SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                          ----------------------------
                                    FORM 10-K
              Annual Report Pursuant to Section 13 or 15(d) of the
                         Securities Exchange Act of 1934

                   For the Fiscal Year Ended December 31, 2000
                          ----------------------------
                         Commission file number: 0-30507

                         PRIMECORE MORTGAGE TRUST, INC.
             (Exact Name of Registrant as Specified in its Charter)

               Maryland                                    94-3324992
   (State or other jurisdiction of                      (I.R.S. Employer
    incorporation or organization)                     Identification No.)

                                99 El Camino Real
                              Menlo Park, CA 94025
                    (Address of principal executive offices)

                                 (650) 328-3060
              (Registrant's telephone number, including area code)

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

              Securities registered under Section 12(b) of the Act:


                                      None

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

         Class A Convertible Preferred Stock, par value $0.01 per share
                                (Title of class)

Indicate  by check mark  whether the  registrant  (1) has 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 herein, 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. [____]

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates of the registrant. The aggregate market value shall be
computed by reference to the price at which the common equity was sold, or the
average bid and asked prices of such common equity, as of a specified date
within 60 days prior to the date of filing. All common equity is held by
affiliates. Class A Convertible Preferred Stock has been sold for $10 per share
<PAGE>

or has been exchanged for on a dollar-for-dollar basis at the rate of $10 per
share. Management owns 431,890 of the 21,011,281 shares of Preferred Stock
outstanding at March 26, 2001.

Note.--If a determination as to whether a particular person or entity is an
affiliate cannot be made without involving unreasonable effort and expense, the
aggregate market value of the common stock held by non-affiliates may be
calculated on the basis of assumptions reasonable under the circumstances,
provided that the assumptions are set forth in this Form.

              APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
                  PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the  registrant  has filed all documents and
reports  required  to be  filed by  Section  12,  13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities  under a plan
confirmed by a court. Not Applicable

                    APPLICABLE ONLY TO CORPORATE REGISTRANTS

Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date. 100 shares of common stock,
21,011,281 shares of Class A Convertible Preferred Stock, as of March 26, 2001

                       DOCUMENTS INCORPORATED BY REFERENCE

List hereunder the following documents if incorporated by reference and the
Part of the Form 10-K (e.g., Part I, Part II,  etc.) into which the document is
incorporated:  (1) Any  annual report  to security  holders;  (2) Any proxy or
information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933. None



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<PAGE>


PART I
------

Item 1.     Business.

The Company and Affiliates

Primecore Mortgage Trust, Inc. (the "Company") is a real estate investment trust
(REIT). We incorporated in Maryland on March 18, 1999, and began operations May
1, 1999. We fund and hold short-term construction mortgage loans that are made
to developers of for-sale, single-family and multi-unit residential real estate.
Most loans are written with 12 to 18 month maturity dates. Loan interest rates
are fixed and currently range from 11% to 13%. Loan origination fees are charged
to borrowers and are typically 4% of the loan commitment amounts. These fees are
earned when a loan is made, are advanced from loan proceeds, and are received
upon repayment of the loans. All loans are secured by recorded deeds of trust on
the property being developed, and title insurance protecting the position of the
deeds of trust is always a condition to making a loan. Most loans are secured by
first deeds of trust on the property being developed, although, under certain
circumstances and where the loan meets our requirements, we may accept a junior
deed of trust. To date, we have made loans only in Northern California, however,
there is no restriction on our ability to make or fund loans in other areas. We
do not engage in any foreign operations or derive any revenue from foreign
operations.

Primecore Funding Group, Inc., an affiliate, manages all of our affairs
pursuant to a management agreement dated October 1, 2000. We have no employees.
Our manager originates and services all of the mortgage loans that we make. Our
manager bears all operating expenses connected with originating and managing our
mortgage loan portfolio and receives a monthly management fee. At February 28,
2001, our manager serviced our portfolio of mortgage loans with an aggregate
balance of approximately $257,235,000 representing funds advanced on loan
commitments totaling approximately $417,938,000.

Susan Fox, one of our founders, is the President and sole shareholder of
Primecore Funding Group, Inc. Currently, under an agreement with Primecore
Funding Group, Primecore Properties, Inc., also an affiliate, performs services
for us that require a California real estate broker license. Consequently, all
references herein to services by our manager that require a California real
estate broker license refer to the services currently performed by Primecore
Properties, Inc.

We have other affiliates with whom we share common officers and some common
directors, but which have their own, independent business purposes. Our other
affiliates include 99 Investors, LLC, Eprime, Inc., and 99 El Camino Partners,
LLC. As described below, when determined to be in the Company's interest, our
affiliates may assist in loan workouts and become borrowers.

We have issued four classes of securities: (1) common stock (100 shares
outstanding); (2) Class A Convertible Preferred Stock ("Preferred Stock"); (3)
Series A short term notes; and (4) Series B short term notes.

Business Strategies

Our investment objective is to make relatively short-term loans on projects that
we believe are likely to ultimately sell for an amount well in excess of the
loan principal, plus interest at the agreed upon rate, and contractual loan
fees. We conduct, through our manager, centralized loan underwriting and
pricing, project evaluation, loan funding and loan servicing to maintain control
of the risks of operating a construction mortgage lending operation and managing
a portfolio of short-term construction mortgage loans. All of our loans are
secured by recorded deeds of trust, and are supported by detailed loan documents
that have been designed to protect our investment. Our manager manages the loans
in order to assure that disbursements are proper, and that projects are built,
to the maximum extent possible, according to stated budgets and timelines.

Our manager's business skills, principles, practices and policies make us
different from institutional new-home construction lenders. Nevertheless, we

                                       1
<PAGE>

face some competition in the business of originating and servicing construction
mortgage loans from banks, thrifts and other independent mortgage lenders. While
most of these entities have significantly greater resources, we compete
effectively due to: (1) our tax advantaged status as a REIT; (2) our manager's
experience in construction lending; (3) freedom from bureaucracy that allows
more flexibility in meeting borrower needs; and (4) freedom from some
regulatory-related administrative costs and requirements, which can result in
increased costs to the borrower due to delays in loan approval, construction or
funding of loans.

Dividend Policy and Distributions

In order to maintain our preferred status as a REIT, we are required to
distribute at least 95% of our annual real estate investment trust taxable
income. We intend to distribute 100% of our annual real estate investment trust
taxable income to our preferred shareholders. We currently make dividend
distributions monthly, although this is subject to change at the discretion of
our Board of Directors. So long as shares of preferred stock remain outstanding,
only holders of our preferred stock will receive dividends; and there will be no
cash dividends declared or paid on our common stock.

From the date we began operations on May 1, 1999, through December 31, 1999, we
paid monthly dividends to our shareholders of Class A Convertible Preferred
Stock of $.75 per share, representing an annualized rate of return of
approximately 11.3%. We declared and paid dividends totaling $1.14 per share for
the twelve-month period ending December 31, 2000, representing an annualized
rate of return of approximately 11.4%. As of July 1, 2000, we declared an
increase in dividends from an annualized rate of return of approximately 11.3%
to an annualized rate of return of approximately 11.5%.

Most of our dividend distribution decisions are determined under the Internal
Revenue Code. The Code requires that we accrue and recognize income on our
loans, including interest and loan fees, when earned. Under Generally Accepted
Accounting Principles ("GAAP"), which is used for financial purposes as opposed
to tax purposes, interest and loan fee income are recognized only after we
receive full repayment of a loan. As a result, our tax basis income differs from
net income determined according to GAAP.

Mortgage Lending

General Business Model. Our business plan is to make and hold to maturity a
portfolio of short-term construction mortgage loans for investment that
generates a net interest margin over time and allows us to take full advantage
of our REIT status. As of December 31, 2000, we had 117 loans outstanding to 75
different borrowers. The loans are made to developers of for-sale, single-family
and multi-unit residential real estate. Our loans often include funding for both
land acquisition and development. Most loans are written with 12 to 18 month
maturity dates. Loan interest rates are fixed and range from 11% to 13%. Loan
origination fees or points are charged to borrowers and are typically 4% of the
loan commitment amounts. All loans are secured by recorded deeds of trust on the
property being developed, and title insurance protecting the position of our
deeds of trust is always a condition to making a loan. Approximately 85% of the
loans at December 31, 2000 were secured by first trust deeds. To date, we have
made loans only in Northern California, however, there is no restriction on our
ability to make or fund loans in other areas.

All approved loans are subject to detailed loan documentation that has been
formulated by our manager's legal counsel for our specific purposes. Our manager
monitors all loans to assure that they are being properly administered and that
loan proceeds are properly disbursed. All loans provide for monthly payments of
interest only and a payment of principal in full at the end of the loan term.
Generally, in accordance with our loan documents, we will advance the interest
payments out of available loan proceeds to the developer on a monthly basis,
although our loan documents provide us with a right not to advance or to cease
such payments should our manager determine that conditions require such actions.
Loan fees are advanced out of the loan proceeds at the outset of the loan.
Generally, our loans require the borrower to make a "balloon payment" equal to
the principal amount, accrued interest and loan fees upon maturity of the loan.
The loan maturity date is the date of sale of the underlying real estate or the
date stated in the loan documents. Although we do not limit the amount of our
investment in any single construction loan, generally our lending criteria is up
to 65%-70% loan to projected completed value for first deeds of trust, and if we
elect to be in a junior position, up to 75% loan to value inclusive of all debt.

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<PAGE>

Management of the Company and Its Loan Portfolio. Primecore Funding Group, Inc.,
our affiliate, manages all of our business, subject to direction from our Board
of Directors. Our manager bears all operating expenses connected with
originating and managing our mortgage loan portfolio, and receives a monthly
management fee that is established by a written agreement. Our manager's
responsibilities, which may be satisfied by subcontracts with affiliates or
others, include:

     1.  Representing the Company in connection with arranging loans;

     2.  In accordance  with the directions of the Company's Board of Directors,
         investing or reinvesting any money of the Company;

     3.  Furnishing reports and statistical and economic research to the Company
         regarding the Company's real estate loan activities and the performance
         of its portfolio of loans;

     4.  Administering  the day-to-day  operations of the Company and performing
         administrative  functions necessary in the management of the Company,
         including the  collection of revenues,  the payment of the Company's
         expenses,  debts and obligations and the maintenance of appropriate
         computer services to perform such administrative functions;

     5.  Counseling the Company in connection with policy decisions to be made
         by the Board of Directors;

     6.  Overseeing the servicing of the Company's loans;

     7.  Establishing underwriting, appraisal and quality control procedures for
         the loans made by the Company;

     8.  Providing the Company with data  processing,  legal and  administrative
         services  to the extent  required  to implement  the  business strategy
         of the Company;

     9.  Providing all actions  necessary for compliance by the Company with all
         federal,  state and local regulatory  requirements  applicable to the
         Company in respect of its business activities,  including maintaining
         books and records and preparing or causing to be prepared all financial
         statements  required  under applicable regulations and contractual
         undertakings;

     10. Providing all actions  necessary to enable the Company to make required
         federal,  state and local tax  filings  and  reports  and  generally
         enable the Company  to  maintain  its  status as a REIT,  including,
         but not  limited  to, soliciting  stockholders for required information
         to the extent required by the REIT provisions of the Code;

     11.  Communicating  on behalf of the Company with the  stockholders  of the
          Company as  required  to satisfy  any  reporting  requirements  and to
          maintain effective relations with such stockholders; and

     12. Performing such other services as may be required from time to time for
         management and other activities relating to the assets and growth of
         the Company as the Board of Directors  shall  reasonably  request or
         the manager  shall deem appropriate under the particular circumstances.

       Our headquarters are the offices of our manager. We currently do not pay
any rent for our headquarters, as these expenses are borne by our manager. The
headquarters consist of 6,828 square feet of office space at 99 El Camino Real,
Menlo Park, California 94025 leased by our manager from 99 El Camino Partners,
LLC, an affiliate. The lease expires on May 31, 2009, and includes two 5 year
options expiring on May 31, 2019. We believe our present facilities are adequate
to meet our current business requirements and those of our manager, and that
suitable facilities for expansion will be available if and when necessary.

                                       3
<PAGE>

     Loan  Origination.  On  our  behalf,  our  manager  continuously  evaluates
prospective  construction loans. Our manager, with Primecore  Properties,  Inc.,
its real estate  brokerage  affiliate,  arranges  and  services all loans on our
behalf. Our manager employs persons skilled in loan  underwriting,  disbursement
and  monitoring,  and the various  legal  issues that may be involved  with real
estate lending.

Mortgage loan originations are generally generated from new loans made to
existing borrowers, referrals from real estate and mortgage loan brokers and
existing borrowers, and contacts from prospective borrowers. Proposed loans are
evaluated by our manager to determine if the loan is of a type typically made by
us, if the security for the loan and the loan to value ratio meets our
investment standards, and if the loan can be priced in a manner to meet our
investment criteria and objectives. The underwriting decision to provide a loan
to an applicant is based primarily upon the loan to completed value ratio for
the underlying collateral. Our manager will generally rely on analysis by its
representatives and not on third party appraisals in determining whether to
originate a particular construction loan.

Collateral valuation. Collateral valuation receives special attention in the
underwriting of our construction loans. Our manager utilizes the experience of
its employees and employees of its real estate brokerage affiliate to make
assessments of a proposed project's viability and projected value, and to make
sure that a loan meets our loan criteria. In the loan evaluation process,
primary emphasis is placed on the ability of the underlying collateral to
protect against losses in the event of default by the borrower. The evaluation
is based on the projected market value of the proposed project, using various
tools, including comparable sales of similar properties and projections of
market appeal and demand at completion. The goal of the underwriting process is
to achieve a comfort level that the projected completion value of the property
will support full repayment of the outstanding loan balance.

Loan Servicing. Our manager has an established operation for servicing all
construction loans that we make, with the goal being protection of loan funds
and collateral for loans. Servicing involves taking all steps necessary to
administer the loan and collect loan payments, including monitoring the
propriety of loan draw requests, monitoring progress of a project, accounting
for principal and interest, dealing with any delinquent borrowers, arranging
loan workouts or extensions where appropriate, and supervising foreclosures and
property disposition in the event of defaults. In order to assure proper use of
loan funds, loan proceeds are disbursed on a course of construction basis, and
only after our manager has received satisfactory evidence of construction
progress. Using its experience in construction lending and its knowledge of real
estate development, our manager monitors the progress of all development
projects securing our loans, and takes steps to assure that the development
projects are being built in a timely manner, within an agreed budget. Before
making disbursements of loan proceeds, borrower disbursement requests are
verified by invoices from the developer or its subcontractors, and by periodic
site inspections of progress. In addition, our manager may require the
submission of signed labor and material lien releases by the builder in
connection with each completed phase of the project before making any periodic
disbursements of a loan. We believe that the servicing of our mortgage loans
will be the most effective method of managing our credit risk. Our manager
expends substantial resources to protect against or mitigate losses on loans.
Our manager's experience has demonstrated that properly managing loans, from
both an underwriting and a servicing standpoint, is the best protection in
keeping the level of delinquencies and losses in our portfolio at a minimum.

Loan Defaults and Affiliate Loans. Our manager's servicing of loans is designed
to protect against loan delinquencies and defaults. However, on limited
occasions we have been required to declare defaults and commence foreclosure
proceedings against borrowers. We have a policy not to take title to real
property through foreclosure or otherwise, in order to retain the primary
business goals of the REIT, and to avoid risks inherent in real property
ownership and development. We have previously relied on our affiliates, 99
Investors LLC and Eprime, Inc., to assume defaulted loans. Some of our directors
and executive officers are principals of these affiliates, and have personally
guaranteed the assumed obligations. Our affiliates are under no legal obligation
to assume defaulted loans, and our principals are under no legal obligation to
guarantee such loans; they have done so for the primary purpose of allowing us
to avoid any risk inherent in real estate development. There is no guarantee
that our affiliates or principals will continue to assume defaulted loans.

                                       4
<PAGE>


In exchange for our affiliates' assumption of defaulted loans, our affiliates
bear the risk of loss on loans made to them and loans they assume, particularly
where they pledge additional collateral to support the assumed loans, but they
also will receive the benefit of any profits to be realized from the successful
development and ultimate sale of the completed properties if the properties sell
for more than the principal and interest due on our loan.


As of December 31, 2000, the funded amount of affiliate loans was $42,050,737,
representing 19.43% of funds disbursed on all loans, and the committed amount of
affiliate loans was $73,850,000, representing 16.92% of all loan commitments as
of such date. See Note 4 to the Financial Statements attached to this Form 10-K
for additional information.

Sales of construction mortgage loans. We plan to hold mortgage loans to
maturity, and have not embarked on selling loans in any secondary market. Also,
the REIT provisions of the Internal Revenue Code limit, in some respects, our
ability to sell mortgage loans. We may, however, decide to sell assets from time
to time for a number of reasons, including, without limitation: (1) to dispose
of an asset as to which credit risk concerns have arisen; (2) to reduce interest
rate risk; (3) or to re-structure our balance sheet when our management deems it
advisable. We will select any mortgage loans to be sold according to the
particular purpose the sale is intended to serve. Our Board of Directors has not
adopted a policy that would restrict management's authority to determine the
timing of sales or the selection of mortgage loans to be sold.

Other REIT qualified investments. As part of the acquisition of a particular
loan, or through a foreclosure we may acquire an equity interest in the real
property securing the loan in the form of a shared appreciation interest or
other equity participation. We also may invest our funds directly in real
property, if in the opinion of our Board of Directors it is in our best
interest. We may also purchase the stock of other mortgage REITs or similar
companies if we believe that they will yield attractive returns on capital and
otherwise not violate any requirements for maintaining our status as a REIT. We
do not, however, presently intend to make these investments.


Risk Factors.  For a discussion of risks attendant to our business,  please see
"Quantitative and Qualitative  Disclosures About Market Risk."

Item 2.      Properties.

We do not own any real property.

Item 3.     Legal Proceedings.

We are not presently subject to any material litigation nor, to our knowledge,
is any litigation threatened against us, other than routine litigation that may
arise in the ordinary course of business, some of which may be covered by
insurance and all of which collectively is not expected to have a material
adverse effect on our cash flows, financial condition or results of operations.

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

No matters were submitted to a vote of our stockholders during the fourth
quarter of the year ended December 31, 2000.

PART II
-------

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

Market Information. There is no public trading market for our Preferred Stock or
our common stock, nor is one expected to develop. We are authorized to issue up
to 50,000,000 shares of stock, 40,000,000 as Preferred Stock and 10,000,000 as
common stock. At December 31, 2000, there were 19,946,445 shares of Preferred
Stock and 100 shares of common stock, issued and outstanding, net of redemptions
and shares issued pursuant to our dividend reinvestment plan. As of December 31,
1999, there were issued and outstanding 18,985,118 shares of Preferred Stock and
100 shares of common stock. The number of outstanding shares is subject to
change because of shareholder redemptions and dividend reinvestments.

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<PAGE>

All sales of stock were exempt from the registration requirements of the
Securities Act of 1933 pursuant to Regulation D, Rule 506. All stock was sold
only to accredited investors, as defined in Regulation D, Rule 501 (a)(4), (5)
or (6) under the 1933 Securities Act. Appropriate legends were placed on each
stock certificate.

Holders.  As of March 26, 2001,  there were 1,225  holders of record of our
Preferred  Stock and three holders of record of our common stock.

Dividends. Holders of our Preferred Stock are entitled to dividends declared and
payable at such times and in such amounts as the Board of Directors may from
time to time determine from amounts legally available for such distribution. For
so long as shares of Preferred Stock shall remain outstanding, there shall be no
dividends declared or paid nor any distributions made on the common stock, nor,
without the written consent of holders of 66 2/3% of the outstanding Preferred
Stock, shall any shares of common stock be purchased or redeemed for a price in
excess of their par value.

Preferred Stock dividends are paid monthly in arrears and were $1.14 per share
(based on weighted average Class A Convertible Preferred Stock shares
outstanding of 18,955,134) for the year ended December 31, 2000, compared with
$0.75 per share (based on weighted average Class A Convertible Preferred Stock
shares outstanding of 17,390,047) for the period from inception (March 18, 1999)
to December 31, 1999. The terms of our dividend reinvestment plan permit our
shareholders to reinvest dividends in additional shares of Class A Convertible
Preferred Stock, currently at $10 per share.

Item 6.   Selected Financial Data.

You should read the following financial and operating data together with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our audited financial statements included elsewhere in this Form
10-K.

Capitalization
Our capitalization, as of December 31, 2000, was as follows:

 Borrowings:
   Short term unsecured notes                            $  38,787,264
   Secured line of credit                                    6,644,692
                                                   -------------------
            Total borrowings                                45,431,956
                                                   -------------------
 Shareholders Equity
   Class A Convertible preferred stock-
          19,946,445 shares outstanding                    199,285,861
   Common stock - 100 shares outstanding (1)                         1
                                                   -------------------
       Total borrowings and shareholders' equity         $ 244,717,818
                                                   ===================

(1)    Our founders have purchased a total of 100 shares of common stock at
       $.01 per share.


In order to maintain our preferred status as a REIT, we are required to
distribute at least 95% of our real estate investment trust taxable income. We
intend to distribute 100% of our annual taxable income to our preferred
shareholders. We currently make dividend distributions monthly, although this is
subject to change at the discretion of our Board of Directors.

For the most part, our dividend distribution decisions are determined under the
Internal Revenue Code. The Code requires that we accrue and recognize income on

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<PAGE>

our loans, including interest and fees, when earned. Under GAAP, which is used
for financial reporting purposes as opposed to tax purposes, interest and fee
income are recognized only after we receive full repayment of our loans. Thus,
our tax basis income differs from net income determined according to GAAP.
Accordingly, our audited financial statements will reflect a deficit due to the
difference in income recognition rules.


The selected financial data set forth below has been derived from our audited
financial statements included elsewhere in this annual report.

                                                                     Period from
                                                                       inception
                                                Year Ended   (March 18, 1999) to
                                         December 31, 2000     December 31, 1999
                                       -------------------   -------------------

                                        (In thousands, except per share amounts)

  Total assets........................... $       216,545      $        186,224
  Total short-term debt..................          45,432                 9,039
  Convertible preferred stock............         199,286               189,851
  Retained deficit.......................         (34,122)              (16,085)

  Operating Results under
     Generally Accepted
     Accounting Principles:
     Principles:
       Revenues..........................          15,140                 2,583
       Net income (loss).................           3,572               ( 2,987)

  Preferred stock dividends..............          21,610                13,098

  Loss allocable to each
     common share:
       Basic and Diluted.................        (180,375)             (160,845)

  Cash flows from (used by):
       Operating activities..............           6,076                (1,434)
       Investing activities..............         (29,986)              (26,887)
       Financing activities..............          23,234                28,997

  Tax Basis Operating Results:
       Tax basis income..................          21,988                11,127

  Preferred stock dividends per share....  $         1.14                  0.75


Change in Accounting for Interest Expense

Effective January 1, 2000, we began capitalizing interest expense on investments
in real estate under development and investments in real estate under
development by affiliates. This change was made to more accurately match the
cost of our investments with the recognition of our revenue. It is our opinion
that interest incurred prior to January 1, 2000 was not material.


Item 7.    Management's Discussion and Analysis of Financial Condition and
           Results of Operations.

General

Our material financial transactions have been purchasing and holding a portfolio
of construction mortgage loans.

Statements contained in this Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and elsewhere in this Form 10-K,

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<PAGE>

which are not historical facts, may be forward-looking statements. Such
statements are subject to risks and uncertainties that could cause actual
results to differ materially from those projected. Investors are cautioned not
to attribute undue certainty to these forward-looking statements, which speak
only as of the date of this registration statement. We undertake no obligation
to publicly release any revisions to these forward-looking statements to reflect
events or circumstances after the date of this registration statement or to
reflect the occurrence of unanticipated events, other than as required by law.

Overview

Subject to the direction and oversight of our Board of Directors, our day-to-day
operations are managed by our manager. We have no employees.

We began operations on May 1, 1999, concurrent with the first interim closing of
a private offering of 14,575,664 shares of our Class A Convertible Preferred
stock at $10 per share primarily in exchange for beneficial interests in trust
deeds on real property securing loans and accrued interest totaling
$145,756,640. Purchasers of our shares were primarily investors in trust deeds
managed by Primecore Funding Group, Inc. who invested in those trust deeds
before our formation and exchanged their interests for our stock at $10 per
share on a dollar for dollar basis. A third and final closing was completed as
of August 31, 1999. A total of 18,048,772 shares were sold.

We completed a second private placement on October 29, 1999, resulting in the
issuance of 1,147,743 shares of Class A Convertible Preferred stock. All real
property securing the trust deeds received in these transactions was either
under development or held for development. We undertook these placements to
provide for our initial capitalization and to convert the trust deed interests
of Primecore Funding Group, Inc. clients into shares of our Class A Convertible
Preferred stock.

We began a new equity private placement offering of an additional 20,000,000
shares of Class A Convertible Preferred Stock at $10.00 per share in August
2000, through which we have issued 3,912,424 shares of Class A Convertible
Preferred Stock as of February 28, 2001, for net proceeds of $39,124,240. This
placement was undertaken to purchase and fund additional and existing
construction mortgage loans and for working capital purposes. This placement is
ongoing, and is presently scheduled to close on or before August 31, 2001.

We have elected to be taxed as a REIT under the Internal Revenue Code of 1986,
as amended (the "Code"), and as such, are required to distribute at least 95
percent of our taxable income annually, subject to adjustments. Our manager
expects that the cash for such distributions will be generated from our
day-to-day operations, although we may also borrow funds to make distributions.

We may experience high volatility in financial reporting net income and tax
basis income from quarter to quarter and year to year, primarily as a result of
fluctuations in interest rates, timing of completion of our investments in real
estate under development and general economic conditions in the greater San
Francisco Bay Area. Our operating results will depend, in part, upon our ability
to manage our interest rate and credit risks while maintaining our REIT status.

Results of Operations

Earnings per share are computed using the weighted average common shares during
the year ending December 31, 2000. During the period ending December 31, 2000,
after reducing net income by dividends of $21,609,791 paid to preferred
shareholders, net loss allocable to common shareholders for the year ended
December 31, 2000 was $18,037,480, or a loss of $180,375 per weighted average
common share, compared with a net loss allocable to common shareholders for the
period from inception on March 18, 1999 through December 31, 1999 of
$16,084,535, or $160,845 per weighted average common share. This increase in net
loss per share is primarily due to a longer time period in 2000 (12 full months
versus approximately five full months of operation in 1999), more preferred
shares outstanding and therefore more preferred dividends paid.

The loans we make are considered real estate acquisition, development and
construction ("ADC") investments for financial reporting purposes. As of
December 31, 2000, our ADC investments totaled approximately $216,413,000 and as

                                       8
<PAGE>

of December 31, 1999, our ADC investments were approximately $183,739,000.
Funding commitments on these loans totaled approximately $436,383,000 at
December 31, 2000 and $354,008,000 at December 31, 1999. For a discussion of
these loan arrangements, see the notes to the financial statements.

We realized substantially all of our revenue from repayment of loans on
completed real estate developments, comprised of interest income earned at
accrual rates ranging from 11 to 13 percent over the life of the loan
investments and loan points of 4 percent of the loan commitment amounts, less
capitalized interest. Income from completed real estate developments totaled
$15,103,946 for the year ended December 31, 2000 compared with $2,566,301 for
the period from inception (March 18, 1999) to December 31, 1999.

As investments in real estate under development for financial reporting
purposes, our loans are stated at the lower of cost or estimated fair value in
our financial statements. We do not carry a reserve for loan losses. We will
write-down the carrying value of an impaired loan to net realizable value if we
learn of deterioration in economic or market conditions or other events that
have adversely affected the value of the loan before it repaid. If we incur a
loss upon repayment of a loan, the loss will be charged to income. Any
write-down or loss will have a direct, adverse effect upon our earnings. As of
December 31, 2000, there were no impairments of the carrying values of our
investments. See note 2 to our financial statements.

The following table summarizes the differences between net income under GAAP,
and taxable income:
                                                                     Period from
                                               Year Ended              Inception
                                        December 31, 2000    (March 18, 1999) to
                                                               December 31, 1999
                                   ---------------------- ----------------------
 Net income (loss) as
          reported................       $    3,572,311         $   (2,986,558)
     Net effect of
          GAAP tax timing
          differences due
          to ADC accounting.......           18,190,527             14,113,961
        Other differences.........              225,000                     --
Taxable income....................           21,987,838             11,127,403
                                   ---------------------- ----------------------
Preferred stock dividends.........       $   21,609,791         $   13,097,977
                                   ====================== ======================

We incurred expenses of $11,568,025 during the year ended December 31, 2000,
compared with $5,569,956 during the period from inception (March 18, 1999)
through December 31, 1999.

Management fees were $10,967,249 for the year ended December 31, 2000 compared
with $5,276,938 for the period from inception (March 18, 1999) through December
31, 1999. The increase in management fees is attributable to 1) our only having
five full months of operations in 1999 compared with twelve months in 2000 and
2) the increase in loan commitments from approximately $354,008,000 as of
December 31 1999 to approximately $436,383,000 as of December 31, 2000.
Effective January 1, 2001, the management fee was increased from .22% per month
to .25% per month of the total loan commitment amount.

Interest cost associated with our notes payable and secured line of credit was
$4,680,818 for the year ended December 31, 2000, compared with $241,152 for the
period from inception (March 18, 1999) through December 31, 1999. Our interest
expense during 1999 was lower than in 2000 primarily because we were unable to
issue shares of preferred stock from November 1999 through July 2000 while we
processed our Form 10/A registration with the Securities and Exchange
Commission. During that period we funded our portfolio growth with unsecured
notes payable which caused our interest costs to increase. All interest incurred
in 2000 was capitalized. Interest incurred in 1999 was expensed. The effect of
not capitalizing interest in 1999 is not material.

General administrative and other expenses were $600,776 for the year ended
December 31, 2000, compared with $51,866 for the period from inception (March
18, 1999) through December 31, 1999. We have no employees, and our general and

                                       9
<PAGE>

administrative and other expenses consist primarily of professional fees. The
increase in professional fees is attributable to 1) our only having five full
months of operations in 1999 compared with twelve months in 2000 and 2)
increased costs related to becoming an SEC registrant in June 2000.

Effective January 1, 2000, we changed our method of accounting for interest
charges. Prior to January 1, 2000, we had expensed all interest incurred. This
change was made to reflect all of the costs of our investments in real estate
under development and real estate under development by affiliates on our balance
sheet.

Liquidity and Capital Resources

Liquidity means the need for, access to and uses of cash. Our principal demands
for liquidity are cash for operations, including funds that are required to
satisfy obligations under existing loan commitments, interest expense associated
with our indebtedness, debt repayments and distributions to shareholders. As of
December 31, 2000, we had a bank overdraft of $3,086,941 because all our cash is
automatically swept against our line of credit. In the near term, our principal
sources of liquidity are the funds available from issuance of unsecured notes
payable, sales of preferred stock under this private placement and repayments of
our real estate investments.

We had unsecured borrowings of $38,787,264 at December 31, 2000 on our Series A
and Series B notes compared with $6,844,474 at December 31, 1999, issued to
accredited investors through private placement. The notes have varying
maturities of up to one year from the date of issuance and bear interest at
rates between 11 and 13 percent with interest payable monthly in arrears. We
expect that proceeds generated from completed real estate developments and
additional equity placements and note issuances will be sufficient to fully
repay notes on or before their scheduled maturity dates.

During 2000, we repaid the $2,195,000 balance owed on a $3,000,000 line of
credit and obtained a new $10,000,000 line of credit with a commercial bank.
Repayment is secured by our assets, is guaranteed by our manager and another
affiliate, carries interest at prime plus 1.25 percent (10.75 percent at
December 31, 2000) and matures in September 2001. Outstanding borrowings under
the line of credit as of December 31, 2000 were $6,644,692.

Year 2000 Issue

Our entire information technology infrastructure is provided by our manager. To
date, our manager has not experienced any material difficulties with respect to
its internal business-critical systems used in connection with the operations of
our manager or our operations, nor does it anticipate any material difficulties
in the future.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk.
An investment in our stock involves a high degree of risk. Among other things,
some of the principal risks are: the real estate lending business may be
adversely affected by periods of economic slowdown, which may be accompanied by
declining real estate values on properties securing repayment of loans;
construction mortgage loans involve greater risks of repayment than loans
secured by property that has already been improved since completion market
valuation of a given project can be highly speculative and subject to
unanticipated conditions; there is no public market for our securities, and
liquidity is not assured; under our business model, loan commitments will
generally exceed immediately available cash resources, and failure to obtain
repayment of loans in our portfolio, or a failure to maintain sufficient equity
would affect our ability to fund commitments; since we have no employees, if our
manager refused or became unable to continue to serve us, and a proper
replacement were not found, this would materially impact our business.

We make loans at fixed rates of interest. To the extent that prevailing market
interest rates change during the holding period, the value of our loans may be
either adversely or positively affected. When a loan matures, generally within a
12 to 18 month period, it is subject to a new interest rate, determined by us,
based upon current conditions. Since we intend to hold all loans until they are
repaid, we do not believe that changes in market interest rates have a material
impact on the value of the Company.

                                       10
<PAGE>

Risk Factors

In addition to the foregoing, and other information contained or incorporated
into this Form 10-K, the following is a discussion of risk factors that we
believe are material at this time and which readers of this Form 10-K should
consider.

General Risks Related to Construction Mortgage Lending

Real estate security. Our securities are subject to risks inherent in real
estate lending. Many of the risks of holding mortgage loans are similar to the
risks of investing directly in the real estate securing the mortgage loans. This
may be especially true in the case of a relatively small or less diverse pool of
mortgage loans. If there is a default on the mortgage loan, the ultimate extent
of our loss, if any, may only be determined after a foreclosure of the mortgage
encumbering the property and, if we take title to the property, upon liquidation
of the property. Factors such as the title to the property or its physical
condition, including environmental considerations and state of construction, may
make a third party unwilling to purchase the property at a foreclosure sale or
for a price sufficient to satisfy the obligations with respect to the related
mortgage loan. Foreclosure laws may protract the foreclosure process. In
addition, the condition of a property may deteriorate during the pendency of
foreclosure proceedings. Some borrowers may become subject to bankruptcy
proceedings, in which case the amount and timing of amounts due may be
materially adversely affected. Even if the real property provides adequate
security for the mortgage loan, substantial delays could be encountered in
connection with the liquidation of a defaulted mortgage loan and a corresponding
delay in the receipt and reinvestment of principal and interest payments could
occur.

Real estate market conditions. The real estate lending business may be adversely
affected by periods of economic slowdown or recession, which may be accompanied
by declining real estate values. Any material decline in real estate values
reduces the ability of borrowers to use real estate equity to support borrowings
and increases the loan-to-value ratios of mortgage loans previously made,
thereby weakening collateral coverage and increasing the possibility of a loss
in the event of default. In addition, delinquencies, foreclosures and losses
generally increase during economic slowdowns and recessions.

Loans on properties not yet constructed. A mortgage loan made to finance a
property that is not yet constructed will generally involve greater risks than a
mortgage loan on property that has been constructed. In the case of a property
already constructed, market value at the time the loan is made is more readily
ascertainable from current market valuations. In the case of a property not
already constructed, there can be no assurance that the improvements to be
constructed can be accomplished with available funds or in a timely manner. Sale
or refinancing of the completed project generally provides the funds for
repayment of a construction mortgage loan. While analyses are made to predict
the completed market value of the development project, such analyses are subject
to unanticipated changes over which we may have no control. Since market value
cannot be determined until a property is actually sold in the marketplace, the
market valuation of a proposed construction project can be especially
speculative.

Economic conditions. The performance of a mortgage loan portfolio will depend
on, among other things, the level of net interest income generated by the
mortgage loans, the market value of the mortgage loans and the supply of and
demand for construction mortgage loans. Prepayment rates, interest rates,
borrowing costs and credit losses depend upon the nature and terms of the
mortgage loans, the geographic location of the properties securing the mortgage
loans, conditions in financial markets, the fiscal and monetary policies of the
United States government and the Board of Governors of the Federal Reserve
System, international economic and financial conditions, competition and other
factors, none of which can be predicted.

Changes in interest rates. The levels of and fluctuations in interest rates,
which affect the ability to earn a spread between interest received on loans and
the costs of borrowings, may directly affect profitability. Profitability is
likely to be adversely affected during any period of unexpected or rapid changes
in interest rates. For example, a substantial or sustained increase in interest
rates could adversely affect the interest rate differential between newly
originated loans and the cost of borrowing. A significant decline in interest
rates could decrease the size of our loan portfolio by increasing the level of
loan prepayments. While we monitor the interest rate environment, and generally

                                       11
<PAGE>

should earn a positive spread between interest paid on borrowed funds and
interest earned on mortgage loans, there can be no assurance that our
profitability would not be adversely affected during any period of changes in
interest rates.

Environmental liabilities. In the event that hazardous substances are found to
have contaminated properties secured by mortgage loans, the value of the real
property may be diminished. If forced to foreclose on a defaulted mortgage loan
on a contaminated property, we might potentially become subject to environmental
liabilities even if we were not responsible for the contamination. While we
intend to exercise due diligence to discover potential environmental liabilities
before the acquisition of any property through foreclosure, hazardous substances
or wastes, contaminants or pollutants may be discovered on properties during our
ownership or after a sale of the property to a third party. If hazardous
substances are discovered on a property, we may be required to remove those
substances or sources and clean up the property. We may also be liable to
tenants and other users of neighboring properties. In addition, we may find it
difficult or impossible to sell the property before or following any clean up.

Legislation and regulation. The mortgage loan and REIT areas are subject to
extensive regulation, supervision and licensing by federal, state and local
governmental authorities and to various laws and judicial and administrative
decisions imposing requirements and restrictions. Laws and regulations may be
subject to legislative, administrative and judicial interpretation, especially
laws and regulations that have been infrequently interpreted or only recently
enacted. Infrequent interpretations of laws and regulations or an insignificant
number of interpretations of recently enacted regulations can result in
ambiguity with respect to permitted conduct under these laws and regulations.
Ambiguity under regulations to which our manager or we are subject may lead to
regulatory investigations or enforcement actions and private causes of action.
Failure to comply with regulatory requirements can lead to loss of approved
status, lawsuits and administrative enforcement actions. There can be no
assurance that we or our manager will maintain compliance with these
requirements in the future without additional expenses, or that more restrictive
local, state or federal laws, rules and regulations will not be adopted or that
existing laws and regulations will not be interpreted in a more restrictive
manner, which would make compliance more difficult for us and our manager.

Specific Risks of Investment in Our Securities

Restrictions on transferability. Shares of our Cl Preferred Stock should be
considered for investment purposes only and not with a view toward transfer,
resale, exchange or distribution. There currently is no public market for our
shares of Preferred Stock, and we currently do not intend to market our
securities in any public market. Accordingly, the transferability of such shares
of stock is limited. Additionally, the shares may not be readily accepted as
collateral for a loan. Also, the transferability of our shares may be affected
by restrictions on resales imposed by the laws of some states. Holders of our
Preferred Stock do not have a vested right to redeem their shares, and therefore
may not be able to liquidate their investment in the event of an emergency or
otherwise. Our Board of Directors currently has a stock redemption policy for
shareholders who wish to sell their shares to us. The policy may be modified or
terminated at the Board's discretion at any time, subject to the exercise of
their prudent business judgment. Any change in the redemption policy, which
would be effected solely for the benefit of the Company, could affect a
shareholder's ability to liquidate their investments.

Dependence on manager. We do not have any employees. All of our day-to-day
operations are conducted on our behalf by our manager and affiliate, Primecore
Funding Group, Inc. Primecore Funding Group, Inc. provides services to us
pursuant to a written management agreement. If our manager refused or became
unable to perform services on our behalf, and if a substitute manager could not
be found, this would materially and adversely impact on our ability to continue
to do business.

Balloon loans. The loans in our portfolio will typically require the borrower to
make a "balloon payment" on the principal amount upon maturity of the loan. To
the extent that a borrower has an obligation to pay a mortgage loan in a large
lump sum payment, their ability to satisfy this obligation may be dependent upon

                                       12
<PAGE>

their ability to obtain suitable refinancing or otherwise raise a substantial
cash amount. An increase in interest rates over the mortgage rate applicable at
the time the loan was originated may have an adverse effect on the borrower's
ability to obtain refinancing or to pay required monthly payments. As a result,
these loans may involve a higher risk of default than fully amortizing loans.

Lack of geographic diversification. Properties securing repayment of the
mortgage loans are currently located in Northern California. Since the
properties secured by the mortgage loans are located in the same geographic
region, these mortgage loans may be subject to a greater risk of delinquency,
default and potential loss if economic or political conditions or real property
values in the region deteriorated substantially. Also, since borrowers will not
be required to purchase earthquake insurance, and properties are in the San
Francisco Bay Area, known for its earthquake activity, mortgage loans are
subject to greater risk of loss than properties located in more stable geologic
areas.

Funding of loan commitments. We use our capital to invest in mortgage loans with
outstanding balances generally less than the outstanding commitment amounts.
This is because disbursements under the commitments occur over time in
conjunction with the construction progress of any particular construction
mortgage loan. We cannot predict with certainty the total amount of our future
capital, however, we expect that proceeds generated from completed real estate
developments and additional equity placements and note issuances, and borrowings
will be sufficient to fund all loan commitments. If, however, for some reason we
were unable to obtain loan payoffs or raise additional capital through the sale
of equity and debt securities or the sale of assets to meet our funding
commitments, and if we were unable to borrow sufficient funds, we might then be
unable to fund all of our existing loan commitments. Borrowers might then be
unable to complete their projects if they could not obtain financing from other
sources, and we conceivably could incur damages. Also, if we became unable to
meet our contractual obligations, our reputation would likely suffer, and we
might be unable to attract new borrowers, resulting in the loss of future
business. This might have a materially adverse effect upon our financial
condition, cash flows and results of operations.

Manager Relationship. Some of our directors and executive officers are also
executive officers, employees and shareholders of our manager. Under a
management agreement, our manager earns a management fee based upon the dollar
amount of our construction mortgage loan portfolio. In evaluating construction
mortgage loans, if our manager were to place an undue emphasis on maximizing
income at the expense of other criteria, such as preservation of capital, to
increase compensation for our manager, this could result in increased exposure
to losses on our mortgage loan portfolio.

Affiliate Loans. Because of our policy not to take title to real property
through foreclosure or otherwise, we have previously relied on our affiliates to
assume defaulted loans. Some of our directors and executive officers are
principals of our affiliates, and have personally guaranteed the assumed
obligations. Our affiliates are under no legal obligation to assume defaulted
loans, and our principals are under no legal obligation to guarantee such loans;
they have done so for the primary purpose of allowing us to avoid any risk
inherent in real estate development. There is no guarantee that our affiliates
or principals will continue to assume defaulted loans.

In exchange for our affiliates' assumption of defaulted loans, our affiliates
bear the risk of loss on the assumed loans, but they also will receive the
benefit of any profits to be realized from the successful development and
ultimate sale of the completed properties. Our affiliates and our principals are
in a position to take advantage of opportunities for themselves to develop and
sell those properties that otherwise belong, ultimately, to our shareholders.
Also, on occasion, we may decide to make new loans to affiliates. While these
loans are subject to the same underwriting criteria as any other loan, and have
generally been made on equivalent, if not superior terms for the REIT, as
compared with loans made to other borrowers, decisions are made, in part, by
interested persons.

As with other loans made to unaffiliated borrowers, due to changes in the scope
of construction and general cost increases during development of a project,
additional funds may be needed to complete a project. As with other loans, we
will grant an additional extension of credit if our management believes
repayment of the increased extension of credit is adequately secured. In the
case of an affiliate, the principals of the affiliates, who are also our
management and members of our board, will be involved in making the decision on
our behalf, creating a conflict of interest. Also, in the event of a default on
an affiliate loan, there would be a conflict of interest in connection with
decisions on how to proceed.

                                       13
<PAGE>

Discretion of board of directors. Management has established our operating
policies and strategies. These policies and strategies may be modified or waived
by the Board of Directors, without shareholder approval. The ultimate effect of
any such changes may adversely affect our operations.

Competition. We feel that we offer our borrowers superior service, and that our
manager enjoys an established record and reputation that benefits our business.
Nevertheless, as with any business, we may face competition, primarily from
commercial banks, savings and loans, other independent mortgage lenders, and
other mortgage REITs. Also, if we expand into particular geographic markets in
order to increase geographic diversity and take advantage of opportunities in
such markets, we may face competition from lenders with established positions in
these locations. Competition can take place on various levels, including
convenience in obtaining a mortgage loan, service, marketing, origination
channels and pricing. Although we do not know of any particular competitor that
dominates our market, many of our competitors in the financial services business
are substantially larger and have more capital and other resources. There can be
no assurance that we will be able to compete successfully in this market
environment. Any failure in this regard could have a material adverse effect on
our results of operations and financial condition.

Borrowing. We may employ a financing strategy to increase the size of our
mortgage loan portfolio by borrowing a portion of the market value of our
mortgage loans. The costs of those borrowings vary depending upon the lender,
the nature and liquidity of the underlying collateral, the movement of interest
rates, the availability of financing in the market and other factors. If the
returns on the mortgage loans purchased with borrowed funds fail to cover the
cost of the borrowings, we will experience net interest losses and may
experience net losses. In addition, we may not be able to achieve the degree of
leverage we believe to be optimal, which may cause us to be less profitable than
we might be otherwise. We may finance some of the mortgage loans that we hold
through interim financing facilities such as bank credit lines. We will be
dependent upon a few lenders to provide the primary credit facilities for our
mortgage loans. Any failure to renew or obtain adequate funding under these
financings, or any substantial reduction in the size of or pricing in the market
for our mortgage loans, could have a material adverse effect on our operations.
We have not made any agreements under which a lender would be required to enter
into new borrowing agreements during a specified period of time; however, we may
make such agreements if deemed favorable. We will face competition for financing
sources, and the effect of the existence of additional mortgage REITs may be to
deny us access to sufficient funds to carry out our business plan or to increase
the cost of funds to us. Our goal is to strike a balance between the
under-utilization of leverage, which reduces potential returns to shareholders,
and the over-utilization of leverage, which could reduce our ability to meet our
obligations during adverse market conditions.

Our ability to achieve all of our investment objectives may depend not only on
our ability to borrow money in sufficient amounts and on favorable terms but
also on our ability to renew or replace on a continuous basis our maturing
short-term borrowings. In the event we are unable to renew or replace maturing
borrowings, we could be required to sell mortgage loans under adverse market
conditions and could incur losses as a result. A sharp rise in interest rates or
increasing market concern about the value or liquidity of a type or types of
mortgage loans in which our portfolio is concentrated will reduce the market
value of the mortgage loans, which would likely cause lenders to require
additional collateral. A number of those factors in combination may cause
difficulties for us, including a possible liquidation of a major portion of our
mortgage loans portfolio at disadvantageous prices with consequent losses, which
could have a material adverse effect on our solvency.

Future offerings. We may increase our capital resources by making additional
offerings of equity and debt securities, including classes of preferred stock,
common stock, commercial paper, medium-term notes, mortgage-backed obligations
and senior or subordinated debt. All debt securities will be and some classes of
preferred stock could potentially be senior to the Class A Convertible Preferred
Stock we are offering under this placement memorandum in the event of our
liquidation. Additional equity offerings may dilute the equity of our
shareholders or reduce the price of shares of our outstanding securities, or
both.

                                       14
<PAGE>

Deficiency upon liquidation of our mortgages. The market value of our mortgage
assets may fluctuate significantly. If we need to sell assets to repay our
outstanding Series A and B short term notes or other borrowings or commitments,
our mortgage assets may prove to be illiquid. Even if sold at a discount, the
proceeds of sale might be less than the outstanding principal amount of, and
interest payable on, our notes.

Operating history. The Company was organized in March 1999, and has been
operating since May 1, 1999. Our prior results will not necessarily be
indicative of our future results. Furthermore, although the principals of
Primecore Funding Group, Inc., our manager, have experience in construction
mortgage lending that predates organization of the Company, there can be no
assurance that the past experience of our manager will be indicative of our
future results.

Public market price volatility. We have made a business decision not to market
our securities on any public market in order to avoid the price volatility to
which publicly-traded securities may be subject. It is always possible that
future, unanticipated events could result in a determination to change such
business decision. In the event a public market for our securities did develop,
the market price of the securities might increase or decrease for reasons
unrelated to our operating performance. In particular, general market price
movements, interest rate changes and credit quality trends might affect the
price of securities related to the specialty finance and real estate industries
market segments. Also, market prices might be influenced by any variation
between the net yield on our mortgage loan portfolio and prevailing market
interest rates and by the market's perception of our ability to achieve earnings
growth. In addition, if the market price of other REIT stocks declined for any
reason, or if there was a broad-based decline in real estate values or in the
value of our portfolio of mortgage loans, the market price of the securities and
transferability could be adversely affected.

Restrictions on ownership of capital stock. Subject to the limitations set forth
in the articles supplementary creating our preferred stock, our charter
authorizes our Board of Directors to reclassify any of the unissued shares of
authorized capital stock into a class or classes of preferred stock. The
issuance of additional preferred stock could have the effect of making more
difficult any attempt to gain control of us by means of a merger, tender offer,
proxy contest or otherwise.

To comply with the requirements for qualification as a REIT at all times, our
charter prohibits any person, absent a waiver from the Board of Directors, from
acquiring or holding, directly or indirectly, shares of capital stock (including
warrants and options), in excess of 9.8% of the vote, value or aggregate number
of the outstanding shares of capital stock or common stock. See the section
"Description of Capital Stock" for a more detailed description of these
limitations on ownership. If a public market were to be established for our
stock, which we presently do not anticipate for reasons set forth above, these
provisions might inhibit market activity and the resulting opportunity for the
holders of our capital stock to receive a premium for their securities that
might otherwise exist in the absence of those provisions. Those provisions also
may make us an unsuitable investment vehicle for any person seeking to obtain
ownership of more than 9.8% of the outstanding shares of capital stock.

In addition, provisions of Maryland law relating to "business combinations" and
a "control share acquisition" and of our charter and bylaws, particularly the
staggered terms for directors, may also have the effect of delaying, deterring
or preventing a takeover attempt or other change in control which would be
beneficial to shareholders and might otherwise result in a premium over then
prevailing market prices.

Every owner of more than 1% (or such lower percentage as required by the Code or
related regulations) of all classes or series of our stock, within 30 days after
the end of each taxable year, is required to respond in writing to our annual
request for stock ownership information, or to include such information on their
tax return, including by stating the name and address of such owner, the number
of shares of each class and series of our stock beneficially owned and a
description of the manner in which such shares are held. Each such owner shall
provide to us such additional information as we may request to determine the
effect, if any, of such beneficial ownership on our status as a REIT and to
ensure compliance with the ownership limitations.

                                       15
<PAGE>

Investment by tax-exempt entities. A fiduciary of a pension, profit-sharing,
stock bonus plan or individual retirement account, including a plan for
self-employed individuals and their employees or any other employee benefit plan
subject to the prohibited transaction provisions of the Internal Revenue Code or
the fiduciary responsibility provisions or "prudent man" rule of the Employee
Retirement Income Security Act of 1974, known as "ERISA", should consider:

          (a) whether the  ownership of our  securities is in accordance  with
     the  documents  and  instruments  governing the employee benefit plan,

          (b) whether the ownership of our securities is consistent with the
     fiduciary's responsibilities and satisfies the applicable requirements of
     ERISA, in particular, the diversification, prudence and liquidity
     requirements of section 404 of ERISA,

          (c) the prohibitions under ERISA on improper delegation of control
     over, or responsibility for "plan assets" and ERISA's imposition of
     co-fiduciary liability on a fiduciary who participates in, or permits, by
     action or inaction, the occurrence of, or fails to remedy, a known breach
     of duty by another fiduciary with respect to plan assets, and

          (d) the need to value the assets of the employee benefit plan
     annually.

A plan fiduciary should understand the illiquid nature of an investment in our
securities and that no secondary market will exist for them, and should review
both anticipated and unanticipated liquidity needs for the plan and conclude
that an investment in our securities is consistent with the plan's foreseeable
future liquidity needs.

REIT status and taxation. We intend to continue to operate as a REIT for federal
income tax purposes. We elected to be subject to tax as a REIT when we filed our
first federal income tax return for 1999. To maintain our classification as a
REIT, we must satisfy tests concerning the sources of our income, the nature and
type of our assets, the amount of our distributions to shareholders, and
concentration of the ownership of our stock. If we fail to qualify as a REIT in
any taxable year and the relief provisions of the Code do not apply, we would be
subject to federal income tax as a regular, domestic corporation, and our
shareholders would be subject to tax as shareholders of such a corporation.
Distributions to shareholders in any year in which we fail to qualify as a REIT
would not be deductible in computing our taxable income. As a result, we could
be subject to income tax liability and the cash available for repayment of our
short term notes or distribution to our shareholders would be significantly
reduced or eliminated. Further, we could also be disqualified from re-electing
REIT status for the four taxable years following the year during which we became
disqualified.

REIT qualification requirements with respect to (1) our source of income, the
nature of our assets and distribution of dividends may limit operational and
financial opportunities otherwise available to us and (2) shareholder
diversification may limit our access to certain otherwise interested investors.

There is no assurance that future legislation, regulations, administrative
interpretations or court decisions will not significantly change the tax laws
with respect to our qualification as a REIT or with respect to the federal
income tax consequences of that qualification. Any such changes may reduce or
eliminate our competitive advantage over non-REIT competitors.

Investment Company Act exemption. We conduct our business so as not to become
regulated as an investment company under the Investment Company Act. The
Investment Company Act exempts entities that are "primarily engaged in the
business of purchasing or otherwise acquiring mortgages and other liens on and
interests in real estate." If we should fail to qualify for an exemption from
registration as an investment company, our ability to use leverage would be
substantially reduced and we would be unable to conduct our business.

                                       16

<PAGE>


Item 8.    Financial Statements and Supplementary Data.

Required financial statements follow commencing on page F-1.
































                                       17
<PAGE>




                   INDEX TO FINANCIAL STATEMENTS AND SCHEDULE



Report of independent public accountants                                    F-1


Balance sheets at December 31, 2000 and 1999                                F-2


Statement of operations for the year ended
December 31, 2000 and for the period from
inception (March 18, 1999) to December 31, 1999                             F-4


Statement of shareholders' equity for the
year ended December 31, 2000 and for the
period from inception (March 18, 1999)
to December 31, 1999                                                        F-5


Statements of cash flows for the year ended
December 31, 2000 and for the period
from inception (March 18, 1999)
to December 31, 1999                                                        F-6


Notes to financial statements                                               F-7


Schedule IV--Mortgage loans on real estate-December 31, 2000                F-14










                                      F-i
<PAGE>


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To the Board of Directors of
Primecore Mortgage Trust, Inc.

We have audited the accompanying balance sheets of Primecore Mortgage Trust,
Inc. (a Maryland Corporation), as of December 31, 2000 and 1999, and the related
statements of operations, shareholders' deficit, and cash flows for the year
ending December 31, 2000 and the period from inception (March 18, 1999) to
December 31, 1999. These financial statements and the schedule referred to below
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and schedule based on our
audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Primecore Mortgage Trust, Inc.
as of December 31, 2000 and 1999, and the results of its operations and its cash
flows for the year ended December 31, 2000 and for the period from inception
(March 18, 1999) to December 31, 1999, in conformity with accounting principles
generally accepted in the United States.

As further discussed in Note 2 to the accompanying financial statements, the
Company changed its method of accounting for interest expense effective January
1, 2000.

Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedule listed in the index of financial
statements and schedule is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.





San Francisco, California
March 8, 2001




                                      F-1
<PAGE>

                         PRIMECORE MORTGAGE TRUST, INC.

                                 BALANCE SHEETS
                        As of December 31, 2000 and 1999

                                                      2000                  1999
                                       -------------------- --------------------
ASSETS:
Investments in real
     estate under development.........   $      174,362,219   $      131,986,969
Investments in real
     estate under development
     by affiliates....................           42,050,737           51,752,328
Cash and cash equivalents.............                   --              675,528
Receivable from affiliate.............                   --            1,743,081
Other assets, net.....................              132,135               66,400
                                       -------------------- --------------------
        Total assets..................   $      216,545,091   $      186,224,306
                                       ==================== ====================

LIABILITIES AND SHAREHOLDERS' EQUITY:
Liabilities
Notes payable (including
     $7,622,535 and $25,000
     to affiliates at
     December 31, 2000 and
     1999, respectively)..............   $       38,787,264    $       6,844,474
Secured line of credit................            6,644,692            2,195,000
Accrued expenses and other............              723,512              214,612
Bank overdraft........................            3,086,941                   --
Preferred stock dividends payable.....            1,901,863            1,798,884
Payable to affiliate..................              236,972            1,404,690
                                       -------------------- --------------------
        Total liabilities.............           51,381,244           12,457,660
                                       -------------------- --------------------
Commitments and contingencies
     (see note 8).....................

Shareholders' Equity
Preferred stock: par value
     $0.01, 40,000,000 shares
     authorized; 19,946,445
     and 18,985,118 shares
     issued and outstanding at
     December 31, 2000 and 1999,
     respectively; entitled to
     $10 per share in liquidation
     before any distributions
     to common........................         199,285,861          189,851,180
Common stock: par value $0.01,
     10,000,000 shares authorized;
     100 shares
      issued and outstanding at
     December 31, 2000 and 1999.......                   1                    1
Retained deficit......................         (34,122,015)         (16,084,535)
                                       ------------------- --------------------
        Total shareholders' equity....         165,163,847          173,766,646
                                       ------------------- --------------------
        Total liabilities and
          shareholders' equity........  $      216,545,091  $       186,224,306
                                       =================== ====================

        The accompanying notes are an integral part of these statements.

                                      F-2
<PAGE>

                         PRIMECORE MORTGAGE TRUST, INC.

                            STATEMENTS OF OPERATIONS
                         For the year ended December 31,
                  2000 and for the period from inception (March
                         18, 1999) to December 31, 1999


                                                                     Period from
                                                                       Inception
                                                Year Ended   (March 18, 1999) to
                                         December 31, 2000      December 31,1999
                                       -------------------- --------------------
REVENUES:

Income from completed real
     estate development
     (including $3,040,082 and
     $38,530 from affiliates).......... $       15,103,946    $       2,566,301
Other..................................             36,390               17,097
                                       -------------------- --------------------
         Total revenues................         15,140,336            2,583,398

EXPENSES:

Management fees paid to an affiliate...         10,967,249            5,276,938
Interest...............................                 --              241,152
General, administrative and other......            600,776               51,866
                                       -------------------- --------------------
         Total expenses                         11,568,025            5,569,956
                                       -------------------- --------------------
         Net income (loss)                       3,572,311           (2,986,558)
         Preferred stock dividends..           (21,609,791)         (13,097,977)
                                       -------------------- --------------------
         Net loss allocable to common   $      (18,037,480)   $     (16,084,535)
                                       ==================== ====================
Basic and diluted net loss per
     common share                       $         (180,375)   $        (160,845)
                                       ==================== ====================
Basic and diluted weighted-average
     common shares outstanding                         100                  100
                                       ==================== ====================


        The accompanying notes are an integral part of these statements.

                                      F-3
<PAGE>



                         PRIMECORE MORTGAGE TRUST, INC.

                       STATEMENTS OF SHAREHOLDERS' EQUITY
                         For the year ended December 31,
                  2000 and for the period from inception (March
                         18, 1999) to December 31, 1999
<TABLE>
                                                  Preferred Stock               Common Stock
                                             ------------------------------- ------------------
<CAPTION>
                                                                                                          Retained
                                                    Shares           Amount   Shares    Amount             Deficit          Total
                                             -------------- ---------------- -------- --------- ------------------- --------------
<S>                                            <C>            <C>              <C>      <C>       <C>                 <C>
Shareholders' equity at inception
   (March 18, 1999)........................             --     $         --       --    $   --     $          --     $         --
   Issuance of common stock................             --               --      100         1                --                1
   Issuance of preferred stock..........        19,267,896      192,678,960       --        --                --      192,678,960
   Issuance of preferred stock under
      reinvestment plan                            309,591        3,095,910       --        --                --        3,095,910
   Redemption of preferred stock...........       (592,369)      (5,923,690)      --        --                --       (5,923,690)
   Dividends paid to preferred
      shareholders.........................             --               --       --        --       (13,097,977)     (13,097,977)
   Net loss................................             --               --       --        --        (2,986,558)      (2,986,558)
                                             -------------- ---------------- -------- --------- ------------------- --------------
Shareholders' equity at
   December 31, 1999.......................     18,985,118     $189,851,180      100    $    1     $ (16,084,535)    $173,766,646

   Issuance of preferred stock, net of
      Offering costs of $178,589...........      2,841,062       28,232,031       --        --                --       28,232,031
   Issuance of preferred stock under
      dividend reinvestment plan...........        589,684        5,896,840       --        --                --        5,896,840
   Redemption of preferred stock...........     (2,469,419)     (24,694,190)      --        --                --      (24,694,190)
   Dividends paid to preferred
      shareholders.........................             --               --       --        --       (21,609,791)     (21,609,791)
   Net income..............................             --               --       --        --         3,572,311        3,572,311
                                             -------------- ---------------- -------- --------- ------------------- --------------
Shareholders' equity at
   December 31, 2000.......................     19,946,445     $199,285,861      100      $  1     $ (34,122,015)   $ 165,163,847
                                             ============== ================ ======== ========= =================== ==============

</TABLE>





        The accompanying notes are an integral part of these statements.

                                      F-4
<PAGE>
                         PRIMECORE MORTGAGE TRUST, INC.

                            STATEMENTS OF CASH FLOWS
                         For the year ended December 31,
                  2000 and for the period from inception (March
                         18, 1999) to December 31, 1999
                                                                     Period from
                                                                       Inception
                                                Year Ended   (March 18, 1999) to
                                         December 31, 2000      December 31,1999
                                       -------------------- --------------------
CASH FLOWS FROM
     OPERATING ACTIVITIES:
   Net income (loss)...................  $       3,572,311       $   (2,986,558)
   Adjustments to reconcile
     net income (loss) to net
     cash provided by (used in)
     operating activities:
        Increase in accrued
          expenses, bank
          overdraft and other..........          3,595,841              214,612
        (Decrease) Increase in
          payable to affiliate.........         (1,167,718)           1,404,690
        Decrease (Increase) in
          other assets, net............             75,299              (66,400)
                                       -------------------- --------------------
          Net cash provided by
            (used in) operating
             activities................          6,075,733           (1,433,656)
                                       -------------------- --------------------
CASH FLOWS FROM
     INVESTING ACTIVITIES:
     Investments in real estate
          under development............       (165,778,439)         (99,692,298)
     Investments in real estate
          under development
          by affiliates................        (30,764,124)         (22,728,985)
     Proceeds from investments
          in real estate under
          development..................        124,348,190           93,279,846
     Proceeds from investments
          in real estate under
          development by affiliates....         40,465,714            3,997,140
     Decrease (Increase) in receivable
          from affiliate...............          1,743,081           (1,743,081)
                                       -------------------- --------------------
          Net cash used in
            investing activities.......        (29,985,578)         (26,887,378)
                                       -------------------- --------------------
CASH FLOWS FROM
     FINANCING ACTIVITIES:
   Proceeds from sales of
          preferred stock, net
          of offering costs............         28,082,031           34,193,960
   Redemptions of preferred stock......        (24,694,190)          (5,923,690)
   Proceeds from sales of common
          stock........................                 --                    1
   Issuance of notes payable...........         61,199,293            6,734,474
   Additions to notes payable
          from reinvested interest.....          1,846,881                   --
   Repayment of notes payable..........        (31,898,384)                  --
   Borrowings on secured line of
          credit.......................          6,644,692            2,195,000
   Repayment of secured line of
          credit.......................         (2,195,000)                  --
   Payment of preferred stock
          dividends....................        (15,609,972)          (8,203,183)
   Loan fees paid......................           (141,034)                  --
                                       -------------------- --------------------
             Net cash provided by
               financing activities....         23,234,317           28,996,562
                                        -------------------- -------------------
             Net (decrease) increase
               in cash and cash
               equivalents.............           (675,528)             675,528
             Beginning cash and cash
               equivalents.............            675,528                   --
                                       -------------------- --------------------
             Ending cash and cash
               equivalents............. $               --   $          675,528
                                       ==================== ====================
Cash paid for interest, net of
     amounts capitalized of
     $4,680,818 and $0 at
     December 31, 2000 and
     1999 respectively................. $               --   $           41,889
                                       ==================== ====================

                                      F-5
<PAGE>


                         PRIMECORE MORTGAGE TRUST, INC.

                      STATEMENTS OF CASH FLOWS (Continued)
                         For the year ended December 31,
                  2000 and for the period from inception (March
                         18, 1999) to December 31, 1999

                                                                     Period from
                                                                       Inception
SUPPLEMENTAL DISCLOSURE OF NONCASH              Year Ended   (March 18, 1999) to
INVESTING AND FINANCING ACTIVITIES:      December 31, 2000      December 31,1999
                                       -------------------- --------------------

Investments in real estate under
     development received in
     exchange for issuance of
     Preferred Stock...................   $        150,000     $    125,574,517
Investments in real estate under
     development by affiliates
     received in exchange for
     issuance of Preferred Stock.......                 --           32,910,483
Investments in real estate under
     development received in
     exchange for notes payable........            795,000                   --
Investments in real estate under
     development by affiliates
     received in exchange for
     notes payable.....................                 --              110,000
Reinvestment of interest on notes
     payable...........................          1,846,881                   --

Preferred stock dividends reinvested
     in preferred Stock................          5,896,840            3,095,910






        The accompanying notes are an integral part of these statements.















                                      F-6
<PAGE>

                         PRIMECORE MORTGAGE TRUST, INC.

                          NOTES TO FINANCIAL STATEMENTS
                           December 31, 2000 and 1999

1.   ORGANIZATION AND BUSINESS:

Organization

Primecore Mortgage Trust, Inc., a Maryland corporation, was formed on March 18,
1999 (inception) and commenced operations effective May 1, 1999 as a real estate
investment trust (REIT). We are engaged in the business of funding and holding
short-term construction mortgage loans secured by single-family residential real
property or mixed-use commercial property, as well as land acquisition and
development loans secured by undeveloped real property, located in the greater
San Francisco Bay Area. We are managed by Primecore Funding Group, Inc., a
California corporation located in Menlo Park, California. Our manager originates
and services the construction mortgage loans we invest in for a monthly
management fee.

Capitalization

We have authorized 50,000,000 shares of capital stock with a $0.01 par value;
40,000,000 shares are designated Class A Convertible Preferred (Preferred
Stock), and 10,000,000 shares are designated as common.

At December 31, 2000, there were 100 shares of common stock outstanding, all
held by William Whitlow, Susan Fox and Michael Rider, who are employees and
officers of our manager. Ms. Fox owns all of the stock of our manager.

The 19,946,445 and 18,985,118 shares of Preferred Stock outstanding as of
December 31, 2000 and 1999 respectively rank senior to our common stock as to
dividends and liquidation rights. The shares are convertible into, and have
voting rights equal to, the same number of shares of our common stock. We will
not pay any dividends to the holders of the common stock so long as any
Preferred Stock is outstanding.

Preferred stock dividends are paid monthly in arrears and were $1.14 per share
(based on weighted average preferred shares outstanding of 18,955,134) for the
year ended December 31, 2000, compared with $0.75 per share (based on weighted
average preferred shares outstanding of 17,390,047) for the period from
inception (March 18, 1999) to December 31, 1999. The terms of our dividend
reinvestment plan permit our shareholders to reinvest dividends in additional
shares of Preferred Stock, currently at $10 per share.

Holders of our Preferred Stock do not have a right to redeem their shares. Our
Board of Directors, however, currently has a stock redemption policy for
shareholders who wish to sell their shares to us. The policy may be modified or
terminated at the Board's discretion at any time. Currently, we will repurchase
shares at $10.00 per share if we have cash available for distribution. Cash
available for distribution is determined at the Board of Director's sole
discretion, and is net of current expenses, anticipated expenses, dividends,
debt obligations and reserves for operating funds. We will not sell or otherwise
liquidate any portion of our mortgage loan portfolio or other assets to fund a
redemption request. We also reserve the right to limit the number and frequency
of stock redemptions by any shareholder.

We completed two equity private placements of Preferred Stock, issuing our stock
at $10 per share. The first sold 18,048,772 shares beginning March 31, 1999 and
completing on August 31, 1999. The second placement sold an additional 1,147,743
shares of Preferred Stock form September 10, 1999 to October 29, 1999. As of
December 31, 1999, 18,985,118 shares of Preferred Stock were issued and
outstanding, net of redemptions and additional shares issued through our
dividend reinvestment plan. Our manager expects that all future placements will
be for cash, which will then be used primarily to fund additional loans. In
connection with the private placements, our manager paid placement costs of
$187,829 on our behalf.


                                      F-7
<PAGE>

                         PRIMECORE MORTGAGE TRUST, INC.

                          NOTES TO FINANCIAL STATEMENTS
                     December 31, 2000 and 1999 - continued

Risk Factors

General Economic Conditions in Silicon Valley and the San Francisco Bay Area.
Properties securing repayment of the mortgage loans are located in the San
Francisco Bay Area and primarily in Silicon Valley. Since the properties secured
by the mortgage loans are located in a limited geographical region, these
mortgage loans may be subject to a greater risk of delinquency or default if the
industries concentrated there suffer adverse economic or business developments.

Other. In addition, we are subject to other significant business and financial
risks, including but not limited to liquidity, the prevailing market for
residential real estate, interest rates, dependence on our manager, timely
completion of projects, lack of borrower diversification, and potential
environmental matters relating to properties on which we have made loans.

Retained Deficit

We had a retained deficit as of December 31, 2000 and 1999 because we pay
dividends to the holders of our Preferred Stock based on our taxable income, in
accordance with REIT requirements. Our taxable income differs from income
measured in accordance with generally accepted accounting principles due to
timing differences in the recognition of income from our investments in real
estate. See Income Taxes in Note 2 below. These dividend distributions are
expected to be matched by revenues from completed real estate projects in future
periods, as described in Notes 2 and 3.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Use of Estimates

These financial statements have been prepared in accordance with accounting
principles generally accepted in the United States using the accrual method of
accounting. The preparation of financial statements in conformity with
accounting principles generally accepted in the United States 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 from those
estimates.

Change in Accounting for Interest Expense

Effective January 1, 2000, the Company began capitalizing interest expense on
its investments in real estate under development and investments in real estate
under development by affiliates. This change was made to more accurately match
the cost of our investments with the recognition of our revenue. It is our
opinion that interest incurred prior to January 1, 2000 was not material.

Investments in Real Estate under Development
and Investments in Real Estate under Development by Affiliates

All of our loans are classified for financial reporting purposes as investments
in real estate under development or investments in real estate under development
by affiliates (Notes 3 and 4). Such investments include capitalized interest and
are stated at the lower of cost or net realizable value. Management conducts a
review for impairment on an investment-by-investment basis whenever events or
changes in circumstances indicate that the carrying amount of an investment may
not be recoverable. An impairment is recognized when estimated expected future

                                      F-8
<PAGE>

                         PRIMECORE MORTGAGE TRUST, INC.

                          NOTES TO FINANCIAL STATEMENTS
                     December 31, 2000 and 1999 - continued

cash flows (undiscounted and without interest charges), typically from the sale
of a completed property, are less than the carrying amount of the investment.
The estimation of expected future net cash flows is inherently uncertain and
relies to a considerable extent on assumptions regarding current and future
economics and market conditions. If, in future periods, there are changes in the
estimates or assumptions incorporated into the impairment review analysis, the
changes could result in an adjustment to the carrying amount of the investments.
To the extent an impairment has occurred, the excess of the carrying amount of
the investment over its estimated fair value, less estimated selling costs, will
be charged to income.

As of December 31, 2000, we believe there were no impairments of the carrying
values of our investments.

Cash and Cash Equivalents

Cash and cash equivalents include cash held in financial institutions and other
highly liquid short-term investments with original maturities of three months or
less.

Income from Completed Real Estate Development

Our investment objective is to make construction mortgage loans on projects we
believe are likely to ultimately sell for an amount sufficient to repay the
principal plus interest of those loans at the agreed upon rate. We do not intend
to own or develop property and do not participate in the profit realized by the
borrower, including affiliated borrowers, upon sale of the property.

We recognize income from our investments in real estate under development upon
the sale or refinancing of the completed real estate to or by a third party.
Income is deferred, along with related points, until the property is sold or
refinanced. We compute income as cash received (which includes amounts funded,
accrued interest and points) less the carrying value of the investments at the
date of repayment (which includes amounts funded and capitalized interest cost).











                                      F-9
<PAGE>

                         PRIMECORE MORTGAGE TRUST, INC.

                          NOTES TO FINANCIAL STATEMENTS
                     December 31, 2000 and 1999 - continued

Income Taxes

To continue to qualify as a REIT, we must currently distribute at least 95
percent of our taxable income. As a REIT, we generally will not be subject to
corporate-level federal income tax on net income we distribute currently to our
shareholders. As such, no provision for federal income taxes is included in our
financial statements. Such taxes are the responsibility of the individual
shareholders. If we fail to qualify as a REIT in any taxable year, we will be
subject to federal income taxes at regular corporate rates (including any
applicable alternative minimum tax) and may not be able to qualify as a REIT for
four subsequent taxable years. Even if we qualify for taxation as a REIT, we may
be subject to certain state and local taxes on our income and property and to
federal income and excise taxes on our undistributed taxable income.

Net income for financial reporting purposes also differs from net income for tax
reporting primarily due to differences in the method of revenue recognition for
arrangements classified as loans for income tax purposes and equity-method
investments in real estate under development for financial reporting purposes.
The following table outlines the primary differences between financial reporting
income and taxable income for the year ended December 31, 2000 and for the
period from inception (March 18, 1999) to December 31, 1999:

                                                                     Period from
                                                                       Inception
                                                Year Ended   (March 18, 1999) to
                                         December 31, 2000      December 31,1999
                                       -------------------- --------------------

Net income (loss), as reported.........    $     3,572,311      $    (2,986,558)
        Less: Income from completed
          real estate development......        (15,103,946)          (2,566,301)
               Capitalized interest....         (4,680,818)                  --
        Add: Accrued interest income
          on loans and related
          points earned................         37,975,291           16,680,262
               Other...................            225,000                   --
                                       -------------------- --------------------
Taxable income.........................        $21,987,838         $ 11,127,403
                                       ==================== ====================
Preferred stock dividends..............        $21,609,791         $ 13,097,977
                                       ==================== ====================

Net Income Per Share of Common Stock

Per share amounts for our common stock are computed using the weighted average
common shares outstanding during the period. Net income (loss) used in the
calculation is reduced by dividends owed to preferred shareholders. The diluted
weighted average common shares outstanding include the dilutive effect of stock
options and other common stock equivalents. There are currently no stock options
or other dilutive common stock equivalents, and as a result, the basic and
diluted weighted average common shares outstanding for the year ended December
31, 2000 and the period from inception (March 18, 1999) to December 31, 1999,
are the same and are 100 shares.

Reclassifications

Certain amounts in the prior period financial statements have been reclassified
to conform to the current year presentation and have no impact on reported net
income or shareholders equity.


                                      F-10
<PAGE>

                         PRIMECORE MORTGAGE TRUST, INC.

                          NOTES TO FINANCIAL STATEMENTS
                     December 31, 2000 and 1999 - continued

3.   INVESTMENTS IN REAL ESTATE UNDER DEVELOPMENT:

We make loans with maturity dates generally ranging from 12 to 18 months. For
financial reporting purposes, we apply the equity method of accounting for our
investments. Investments in real estate under development represent funds
advanced in cash plus capitalized interest on arrangements in effect at any
particular time. Since real estate under development generates no operating
income, we do not accrue any income for financial reporting purposes until the
sale or refinancing of a property. The income that we ultimately realize is
based upon the terms of the construction mortgage loan. During the year ended
December 31, 2000, interest rates on loans outstanding ranged from 11 percent to
13 percent. In addition, we charged points, which were typically 4 percent of
the borrowed amount during that same period.

The following table summarizes our portfolio of investments in real estate under
development at December 31, 2000:
<TABLE>
<CAPTION>
                                               Interest   Maturity Dates           Commitment             Carrying
         Location - County                        Rates                               Amount               Amount
--------------------------------------  ----------------  --------------  -------------------  -------------------
         <S>                                 <C>             <C>                   <C>                 <C>

         Alameda                           11.00-11.25%     03/01-10/01           20,930,000            4,849,722
         Contra Costa                      11.00-12.00%     03/01-11/01           16,987,842            2,797,451
         Marin                             11.00-13.00%     01/01-02/02           61,230,000           31,861,815
         Monterey                          11.25-11.50%     04/01-05/02           30,800,000           16,142,512
         San Francisco                     11.25-13.00%     04/01-10/01           35,520,000           14,485,600
         San Mateo                         11.00-13.00%     02/01-05/02           86,635,230           41,342,468
         Santa Clara                       11.00-13.00%     12/00-04/02           92,395,000           53,393,586
         Other                             11.00-11.25%     05/01-06/01           18,035,000            9,489,065
                                                                          -------------------  -------------------

                                                                               $ 362,533,072        $ 174,362,219

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

The following table summarizes our portfolio of investments in real estate under
development at December 31, 1999.
<TABLE>
<CAPTION>

                                               Interest        Maturity           Commitment             Carrying
         Location - County                        Rates           Dates               Amount               Amount
--------------------------------------  ----------------  --------------  -------------------  -------------------
          <S>                              <C>               <C>                   <C>                 <C>

         Alameda                           11.00-12.00%     04/00-03/01            1,265,000              564,221
         Contra Costa                            11.00%     05/00-10/00           23,352,842            4,960,151
         Marin                             11.00-13.00%     12/99-06/01           54,090,000           23,402,619
         San Francisco                           11.00%     08/00-01/01           32,600,000           16,352,410
         San Mateo                         11.00-12.00%     12/99-12/01           65,930,000           28,384,528
         Santa Clara                       11.00-13.00%     11/99-02/01           81,675,000           47,487,369
         Other                                   11.00%     05/98-05/01           29,040,500           10,835,671
                                                                          -------------------  -------------------

                                                                               $ 287,953,342        $ 131,986,969
                                                                          ===================  ===================
</TABLE>

Earned but unrecognized interest and points on loans outstanding at December 31,
2000 totaled $31,166,724 compared with $13,475,298 in earned but unrecognized
interest and points on loans outstanding at December 31, 1999. These amounts
will be recognized as income from completed real estate development upon the
sale or refinancing of the underlying property.

We will fund unfunded commitments on existing loans from the repayment of other
loans, borrowings on our line of credit (Note 6), issuance of short-term notes
payable or issuance of additional preferred stock. We believe we will have
adequate sources of capital to fund these commitments when and as they become
due.

                                      F-11
<PAGE>

                         PRIMECORE MORTGAGE TRUST, INC.

                          NOTES TO FINANCIAL STATEMENTS
                     December 31, 2000 and 1999 - continued

During the year ended December 31, 2000, we capitalized $3,562,236 of interest
expense to investments in real estate under development compared with $0 during
the year ended December 31, 1999.

4.   INVESTMENTS IN REAL ESTATE UNDER DEVELOPMENT BY AFFILIATES:

We have also made loans to affiliates of our manager acting as the developer.
These arrangements are accounted for in a manner identical to that described in
Note 3 above. The following table summarizes our portfolio of investments in
real estate under development by affiliates at December 31, 2000:
<TABLE>
<CAPTION>
                                               Interest           Maturity    Commitment Amount             Carrying
         Location - County                        Rates              Dates                                    Amount
--------------------------------------  ----------------  --------------  -------------------  -------------------
          <S>                              <C>               <C>                   <C>                 <C>

         San Mateo                               11.25%        10/01-12/01           12,100,000            6,374,508
         Santa Clara                       11.00-11.50%        03/01-11/01           61,750,000           35,676,229
                                                                            -------------------  -------------------

                                                                                   $ 73,850,000         $ 42,050,737
                                                                            ===================  ===================
</TABLE>
The following table summarizes our portfolio of investments in real estate under
development by affiliates at December 31, 1999:
<TABLE>
<CAPTION>
                                               Interest           Maturity           Commitment             Carrying
         Location - County                        Rates              Dates               Amount               Amount

--------------------------------------  ----------------  --------------  -------------------  -------------------
          <S>                              <C>               <C>                   <C>                 <C>

         Contra Costa                            11.00%              06/00            1,800,000            1,267,753
         San Mateo                               11.00%        11/99-09/00           22,825,000           25,223,831
         Santa Clara                             11.00%        06/00-03/01           33,930,000           18,732,927
         Other                                   11.00%              03/00            7,500,000            6,527,817
                                                                            -------------------  -------------------

                                                                                   $ 66,055,000         $ 51,752,328
                                                                            ===================  ===================
</TABLE>
Earned but unrecognized interest and points on loans outstanding at December 31,
2000 totaled $7,944,747, compared with $3,204,964 at December 31, 1999. Such
amounts will be recognized as income from completed real estate development upon
the sale or refinancing of the underlying property.

During the year ended December 31, 2000, we capitalized $1,118,582 of interest
expense to investments in real estate under development by affiliates compared
with $0 during the year ended December 31, 1999.

5.   NOTES PAYABLE:

We had unsecured borrowings of $38,787,264 at December 31, 2000 compared with
$6,844,474 at December 31, 1999 on notes issued to accredited investors through
private placements. These notes have varying maturities of up to one year from
the date of issuance. The notes bear interest at rates between 11 and 13 percent
with interest payable monthly in arrears. Notes issued prior to September 29,
2000 are callable at the option of the note holder upon 60 day written notice,
subject to availability of funds. Notes issued by us after September 29, 2000
may be redeemed at our option before their stated maturity. At December 31,
2000, $7,622,535 of our unsecured notes payable were held by our officers,
directors or employees of our manager compared with $25,000 at December 31,
1999.

                                      F-12
<PAGE>

                         PRIMECORE MORTGAGE TRUST, INC.

                          NOTES TO FINANCIAL STATEMENTS
                     December 31, 2000 and 1999 - continued

6.   LINES OF CREDIT:

During the year ended December 31, 2000, we repaid the $2,195,000 balance owed
on a $3,000,000 line of credit and obtained a new $10,000,000 line of credit
with a commercial bank. The amount borrowed under the line of credit at December
31, 2000, was $6,644,692. Repayment is secured by our assets and guaranteed by
our manager and another affiliate, carries interest at prime plus 1.25 percent
(10.75 percent at December 31, 2000) and matures in September 2001. The terms of
the line of credit require, among other provisions, that we maintain total
equity of no less than $150,000,000, a debt to equity ratio of less than 1.5 to
1.0 and quarterly net income from operations of at least $500,000. We were in
compliance with all covenants at December 31, 2000. We incurred loan fees and
other costs of $141,034, which are included in other assets in the accompanying
balance sheets and are being amortized on a straight-line basis over the life of
the facility. Accumulated amortization of deferred loan fees amounted to $40,644
at December 31, 2000.


7.   TRANSACTIONS WITH AFFILIATES:

Management Fees

A management agreement dated March 30, 1999 between us and our manager provides
for a monthly fee payable in arrears equal to 0.22 percent of the total
commitment amount of the loans in our investments in real estate under
development and in our investments in real estate under development by
affiliates. We amended the agreement with our manager on October 1, 2000, which,
among other things, increased the management fee to .25% per month, or 3.0% per
annum, of the total commitment amount as described above. The increased rate
becomes effective January 1, 2001.

For the year ended December 31, 2000, the portfolio management fees paid to our
manager were $10,967,249, compared with $5,276,938 for the period from inception
(March 18, 1999) to December 31, 1999.

Receivable from Affiliates

The $1,743,081 receivable from affiliate at December 31, 1999, represents the
balance due from our manager as a result of a decision by our manager to pay
from its own funds a shortage in the proceeds from the sale of a property below
the carrying amount of our investment. The property had been acquired by an
entity under our manager's control through foreclosure prior to the purchase of
the investment by us. The receivable was settled during 2000.

Payable to Affiliate

The $236,972 and $1,404,690 payable to affiliate at December 31, 2000 and 1999
respectively represents short-term advances to us by our manager to facilitate
our cash management. Our manager charges us an interest rate of 11 percent per
annum on the outstanding balance.

                                      F-13
<PAGE>

                         PRIMECORE MORTGAGE TRUST, INC.

                          NOTES TO FINANCIAL STATEMENTS
                     December 31, 2000 and 1999 - continued

8.   COMMITMENTS AND CONTINGENCIES:

Litigation

We are involved in legal actions relating to our investments in real estate
under development arising in the normal course of our business. We believe the
liabilities, if any, which may ultimately result from such legal actions, will
not have a materially adverse effect on our financial position, results of
operations, or cash flows.

General Uninsured Losses

We require that our borrowers carry comprehensive liability, fire, flood,
extended coverage, and rental loss insurance with policy specifications, limits,
and deductibles customarily carried for similar properties. We also carry
stop-gap insurance to cover losses in case a borrower's policy lapses. There
are, however, certain types of extraordinary losses that may be either
uninsurable or not economically insurable. Further, all of the investments are
located in areas that are subject to earthquake activity. Should an investment
sustain damage as a result of an earthquake, we may incur losses due to
insurance deductibles, co-payments on insured losses, or uninsured losses.
Should an uninsured loss occur, we could lose our investment in, and anticipated
profits and cash flows from an investment.


9.  UNUADITED QUARTERLY RESULTS OF OPERATIONS:

The following represents an unaudited summary of quarterly results of operation
for the year ended December 31, 2000 and for the period from inception (March
18, 1999) to December 31, 1999:















                                      F-14
<PAGE>

                            STATEMENTS OF OPERATIONS
                         For the year ended December 31,
                  2000 and for the period from inception (March
                         18, 1999) to December 31, 1999
<TABLE>
<CAPTION>
                                     Three Months       Three Months         Three Months        Three Months
                                            Ended              Ended                Ended               Ended          Year Ended
                                   March 31, 2000      June 30, 2000  September 30,  2000   December 31, 2000    December 31, 2000
                               ------------------  -----------------  -------------------  -------------------  -------------------
<S>                             <C>                 <C>                <C>                  <C>                  <C>
REVENUES:

Income from completed real
   estate development
   (including $526,610,
    $471,390, $511,250,
    $1,530,832 and $3,040,
    082 from affiliates)           $   2,666,240      $   4,995,358       $    2,566,718       $    4,875,630        $  15,103,946

Other                                         32             36,352                    6                   --               36,390
                               ------------------  -----------------  -------------------  -------------------  -------------------
         Total  revenues               2,666,272          5,031,710            2,566,724            4,875,630           15,140,336

EXPENSES:

Management fees paid to
     an affiliate                      2,465,052          2,776,935            2,903,744            2,821,518           10,967,249
Interest                                      --                 --                   --                   --                   --
General, administrative
     and other                           199,952            129,097              128,953              142,775              600,776
                               ------------------  -----------------  -------------------  -------------------  -------------------
         Total expenses                2,665,004          2,906,032            3,032,697            2,964,293           11,568,025
                               ------------------  -----------------  -------------------  -------------------  -------------------
         Net income (loss)                 1,268          2,125,678             (465,973)           1,911,338            3,572,311
         Preferred stock
            dividends                 (5,366,223)        (5,238,210)          (5,355,477)          (5,649,881)         (21,609,791)
                               ------------------  -----------------  -------------------  -------------------  -------------------
         Net loss allocable
            to common             $   (5,364,955)     $  (3,112,532)      $   (5,821,450)     $    (3,738,543)      $  (18,037,480)
                               ==================  =================  ===================  ===================  ===================

Basic and diluted net loss
     per common share             $      (53,650)      $    (31,125)       $     (58,214)       $     (37,385)       $    (180,375)
                               ==================  =================  ===================  ===================  ===================
Basic and diluted
     weighted-average common
     shares                                  100                100                  100                  100                  100
                               ==================  =================  ===================  ===================  ===================
</TABLE>

                                      F-15
<PAGE>

                      STATEMENTS OF OPERATIONS (CONTINUED)
                         For the year ended December 31,
                  2000 and for the period from inception (March
                         18, 1999) to December 31, 1999
<TABLE>
<CAPTION>
                                        Inception                                                                       Period from
                                 (March 18, 1999)       Three Months         Three Months         Three Months            Inception
                                               to              Ended                Ended                Ended  (March 18, 1999) to
                                   March 31, 1999      June 30, 1999  September 30,  1999    December 31, 1999    December 31, 1999
                               ------------------  -----------------  -------------------  -------------------  -------------------
<S>                             <C>                 <C>                <C>                  <C>                  <C>
REVENUES:

Income from completed real
   estate development
   (including $0, $0, $0,
   $38,530 and $38,530
   from affiliates)             $             --    $       109,653        $     536,099       $    1,920,549       $    2,566,301
Other                                         --             11,566                5,531                   --               17,097

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

         Total revenues                       --            121,219              541,630            1,920,549            2,583,398

EXPENSES:

Management fees paid to
     an affiliate                             --          1,310,876            1,934,968            2,031,094            5,276,938
Interest expense                              --                 --               35,081              206,071              241,152
General, administrative
     and other                                --                 52               23,391               28,423               51,866
                               ------------------  -----------------  -------------------  -------------------  -------------------
         Total expenses                       --          1,310,928            1,993,440            2,265,588            5,569,956
                               ------------------  -----------------  -------------------  -------------------  -------------------
         Net income (loss)                    --         (1,189,709)          (1,451,810)            (345,039)          (2,986,558)
         Preferred stock
            dividends                         --         (2,740,142)          (4,990,853)          (5,366,982          (13,097,977)
                               ------------------  -----------------  -------------------  -------------------  -------------------
         Net loss allocable
            to common           $             --    $    (3,929,851)      $   (6,442,663)     $    (5,712,021)     $   (16,084,535)
                               ==================  =================  ===================  ===================  ===================
Basic and diluted net loss
     per common                 $             --       $    (39,299)       $     (64,426)       $     (57,120)      $     (160,845)

                               ==================  =================  ===================  ===================  ===================
Basic and diluted
     weighted-average
     common shares                           100                100                  100                  100                  100
                               ==================  =================  ===================  ===================  ===================
</TABLE>
                                      F-16

<PAGE>

Item 9.      Changes in and Disagreements with Accountants on Accounting and
             Financial Disclosure.

None.

PART III
--------

Item 10.     Directors and Officers of the Registrant.

Our board of directors consists of five directors, two of which were elected
after expansion of our board on March 1, 2001. We do not have an audit
committee. Our directors, executive officers and senior officers and their
positions are:

    Name                       Position
    ----                       --------

    Susan Fox                  Director and President
    William Whitlow            Chairman of the Board
    Michael Rider              Director, Treasurer and Chief Financial Officer
    Robert Puette              Director
    James Barrington           Director
    Ben Hamburg                Secretary

      The business background and experience of our directors and executive
officers is as follows:

      Susan Fox, age 44, is a co-founder, director and president of the Company.
Ms. Fox is also a  director,  President  and sole  shareholder  of our  manager,
Primecore Funding Group, Inc., Primecore Properties, Inc., and Eprime, Inc., and
is the sole member of 99 Investors LLC and 99 El Camino Partners, LLC. Ms. Fox's
term of office as a director  expires in 2001. Ms. Fox has been involved in real
estate development and construction  lending for over twenty years. In 1993, Ms.
Fox became a  consultant,  then employee and President of Jim Ward & Associates,
Inc.  Ms.  Fox  was  responsible  for  dealing  with  substantial  loan  workout
situations  relating  to  loans  made  prior  to her  retention  by  Jim  Ward &
Associates.  Since 1996,  Ms. Fox has been the  President of  Primecore  Funding
Group, Inc., which she formed with Michael Heren. Ms. Fox has overall management
responsibility and primary responsibility for loan underwriting and managing the
loan portfolio.

       William Whitlow, age 47, is Chairman of the Board of Directors of the
Company, and is Chief Operating Officer of Primecore Funding Group, Inc. The
Board of Directors appointed Mr. Whitlow to the Board on September 29, 2000, and
the term of office to which he was elected expires in 2002. Mr. Whitlow received
a Masters of Management from the J. L. Kellogg Graduate School of Management at
Northwestern University, and a Masters of Architecture from the University of
Illinois. Prior to joining Primecore, Mr. Whitlow was Managing Director of
Arthur Andersen's Western Region Real Estate Capital Markets Group based in San
Francisco. He was responsible for strategic capital markets consulting, private
placements of debt and equity, portfolio and company sales, and mergers and
acquisitions. Prior to joining Arthur Andersen, Mr. Whitlow was a Director of
PricewaterhouseCoopers' Real Estate Capital Markets Group, operated his own real
estate firm, Alliance Management, was a Vice President at Pacific Gateway
Properties, where he directed the strategic management and repositioning of the
company's real estate portfolio, and was with Aetna Realty Investors, where he
held various positions over a 9-year period, performing loan production, asset
management and dispositions services. Mr. Whitlow is a member of the Urban Land
Institute, PREA, and the National Association of Real Estate Investment Trusts.

       Michael Rider, age 38, is a  co-founder,  director,  treasurer  and Chief
Financial  Officer  of the  Company.  Mr.  Rider's  term of office as a director
expires in 2003.  Mr.  Rider is a Certified  Public  Accountant.  Mr.  Rider was
controller,  then  Chief  Financial  Officer  for  The  Plymouth  Group  and its
successor,  TPG  Development  Corporation,  a San Francisco Bay Area real estate
development  company  from 1991 until  1998.  Since July 1998,  he has served as
Chief Financial  Officer of Primecore  Funding Group,  Inc. He is also the Chief
Financial Officer for our affiliates:  Eprime, Inc., Primecore Properties, Inc.,
and 99 Investors, LLC.

                                       18
<PAGE>

       Robert Puette, 58, was appointed, on March 1, 2001, to fill a newly
created director position, with a term of office expiring in 2002. Mr. Puette
formerly served as an advisory director to the Company. Between 1997 and 2000,
Mr. Puette was the President, Chief Executive Officer, and member of the Board
of Directors of Centigram Communications Corporation, a publicly held
communications technology company headquartered in San Jose, California. Prior
to his position at Centigram, Mr. Puette served as President, CEO and Chairman
of the Board of Directors at NetFRAME Systems, a high-availability computer
server company from 1995 to 1997, and from 1990 to 1993, Mr. Puette served as
President of Apple USA. Prior to 1990, Mr. Puette served as a group general
manager of Hewlett-Packard Company. Mr. Puette is also on the Board of Quality
Semiconductor Corporation and is a former director of Cisco Systems, Inc. Mr.
Puette holds a BSEE degree from Northwestern University and a MSDR degree from
Stanford University.

       James Barrington, 59, was  appointed,  on March 1, 2001,  to fill a newly
created  director  position,  with  a term  of  office  expiring  in  2003.  Mr.
Barrington formerly served as an advisory director to the Company.  From 1965 to
1999, Mr. Barrington was with Arthur Andersen LLP, serving primarily as an audit
and business advisory partner.  Mr. Barrington  retired from Arthur Andersen LLP
on August 31, 1999, and has been retired but doing limited consulting work since
that time for BF  Enterprises,  a public real estate  holdings  and  development
company.  Mr.  Barrington  formerly  was a member of the board of  directors  of
Resource  Phoenix.Com,  an online provider of financial and management reporting
and record keeping services which has been liquidated. Mr. Barrington received a
B.S.  in  accounting  from  San Jose  State  University  and a  M.B.A.  from the
University of California at Berkeley.

       Ben Hamburg, 47, is secretary of the Company. Mr. Hamburg is also General
Counsel  of  Primecore  Funding  Group,  Inc.  Mr.  Hamburg  graduated  from the
University  of  California,  Los  Angeles,  and earned  his law degree  from the
University  of  California,  Berkeley,  Boalt  Hall  School of Law in 1979.  Mr.
Hamburg  served as a law clerk to the Honorable Ira A. Brown,  Jr., Judge of the
San  Francisco  Superior  Court.  Since  1981,  Mr.  Hamburg has been in private
practice,  most recently  with the San  Francisco law firm of Freeland  Cooper &
Hamburg,  and has  specialized in real estate and commercial  matters.  Prior to
joining  Primecore as its General  Counsel,  Mr. Hamburg  represented  Primecore
Funding Group as its outside legal counsel.

Section 16(a) Beneficial Ownership Reporting Compliance

Ms. Fox and Mr. Rider were directors and  officers  of  the  Company  throughout
2000.  Mr.  Whitlow  became a director in September  2000.  Until  October 2000,
Michael  Heren was a director and an officer of the  Company.  Because no person
has ever  owned  more  than 10% of the  outstanding  Preferred  Stock,  only the
Company's  officers and  directors  have been  required to report under  Section
16(a) of the  Securities  Exchange  Act of 1934.  Ms. Fox and Messrs.  Rider and
Heren  should  have  filed  statements  of  beneficial  ownership  on SEC Form 3
respecting  their ownership of common stock and Preferred Stock during 2000 when
the Preferred Stock became  registered  during 2000 under Section 12 of the 1934
Act.  Mr.  Whitlow  should  have done so within 10 days of  becoming a director.
Their  failures to do so should have been  addressed by filings on SEC Form 5 on
or before  February  14, 2001. A Form 5 was filed by each of Ms. Fox and Messrs.
Whitlow and Rider during April 2001. Mr. Heren has not filed a Form 5.

Regulatory Proceedings

As indicated in prior reports, the manager was a party to certain regulatory
proceedings before the California Department of Real Estate and both our manager
and some related parties were the served by the California Department of
Corporations with administrative subpoenas. All matters arose out of events
related to the manager's method of doing business prior to formation of the
Company. A description of the matters, as disclosed in prior reports and updated
through the date of this filing, follows:

                                       19
<PAGE>

California Department of Real Estate

In February 1999, Primecore Funding Group, Inc. and its designated
broker-officer, Michael Heren, were the subjects of an accusation filed by a
deputy real estate commissioner of the California Department of Real Estate. The
accusation followed an audit conducted by representatives of the Department of
Real Estate and was based upon Primecore Funding Group, Inc.'s record-keeping
activities as a real estate broker and Mr. Heren's supervision of those
activities. The audit period covered records from January 1, 1997 through
February 5, 1999, prior to the formation of the Company. None of the acts
contained in the accusation involved the Company or any actions taken by
Primecore Funding Group, Inc. on behalf of the Company.


Prior to the time the audit was performed, Primecore Funding Group, Inc.'s
established manner of doing business involved solicitation, negotiation and
servicing of construction mortgage loans between borrowers and private lenders.
Primecore Funding Group, Inc. acted as a real estate broker; it was not a
principal in the transactions. All of the loans were short-term construction
loans that usually matured within 12 to 18 months. The loans were multi-lender
transactions, usually with more than one beneficiary on a single note and deed
of trust. Primecore Funding Group, Inc. did not maintain separate records for
each beneficiary or transaction, and did not keep records that would permit a
monthly reconciliation of the balances of all separate beneficiary or
transaction records to the ending balance of the control record of all trust
funds received and disbursed, as required by the California Code of Regulations.
It also did not designate three of its four bank accounts as trust accounts, and
did not carry fidelity bond coverage for two of the three signatories on those
bank accounts who were not licensed by the Department of Real Estate.

Once advised of the results of the audit, Mr. Heren and Primecore Funding Group,
Inc. promptly took steps to correct the out-of-trust and record-keeping
compliance issues, with special attention being given to protecting investors
from loss. The corporation designated its bank accounts as trust accounts and
obtained a fidelity bond to cover its account signatories who were not licensed
by the Department of Real Estate. Primecore Funding Group, Inc. also took steps,
including creation of the Company, to bring its business practices into full
compliance with all applicable rules and regulations.

In July 1999, an administrative law judge, conducted a hearing on the
accusation. At the hearing, it was undisputed that no investor or borrower had
ever lost money, and there was no dispute that Primecore Funding Group, Inc. was
financially sound. The administrative law judge found that although the
corporation's trust fund records were not maintained in compliance with the
rules and regulations governing real estate licensees, there had been no
diversion of funds, nor any dishonesty in Primecore Funding Group, Inc.'s
dealings with investors or borrowers. The judge further found that all investor
funds were accounted for and stayed in the business for the benefit of
investors. In addition, the judge noted Primecore Funding Group, Inc.'s full
cooperation with the Department of Real Estate and its formation of the Company
to ensure future compliance with applicable record-keeping rules and
regulations. As a result of these findings, the judge decided that it would not
be against the public interest to permit Mr. Heren and Primecore Funding Group,
Inc. to continue to hold real estate broker licenses upon specific terms and
conditions. The judge recommended that Mr. Heren and Primecore Funding Group,
Inc. should have restrictions placed on their real estate broker licenses for
three years, and further recommended that Mr. Heren be required to take real
estate education courses. The Real Estate Commissioner, Mr. Heren and Primecore
Funding Group, Inc. accepted the recommendations.

On April 27, 2000,  the  California  Department  of  Real  Estate  filed  a  new
accusation  against  Primecore  Funding Group,  Inc., Mr. Heren and Ms. Fox. The
accusation  alleged  new  violations  of trust  fund  accounting  and  reporting
requirements  relating to the  remaining  deeds of trust,  and not to activities
conducted on behalf of the Company. In addition, it was claimed that Ms. Fox, as
President of Primecore  Funding Group,  Inc., had participated in negotiation of
loans  without  a real  estate  license.  Although  Ms.  Fox's  activities  were
identical  to those  conducted at the time of the first  accusation,  the latter
issue had never before been raised by the Department of Real Estate.

In August 2000, a hearing was again held before the same administrative law
judge who had heard the first accusation. At the hearing, it was again
undisputed that no investor or borrower had ever lost money, and again there was
no dispute that Primecore Funding Group, Inc. was financially sound. The
administrative law judge found that most of the violations were mostly technical

                                       20
<PAGE>

and unintentional, were mainly due to the transition to a REIT format, and were
promptly corrected when brought to the attention of management, with special
attention being given to protecting investors from any loss. Again, the
administrative law judge specifically found that there had been no diversion of
funds, nor any dishonesty by Primecore Funding Group, Inc. or its management. In
addition, the judge again noted Primecore Funding Group, Inc.'s full cooperation
with the Department of Real Estate to ensure future compliance with applicable
record keeping rules and regulations. Again, the judge found that it would not
be against the public interest to allow Primecore Funding Group, Inc., Mr. Heren
and Ms. Fox to continue to hold their real estate licenses. The judge
recommended, and the Real Estate Commissioner agreed, that restricted licenses
should continue to be available to Primecore Funding Group, Inc., Mr. Heren and
Ms. Fox, with restrictions similar to those noted above with respect to the
first accusation. In addition, the Commissioner suspended these restricted
licenses for a 45-day period. On February 1, 2001, Ms. Fox filed a petition for
writ of mandamus in San Mateo County Superior Court asking that the Court
overturn the Commissioner's decision as to her on various grounds, including
that the decision is not supported by the evidence, and is inconsistent with the
law. The matter is presently pending, and no hearing date on the petition for
writ of mandamus has been scheduled.

In operating solely on behalf of the Company in negotiating and arranging loans
and in servicing loans and dealing with borrowers on loans in our portfolio,
Primecore Funding Group, Inc. is legally exempt from reporting similar to the
type involved in the accusations because the Company's securities are registered
under section 12 of the Securities Exchange Act of 1934. Accordingly, for the
reasons stated by the administrative law judge, and as a result of our formation
and registration of securities, it is believed that there should be no further
difficulties between Primecore Funding Group, Inc. or its officers and the
California Department of Real Estate.

California Department of Corporations

On March 17, 1999, after Primecore Funding Group, Inc. had already determined to
change to a REIT format, and the day before the Company was incorporated, the
California Department of Corporations issued a Desist and Refrain Order directed
to Primecore Funding Group, Inc., ordering it to stop selling securities,
including any undivided interests in a note "of Primecore Funding Group, Inc."
which is secured directly by real property, or any other security under
California law.

The Order recited the Commissioner of Corporations opinion that the sale of
undivided interests in a note directly secured by real property was a security
that must be qualified or exempt from qualification before it can be sold.

Inasmuch as Primecore Funding Group, Inc. had already determined to form the
Company to bring all activities into compliance with applicable regulations, no
hearing was requested and no further administrative proceedings were scheduled.

On July  23,  1999,  and   March  9,  2000,   the   California   Department   of
Corporations served  administrative  subpoenas for business records of Primecore
Funding  Group,  Inc. and Primecore  Mortgage  Trust,  Inc.  issued  pursuant to
California   Corporation  Code  Section 25531  in  connection  with  an  inquiry
concerning  the  business of Primecore  Funding  Group,  Inc.  and  formation of
Primecore  Mortgage Trust, Inc. The records requested were provided.

Compensation of Directors

None of the directors of the Company who also serve as executive officers or
employees of our affiliates receives any separate compensation for service on
our Board of Directors or on any Board committee. Although all directors are
entitled to receive reimbursement of reasonable out-of-pocket expenses incurred
in connection with meetings of the Board of Directors, to date, no director has
requested compensation for out of pocket expenses. Messrs. Puette and
Barrington, who are not employed by our affiliates or us, receive annual
compensation totaling $60,000. Our charter obligates us to indemnify our
directors and officers and to pay or reimburse expenses for such individuals in
advance of the final disposition of a proceeding to the maximum extent permitted

                                       21
<PAGE>

from time to time by Maryland law. The Maryland General Corporation Law, the
"Maryland GCL", permits a corporation to indemnify its present and former
directors and officers, among others, against judgments, penalties, fines,
settlements and reasonable expenses actually incurred by them in connection with
any proceeding to which they may be made a party by reason of their service in
those or other capacities, unless it is established that (a) the act or omission
of the director or officer was material to the matter giving rise to the
proceeding and (1) was committed in bad faith, or (2) was a result of active and
deliberate dishonesty, (b) the director or officer actually received an improper
personal benefit in money, property or services, or (c) in the case of any
criminal proceeding, the director or officer had reasonable cause to believe
that the act or omission was unlawful.

Terms of Directors and Officers

Our Board of Directors consists of the number of persons as shall be fixed by
the Board of Directors from time to time by resolution to be divided into three
classes, designated Class I, Class II and Class III, with each class to be as
nearly equal in number of directors as possible. Currently there are five
directors. Ms. Fox is a Class I director, Mr. Whitlow and Mr. Puette are Class
II directors, and Mr. Rider and Mr. Barrington are Class III directors. Ms. Fox
will stand for reelection at the annual meeting of shareholders held in 2001,
and Messrs. Whitlow, Puette and Barrington will have their appointments come on
for election at the same meeting. Thereafter, Class II and III directors will
stand for reelection in 2002 and 2003. At each annual meeting, the successors to
the class of directors whose term expires at that time are to be elected to hold
office for a term of three years, and until their successors are elected and
qualified, so that the term of one class of directors expires at each annual
meeting.

For any vacancy on the Board of Directors, including a vacancy created by an
increase in the number of directors, the vacancy may be filled by election of
the Board of Directors or the shareholders, with the director so elected to
serve until the next annual meeting of shareholders, if elected by the Board of
Directors, or for the remainder of the term of the director being replaced, if
elected by the shareholders; any newly-created directorships or decreases in
directorships are to be assigned by the Board of Directors so as to make all
classes as nearly equal in number as possible. Directors may be removed only for
cause and then only by vote of a majority of the combined voting power of
shareholders entitled to vote in the election for directors. Subject to the
voting rights of the holders of the preferred stock, the charter may be amended
by the vote of a majority of the combined voting power of shareholders, provided
that amendments to the article dealing with directors may only be amended if it
is advised by at least two-thirds of the Board of Directors and approved by vote
of at least two-thirds of the combined voting power of shareholders. The effect
of these as well as other provisions of our charter and bylaws may discourage
takeover attempts and make more difficult attempts by shareholders to change
management.

Executive officers are appointed by the Board of Directors, serve at the Board's
pleasure and may be removed from office at any time without cause. There are no
family relationships among any of our directors or executive officers.

Item 11.     Executive Compensation.
None of the executive officers of the Company receive compensation from us for
their services. All are paid directly by our manager as part of and not in
addition to the management fee. For the year ended December 31, 2000, the
portfolio management fees paid to our manager were $10,967,249. We do not have a
stock option or deferred compensation plan.

Item 12.     Security Ownership of Certain Beneficial Owners and Management.
The following table presents information regarding the beneficial ownership of
our capital stock as of February 28, 2001 of: (1) each person known by us to own
beneficially five percent or more of our outstanding capital stock; (2) each of
our directors and executive officers; and (3) all of our directors and executive
officers as a group. The beneficial owners named have, to our knowledge, sole
voting and investment power with respect to the shares beneficially owned,
subject to community property laws where applicable.

                                       22
<PAGE>

                                                  Number               Percent
 Title of Class           Beneficial Owner        of Shares            of Class
 --------------           ----------------        ---------            --------

 Class A
    Convertible Preferred     Susan Fox              22,500               *
                              Michael Rider           5,000               *
                              Robert Puette         404,349               2.1
                                                    -------               ---

                              Total                 431,686               2.1
                                                    =======               ===

 Common                       William Whitlow            40                40
                              Susan Fox                  40                40
                              Michael Rider              20                20
                                                    -------               ---

                              Total                     100               100
                                                    =======               ===

o Less than one percent of our outstanding capital stock.

Item 13.    Certain Relationships and Related Transactions.

Primecore Funding Group, Inc., our affiliate, manages all of our business,
subject to direction from our Board of Directors. Our manager bears all
operating expenses connected with originating and managing our mortgage loan
portfolio, and receives a monthly management fee that is established by a
written management agreement that we entered into with our manager. Our
headquarters are the offices of our manager. We currently do not pay any rent
for our headquarters, as these expenses are borne by our manager.

We have other affiliates, which are entities with whom we share common officers
and some common directors, but which have their own business purposes. The
following is a list of other affiliates:

Primecore  Properties,  Inc.  is  a  California   corporation,  incorporated  in
1997.  Ms.  Fox is its  sole  shareholder  and one of its  directors.  Primecore
Properties,  Inc. is licensed by the  California  Department of Real Estate as a
real estate  corporation.  Theresa May Couture is licensed as an individual real
estate broker and is the designated broker-officer of Primecore Properties, Inc.
Primecore Properties, Inc. provides services to us for activities that require a
California  real estate broker  license,  through an agreement with our manager.
Primecore Properties, Inc. does not receive any compensation from us.

Eprime, Inc. is a California corporation,  incorporated in 2000. Ms. Fox is
the sole shareholder and director.  She is the president and secretary, and Mr.
Rider is the chief financial officer.  Eprime, Inc. does not have any employees,
does not provide any services to us and does not receive any  compensation  from
us.

99 Investors,  LLC, a California limited liability  company,  was formed in
1996.  Ms.  Fox is its sole  member.  It does not have any  employees, does not
perform any services for us and does not receive any compensation from us.

99 El Camino Partners,  LLC, a California  limited liability  company,  was
formed in 1996. Ms. Fox is its sole member.  The  partnership has no employees,
does not provide any services to us and does not receive any compensation  from
us. 99 El Camino  Partners  owns the property at 99 El Camino Real, Menlo Park,
California, our principal place of business and that of our affiliates.

Because of our policy not to take title to real property through foreclosure or
otherwise, we have previously relied on two of our affiliates, 99 Investors LLC
and 99 El Camino Partners, LLC, to assume defaulted loans. Some of our directors
and executive officers are principals of such affiliatesOur affiliates bear the
risk of loss on the assumed loans, but they also will receive the benefit of any
profits to be realized from the successful development and ultimate sale of the
completed properties. Our affiliates and our principals are in a position to
take advantage of opportunities for themselves to develop and sell those
properties that otherwise belong, ultimately, to our shareholders. Also, on
occasion, we may decide to make new loans to affiliates. While these loans are

                                       23
<PAGE>

subject to the same underwriting criteria as any other loan, and have generally
been made on equivalent, if not superior terms for the REIT, as compared with
loans made to other borrowers, decisions are made, in part, by interested
persons.As with other loans made to unaffiliated borrowers, due to changes in
the scope of construction and general cost increases during development of a
project, additional funds may be needed to complete a project. As with other
loans, we will grant an additional extension of credit if our management
believes repayment of the increased extension of credit is adequately secured.
In the case of an affiliate, the principals of the affiliates, who are also our
management and members of our board, will be involved in making the decision on
our behalf, creating a conflict of interest. Also, in the event of a default on
an affiliate loan, there would be a conflict of interest in connection with
decisions on how to proceed. See Note 4 and Schedule 4 of our financial
statements for further detail on investments in real estate under development by
affiliates.

PART IV
-------

Item 14.        Exhibits, Financial Statement Schedules and Reports on Form 8-K.

     (a)      Documents filed as part of the report

          1.       The following financial statements are included in this
                   annual report on Form 10-K as part of Item 8:

               a.       Report of Independent Public Accountants
               b.       Balance Sheets At December 31, 2000 and 1999
               c.       Statements of Operations for the year ended December 31,
                        2000 and for the period from inception (March 18, 1999)
                        to December 31, 1999
               d.       Statements of Shareholders' Equity for the year ended
                        December 31, 2000 and for the period from inception
                        (March 18, 1999) to December 31, 1999
               e.       Statements of Cash Flows for the year ended December 31,
                        2000 and for the period from inception (March 18, 1999)
                        to December 31, 1999
               f.       Notes to Financial Statements December 31, 2000 and 1999

          2.       The following financial statement schedule is included in
                   this annual report on Form 10-K following this Item 14.

               a.       Schedule IV - Mortgage loans on real estate -
                        December 31, 2000

          3.       Exhibits

                  Exhibits included with this Form 10-K following the signature
                  page, or those incorporated by reference to other filings,
                  are:


                 3i.1     Articles of Incorporation of the Company are hereby
                          incorporated herein by reference from Exhibit 3(i) to
                          the Company's Registration Statement on Form 10-12G,
                          filed on April 28, 2000

                 3i.2     Articles Supplementary of the Company are hereby
                          incorporated herein by reference from Exhibit 99.1 to
                          the Company's Registration Statement on Form 10-12G,
                          filed on April 28, 2000

                 3ii.1    Bylaws, Amended March 21, 2000, are hereby
                          incorporated herein by reference from Exhibit 3(ii) to
                          the Company's Registration Statement on Form 10-12G,
                          filed on April 28, 2000

                 3ii.2    Bylaws, Amended March 1, 2001

                 4.1      Specimen Stock Certificate is hereby incorporated
                          herein by reference from Exhibit 99.2 to the Company's
                          Registration Statement on Form 10-12G, filed on April
                          28, 2000

                                       24
<PAGE>

                 4.2      Registration Rights Agreement is hereby incorporated
                          herein by reference from Exhibit 4.1 to the Company's
                          Registration Statement on Form 10-12G, filed on April
                          28, 2000

                 4.3      Founder's Registration Rights Agreement is hereby
                          incorporated herein by reference from Exhibit 4.2 to
                          the Company's Registration Statement on Form 10-12G,
                          filed on April 28, 2000

                 10.1     Management Agreement dated March 30, 1999 is hereby
                          incorporated herein by reference from Exhibit 10 to
                          the Company's Registration Statement on Form 10-12G,
                          filed on April 28, 2000

                 10.2     Management Agreement dated October 1, 2000

                 11.1     Statement re computation of per share earnings



     (b)      Reports on Form 8-K


              None.


















                                       25
<PAGE>
<TABLE>

                                                                                                                         SCHEDULE IV

                         PRIMECORE MORTGAGE TRUST, INC.

                          MORTGAGE LOANS ON REAL ESTATE
                                DECEMBER 31, 2000

<CAPTION>
                                                                                                                           Principal
                                                                                                                           Amount of
                                                                                                                       Loans Subject
                                                              Periodic                                    Carrying     to Delinquent
                                              Final Maturity   Payment                 Face Amount of     Amount of     Principal or
       Description            Interest Rate             Date     Terms    Prior Liens     Mortgages       Mortgages         Interest
----------------------------  --------------  --------------  --------  -------------  --------------  ------------  ---------------
 <S>                           <C>             <C>             <C>         <C>          <C>                <C>          <C>

INVESTMENTS IN REAL ESTATE

    Single Family Attached    11.00-12.00%       2/01 - 5/01    Note 1    $        --  $  8,685,000     $  4,609,846       $    --
    Land Development          11.00-12.00%       1/01 - 6/01    Note 1             --    16,417,842        8,566,653            --
    Condominium               11.00-11.50%      4/01 - 11/01    Note 1             --    79,060,000       25,968,646            --
    Single Family Detached    11.00-13.00%      12/00 - 5/02    Note 1     17,625,000   258,370,230      135,217,074            --
                                                                                       ------------- ---------------- -------------

                                                                                       $362,533,072     $174,362,219      $     --
                                                                                       ============= ================ =============

REAL ESTATE UNDER DEVELOPMENT
BY AFFILIATES

    104 Second Street -
          5 unit Condo              11.50%          11/20/01              $        --     2,450,000     $  1,855,998      $     --
    Quarry Estates Lot 1 -
          Single Family             11.50%            4/1/01                       --     5,000,000        4,422,584            --
    Quarry Estates Lot 2 -
          Single Family             11.50%            4/1/01                       --     5,000,000        4,390,263            --
    7 Lots, Los Altos Nursery       11.00%           3/31/01                3,927,000    12,800,000        7,526,933            --
    Quarry Estates Lot 13 -
          Single Family             11.00%           9/15/01                1,200,000     5,000,000        1,670,228            --
    Quarry Estates Lot 15 -
          Single Family             11.00%           9/15/01                1,200,000     5,000,000        1,794,693            --
    Quarry Estates Lot 16 -
          Single Family             11.00%           9/15/01                1,200,000     5,000,000        1,597,956            --


</TABLE>
                                      FS-1
<PAGE>
<TABLE>
<CAPTION>

                                                                                                                           Principal
                                                                                                                           Amount of
                                                                                                                       Loans Subject
                                                              Periodic                                    Carrying     to Delinquent
                                              Final Maturity   Payment                 Face Amount of     Amount of     Principal or
       Description            Interest Rate             Date     Terms    Prior Liens     Mortgages       Mortgages         Interest
----------------------------  --------------  --------------  --------  -------------  --------------  ------------  ---------------
 <S>                           <C>             <C>             <C>         <C>          <C>                <C>          <C>

    8 Los Altos Properties        11.00%           9/27/01               70,062,000     13,500,000      9,686,571               --
    91 Fleur Place -
          Single Family           11.25%          10/27/01                3,185,000      5,000,000      3,810,244               --
    37 Euclid -
          Single Family           11.25%          12/29/01                2,000,000      7,100,000      2,564,263               --
    Scotia Pines Subdivision      11.00%            3/1/01               83,562,000      8,000,000      2,731,003               --
                                                                                    ------------------------------------------------

                                                                                        73,850,000   $ 42,050,737          $    --
                                                                                    ================================================
</TABLE>








                                      FS-2

<PAGE>


                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has caused this registration statement to
be signed on its behalf by the undersigned, thereunto duly authorized, on March
31, 2001
                                 PRIMECORE MORTGAGE TRUST , INC .

                                 By:            /s/ SUSAN FOX
                                    ------------------------------------
                                             Susan Fox, President


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

          Name                       Capacity                      Date

     /s/ SUSAN FOX            Director and President          March 31, 2001
     -------------
       Susan Fox

  /s/ WILLIAM WHITLOW         Chairman of the Board           March 31, 2001
  -------------------
    William Whitlow

   /s/ MICHAEL RIDER      Director, Treasurer and Chief       March 31, 2001
   -----------------            Financial Officer
     Michael Rider













                                       26
<PAGE>





                                 EXHIBIT INDEX


            EXHIBIT
            NUMBER                DESCRIPTION OF EXHIBIT

            3ii.2                 Bylaws, Amended March 1, 2001
            10.2                  Management Agreement dated October 1, 2000
            11.1                  Statement re computation of per share earnings

















                                       27