers in the amount of approximately $791,000.                                                         
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The Manager has the right to purchase from the Company the interest
receivable or principal on delinquent loans held by the Company. The Company
shall not sell a foreclosed property to the Manager or to another program in
which the Manager or its affiliates has an interest. As of December 31,
2001, no such transactions occurred.

30



---



##### Table of Contents



Vestin Fund II, LLC

NOTES TO FINANCIAL STATEMENTS  CONTINUED

December 31, 2001 and 2000

NOTE F  TRANSACTIONS WITH THE MANAGER AND ITS AFFILIATES



| |  | 3. Short-Term Investments in Certificates of LTD, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | As of December 31, 2001, the Company has an amount totaling $1,675,000
invested in certificates of LTD, Inc., an investment fund owned by the Chief
Executive Officer of Vestin Group, Inc. LTD, Inc. is an investment fund
offering 2001-Prime Plus One Certificates (Certificate), earning 5.75% at
December 31, 2001. The terms of the Certificates provide the subscriber
repayment of their funds in full or in part upon a thirty (30) day written
request. Subsequent to year end the Company liquidated its investment in
these certificates. The Certificates have been recorded on the balance sheet
as short-term investments  related party.
|
| |  | 4. Purchase of Loans from Vestin Fund I, LLC                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | During the year ended December 31, 2001, the Company purchased $21,289,763 in
mortgage loans from Vestin Fund I, LLC., a Company managed by the Manager.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | 5. Due to Managing Member                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | Due to Managing Member at December 31, 2001 consisted of a $80,000 advance,
deferred offering cost paid by the Manager of $142,448 and distributions
payable to the manager in the amount of $46,630. The advance does not
accrue interest and is due on demand.                                                                                                                                                                                                                                                                                                                                                                                           

NOTE G  SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

|                                                                       |      |  |         |   |         |  |         |         |         |  |      |           |  |  |   |           |  |  |   |           | 
|---------------------------------------------------------------------- | ---- |  | ------- | - | ------- |  | ------- | ------- | ------- |  | ---- | --------- |  |  | - | --------- |  |  | - | --------- | 
|                                                                       |      |  | First   |   | Second  |  | Third   |         | Fourth  |  |      |           | 
|                                                                       |      |  | Quarter |   | Quarter |  | Quarter |         | Quarter |  | Year
|                                                                       |      |  |         |   |         |  |         |         |         |  |     
|Revenues:                                                              |      |  |         |   |         |  |         |         |         |  |      |           |  |  |   |           |  |  |   |          
|                                                                       | 2001 |  |         |  |         |  | $       | 15,405  |         |  | $    | 1,094,999 |  |  | $ | 2,691,245 |  |  | $ | 3,801,649 | 
|Expenses:                                                              |      |  |         |   |         |  |         |         |         |  |      |           |  |  |   |           |  |  |   |          
|                                                                       | 2001 |  |         |  |         |  |         | 20      |         |  |      | 60        |  |  |   | 86,879    |  |  |   | 86,959    | 
|Net income:                                                            |      |  |         |   |         |  |         |         |         |  |      |           |  |  |   |           |  |  |   |          
|                                                                       | 2001 |  |         |  |         |  |         | 15,385  |         |  |      | 1,094,939 |  |  |   | 2,604,366 |  |  |   | 3,714,690 | 
|Net income allocated
to members per
weighted average
membership units: |      |  |         |   |         |  |         |         |         |  |      |           |  |  |   |           |  |  |   |          
|                                                                       | 2001 |  |         |  |         |  |         | .02     |         |  |      | .31       |  |  |   | .31       |  |  |   | .67       | 
|Weighted average
membership units:                                     |      |  |         |   |         |  |         |         |         |  |      |           |  |  |   |           |  |  |   |          
|                                                                       | 2001 |  |         |  |         |  |         | 635,912 |         |  |      | 3,535,728 |  |  |   | 8,466,617 |  |  |   | 5,548,510 | 

31



---



##### Table of Contents



Supplementary Information

32



---



##### Table of Contents



Report of Independent Certified Public Accountants
on Supplementary Information

Vestin Group, Inc.
Manager
Vestin Fund II, LLC

Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole of Vestin Fund II, LLC, as of December
31, 2001 and 2000, for the year ended December 31, 2001 and for the period from
December 7, 2000 (date of inception) through December 31, 2000, which are
presented in the preceding section of this report. The supplementary
information presented hereinafter is presented for purposes of additional
analysis and is not a required part of the basic financial statements. Such
information has been subjected to the audit procedures applied in the audit of
the basic financial statements and, in our opinion, is fairly stated, in all
material respects, in relation to the basic financial statements taken as a
whole.

Reno, Nevada
February 8, 2002

33



---



##### Table of Contents



Schedule II

Vestin Fund II, LLC

MORTGAGE LOANS ON REAL ESTATE
MORTGAGE LOAN ROLLFORWARD

|                             |                              |                          |             |   |             | 
|---------------------------- | ---------------------------- | ------------------------ | ----------- | - | ----------- | 
|Balance, December 7, 2000    |                              | $                        |            |  
|                             | Additions during the period  |                          |             |   |            
|                             |                              | New mortgage loans       |             |   |            | 
|                             |                              |                          |             |  
|                             | Deductions during the period |                          |             |  |            
|                             |                              | Collections of principal |             |   |            | 
|                             |                              |                          |             |  
|                             |                              |                          |             |  
|                             |                              |                          |             |  
|Balance at December 31, 2000 |                              |                          |             |  
|                             | Additions during the period  |                          |             |   |            
|                             |                              | New mortgage loans       |             |   | 154,669,007 | 
|                             |                              |                          |             |  
|                             | Deductions during the period |                          |             |   |            
|                             |                              | Collections of principal |             |   | 22,405,938  | 
|                             |                              | Mortgage loans sold      |             |   | 15,026,598  | 
|                             |                              |                          |             |  
|                             |                              |                          | 37,432,536  |  
|                             |                              |                          |             |  
|Balance at December 31, 2001 |                              | $                        | 117,236,471 |  
|                             |                              |                          |             |  

34



---



##### Table of Contents



Schedule IV

Vestin Fund II, LLC

MORTGAGE LOANS ON REAL ESTATE
MORTGAGE LOANS BY TYPE OF PROPERTY

December 31, 2001

|                            |  |          |        |             |  |             |             |          |  |             |            |  |  |  |             |        |  |   |   | 
|--------------------------- |  | -------- | ------ | ----------- |  | ----------- | ----------- | -------- |  | ----------- | ---------- |  |  |  | ----------- | ------ |  | - | - | 
|                            |  |          |        |             |  |             |             |          |  | Carrying    |            |  |  |  |             | Amount
|                            |  | Interest |        | Face Amount |  | Amount      |             | Maturity |  | Subject to 
|Type of Property            |  | Rate     |        | of Mortgage |  | of Mortgage |             | Date     |  | Delinquency
|                            |  |          |        |             |  |             |             |          |  |            
|Commercial                  |  |          | 10%-15 | %           |  | $           | 113,333,500 |          |  | $           | 50,135,497 |  |  |  | 03/02-10/03 |        |  | $ |  | 
|Construction                |  |          | 14%-15 | %           |  |             | 75,330,000  |          |  |             | 25,210,571 |  |  |  | 01/02-12/02 |        |  |   |  | 
|Acquisition and development |  |          | 13%-16 | %           |  |             | 52,913,043  |          |  |             | 18,156,395 |  |  |  | 12/02       |        |  |   |  | 
|Land                        |  |          | 10%-15 | %           |  |             | 20,325,000  |          |  |             | 15,610,554 |  |  |  | 12/01-12/02 |        |  |   |  | 
|Bridge                      |  |          | 14     | %           |  |             | 31,500,000  |          |  |             | 8,030,064  |  |  |  | 11/01-01/02 |        |  |   |  | 
|Residential                 |  |          | 14     | %           |  |             | 1,300,000   |          |  |             | 93,390     |  |  |  | 05/02       |        |  |   |  | 

35



---



##### Table of Contents



Schedule IV

Vestin Fund II, LLC

MORTGAGE LOANS ON REAL ESTATE
MORTGAGE LOANS BY LIEN POSITION

December 31, 2001

|              |  |             |             |          |  |             |        |          |  |             |             |  |  |  |             |        |  |   |   | 
|------------- |  | ----------- | ----------- | -------- |  | ----------- | ------ | -------- |  | ----------- | ----------- |  |  |  | ----------- | ------ |  | - | - | 
|              |  |             |             |          |  |             |        |          |  | Carrying    |             |  |  |  |             | Amount
|              |  | Face Amount |             | Interest |  | Amount      |        | Maturity |  | Subject to 
|Lien Position |  | of Mortgage |             | Rate     |  | of Mortgage |        | Date     |  | Delinquency
|              |  |             |             |          |  |             |        |          |  |            
|1st           |  | $           | 280,673,543 |          |  |             | 10%-16 | %        |  | $           | 117,106,471 |  |  |  | 11/01-10/03 |        |  | $ |  | 
|2nd           |  | $           | 14,028,000  |          |  |             | 10%-15 | %        |  | $           | 130,000     |  |  |  | 12/01-12/02 |        |  | $ |  | 

36



---



##### Table of Contents



Schedule IV

Vestin Fund II, LLC

MORTGAGE LOANS ON REAL ESTATE
MORTGAGE LOANS THAT EXCEED THREE PERCENT
OF THE PORTFOLIO

December 31, 2001

|                            |  |          |       |          |  |          |            |           |  |           |  |             |            |      |  |          |            |        |  |   |   |  |  | 
|--------------------------- |  | -------- | ----- | -------- |  | -------- | ---------- | --------- |  | --------- |  | ----------- | ---------- | ---- |  | -------- | ---------- | ------ |  | - | - |  |  | 
|                            |  |          |       |          |  |          |            |           |  |           |  |             |            | Face |  | Carrying |            | Amount
|                            |  | Interest |       | Maturity |  | Lien     |            | Amount of |  | Amount of |  | Subject to 
|Description of Loan         |  | Rate     |       | Date     |  | Position |            | Mortgage  |  | Mortgage  |  | Delinquency
|                            |  |          |       |          |  |          |            |           |  |           |  |            
|Commercial                  |  |          | 10.00 | %        |  |          | 12/11/2002 |           |  | 1st       |  | $           | 13,245,000 |      |  | $        | 12,995,000 |        |  | $ |  | 
|Commercial                  |  |          | 11.00 | %        |  |          | 10/22/2003 |           |  | 1st       |  |             | 15,150,000 |      |  |          | 11,627,286 |        |  |   |  | 
|Acquisition and Development |  |          | 14.00 | %        |  |          | 09/10/2002 |           |  | 1st       |  |             | 18,000,000 |      |  |          | 11,036,089 |        |  |   |  | 
|Land                        |  |          | 14.00 | %        |  |          | 04/30/2002 |           |  | 1st       |  |             | 12,500,000 |      |  |          | 8,000,000  |        |  |   |  | 
|Commercial                  |  |          | 14.00 | %        |  |          | 10/26/2002 |           |  | 1st       |  |             | 7,840,000  |      |  |          | 7,445,245  |        |  |   |  | 
|Construction                |  |          | 15.00 | %        |  |          | 02/25/2002 |           |  | 1st       |  |             | 14,000,000 |      |  |          | 6,210,625  |        |  |   |  | 
|Bridge                      |  |          | 14.00 | %        |  |          | 11/27/2001 |           |  | 1st       |  |             | 20,000,000 |      |  |          | 5,675,873  |        |  |   |  | 
|Construction                |  |          | 14.25 | %        |  |          | 01/01/2002 |           |  | 1st       |  |             | 5,350,000  |      |  |          | 4,703,590  |        |  |   |  | 
|Commercial                  |  |          | 12.50 | %        |  |          | 11/29/2002 |           |  | 1st       |  |             | 6,412,500  |      |  |          | 4,612,500  |        |  |   |  | 
|Commercial                  |  |          | 14.00 | %        |  |          | 06/29/2002 |           |  | 1st       |  |             | 5,250,000  |      |  |          | 4,246,000  |        |  |   |  | 
|Commercial                  |  |          | 14.00 | %        |  |          | 11/07/2002 |           |  | 1st       |  |             | 45,000,000 |      |  |          | 3,879,592  |        |  |   |  | 

37



---



##### Table of Contents






ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

There were no changes in or disagreements on any items dealing with accounting
and financial disclosure with the accountants during the fiscal year.




PART III




ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

The Company does not have any directors or officers. The Company is managed by
Vestin Mortgage. Vestin Mortgage is a wholly-owned subsidiary of Vestin Group,
Inc., a Delaware corporation, whose common stock is publicly held and is traded
on the NASDAQ under the symbol VSTN.

The directors and executive officers of Vestin Mortgage, Inc. are listed below:

|                     |  |     |    |       |  |                                     
|-------------------- |  | --- | -- | ----- |  | ------------------------------------
|Name                 |  | Age |    | Title
|                     |  |     |    |      
|Stephen J. Byrne     |  |     | 44 |       |  | Chief Executive Officer and Director
|Peggy S. May         |  |     | 32 |       |  | President                           
|Stephen A. Schneider |  |     | 55 |       |  | Vice President                      
|Michael V. Shustek   |  |     | 42 |       |  | Director                            
|Lance K. Bradford    |  |     | 35 |       |  | Treasurer, Secretary and Director   

The principal occupation and business experience for each of our officers and
directors and key employees, for at least the last five years, are as follows:

Stephen J. Byrne has been the Chief Executive Officer of Vestin Mortgage and
the Chief Operations Officer of Vestin Group since January 2001. Mr. Byrne has
also been a director of Vestin Mortgage since 1997 and of Vestin Group since
April 1999. From its inception in 1997 to 2000, Mr. Byrne was the President of
Vestin Mortgage. From 1999-2000, Mr. Byrne also served as the President of
Vestin Group. Mr. Byrne joined Del Mar Mortgage in June 1998 as its Senior
Lending Officer. In 1997, Mr. Byrne founded Vestin Mortgage which he owned and
operated before joining Del Mar Mortgage. From 1991 to 1997, Mr. Byrne served
as Vice President of Wells Fargo

Peggy S. May has been with Vestin Group since September 1995, and has been the
President of Vestin Mortgage since January 2001. From 1997 to 2000, Ms. May was
the Senior Vice President of Vestin Mortgage. She is responsible for all new
and existing clients, loan packages and manages investor relationships and
serves as the administrator of the corporate offices. Ms. May has over ten
years of experience in title, escrow and private lending.

Stephen A. Schneider has been Vice President of Vestin Mortgage since January
2001. From July 2000 to December 2000, Mr. Schneider was the Chief Operation
Officer of Vestin Group. Mr. Schneider is responsible for the maintenance of
all banking and financial relationships. Mr. Schneider has over 26 years
experience in the financial services industry. He worked at US Bank where he
managed the banks business banking department and underwrote loans for
companies with sales of $1 million to $10 million and maintained relationships
with the banks business customers. Mr. Schneider sits on the boards of Focus
Las Vegas and Leadership Las Vegas Youth as well as several other
organizations. He is responsible for the Vestin Foundation, a non-profit
organization aimed at funding local charitable organizations.

Michael V. Shustek has been a director of Vestin Mortgage and Chairman of the
Board of Directors, Chief Executive Officer and a director of Vestin Group
since April 1999. In 1995, Mr. Shustek founded Del Mar Mortgage, and has been
involved in various aspects of the real estate industry in Nevada since 1990.
In 1993, he founded Foreclosures of Nevada, Inc., a company specializing in
non-judicial foreclosures. In 1993, Mr. Shustek also started Shustek
Investments, a company that originally specialized in property valuations for
third-party lenders or investors and which continues today as the primary
vehicle for his private investment portfolio. In 1997, Mr. Shustek founded
Nevada First Bank, with the largest initial capital base of any new state
charter in Nevadas history. In 2000, Mr. Shustek co-authored a book, Trust
Deed Investments, on the topic of private mortgage lending. Mr. Shustek is a
guest lecturer at the University of Nevada, Las Vegas, where he also teaches a
course in Real Estate Law and Ethics. Mr. Shustek received a Bachelor of
Science degree in Finance at the University of Nevada, Las Vegas.

On November 9, 1998, the State of Nevada, Department of Business and Industry,
Financial Institutions Division and Del Mar Mortgage Inc., which is owned by
Mr. Shustek, settled allegations of noncompliance brought by the division. Del
Mar Mortgage neither admitted nor denied the divisions allegations. On
February 11, 1999, the division issued an order against Del Mar Mortgage, which
alleged violations of the Nevada regulatory statutes and established a
conservator to oversee Del Mar Mortgages operations. On February 16, 1999, Del
Mar Mortgage sued the division, contesting the order. On March 26, 1999, Del
Mar Mortgage and the

38



---



##### Table of Contents



division entered into a stipulated court order that effectively superceded the
November 1998 agreement. The stipulated court order also vacated the divisions
order and removed the conservator. Without admitting any facts, and solely to
settle these matters, Del Mar Mortgage agreed to assure compliance with
applicable law in all advertisements, solicitations of mortgage borrowers and
in its making and servicing of mortgage loans. Vestin Mortgage and Vestin
Group, as successors to the mortgage company business of Del Mar Mortgage,
agreed to adhere to the terms of the stipulation. Del Mar Mortgage also paid
$20,000 to the division under the November 1998 agreement, in addition to the
$30,000 Del Mar Mortgage had paid prior to February.

Lance K. Bradford has been a director, Treasurer and Secretary of Vestin
Mortgage since April 1999. Mr. Bradford has been the Chief Financial Officer,
President, Treasurer, and a director of Vestin Group since April 1999. From
1999 to 2000, Mr. Bradford was also the Corporate Secretary of Vestin Group.
Since 1992, Mr. Bradford has been a partner in L.L. Bradford & Company, Las
Vegas, Nevada, a Certified Public Accounting firm that he founded. From 1988 to
1991, Mr. Bradford served as an accountant with Ernst & Young International.
Mr. Bradford received a Bachelor of Science degree in Accounting from the
University of Nevada, in Reno, Nevada.




ITEM 11. EXECUTIVE COMPENSATION

Not Applicable.




ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

No person or entity owns beneficially more than 5% of the ownership interests
in us. Our Manager owns approximately 110,000 units or 0.90% of our capital as
of December 31, 2001.




ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Transactions with Management and Others

Management Fee

Our Manager is entitled to receive from us a management fee of up to 0.25% of
our aggregate capital contribution, paid monthly in arrears. The amount of
management fees paid to our Manager for the year ended December 31, 2001 was
approximately $87,000.

Amount Due to Managing Member

As of December 31, 2001, we owed our Manager a total of $269,078 for expenses
advanced on our behalf.

Loan Brokerage and Origination Fees

Our Manager received loan brokerage and origination fees ranging on all of the
mortgage loans held by us paid from borrowers. During 2001, our Manager earned
loan brokerage and origination fees on our loans paid by borrowers in the
amount of approximately $3,100,000.

Servicing Fees

Our Manager received from borrowers an annual servicing fee of 0.25% of the
outstanding principal balance of loans. During 2001, our Manager earned loan
servicing fees on our loans in the amount of approximately $7,300.

Extension Fees

Our Manager receives loan extension fees of 2.00% to 5.00% of the outstanding
principal as permitted by local law and local market conditions. As of December
31, 2001, our Manager earned loan extension fees paid by the borrowers in the
amount of approximately $791,110.

39



---



##### Table of Contents



Loan Evaluation and Processing Fees

Loan evaluation and processing fees are paid to our Manager from borrowers
under loans held by us. During 2001, our Manager earned loan evaluation and
processing fees on our loans paid by borrowers in the amount of approximately
$65,000.

Short-Term Instrument in LTD, Inc.

As of December 31, 2001, the Company has an amount totaling $1,675,000 invested
in certificates of LTD, Inc., an investment fund owned by the Chief Executive
Officer of Vestin Group, Inc. LTD, Inc. is an investment fund offering
2001-Prime Plus One Certificates (Certificate), earning 5.75% at December 31,
2001. The terms of the Certificates provide the subscriber repayment of their
funds in full or in part upon a thirty (30) day written request and
accordingly, subsequent to year end, the Company liquidated its investment in
these certificates. The Certificates have been recorded on the balance sheet as
short-term investments  related party.

Purchase of Loans from Vestin Fund I, LLC

During the year ended December 31, 2001, the Company purchased $21,289,763 in
mortgage loans from Vestin Fund I, LLC., a Company managed by the Manager.

40



---



##### Table of Contents






PART IV




ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K




EXHIBIT INDEX

|            |  |                            
|----------- |  | ---------------------------
|Exhibit No. |  | Description of Exhibits    
|            |  |                            
|3.1(1)      |  | Articles of Organization(1)
|10          |  | Operating Agreement(1)     



|(1) |  | Incorporated herein by reference to our S-11 Registration Statement filed
on December 21, 2000.
|--- |  | -----------------------------------------------------------------------------------------------




SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.

| |                     |                                                                                                             
| | ------------------- | ------------------------------------------------------------------------------------------------------------
| | Vestin Fund II, LLC
| |                     |                                                                                                             
| | By:                 | Vestin Mortgage, Inc., its sole manager                                                                     
| |                     |                                                                                                             
| | By:                 | /s/ Stephen J. Byrne                                                                                        
| |                     | Stephen J. Byrne
        Chief Executive Officer and Director
        (Principal Officer of Manager)        
| |                    
| |                     |                                                                                                             
| | By:                 | /s/ Lance K. Bradford                                                                                       
| |                     | Lance K. Bradford
        Director, Secretary and Treasurer
        (Chief Financial Officer of the Manager)
| |                    
| |                     |                                                                                                             
| | By:                 | /s/ Michael V. Shustek                                                                                      
| |                     | Michael V. Shustek
        Director of the Manager                                                          
| |                    

Dated: April 1, 2002

41