SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                         ------------------------------

                                  FORM 10-KSB

              Annual Report Pursuant to Section 13 or 15(d) of the
  Securities Exchange Act of 1934 For the Fiscal Year Ended September 30, 2008
                        --------------------------------

                            BELLAVISTA CAPITAL, 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.)

                           15700 Winchester Boulevard
                               Los Gatos, CA 95030
                         (Address of principal offices)
      (408 354-8424) ((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:
                   Common Stock, par value $17 0.01 per share
                                (Title of class)

Indicate  by  check  mark if the  registrant  is not  required  to file  reports
pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]

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 [ ]

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-K contained in this form, and no disclosure  will be contained,  to
the  best  of  registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB. [ ]

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

State  issuer's  revenues  for its most  recent  fiscal  year:  $12,199,295  The
aggregate  market  value of the  voting and  non-voting  common  equity  held by
non-affiliates computed by reference to the price at which the common equity was
last sold,  or the average bid and asked  price of such common  equity,  as of a
specified date within the past 60 days: N/A. The number of shares outstanding of
each  of the  issuer's  classes  of  common  equity  as of  December  31,  2008:
11,171,433 Shares of Common Stock were outstanding

Transitional Small Business Disclosure Format: Yes [ ] No [X]



<PAGE>

This Annual Report on Form 10-KSB of BellaVista  Capital,  Inc. (the  "Company")
contains  forward-looking  statements.  All statements  other than statements of
historical  fact may be  forward-looking  statements.  These include  statements
regarding the Company's future financial results,  operating  results,  business
strategies,  projected  costs and capital  expenditures,  investment  portfolio,
competitive  positions,  and plans  and  objectives  of  management  for  future
operations.  Forward-looking  statements  may be  identified by the use of words
such as "may,"  "will,"  "should,"  "expect,"  "plan,"  anticipate,"  "believe,"
"estimate,"  "predict,"  "intend,"  "seek,"  "target"  and  "continue,"  or  the
negative  of these  terms,  and  include  the  assumptions  that  underlie  such
statements.  The Company's  actual  results could differ  materially  from those
expressed or implied in these forward-looking  statements as a result of various
risks and uncertainties,  including those set forth in the Financial  Statements
referred to under Item - 7 Financial Statements, at Footnote 1 under the caption
"Risk  Factors."  All  forward-looking  statements  in this  report are based on
information  available  to the  Company as of the date  hereof  and the  Company
assumes no obligation to update any such statements.

The  following  information  should be read in  conjunction  with the  Financial
Statements and notes thereto included in this Form 10-KSB.


                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

Business Focus and Strategies

Organized  in 1999 as a real  estate  investment  trust or  "REIT," we invest in
residential real estate  development  projects.  We generally invest in for-sale
single-family  or  multi-family   projects,   typically  structured  as  secured
construction  loans,  secured  subordinated  loans,  mezzanine  loans, or equity
investments.  We will also consider  investments in commercial  real estate.  We
seek to  invest  throughout  California;  however,  we have  invested  and  will
continue to invest in other states when presented  with suitable  opportunities.
We do not engage in any foreign  operations  or derive any revenue  from foreign
operations, and do not intend to do so in the future. Effective January 1, 2004,
we withdrew our REIT status and are now taxed as a C Corporation.

Most investments that we structure as loans are underwritten with maturity dates
of up to 24  months,  which  dates  may be  extended  when  deemed  to be in the
Company's best interest. Most investments 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  precondition  to funding a secured  loan. We may
also make unsecured loans to development  entities or take an ownership interest
in a development  entity.  In such  circumstances we typically  require a shared
appreciation interest or other equity participation.

All approved  investments are subject to detailed legal  documentation  that has
been  formulated by legal counsel for our specific  purposes.  In addition,  our
Board of Directors has implemented  specific  guidelines for the making of loans
and investments. In accordance with our loan documents, we generally advance the
monthly  interest  payments out of available  loan  proceeds,  although our loan
documents  provide  us with a right not to  advance  or to cease  such  payments
should it be determined  that  conditions  require such  actions.  Loan fees, if
charged,  are typically  advanced out of the loan proceeds with the initial loan
advance. Generally, our loans require the borrower to make a ``balloon payment''
equal to the  principal  advanced  as well as  advanced  interest  and fees upon
maturity of the loan.  The loan maturity date is the earlier of the date of sale
of the secured real estate or the date stated in the loan documents.

Risk Factors

General  Economic  Conditions  in  Lending  Areas.  Our  business  plan seeks to
diversify our investments  throughout California and other states in the western
United States of America.  Approximately 95.47% of our investments are currently
located in the San Francisco Bay Area, 2.52% are in Southern California, .52% is
in  California's  Central  Valley,  and 1.49% are located in other states of the
United States of America.  The potential  success of real estate  investments in
general  is  subject  to  fluctuations  in local  market  conditions,  including
fluctuations in the supply of and demand for similar properties, and the success
of our investments will depend,  to some extent, on the economic and real estate
market  conditions  prevailing in the markets where our investments are located.
Since the investments are located in a limited  geographical region, they may be
subject  to  a  greater  risk  of  delinquency  or  default  if  the  industries
concentrated there suffer adverse economic or business developments.


                                       2
<PAGE>

Realization  of  Assets.  The  Company's  liquidity  and  ability  to  meet  its
obligations  as they become due are subject to, among other things,  its ability
to obtain timely  repayments or other  dispositions of its investments.  Many of
the investments  rely on the completion and sale of the developed real estate in
order to realize  repayment  or other  disposition  proceeds.  In the event that
proceeds from repayments or other investment  dispositions are not sufficient to
timely meet our  commitments  and credit  facilities  are not  extended on terms
favorable to us, we may be forced to sell some of our  investments  prematurely.
In such cases, the amount of proceeds received could be substantially  less than
what we would  have  expected  if we allowed a proper  marketing  period for the
investment.  This would have a negative  impact on the estimated net  realizable
value of our assets and would force the Company to adopt an alternative strategy
that  may  include  actions  such  as  seeking  additional  capital  or  further
downsizing.  The financial  statements do not include any adjustments that might
result from the outcome of this uncertainty.

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,  fluctuations  in prevailing  interest  rates,  timely
completion of projects by  developers,  uninsured  risks such as earthquake  and
other casualty  damage that may be uninsurable or insurable only at economically
unfeasible costs, and potential environmental liabilities relating to properties
on which we have made investments or received through foreclosure.

Company Management

Investment  Origination.   We  engage  persons  skilled  in  loan  underwriting,
disbursement and monitoring,  and the various business and legal issues that may
be involved with real estate  lending and investing.  Our  management  staff and
independent contractors where appropriate, provide all of the services including
but not limited to: underwriting loans and investments, overseeing all loans and
investments,   and  servicing  loans.  Proposed  investments  are  evaluated  to
determine  whether the investment is of a type typically made by us, whether the
developer  has the  experience  necessary  to manage the  project,  whether  the
collateral  is  sufficient  to meet our  investment  standards,  and whether the
investment  meets  criteria and  objectives set forth by the Board of Directors.
The Board of Directors must approve any new investment.

Collateral  valuation.  We utilize the experience of our management staff, third
party  appraisals or other  information  deemed useful to make  assessments of a
proposed project's viability and projected value in order to determine whether a
proposed investment meets our criteria.  In the evaluation process,  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 investment plus the projected rate of return.  We typically require third
party appraisals to support valuation.

Servicing.   Investment   servicing  involves  taking  all  steps  necessary  to
administer  the  investment,  including  monitoring  the  propriety  of  funding
requests,  monitoring  progress of a project and  accounting  for  principal and
income.  Where appropriate,  we employ an outside agent to monitor  construction
progress  and  draw  requests.  Loan  proceeds  are  disbursed  as  construction
progresses, and only after we have received satisfactory  documentation.  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.

Sales of construction  mortgage loans.  The Company plans to hold mortgage loans
to maturity, and have not embarked on selling loans in any secondary market, nor
are we aware that an efficient secondary market exists for the loans we hold. 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 for 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. 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.

ITEM 2.  DESCRIPTION  OF PROPERTY.  The Company owns interests in real property,
including  joint  venture  interests in real  property and certain real property
that we have acquired through  foreclosure.  Our policy is to maximize the value
of the  foreclosed  properties  prior to  liquidation.  In some  cases  this may
involve  completing  construction,  sometimes  through  a  subsidiary,  and then
marketing the property for sale.  The properties we own are described in Notes 5
and 6 to the Consolidated  Financial  Statements contained as Item 7 of the Form
10-KSB and begin on page FS-1.

                                       3
<PAGE>


ITEM 3. LEGAL  PROCEEDINGS.  Legal  proceedings  are described in Note 12 to the
financial statements included in the Form 10-KSB under Item 7, under the caption
"Litigation."

ITEM 4.  SUBMISSION  OF MATTERS TO A VOTE OF SECURITY  HOLDERS.  No matters were
submitted to a vote of our  shareholders  during the year ending  September  30,
2008  except  for  the   reelection  of  directors  at  the  annual  meeting  of
shareholders.


                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS
ISSUER  PURCHASES  OF EQUITY  SECURITIES.  Market  for  Common  Equity,  Related
Stockholder Matters and Small Business Issuer Purchases of Equity Securities are
described in Note 10 to the  financial  statements  included  in the Form 10-KSB
under Item 7, under the caption "Shareholder's Equity."


ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION General

Statements  contained in this Item 6,  "Management's  Discussion and Analysis or
Plan of Operation,''  ("MD&A") and elsewhere in this Form 10-KSB,  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
Form 10-KSB.  We undertake no  obligation  to publicly  release any revisions to
these  forward-looking  statements to reflect events or circumstances  after the
date of this Form 10-KSB or to reflect the occurrence of  unanticipated  events,
other than as required by law.

Overview

BellaVista  Capital was incorporated in March 1999 as Primecore  Mortgage Trust,
Inc. Since  incorporation  and through December 2000,  Primecore  engaged in the
business of providing  loans for the  development of primarily  high-end  single
family  residential  real  estate.  During  1999 and 2000  Primecore  raised the
capital to fund these  loans from the sale of shares of  Preferred  Stock.  This
capital was invested primarily in high priced San Francisco Bay Area residential
real estate at a time when prices were increasing at a rapid pace. By the end of
2000, Primecore had loan commitments of $436 million on 117 loans with over $216
million funded.

After 2000,  the market for high-end  real estate in the San  Francisco Bay Area
began to  deteriorate;  Primecore  began to  experience  borrower  defaults  and
through 2003 took title to 48 properties by way of  foreclosure  or deed in lieu
of  foreclosure.  Primecore  also  recognized  significant  impairments  in  its
portfolio.  The impairment of the investment  portfolio  resulted in substantial
operating losses.  The Company realized that these net operating losses could be
carried  forward and used to reduce future taxable income.  In prior years,  the
company  used its REIT  status,  and the  payment  of  dividends,  to  eliminate
corporate level taxation.  However, the REIT rules restricted the types of loans
the Company could make. In particular,  the Company was  prohibited  from making
loans with equity participations. With the ability to carry forward prior years'
net operating  losses to offset future taxable  income,  the Company was free to
terminate its REIT status,  which it did effective  January 1, 2004,  and was no
longer restricted in the types of investments it could make. As of September 30,
2008 the  Company's  available  Federal net operating  loss carry  forwards were
approximately  $101.6  million.  If these net operating  loss carry forwards are
fully  utilized  to  offset  future  taxable  income,  at  current  Federal  and
California  state tax  rates,  it would  save the  Company  approximately  $43.5
million in tax payments.

In April  2004  Primecore  changed  its name to  BellaVista  Capital in order to
reflect its new business focus. During 2004 new management focused on completing
and  liquidating  the existing  portfolio of assets,  internalizing  operations,
resolving  outstanding  legal issues and developing a pipeline of new investment
opportunities.  In addition  to the  completion  and sale of our  non-performing
investments,  management  completed the  transition to internal  management  and
significantly reduced continuing operating expenses.

The current real estate market is best  characterized by significant  erosion in
real estate  values and  significant  decrease in rate of inventory  absorption;
thus the Company has currently discontinued investments in subordinated debt and


                                       4
<PAGE>

equity  investments.  Any investments  made during this very difficult  economic
period,  which we believe is expected to last through  2010,  will range between
$0.5  million and $2.0  million and will  typically be secured by first deeds of
trust requiring monthly interest payments.

As a result of the current  difficult market  conditions,  the Company has taken
control  of certain  nonperforming  loans and  equity  partnership  investments.
Control was obtained by settlement  with the borrower or by assuming the role of
managing partner.  These properties are now categorized as Direct investments in
real estate developments.  For each of these properties,  the Company has made a
determination  on how to maximize  value based on the local  market  conditions,
potential  for  future  appreciation,  and the  properties'  operating  and debt
structure.  In a number of cases,  these  Investments  in Real  Estate are being
operated  as  either a rental  or a hybrid of units  used for  rental  and units
available  for sale.  In a particular  case,  it was deemed  appropriate  to (1)
auction the residential units for one of the properties due to its existing debt
structure and to (2) lease and hold the commercial space.

RESULTS OF OPERATIONS

We reported  revenues  from Loans  Receivable  Secured by Real  Estate  totaling
approximately  $1.1 million  during the year ended  September  30, 2008 compared
with $1.7 million  during the year ended  September  30,  2007.  The decrease in
revenues was due to (1) a decrease in the average amount invested in these loans
during the  comparable  periods;  and (2) a decline in our average return due to
nonperforming loans in our portfolio.

We reported  revenues  of  approximately  $2.8  million  from our Joint  Venture
Investments in Real Estate Developments during the year ended September 30, 2008
compared  with $1.9  million  during  the year ended  September  30,  2007.  Our
revenues are derived from repayment of loans and equity  participations.  During
the year ended  September  30,  2008 we sold a number of units  related to these
investments which resulted in higher revenues.

During  the  year  ended  September  30,  2008  we  reported  revenues  totaling
approximately  $7.7 million  from our  Investments  in Real Estate  Developments
compared  with  revenues of $11.1  million  during the year ended  September 30,
2007. The revenues  decreased  during 2008 compared with 2007 due to fewer units
sold than were projected.

During the year ended September 30, 2008, we reported revenues totaling $206,524
from our investment in rental  property  compared with zero revenues  during the
year ended  September 30, 2007.  This was due to the conversion of MSB Brighton,
one  of the  Company's  Investments  in  Real  Estate  Development  to a  rental
property.

Expenses

We group  our  operating  expenses  in  three  categories:  recurring  expenses,
nonrecurring expenses,  and impairments.  Recurring expenses are associated with
the ongoing operations of the Company. Nonrecurring expenses are legal costs and
carrying  costs of real estate owned (REO)  included  with  investments  in real
estate.  During  the year  ended  September  30,  2008 our  recurring  operating
expenses were  approximately  $2.0 million  compared with $1.5 million for 2007.
The increase is principally due to increased rental and depreciation expenses in
2008.  As a result of the  continuing  downturn  in the real  estate  market and
significant   uncertainties   associated  with  future   investments,   we  have
discontinued  funding any new equity  investments  and  significantly  curtailed
funding new trust deed investments while we wait for the market to stabilize. In
order to streamline the operations of the company and its expense  structures to
the eroding current market conditions and declining  property values,  the Board
of Directors determined that the best course of action to preserve shareholder's
value  was to  outsource  a  significant  portion  of the  Company's  day-to-day
administrative and asset management functions. As a result,  effective September
30, 2008 we terminated the positions of the Chief Investment Officer,  the Chief
Executive  Officer,  and the two  administrative  employees.  The  Executive and
Financial  Officer  responsibilities  have been  assumed by two of the  existing
board members,  with a third member also overseeing the  operational  aspects of
the business on an as-needed basis. In addition,  the day-to-day  administrative
and asset  management  functions have been  outsourced to a  professional  asset
manager,  Cupertino Capital. The agreement governing the services to be provided
by,  and the terms of the  Company's  relationship  with,  Cupertino  Capital is
filled with this report as Exhibit 10.4.

During the year ended  September 30, 2008 our  nonrecurring  operating  expenses
were  approximately  $362,000  compared  with  $327,000  during  the year  ended
September 30, 2007. The increase in nonrecurring  operating  expenses was due to
the cost  associated  with carrying and warranty  costs of prior  investments in
real estate.


                                       5
<PAGE>

During the year ended September 30, 2008 our rental expenses were  approximately
$264,000 compared with $0 during the year ended September 30, 2007. The increase
is due to converting the investment in MSB Brighton to a rental  property from a
property  held for sale.  For the year ended  September  30, 2007,  Brighton was
under construction and was reported as a joint venture investment.

We recorded  impairment charges totaling  approximately $17.0 million during the
year ended September 30, 2008,  compared with $7.7 million during the year ended
September 30, 2007. The recorded  impairments during 2008 pertain to investments
that suffered  significant  declines in values due to the prevailing  conditions
for the real estate market coupled with slower sales rates on these  investments
than projected.  We have impaired our  investments  based on our estimate of the
resulting  decrease in value due to these two factors as well as the increase in
costs  associated  with holding or renting the properties for an extended period
of time in this highly uncertain real estate market.

Capitalized  interest cost associated with our borrowings was $53,781 during the
year  ended  September  30,  2008  compared  with  $9,522  during the year ended
September 30, 2007. The increase was due to an increase in our outstanding  debt
during  the  year  ended   September  30,  2008,   mainly   resulting  from  the
consolidation of the Cummings Park project.


LIQUIDITY AND CAPITAL RESOURCES

Liquidity means the need for,  access to and uses of cash. Our principal  source
of liquidity  is the  repayment of our real estate  investments.  Our  principal
demands for liquidity are funds that are required to satisfy  obligations  under
existing loan  commitments,  costs of operating and holding  investments in real
estate development for future sales, and operating expenses.

Sources of Cash

As of September 30, 2008 our primary  source of liquidity was the  collection of
our investments in real estate,  $3.0 million in lines of credit and the cash we
had in the bank. We do not currently  have any plan to sell equity or issue debt
securities. However, we do have the ability to borrow money from various funding
sources using our real estate  investments as collateral if we determine that we
need additional liquidity.

We typically receive  repayment on our investments when the development  project
has been  completed and sold or refinanced to third  parties.  Accordingly,  our
repayments  are a function of our  developers'  ability to complete and sell the
development  properties  in  which  we have  invested.  During  the  year  ended
September 30, 2008 we received  repayments,  including  income,  totaling  $17.9
million  compared with $28.2 million  during the year ended  September 30, 2007.
The  following  table  summarizes  our liquidity  expectations  based on current
information  regarding project  completion and sales absorption  assumptions for
the  investments  we held at September  30, 2008.  The expected  proceeds in the
following table are higher than our net realizable value estimates  because they
include our estimated  costs to complete and are presented net of $12,453,057 in
secured debt.


                                                        Expected Proceeds
                                                  ------------------------
Scheduled investment completion:
   Year ended   09/30/09                                $       5,467,548
   Year ended   09/30/10                                        6,394,008
   Year ended   09/30/11                                        7,820,773
   Year ended   09/30/12                                       13,484,600
   Year ended   09/30/13                                        3,767,959
                                                  ------------------------
   Total                                                 $     36,934,888
                                                  ========================


It is possible  that our  repayments  may not be  sufficient  to timely meet our
commitments  and we may be forced to sell assets or seek financing at terms that
may not be favorable to us. This would have a negative  impact on the  estimated
net realizable value of our assets.


                                       6
<PAGE>

Uses of Cash

The  following  table  sets  forth  the  projected  timing  and  amount  of  our
obligations  through  September  30,  2010,  without  taking  into  account  new
investments that may be made during future periods:

                                                      Year                Year
                                                     ended               ended
                                Total   September 30, 2009  September 30, 2010
                     ------------------ ------------------- -------------------
Investment fundings   $        948,766   $         948,766   $              --
                     ------------------ ------------------- -------------------
   Total              $        948,766   $         948,766   $              --
                     ================== =================== ===================

Investment  fundings  are the  largest  use of our cash.  During  the year ended
September 30, 2008 we invested $14.9 million in continuing  development projects
compared with $27.9 million during the year ended September 30, 2007

At September  30, 2008, we estimated  the costs to complete our  investments  in
real estate  developments  plus the  remaining  funding  obligation on our joint
venture  investments in real estate  developments to be approximately  $948,766.
The exact timing of the  investment  fundings is  dependent  on several  factors
including weather,  governmental regulation and developer related issues, so the
timing  of  investment  fundings  in the  above  table is an  estimate  based on
information available to us at this time.

Stock Repurchases

In the  past,  we  have  provided  liquidity  to our  stockholders  through  the
repurchase  of  outstanding  shares.  Because  our  stock  does not trade in any
secondary  market,  no market value exists for our stock and another method must
be used to determine the repurchase  price.  The Board of Directors has used the
net  realizable  value of the  Company's  assets as well as an assessment of the
risk profile for each investment to guide in the determination of the repurchase
price for  planned  repurchases  as well as Company  repurchases  in response to
unsolicited tender offers.

Stockholder Liquidity and Realizable Value of Investments

The realizable value of our assets represents our current estimate of the amount
of proceeds we expect to receive once our  investments  are  completed and ready
for sale. The estimate relies on a number of assumptions  including the expected
value of the investment  once  completed,  less  applicable  selling costs,  the
remaining  costs and the length of time  required to complete the project.  Many
factors  outside of the Company's  control can cause changes in these  estimates
and produce significantly different results.  Furthermore, as noted above, there
is no  organized  public  market  for the  Company's  shares,  so the  Company's
calculation  of the  estimated  realizable  value of its assets per  outstanding
share  should not be viewed as an  estimate of any market  value per share,  and
there can be no assurance as to the amount or timing of any  investment  returns
on the shares.

During the period from June 2005 to January  2009,  the Company has not used its
funds to pay  dividends or  distributions  or,  except in certain  extraordinary
circumstances,  to redeem shares. Such extraordinary circumstances have included
Company tender offers in response to unsolicited third party tender offers which
the Board deemed inadequately priced and opportunistic. The Board will determine
the  timing  and  terms of any  future  share  redemptions  based  on  available
liquidity,  net  realizable  value,  and assessment of the risk profile for each
investment.

The information  presented below reconciles the differences between the carrying
value of our investments based on US GAAP and the estimated  realizable value of
our investments.

<TABLE>
<CAPTION>
                                                                                     As of September 30,
                                                                            --------------------------------------
                                                                                      2008               2007
                                                                            -------------------- -----------------
   <S>                                                                               <C>                 <C>
Loans receivable secured by real estate                                           $  11,251,773     $  11,163,000
Joint Venture investments in real estate developments                                 9,944,197        33,704,973
Investments in real estate developments                                              19,026,984                --
Investment in rental property                                                         3,928,429                --
                                                                            -------------------- -----------------
Total investments in real estate per US GAAP                                         44,151,383        50,081,193
Collectible interest and preferred return not reportable per US GAAP                  4,023,463         4,487,203
                                                                            -------------------- -----------------
   Estimated  realizable value of investments in real estate                      $  48,174,846     $  54,968,396
                                                                            ==================== =================
</TABLE>


                                       7
<PAGE>

Net Realizable Value of Assets per Share

The following  calculation  determines  the estimated net  realizable  value per
share of stock at September 30, 2008 and 2007:

<TABLE>
<CAPTION>
                                                                                     As of September 30,
                                                                            --------------------------------------
                                                                                      2008               2007
                                                                            -------------------- -----------------
   <S>                                                                               <C>                 <C>
Cash                                                                         $          636,346   $     1,759,241
Other assets                                                                            682,411         1,015,379
Estimated realizable value of investments in real estate                             48,174,846        54,968,396
                                                                            -------------------- -----------------
Total realizable assets                                                              49,493,603        57,743,016
Accounts and notes payable                                                          (13,520,210)         (597,313)
                                                                            -------------------- -----------------
Estimated net realizable assets                                              $       35,973,393   $    57,145,703
Shares outstanding                                                                   11,590,870        13,951,452
                                                                            -------------------- -----------------
   Estimated net realizable assets per share                                 $             3.10   $          4.10
                                                                            ==================== =================
</TABLE>

Our estimated net realizable  assets per share were $3.10 at September 30, 2008,
a decrease of $1.00 per share from the $4.10 we estimated at September 30, 2007.
The decrease in the estimated realizable value of several of our investments was
the result of the continuing  significant declines in real estate values and the
substantial reduction in inventory absorption rates.


Critical Accounting Policies and Estimates

Management's Discussion and Analysis of Financial Condition or Plan of Operation
covers our financial  statements,  which have been  prepared in accordance  with
accounting  principles  generally accepted in the United States. The preparation
of  these  financial  statements  requires  management  to  make  estimates  and
assumptions  that affect the reported  amounts of assets and liabilities and the
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. On an on-going basis,  management  evaluates its estimates and
judgments,   including  those  related  to  the  valuation  of  our  assets  and
liabilities.   Management  bases  its  estimates  and  judgments  on  historical
experience and on various other factors that are believed to be reasonable under
the  circumstances,  the  results of which  form the basis for making  judgments
about the  carrying  values  of  assets  and  liabilities  that are not  readily
apparent  from other  sources.  Actual  results may differ from these  estimates
under  different  assumptions or conditions.  Management  believes the following
critical  accounting  policies,   among  others,  affect  the  more  significant
judgments and estimates used in the  preparation of its  consolidated  financial
statements.

Valuation and  Realizability of Investments.  All of our Acquire,  Develop,  and
Construct loans (ADC loans) are classified for financial  reporting  purposes as
joint venture investments in real estate  developments.  We have taken ownership
on  some  ADC  loans  that  are   classified  as   investments  in  real  estate
developments.  Such  investments  are stated at the lower of cost or fair 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.  Impairment is recognized  when estimated
expected  future  cash  flows   (undiscounted  and  without  interest  charges),
typically  from the sale of a  completed  property,  are less than the  carrying
amount of the investment,  plus estimated  costs to complete.  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
that there is  impairment,  the excess of the carrying  amount of the investment
over its estimated fair value,  less estimated selling costs, will be charged to
income.  We believe that all of our investments are carried at the lower of cost
or fair  value;  however  conditions  may  change  and  cause  our ADC loans and
investments in real estate to decline in value in a future period.

Loan  Accounting.  We have  applied the guidance of AICPA  Practice  Bulletin 1,
Purpose and Scope of AcSEC Practice Bulletins and Procedures for Their Issuance,
Exhibit I in accounting  for our  investment  loans as real estate  acquisition,
development,  or  construction  (ADC)  arrangements.  In accordance with the ADC
accounting  rules,  we treat  these  loans as if they  were  real  estate  joint
ventures,  and thus we do not accrue  income for  interest and points on our ADC
loans until the sale or  refinancing  of a property.  Revenue from  interest and


                                       8
<PAGE>

points from these ADC loans is  recognized  as cash is received from the sale or
refinancing  of such  properties.  ADC loans  are  classified  as joint  venture
investments  in real estate  developments  and include  amounts funded under the
loan  agreements.  If our ADC loans qualified as loans under GAAP,  interest and
points  would  be  recognized  as  income  in  periods  prior to the sale of the
underlying property.

In addition to ADC loans, we have made direct equity  investments in real estate
joint  ventures.  These joint venture  investments are accounted for in the same
manner as our ADC loans and are classified as joint venture  investments in real
estate  developments.  During the year ended  September  30,  2008,  we acquired
control and became the 100% owner of two of our joint ventures  investments  MSB
Brighton,  a multi-unit  condominium  conversion in California and Cummings Park
Associates,  a  residential  and retail  project in East Palo Alto. As discussed
earlier,  due to weak market  conditions  we chose to convert  the MSB  Brighton
project to a rental  property and thus  classified it as an Investment in Rental
Property on our financial statements.

ITEM 7.  FINANCIAL STATEMENTS

Required  financial  statements and supplementary data are included in this Form
10-KSB commencing on page FS-1.

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

ITEM 8A.  CONTROLS AND PROCEDURES

Evaluation of Effectiveness of Disclosure Controls and Procedures

Our management,  including our Chief  Executive  Officer and our Chief Financial
Officer,  have evaluated our  disclosure  controls and procedures (as defined in
Rules  13a-15(e)  and  15d-15(e)  of the  Securities  Exchange  Act of 1934,  as
amended),  as of the period ended September 30, 2008, the period covered by this
Annual Report on Form 10-KSB.  Based upon that  evaluation,  our chief executive
officer and chief financial officer have concluded that our disclosure  controls
and  procedures  were not fully  effective as of  September  30, 2008 due to the
significant deficiency described below.

Management's Annual Report on Internal Control Over Financial Reporting

Our  management  conducted an  assessment of the  effectiveness  of our internal
control over financial reporting as of September 30, 2008 based on the framework
set forth in Internal Control -- Integrated Framework issued by the Committee of
Sponsoring  Organizations of the Treadway  Commission  (COSO).  Internal control
over  financial   reporting  cannot  provide  absolute  assurance  of  achieving
financial  reporting  objectives because of its inherent  limitations.  Internal
control over financial  reporting is a process that involves human diligence and
compliance  and is subject to lapses in judgment and  breakdowns  resulting from
human  failures.  Because  of such  limitations,  there is a risk that  material
misstatements  may not be  prevented  or detected on a timely  basis by internal
control  over  financial  reporting.  Also,  projections  of any  evaluation  of
effectiveness to future periods are subject to the risk that controls may become
inadequate  because of changes in  conditions,  or that the degree of compliance
with the policies or procedures may deteriorate.

A material  weakness in internal control over financial  reporting is defined by
the Public  Company  Accounting  Oversight  Board's  Audit  Standard  No. 5 as a
deficiency, or a combination of deficiencies, in internal control over financial
reporting,  such  that  there  is  a  reasonable  possibility  that  a  material
misstatement of the company's annual or interim financial statements will not be
prevented or detected on a timely basis.

A significant  deficiency is a control  deficiency,  or  combination  of control
deficiencies,  in internal control over financial  reporting that is less severe
than a material  weakness,  yet  important  enough to merit  attention  by those
responsible for oversight of our financial reporting.

                                       9
<PAGE>

Our  management  conducted an  evaluation of the  effectiveness  of our internal
control over financial reporting. Based on this evaluation, management concluded
that our internal control over financial reporting was not fully effective as of
September 30, 2008.

Management's  assessment  identified  the  following  significant  deficiency in
internal control over financial reporting:  the changes in personnel and systems
during  fiscal  2008  reduced  management's  ability to maintain  the  financial
control system and produce financial statements.

In order to address this significant  deficiency,  the Company's  management and
the board of directors  decided to meet on a regular basis to review and approve
significant  transactions  affecting the financial statements,  to review to the
financial information reported on forms 10-QSB and 10-KSB, and to seek expertise
as deemed necessary in critical accounting and financial reporting matters.

This  annual  report  does not include an  attestation  report of the  company's
registered  public  accounting  firm regarding  internal  control over financial
reporting.  Management's  report was not subject to attestation by the company's
registered  public accounting firm pursuant to temporary rules of the Securities
and Exchange  Commission  that permit the company to provide  only  management's
report in this annual report.

Changes in Internal Control Over Financial Reporting

As noted above,  the Company  hired an  independent  management  company to help
administer the company's  operations.  The changes are still being  evaluated to
determine the ongoing effect on internal control.

ITEM 8B.  OTHER INFORMATION

None.

                                    PART III


ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT

Our Board of  Directors  consists of four  director  positions.  Our  directors,
executive  officers and senior officers and their  positions,  as of the date of
this filing, are:

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

William Offenberg    Executive Chairman of the Board and Chief Executive Officer
Robert Puette        Director
Jeffrey Black        Treasurer, Chief Financial Officer and Director
Patricia Wolf        Secretary and Director


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

William Offenberg, age 55, has been a member of the Board since July 2005. Prior
to joining the Board,  Mr.  Offenberg  acted as a consultant  to the Board since
July  2004.  From  1998 to 2005,  Mr.  Offenberg  was an  Operating  Partner  at
Morgenthaler Partners, a $2 billion private equity firm, where he specialized in
recapitalizations  and leveraged buyouts.  In his capacity as Operating Partner,
Mr.  Offenberg  has  served in a variety of  executive  and board  positions  at
various Morgenthaler  portfolio companies.  Between 1993 and 1997, Mr. Offenberg
was President and Chief Executive Officer of Gatan International, a developer of
scientific instrumentation.  Prior to joining Gatan, Mr. Offenberg was President
of  Spectra-Physics  Analytical  from 1986 to 1993.  Between 1977 and 1986,  Mr.
Offenberg held various management positions at Perkin-Elmer's  Instrument Group.
Mr. Offenberg began his career as a chemist at Atlantic Richfield. Mr. Offenberg
has degree in Chemistry from Bowdoin College and did graduate work in analytical
chemistry at Indiana University.

Robert Puette, age 66, is the President of Puette Capital  Management,  Inc., an
investment and consulting  company that he founded in 2005. He has been a member
of the  BellaVista  Board since March 1, 2002.  Prior to such time,  Mr.  Puette


                                       10
<PAGE>

served as an advisory director to the Company. Between 2001 and 2004, Mr. Puette
was a partner at the WK Technology  venture capital firm. Between 1997 and 2000,
Mr. Puette was the President,  Chief Executive Officer,  and member of the Board
of Directors of Centigram Communications  Corporation (NASDAQ), a communications
technology  firm.  Prior to his position at  Centigram,  from 1995 to 1997,  Mr.
Puette  served as  President,  CEO and  Chairman  of the Board of  Directors  at
NetFRAME Systems (NASDAQ), a high-availability computer server company, and from
1990 to 1993;  Mr.  Puette served as President of Apple USA,  Apple  Corporation
(NASDAQ).  Prior to 1990,  Mr.  Puette  served  as a Group  General  Manager  of
Hewlett-Packard  Corporation  (NYSE). Mr. Puette is also on the Boards of Bentek
Corporation (Private), Fat Spaniel Corporation (Private),  AuditSolutions,  Inc.
(Private), Angstrom Power, Inc. (Private) and Aether Wire Corporation (Private).
He is also a former director of Cisco Systems (NASDAQ).  Mr. Puette holds a BSEE
degree from Northwestern University and a MSOR degree from Stanford University.

Jeffrey Black, age 54 is a Senior Vice President in the Silicon Valley office of
Grubb & Ellis, a national real estate  company,  where he has worked since 1977.
In  his  30  years  as a real  estate  broker,  he  has  concluded  real  estate
transactions  in  excess  of $1  billion.  Notable  clients  that Mr.  Black has
represented include eBay, Altera, Amdahl, AT&T, Exxon Corporation, Marriott, TRW
Corporation,  VLSI  Technology,  Steelcase,  Advanced  Micro Devices and Ernst &
Young.  He has been  named one of the Top 10 Brokers  Nationwide  (Grubb & Ellis
2003); No. 4 Broker in Silicon Valley (San Jose Business Journal 2003); the Hall
of Fame Award  (Association  of Silicon Valley  Brokers  1997).  Mr. Black has a
Bachelor's  of  Science  and  Commerce   degree  in  Finance  from  Santa  Clara
University.

Patricia  Wolf,  age 62, is currently  Chair of the Board of Trustees for Ottawa
University where she focuses on strategic planning issues.  From 1986 until 2002
she was employed by Management Technology America, the computer software company
she founded in 1986. In 1999, Ms. Wolf sold Management  Technology  America to a
company  listed on the NYSE.  During the period from 1999 to 2002 she  continued
her employment with Management  Technology America.  Ms. Wolf holds a Bachelor's
degree in Business Administration and a Master's degree in Management, both from
Ottawa University.

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 four
director positions.  Mr. Puette is a Class I director and his term expires as of
the annual meeting of shareholders  for the fiscal year ended in 2009. Mr. Black
and Ms. Wolf are Class II directors and their terms expire as of the meeting for
the fiscal year ended in 2010.  Mr.  Offenberg is a Class III director,  and his
term expires as of the meeting for the fiscal year ended in 2009. 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.  The full Board acts to nominate  candidates for
the Board,  as there is no  separate  nominating  committee.  There have been no
changes  during the year covered by this report in the procedures for nomination
or by which shareholders may recommend nominees to the Board.

Upon Mr.  Rider's  resignation  from the Board of Directors as of September  30,
2008, a resolution  was passed to decrease the number of directors  from five to
four.

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 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.


                                       11
<PAGE>

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.

Audit Committee

The Company has no separate audit committee.  The Board of Directors acts as the
audit committee for all purposes  relating to  communications  with the auditors
and  responsibility  for  oversight of the audit.  The Board of Directors has an
independent member financial expert,  Robert Puette, who has financial expertise
gained as an executive of and former audit  committee  member of public  company
Board of Directors.

Section 16(a) Beneficial Ownership Reporting Compliance

Based  solely  on a review  of  copies  of the  Forms 3, 4 and 5 and  amendments
thereto  furnished to the Company with respect to the fiscal year ended 2008, or
written  representations that no such reports were required to be filed with the
Securities and Exchange  Commission,  the Company  believes that during the year
ended  September  30,  2008,  all  directors  and  officers  of the  Company and
beneficial  owners of more than 10% of any  class of  equity  securities  of the
Company  registered  pursuant  to Section  12 of the  Exchange  Act filed  their
required  Forms 3, 4, or 5, as  required  by  Section  16(a)  of the  Securities
Exchange Act of 1934, as amended.

Code of Ethics

The  Company  has  adopted a Code of Ethics  applicable  to the Chief  Executive
Officer,  the Chief Financial Officer, and the principal accounting officer. The
Company's  Code of Ethics is  incorporated  by reference as Exhibit 14.1 to this
report.


ITEM 10.     EXECUTIVE COMPENSATION.


Compensation of Officers

<TABLE>
<CAPTION>
Summary Compensation Table
---------------- ------ ------------ ---------- ---------- ---------- ---------- ---------- ----------- ----------
<S>              <C>     <C>         <C>        <C>        <C>        <C>        <C>        <C>         <C>
Name             Year    Salary      Bonus      Stock      Option     Non-       Nonquali-  All         Total
and                      ($)         ($)        Awards     Awards     Equity     fied       Other       ($)
Principal                                       ($)        ($)        Incentive  Deferred   Compen-
Position                                                              Plan       Compen-    sation
                                                                      Compen-    sation     ($)
                                                                      sation     Earnings
                                                                      ($)        ($)
---------------- ------- ----------- ---------- ---------- ---------- ---------- ---------- ----------- ----------
Michael          2008    $250,000   $ 7,500     0          0          0          0          0           $257,500
Rider,
Chief Executive
Officer,         ------- ---------- ----------- ---------- ---------- ---------- ---------- ----------- ----------
Director         2007    $250,000   $12,500     0          0          0          0          0           $262,500


---------------- ------- ---------- ----------- ---------- ---------- ---------- ---------- ----------- ----------
Eric             2008    $103,846         0     0          0          0          0          0           $103,846
Hanke,
Chief
Investment       ------- ---------- ----------- ---------- ---------- ---------- ---------- ----------- ----------
Officer,         2007    $150,000   $20,500     0          0          0          0          0           $170,500
Secretary

---------------- ------- ---------- ----------- ---------- ---------- ---------- ---------- ----------- ----------
</TABLE>

On September 30, 2008, the Company terminated Mr. Rider.  According to the terms
of his separation agreement, Mr. Rider shall receive payment of $125,000, in the
form of salary  continuance  from the date of his termination to March 31, 2009.


                                       12
<PAGE>

In addition  Mr.  Rider  received a payment of $7,500.  Mr.  Rider has agreed to
provide  assistance  to the Company on an as needed  basis during this six month
period. On November 30, 2007, the Company terminated Mr. Hanke. According to the
terms of his employment  agreement Mr. Hanke received payments of $75,000 in the
form of salary continuance from the date of his termination to May 31, 2008.

<TABLE>
<CAPTION>
Outstanding Equity Awards At Fiscal Year-End
--------------------------------------------------------------------------------------------------------------------
<S>              <C>     <C>         <C>        <C>        <C>        <C>        <C>        <C>         <C>
Name      Number      Number         Equity      Option   Option     Number    Market     Equity     Equity
          of          of             Incentive   Exercise Expiration of Shares Value of   Incentive  Incentive
          Securities  Securities     Plan        Price    Date       or Units  Shares or  Plan       Plan
          Underlying  Underlying     Awards;     ($)                 of Stock  Units of   Awards;    Awards;
          Unexercised Unexercised    Number                          That Have Stock      Number     Market or
          Options     Options        of                              Not       That Have  of         Payout
          (#)         (#)            Securities                      Vested    Not        Unearned   Value
          Exercisable Unexercisable  Underlying                      (#)       Vested     Shares,    Of
                                     Unexercised                               ($)        Units or   Unearned
                                     Unearned                                             Other      Shares,
                                     Options                                              Rights     Units or
                                     (#)                                                  That Have  Other
                                                                                          Not        Rights
                                                                                          Vested     That Have
                                                                                          (#)        Not
                                                                                                     Vested
                                                                                                     ($)

--------------------------------------------------------------------------------------------------------------------
None
--------------------------------------------------------------------------------------------------------------------
</TABLE>

Compensation of Directors

<TABLE>
<CAPTION>
--------------- ------------- ------------- ------------- -------------- --------------- --------------- -------------
<S>              <C>     <C>         <C>        <C>        <C>        <C>        <C>        <C>         <C>
Name                Fees         Stock         Option      Non-Equity     Nonqualified     All Other        Total
                   Earned        Awards        Awards       Incentive       Deferred      Compensation       ($)
                     Or           ($)           ($)           Plan        Compensation        ($)
                  Paid in                                 Compensation      Earnings
                    Cash                                       ($)            ($)
                    ($)
--------------- ------------- ------------- ------------- -------------- --------------- --------------- -------------
William           $44,500                0             0              0               0         $84,725      $129,225
Offenberg

--------------- ------------- ------------- ------------- -------------- --------------- --------------- -------------
Robert             38,000                0             0              0               0               0        38,000
Puette

--------------- ------------- ------------- ------------- -------------- --------------- --------------- -------------
Patricia           38,000                0             0              0               0               0        38,000
Wolf

--------------- ------------- ------------- ------------- -------------- --------------- --------------- -------------
Jeffrey            46,000                0             0              0               0               0        46,000
Black

--------------- ------------- ------------- ------------- -------------- --------------- --------------- -------------
</TABLE>

As Chairman of the Board, Mr. Offenberg  received $30,000 while Messrs.  Puette,
Black and Ms. Wolf received $25,000 each for their participation in our standard
board meetings.  All directors  excluding direct  management  employees are also
compensated $1,000 for every special board meeting they attend.

On September  25,  2007,  the Company  entered  into an agreement to  compensate
William Offenberg, as Executive Chairman of the Board. The compensation paid Mr.
Offenberg  during the fiscal year covered by this report under such agreement is
shown under the "All Other Compensation" column in the above table.


                                       13
<PAGE>

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  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.


ITEM 11.  SECURITY  OWNERSHIP OF CERTAIN  BENEFICIAL  OWNERS AND  MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.

The following table presents  information  regarding the beneficial ownership of
the only known  beneficial  owners of in excess of 5% of our outstanding  common
shares.

Security Ownership of Certain Beneficial Owners

                                                             Number     Percent
Title of Class   Name and Address of Beneficial Owner     of Shares    of Class
                                                      -------------- -----------

Common Stock     MacKenzie Patterson Fuller, LLC          1,390,046       12.44
                 1640 School Street
                 Moraga, California 94556

                 Jay Duncanson                              658,735        5.90
                 c/o Menlo Advisors
                 800 Oak Grove Avenue
                 Menlo Park, CA 94025
                                                      -------------- -----------
                         Total                            2,048,781       18.34
                                                      ============== ===========


The following table presents  information  regarding the beneficial ownership of
our capital  stock as of December  31,  2008 of: (1) each of our  directors  and
executive  officers;  and (2) all of our directors  and executive  officers as a
group.  Unless otherwise indicated in the footnotes to the table, 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.

                                                     Number            Percent
Title of Class       Beneficial Owner             of Shares           of Class
                                          ------------------ -------------------
Common Stock         Robert Puette                 405,241                3.50
                     Jeffrey Black                 250,852                2.16
                     Patricia Wolf                 167,030                1.44
                     William Offenberg             107,404                   *
                                          ------------------ -------------------
                        Total                      930,527                8.03
                                          ================== ===================

  * Less than one percent of our outstanding capital stock.


ITEM 12.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Two out of four of the  current  members of the  Board,  William  Offenberg  and
Jeffrey Black act as executive  officers of the Company and cannot be considered
independent  directors  while the other two members of the Board are  considered
independent,  as that term is defined under New York Stock Exchange Rule Section
303A, the NYSE's  Corporate  Governance  Rules.  Under those Rules,  no director
qualifies  as  "independent"   unless  the  Board  of  Directors   affirmatively
determines  that the  director  has no  material  relationship  with the Company
(either directly or as a partner, shareholder or officer of an organization that
has a  relationship  with  the  Company).  Material  relationships  can  include
commercial,  industrial, banking, consulting, legal, accounting,  charitable and
familial  relationships,  among others.  However, as the concern is independence
from management,  the NYSE does not view ownership of even a significant  amount

                                       14
<PAGE>

of stock, by itself, as a bar to an independence finding. Accordingly, while Mr.
Puette and Ms. Wolf own shares of the Company's  common  stock,  the Board views
these  directors/nominees  as independent under these standards.  In addition, a
director is not independent under the NYSE Rules if: (i) the director is, or has
been within the last three years,  an employee of the  Company,  or an immediate
family member is, or has been within the last three years, an executive officer,
of the  Company;  (ii) the  director has  received,  or has an immediate  family
member who has received,  during any  twelve-month  period within the last three
years, more than $100,000 in direct compensation from the listed company,  other
than  director  and  committee  fees  and  pension  or other  forms of  deferred
compensation for prior service  (provided such compensation is not contingent in
any way on continued  service;  (iii) (A) the  director or an  immediate  family
member is a current partner of a firm that is the Company's internal or external
auditor; (B) the director is a current employee of such a firm; (C) the director
has an immediate  family member who is a current employee of such a firm and who
participates  in the firm's  audit,  assurance  or tax  compliance  (but not tax
planning) practice; or (D) the director or an immediate family member was within
the last three years (but is no longer) a partner or employee of such a firm and
personally  worked on the Company's audit within that time; (iv) the director or
an immediate family member is, or has been within the last three years, employed
as an executive  officer of another  company where any of the Company's  present
executive  officers  at the  same  time  serves  or  served  on  that  company's
compensation  committee;  or (v)  the  director  is a  current  employee,  or an
immediate family member is a current  executive  officer,  of a company that has
made  payments  to, or received  payments  from,  the  Company  for  property or
services in an amount which, in any of the last three fiscal years,  exceeds the
greater  of $1  million,  or 2%  of  such  other  company's  consolidated  gross
revenues.


ITEM 13.  EXHIBITS.

a.   Financial Statements.  The following financial information is included as a
     separate section of this Annual Report on Form 10-KSB:

     1.   Report of Independent Registered Public Accounting Firms

     2.   Consolidated Balance Sheets as of September 30, 2008 and 2007

     3.   Consolidated  Statements of Operations  for the years ended  September
          30, 2008 and 2007

     4.   Consolidated  Statement  of  Shareholders'  Equity for the years ended
          September 30, 2008 and 2007

     5.   Consolidated  Statements  of Cash Flows for the years ended  September
          30, 2008 and 2007

     6.   Notes  to  Consolidated  Financial  Statements  for  the  years  ended
          September 30, 2008 and 2007



b.   Exhibits

     Exhibits  submitted with this Form 10-KSB, as filed with the Securities and
     Exchange  Commission,  or those  incorporated by reference to other filings
     are:

     Exhibit No.    Description of Exhibit

     3(i)           Articles of Incorporation of the Company are incorporated by
                    reference to Exhibit 3(i) to the  Company's  Form 10-12 G/A,
                    previously filed on April 28, 2000

     3(ii)          Bylaws,   Amended  March  30,  2000  are   incorporated  by
                    reference to Exhibit 3(ii) to the Company's  Form 10-12 G/A,
                    previously filed on April 28, 2000

     3(iii)         Articles  Supplementary of the Company are incorporated by
                    reference to Exhibit 99.1 to the  Company's  Form 10-12 G/A,
                    previously filed on April 28, 2000

     3(iv)          Specimen Stock Certificate, is incorporated by reference to
                    Exhibit  99.2 to the  Company's  Form 10-12 G/A,  previously
                    filed on April 28, 2000

     4.1            Shareholder   Rights   Agreement  dated  July  19,  2004  is
                    incorporated  by  reference  to Exhibit  4.4 in the Form 8-K
                    previously filed July 20, 2004

     10.1           Compensation Agreement dated May 12, 2007 between BellaVista
                    Capital, Inc. and Michael Rider is incorporated by reference
                    to Exhibit 10.1 to the Company's March 31, 2007 Form 10-QSB,
                    previously filed on May 21, 2007


                                       15
<PAGE>

     10.2           Compensation  Agreement  dated  September  25, 2007  between
                    BellaVista Capital,  Inc. and William Offenberg,  previously
                    filed on December 19, 2007

     10.3           Compensation Agreement dated May 12, 2007 between BellaVista
                    Capital, Inc. and Eric Hanke is incorporated by reference to
                    Exhibit  1042 to the  Annual  Report on Form  10-KSB for the
                    year ended September 30, 2007,  previously filed on December
                    19, 2007.

     10.4           Management    Agreement   between    BellaVista   and   RMRF
                    Enterprises, Inc., dba Cupertino Capital

     14.1           Code of Ethics is  incorporated by reference to Exhibit 14.1
                    to the Company's 2003 Form 10-K,  previously  filed on April
                    14, 2004

     31.1           Certification of Chief Executive Officer

     31.2           Certification of Chief Financial Officer

     32.1           Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
                    Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

     32.2           Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
                    Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002



c.   Financial Statement Schedules

     None

ITEM 14.   PRINCIPAL ACCOUNTANT FEES AND SERVICES.

The Company  accrues  expenses  associated  with principal  accountant  fees and
services in the year being audited or serviced. The following table presents the
expenses accrued by the Company for such fees and services:

                                               Year Ended September 30,
                                         -------------------------------------
                                                      2008               2007
                                         ------------------ ------------------
Audit fees                                $        103,587   $        162,028
Audit-related fees                                      --                 --
Tax fees                                            49,810             24,170
All other fees                                          --                 --
                                         ------------------ ------------------
   Total                                  $        153,397   $        186,198
                                         ================== ==================

Tax fees are  comprised  of fees  related to the  preparation  and filing of the
Company's federal and applicable state tax returns.

The Company does not have an independent audit committee,  and the full board of
directors  therefore serves as the audit committee for all purposes  relating to
communication  with the Company's  auditors and  responsibility  for the Company
audit.  All  engagements  for audit  services,  audit  related  services and tax
services  are approved in advance by the full board of directors of the Company.
The  Company's  Board of Directors has  considered  whether the provision of the
services  described  above for the years  ended  September  30, 2008 and 2007 is
compatible with maintaining the auditor's independence.

All  audit  and  non-audit  services  that  may be  provided  by  our  principal
accountant to the Company shall require pre-approval by the Board.  Further, our
auditor shall not provide those services to the Company specifically  prohibited
by the  Securities  and  Exchange  Commission,  including  bookkeeping  or other
services related to the accounting records or financial  statements of the audit
client;  financial  information systems design and implementation;  appraisal or
valuation services, fairness opinion, or contribution-in-kind reports; actuarial
services;  internal audit  outsourcing  services;  management  functions;  human
resources;  broker-dealer,  investment  adviser, or investment banking services;
legal services and expert services unrelated to the audit; and any other service
that  the  Public  Company  Oversight  Board  determines,   by  regulation,   is
impermissible.

                                       16
<PAGE>

                                   SIGNATURES

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.


Signature                     Capacity                               Date

                              President, Chief Executive Officer
/s/ William Offenberg         and Executive Chairman           January 21, 2009
-----------------------------
William Offenberg

/s/ Robert Puette             Director                         January 22, 2009
-----------------------------
Robert Puette
                              Treasurer, Chief Financial Officer
/s/ Jeffrey Black             Officer and Director             January 21, 2009
-----------------------------
Jeffrey Black

/s/ Patricia Wolf             Secretary and Director           January 21, 2009
-----------------------------
Patricia Wolf























                                       17
<PAGE>

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                         Page No

Report of independent registered public
  accounting firm - PMB Helin Donovan, LLP                                  FS-1

Consolidated condensed balance sheets as of
  September 30, 2008 and 2007                                               FS-2

Consolidated statements of operations for the years
  ended September 30, 2008 and 2007                                         FS-3

Consolidated statements of shareholders' equity for
  the years ended September 30, 2008 and 2007                               FS-4

Consolidated statements of cash flows for the years
  ended September 30, 2008 and 2007                                         FS-5

Notes to consolidated financial statements                          FS-6 - FS-17


<PAGE>


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of
BellaVista Capital, Inc.

We have  audited the  accompanying  consolidated  balance  sheets of  BellaVista
Capital,  Inc., as of September  30, 2008 and 2007 and the related  consolidated
statements of  operations,  shareholders'  equity,  and cash flows for the years
ended  September  30,  2008  and  2007  These   financial   statements  are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (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.  The Company is not  required to
have,  nor were we engaged to perform,  an audit of its  internal  control  over
financial reporting.  Our audit included  consideration of internal control over
financial  reporting  as  a  basis  for  designing  audit  procedures  that  are
appropriate  in the  circumstances,  but not for the  purpose of  expressing  an
opinion on the  effectiveness  of the Company's  internal control over financial
reporting.  Accordingly  we express  no such  opinion.  An audit  also  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  financial   statements,   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  consolidated  financial  position  of  BellaVista
Capital,  Inc.  as of  September  30,  2008  and  2007  and the  results  of its
consolidated  operations  and its  consolidated  cash flows for the years  ended
September 30, 2008 and 2007, in conformity with accounting  principles generally
accepted in the United States of America.


PMB Helin Donovan, LLP


San Francisco, California
January 15, 2009






                                      FS-1
<PAGE>

<TABLE>
<CAPTION>

                                                        BELLAVISTA CPITAL, INC.
                                                 CONSOLIDATED CONDENSED BALANCE SHEETS
                                                   AS OF SEPTEMBER 30, 2008 AND 2007



                                                                                                       2008                   2007
                                                                                      ---------------------- ----------------------
 <S>                                                                                            <C>                   <C>
ASSETS:
Cash and cash equivalents                                                                $          636,346     $        1,759,241
Loans receivable secured by real estate
September                                                                                        11,251,773             11,163,000
Joint venture investments in real estate developments                                             9,944,197             33,704,973
Investments in real estate developments                                                          19,026,984              5,213,220
Investment in rental property, net of accumulated depreciation of $130,038 and $0 at
   September 2008 and 2007, respectively                                                          3,928,429                     --
Fixed assets, net of accumulated depreciation of  $12,831 and $95,620 at September
   30, 2008 and 2007, respectively                                                                   24,379                 32,220
Other assets, net                                                                                   670,836                958,201
                                                                                      ---------------------- ----------------------
        Total assets                                                                     $       45,482,944     $        52,830,855
                                                                                      ====================== ======================


LIABILITIES AND SHAREHOLDERS' EQUITY:

Notes payable and line of credit                                                                 12,453,057                     --
Accounts payable and accrued expenses                                                             1,062,168                587,791
Capital lease                                                                                         4,985                  9,521
                                                                                      ---------------------- ----------------------
        Total liabilities                                                                        13,520,210                597,312

Commitments and contingencies (see note 12)

Common stock: par value $0.01, 50,000,000 shares authorized at September 30, 2008 and
   2007; 11,590,870 and 13,951,452 shares issued and outstanding at September 30,
   2008 and 2007, respectively                                                                      115,908                139,514
Additional paid-in capital                                                                      103,360,168            108,051,407
Accumulated deficit                                                                             (71,513,342)           (55,957,378)
                                                                                      ---------------------- ----------------------
        Total shareholders' equity                                                               31,962,734             52,233,543
                                                                                      ---------------------- ----------------------
        Total liabilities and shareholders' equity                                       $       45,482,944     $       52,830,855
                                                                                      ====================== ======================
</TABLE>


                                      FS-2
<PAGE>


<TABLE>
<CAPTION>
                                                        BELLAVISTA CPITAL, INC.
                                                 CONSOLIDATED STATEMENTS OF OPERATIONS
                                            FOR THE YEARS ENDED SEPTEMBER 30, 2008 AND 2007



                                                                                                           2008               2007
                                                                                             ------------------- ------------------
  <S>                                                                                                 <C>               <C>
REVENUES:
  Revenues from loans receivable                                                                $     1,080,230     $    1,685,510
  Equity in earnings from joint venture investments                                                   2,779,574          1,855,390
  Proceeds from sale                                                                                  7,769,865         11,117,701
  Rental revenue                                                                                        206,524                 --
  Other income                                                                                          363,102             17,151
                                                                                             ------------------- ------------------
   Total revenues                                                                                    12,199,295         14,675,752
   Cost of investments in real estate developments                                                   (7,945,659)       (11,288,647)
                                                                                             ------------------- ------------------
   Gross profit                                                                                       4,253,636          3,387,105

EXPENSES:
  Salaries expense                                                                                      601,484            714,245
  Facilities expense                                                                                     53,212             93,440
  Legal and accounting expense                                                                          256,790            290,239
  Board of directors fees                                                                               395,983            318,023
  General and administrative expense                                                                    176,790             84,432
  REO and non-recurring expenses                                                                        362,071            327,064
  Rental expenses                                                                                       264,371                 --
  Depreciation expense                                                                                  139,245             21,701
  Reserve for uncollectible interest                                                                    189,849                 --
  Provision for impairment of real estate investments                                                17,017,722          7,665,943
                                                                                             ------------------- ------------------
   Total expenses                                                                                    19,457,517          9,515,087
                                                                                             ------------------- ------------------
   Net loss from operations                                                                         (15,203,881)        (6,127,982)

OTHER INCOME (EXPENSE)
  Loss on sale of fixed assets                                                                          (14,888)                --
  Interest income                                                                                        36,694             49,932
  Interest expense                                                                                     (369,889)          (213,496)
                                                                                             ------------------- ------------------
   Total other income (expense)                                                                        (348,083)          (163,564)
                                                                                             ------------------- ------------------
   Net loss before tax                                                                              (15,551,964)        (6,291,546)
   Income tax expense                                                                                    (4,000)           (27,395)
                                                                                             ------------------- ------------------
   Net loss allocable to common stock                                                               (15,555,964)        (6,318,941)
                                                                                             =================== ==================

Basic and diluted net loss per common share................................................     $         (1.25)    $       ( 0.44)
                                                                                             =================== ==================

Basic and diluted weighted-average common shares outstanding...............................          12,415,253         14,286,236
                                                                                             =================== ==================
</TABLE>



                                      FS-3
<PAGE>








<TABLE>
<CAPTION>
                                                       BELLAVISTA CAPITAL, INC.
                                            CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                            FOR THE YEARS ENDED SEPTEMBER 30, 2008 AND 2007




                                                      Common stock
                                           -----------------------------------
                                                                                    Additional       Accumulated
                                                 Shares            Amount        paid-in capital     deficit            Total
                                           ----------------- ----------------- ----------------- ----------------- -----------------
  <S>                                            <C>                <C>                <C>                <C>             <C>
Shareholders' equity at October 1, 2006          14,991,325   $       149,913    $  110,445,001   $   (49,638,437)  $    60,956,477
   Stock repurchases                             (1,039,873)          (10,399)       (2,393,594)               --        (2,403,993)
   Net loss                                              --                --                --        (6,318,941)       (6,318,941)
                                           ----------------- ----------------- ----------------- ----------------- -----------------
Shareholders' equity at September 30, 2007       13,951,452           139,514       108,051,407       (55,957,378)       52,233,543
   Stock repurchases                             (2,360,582)          (23,606)       (4,691,239)               --        (4,714,845)
   Net loss                                              --                --                --       (15,555,964)      (15,555,964)
                                           ----------------- ----------------- ----------------- ----------------- -----------------
Shareholders' equity at September 30, 2008       11,590,870   $       115,908       103,360,168   $   (71,513,342)  $    31,962,734
                                           ================= ================= ================= ================= =================
</TABLE>































                                      FS-4
<PAGE>


<TABLE>
<CAPTION>
                                                       BELLAVISTA CAPITAL, INC.
                                                 CONSOLIDATED STATEMENTS OF CASH FLOWS
                                            FOR THE YEARS ENDED SEPTEMBER 30, 2008 AND 2007

                                                                                                       2008               2007
                                                                                        -------------------- --------------------
  <S>                                                                                               <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net loss                                                                              $    (15,555,964)    $     (6,318,941)
   Adjustments to reconcile net income to net cash provided by operating activities:
        Depreciation                                                                                139,245               21,701
            Loss on sale of fixed assets                                                             14,888                   --
            Allowance for uncollectible interest                                                    189,849                   --
        Provision for impairment                                                                 17,017,722            7,665,943
        Decrease (increase) in other assets                                                         146,840             (210,529)
        Decrease in accounts payable and accrued expenses                                           (70,357)            (263,266)
                                                                                        -------------------- --------------------
          Net cash provided by operating activities                                               1,882,223              894,908

CASH FLOWS FROM INVESTING ACTIVITIES:
    Proceeds from repayments of investments in real estate                                       17,895,238           28,198,247
    Cash proceeds from consolidation of entities                                                     81,080                   --
    Investments in real estate                                                                  (14,866,827)         (27,935,945)
    Proceeds from sale of fixed assets                                                                2,200                   --
   Purchase of fixed assets                                                                         (18,454)                  --
                                                                                        -------------------- --------------------
        Net cash provided by investing activities                                                 3,093,237              262,302

CASH FLOWS FROM FINANCING ACTIVITIES:
   Stock repurchases                                                                             (4,714,845)          (2,403,993)
   Borrowings under notes payable and line of credit                                              8,543,781            2,770,000
   Repayment of  notes payable and line of credit                                                (9,922,755)          (2,770,000)
   Payments under capital lease                                                                      (4,536)                  --
                                                                                        -------------------- --------------------
        Net cash used in financing activities                                                    (6,098,355)          (2,403,993)
                                                                                        -------------------- --------------------
          Net decrease increase in cash and cash equivalents                                     (1,122,895)          (1,246,783)
          Beginning cash and cash equivalents                                                     1,759,241            3,006,024
                                                                                        -------------------- --------------------
          Ending cash and cash equivalents                                                 $        636,346            1,759,241
                                                                                        ==================== ====================

Cash paid for interest                                                                     $        371,128                   --
                                                                                        ==================== ====================
Cash paid for income taxes and franchise fees                                              $          4,000                2,400
                                                                                        ==================== ====================
Supplementary disclosure of noncash investing and financing activities:

Acquisition of property and equipment through a capital lease                              $             --     $          9,521

During 2008, the company assumed ownership of three entities and exchanged its
   investments in real estate of $7,985,161 for noncash assets of $31,098,567 and
   liabilities of $23,113,406 prior to consolidation of these entities
</TABLE>


                                      FS-5
<PAGE>


                            BELLAVISTA CAPITAL, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED SEPTEMBER 30, 2008 AND 2007


1.   ORGANIZATION AND BUSINESS:


Organization

BellaVista  Capital,  Inc., a Maryland  corporation (the Company,  our, we), was
formed on March 18, 1999 and commenced operations effective May 1, 1999. We have
been engaged in the business of investing in real estate  development  projects,
primarily in California. Our investments are structured as loans secured by real
estate,  loans  made to real  estate  development  entities  and  joint  venture
investments in real estate  development  entities.  We are organized in a single
operating  segment for  purposes of making  operating  decisions  and  assessing
performance.  BellaVista  Capital,  Inc. is also the 100%  shareholder  of Sands
Drive  San  Jose, Inc., and  Frank  Norris Condominiums Inc., both of which  are
California  corporations  formed  for the  purpose  of  developing  and  selling
residential  real estate.  The Company  holds a 100%  interest in Cummings  Park
Associates,  LLC a California  Limited  Liability  Company formed to develop and
sell a mixed use  residential  and retail project in East Palo Alto  California.
The Company also holds a 100% interest in MSB Brighton LLC,  currently  operated
as a rental property.


2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:


Consolidation Policy

The  consolidated  financial  statements  include  the  accounts  of  BellaVista
Capital, Inc. and its wholly owned subsidiaries: Sands Drive San Jose, Inc., MSB
Brighton LLC, Frank Norris Condominiums Inc., and Cummings Park Associates, LLC.
All   intercompany   accounts  and   transactions   have  been   eliminated   in
consolidation.  Investments acquired or created are evaluated based on Financial
Accounting Standards Board ("FASB")  Interpretation ("FIN") 46R,  "Consolidation
of Variable  Interest  Entities,"  which requires the  consolidation  of VIEs in
which we are  considered  to be the primary  beneficiary.  If the  investment is
determined  not to be within  the  scope of FIN 46R,  then the  investments  are
evaluated for  consolidation  under the American  Institute of Certified  Public
Accountants'  Statement of Position 78-9,  "Accounting  for  Investments in Real
Estate  Ventures,"  as amended by Emerging  Issues  Task Force  Issue No.  04-5,
"Determining  Whether a General  Partner,  or the  General  Partners as a Group,
Controls a Limited  Partnership or Similar Entity When the Limited Partners Have
Certain Rights.


Use of Estimates

These  financial  statements  have been prepared in accordance  with  accounting
principles  generally accepted in the United States of America.  The preparation
of financial  statements  in conformity  with  accounting  principles  generally
accepted in the United States of America  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.  Valuations of investments in real estate include management's
best  estimates  of the  amounts  expected  to be  realized  on the  sale of its
investments. The estimates are based on an analysis of the properties, including
certain  inherent  assumptions and estimates that are involved in preparing such
valuations.  The  amounts the  Company  will  ultimately  realize  could  differ
materially in the near term from these estimates.

Loans Receivable Secured By Real Estate

We have  originated  loans  secured by real  estate.  These loans are secured by
deeds of  trust on real  property,  pay  interest  on a  monthly  basis  and are
typically additionally collateralized by personal guarantees from the principals
of our borrowers.  We recognize interest income on these loans during the period
in which the  interest is earned and  recognize  income on any loan fees charged
under the effective interest method.

We establish and maintain credit reserves for loans  receivable  secured by real
estate  based on estimates  of credit  losses  inherent in these loans as of the
balance sheet date. To calculate the credit  reserve,  we assess inherent losses

                                      FS-6
<PAGE>

                            BELLAVISTA CAPITAL, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED SEPTEMBER 30, 2008 AND 2007

by  determining  loss  factors  (defaults,  the  timing  of  defaults,  and loss
severities  upon  defaults)  that can be  specifically  applied to each loan. We
follow the guidelines of Staff Accounting  Bulletin No. 102,  Selected Loan Loss
Allowance   Methodology  and  Documentation  Issues  (SAB  102),  and  Financial
Accounting  Statement No. 5,  Accounting for  Contingencies  (FAS 5), in setting
credit  reserves  for our  residential  and  commercial  loans.  We  follow  the
guidelines of Financial  Accounting  Statement No. 114,  Accounting by Creditors
for Impairment of a Loan (FAS 114), in determining impairment on commercial real
estate loans.

Joint Venture Investments in Real Estate Developments

Our joint  venture  investments  in real estate  developments  are  comprised of
loans,  known as Acquire,  Develop,  and Construct loans (ADC Loans),  which are
secured  by  real  estate  and  have  many   characteristics  of  joint  venture
investments and investments in real estate joint ventures.

ADC Loans

We have originated secured loans to acquire,  develop and construct  residential
real estate. These loans contain many of the following characteristics which are
identified with ADC loans:

1.   The lender has agreed to provide all or  substantially  all necessary funds
     to acquire,  develop or construct the  property.  The borrower has title to
     but little or no cash equity in the project;
2.   The lender funds substantially all the interest and fees during the term of
     the loan by adding them to the loan balance;
3.   Typically, the lender's only security is the project itself. The lender has
     no recourse to other  assets of the  borrower,  and the  borrower  does not
     guarantee the debt;
4.   In order for the lender to  recover  its  investment  in the  project,  the
     property  must be sold to  independent  third  parties or the borrower must
     obtain refinancing from another source.

Because our ADC loans contain many of the characteristics of investments in real
estate,  they are classified for financial  reporting  purposes as joint venture
investments  in real  estate  developments  (Note 4).  ADC loans  with no equity
participation  interest  are  stated  at the  lower  of cost or fair  value  and
accounted for as an investment in real estate.  Revenue from interest and points
is  recognized  as  cash is  received  from  the  sale  or  refinancing  of such
properties.  ADC  loans  that  include  an  equity  participation  interest  are
accounted  for in the same manner as joint  venture  investments  in real estate
developments.  ADC loans include  amounts  funded under the loan  agreements and
capitalized  interest expense,  where applicable.  If our ADC loans qualified as
borrowings  under US GAAP,  interest and points would be recognized in income as
earned instead of at the time of sale of the underlying property.

Joint Venture Investments in Real Estate

We provide  equity  capital to real  estate  developers  necessary  to  acquire,
develop and construct real estate developments.  Such investments are structured
as  membership  interests  in  the  development  entity.  We  account  for  such
investments using the equity method of accounting.

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,  or at least  quarterly.  Impairment is
recognized when estimated  expected future cash flows  (undiscounted and without
interest  charges),  typically from the sale of a completed  property,  are less
than the  carrying  amount of the  investment,  which does not  include  accrued
interest  and  points.  The  estimation  of  expected  future  net cash flows is
inherently  uncertain  and  relies  to  a  considerable  extent  on  assumptions
regarding  current  and future  economic  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 impairment has occurred,  the
excess of the carrying  amount of the investment  over its estimated fair value,
less estimated selling costs, is charged to operations.


                                      FS-7
<PAGE>

                            BELLAVISTA CAPITAL, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED SEPTEMBER 30, 2008 AND 2007

Investments in Real Estate Developments

Investments in Real Estate Developments  represent development projects that the
Company has obtained  through  foreclosure  of its mortgage loans or controls by
virtue of its operating agreements with development entities, and relate to real
properties  for which the  Company  has a  controlling  ownership  interest.  We
consolidate  the assets and  liabilities  of these  Investments  in Real  Estate
Developments in our financial statements. The Company's basis in the projects is
the carrying amount of the project at the time of loan  foreclosure.  Management
conducts a review for impairment of these assets on an  investment-by-investment
basis  whenever  events or changes in  circumstances  indicate that the carrying
amount  may  not  be  recoverable,  but  not  less  frequently  than  quarterly.
Impairment is recognized when estimated expected future cash flows (undiscounted
and without interest charges),  typically from the sale of a completed property,
are less than the  carrying  amount of the  investment,  which does not  include
accrued interest and points. The estimation of expected future net cash flows is
inherently  uncertain  and  relies  to  a  considerable  extent  on  assumptions
regarding  current  and future  economic  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 impairment has occurred,  the
excess of the carrying  amount of the investment  over its estimated fair value,
less estimated selling costs, is charged to operations.

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. As of September 30, 2008 we had cash  totaling  approximately  $110,960 in
excess  of the  $100,000  limits  provided  by  the  Federal  Deposit  Insurance
Corporation.

Fixed Assets

Fixed assets,  which include  equipment and furniture,  are carried at cost less
accumulated  depreciation.  Depreciation  and amortization is recorded using the
straight-line  method over the estimated  useful life of the asset Furniture and
equipment  have useful lives  ranging from 3 to 7 years.  Buildings  have useful
life of 30 to 40 years.

Income Taxes

Our taxable  income  differs from income  measured in accordance  with generally
accepted  accounting  principles  in the United  States of America due to timing
differences in the  recognition of income from our ADC loans and REO properties.
For tax  purposes,  interest  and points are accrued as income  according to the
terms  of our  loan  contracts,  but not  recognized  under  generally  accepted
accounting  principles  in the United  States of America  until the contract has
been paid through sale or refinancing of the secured property.

The Company uses the asset and liability  method whereby deferred tax assets and
liability  account  balances are  determined  based on  differences  between the
financial  reporting  and tax bases of assets and  liabilities  and are measured
using enacted tax rates and laws that will be in effect when the differences are
expected to reverse. The Company provides a valuation  allowance,  if necessary,
to reduce deferred tax assets to their estimated realizable value.

Recent Accounting Pronouncements:

In June 2006, the FASB issued Interpretation No.48,  "Accounting for Uncertainty
in Income Taxes -- An  Interpretation  of FASB Statement No. 109", (FIN 48). FIN
48 clarifies the  accounting for  uncertainty  in income taxes  recognized in an
enterprise's  financial  statements in accordance  with FASB  Statement No. 109,
"Accounting for Income Taxes".  FIN 48 also  prescribes a recognition  threshold

                                      FS-8
<PAGE>

                            BELLAVISTA CAPITAL, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED SEPTEMBER 30, 2008 AND 2007

and  measurement   attribute  for  the  financial   statement   recognition  and
measurement of a tax position taken or expected to be taken in a tax return that
results  in  a  tax  benefit.   Additionally,   FIN  48  provides   guidance  on
de-recognition,   statement  of  operations   classification   of  interest  and
penalties,  accounting in interim  periods,  disclosure,  and  transition.  This
interpretation  is effective for fiscal years beginning after December 15, 2006.
The Company will adopt FIN 48 as of January 1, 2007,  as  required.  The Company
has determined that there is no impact in adopting FIN 48.

In December 2007, the FASB issued SFAS No. 141R, "Business  Combinations" ("SFAS
141R") which  establishes  principles and requirements for how the acquirer of a
business  recognizes and measures in its financial  statements the  identifiable
assets acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree. The statement also provides guidance for recognizing and measuring the
goodwill acquired in the business combination and determines what information to
disclose to enable users of the  financial  statement to evaluate the nature and
financial  effects  of the  business  combination.  SFAS 141R is  effective  for
financial  statements issued for fiscal years beginning after December 15, 2008.
Accordingly,  any business  combinations the Company engages in will be recorded
and disclosed  following  existing GAAP until January 1, 2009.  The Company does
not  expect  SFAS 141R will have an  impact  on its  financial  statements  when
effective, but the nature and magnitude of the specific effects will depend upon
the nature, terms and size of the acquisitions the Company consummates after the
effective  date.  The  Company is  evaluating  the impact of this  standard  and
currently  does not  expect it to have a  significant  impact  on its  financial
position, results of operations or cash flows.

In December  2007,  the FASB issued SFAS No. 160,  "Noncontrolling  Interests in
Consolidated  Financial  Statements,  an amendment of ARB No. 51" ("SFAS  160").
SFAS 160  introduces  significant  changes in the  accounting  and reporting for
business acquisitions and noncontrolling interest ("NCI") in a subsidiary.  SFAS
160 also changes the accounting for and reporting for the  deconsolidation  of a
subsidiary.  Companies  are  required to adopt the new standard for fiscal years
beginning  after January 1, 2009.  The Company is evaluating  the impact of this
standard and currently  does not expect it to have a  significant  impact on its
financial position, results of operations or cash flows.

In February  2008, The FASB issued FSP No. 140-3,  "Accounting  for Transfers of
Financial Assets and Repurchase  Financing  Transactions" ("FSP No. 140-3"). FSP
No. 140-3 clarifies repurchase  financing,  which is a repurchase agreement that
relates  to  a  previously   transferred   financial   asset  between  the  same
counterparties  (or  consolidated  affiliates of either  counterparty),  that is
entered  into  contemporaneously  with,  or in  contemplation  of,  the  initial
transfer.  FSP No. 140-3 is effective for fiscal years  beginning after November
15,  2008 and  interim  periods  within  those  fiscal  years.  The  Company  is
evaluating  the  impact of this  standard  and  currently  does not  expect  the
adoption  of FSP  No.  140-3  to  have a  significant  impact  on its  financial
position, cash flows and results of operations.

In September  2006, the Financial  Accounting  Standards  Board ("FASB")  issued
Statement  of  Financial  Accounting  Standards  ("SFAS")  No. 157,  "Fair Value
Measurements."  The  Statement  defines fair value,  establishes a framework for
measuring  fair value in generally  accepted  accounting  principles and expands
disclosure  related to the use of fair value  measures in financial  statements.
The  provisions of SFAS No. 157 were to be effective for fiscal years  beginning
after  November  15,  2007.  On February  6, 2008,  the FASB agreed to defer the
effective date of SFAS No. 157 for one year for certain  nonfinancial assets and
nonfinancial liabilities,  except those that are recognized or disclosed at fair
value in the financial statements on a recurring basis (at least annually).  The
Company is evaluating  the impact of this standard and currently does not expect
it to have a significant impact on its financial position, results of operations
or cash flows.

In February  2007,  the FASB  issued SFAS No. 159 ", "The Fair Value  Option for
Financial  Assets and  Financial  Liabilities  - including  an amendment of FASB
Statement  No. 115" ("SFAS  159").  SFAS 159  permits  entities to measure  many
financial  instruments and certain other items at fair value.  Effective January
1, 2008, the Company  adopted SFAS No. 159, "The Fair Value Option for Financial
Assets and Financial  Liabilities - including an amendment of FASB Statement No.
115." SFAS No. 159 allows an entity the  irrevocable  option to elect fair value
for the initial  and  subsequent  measurement  of certain  financial  assets and
liabilities under an instrument-by-instrument  election. Subsequent measurements
for the financial  assets and liabilities an entity elects to fair value will be
recognized  in  the  results  of  operations.  SFAS  No.  159  also  establishes
additional  disclosure  requirements.  The  Company did not elect the fair value
option under SFAS No. 159 for any of its financial  assets or  liabilities  upon
adoption.  The adoption of SFAS No. 159 did not have a significant impact on its
financial position, cash flows and results of operations.


                                      FS-9
<PAGE>

                            BELLAVISTA CAPITAL, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED SEPTEMBER 30, 2008 AND 2007

In March  2008,  the FASB  issued  SFAS No. 161  "Disclosures  about  Derivative
Instruments  and Hedging  Activities - an amendment of FASB  Statement  No. 133"
("SFAS 161").  SFAS 161 requires  qualitative  disclosures  about objectives and
strategies  for using  derivatives,  quantitative  disclosures  about fair value
amounts of and gains and losses on derivative instruments, and disclosures about
credit-risk-related contingent features in derivative agreements.  Companies are
required to adopt the new  standard for be effective  for  financial  statements
issued for fiscal years and interim  periods  beginning after November 15, 2008.
The  Company  does not expect  the  adoption  of SFAS 161 to have a  significant
impact on its financial position, results of operations or cash flows.

In June 2007 the FASB  ratified  EITF No. 07-3,  "Accounting  for  Nonrefundable
Advance  Payments  for  Goods or  Services  to Be Used in  Future  Research  and
Development  Activities"  ("EITF 07-3") which  requires  non-refundable  advance
payments  for goods and services to be used in future  research and  development
activities  to be recorded as an asset and the payments to be expensed  when the
research and  development  activities are performed.  EITF 07-3 is effective for
fiscal years beginning after December 15, 2007.  Effective  January 1, 2008, the
Company  adopted EITF 07-3. The adoption of EITF 07-3 did not have a significant
impact on its financial position, results of operations or cash flows.

In April  2008,  the FASB  issued  FASB Staff  Position  ("FSP")  No. FAS 142-3,
"Determination  of the Useful Life of Intangible  Assets,"  ("FSP  142-3").  The
intent  of this FSP is to  improve  consistency  between  the  useful  life of a
recognized  intangible asset under SFAS No. 142,  "Goodwill and Other Intangible
Assets" ("SFAS No. 142"),  and the period of expected cash flows used to measure
the fair value of the  intangible  asset under SFAS No. 141R. FSP No. 142-3 will
require that the  determination of the useful life of intangible assets acquired
after the effective date of this FSP shall include assumptions regarding renewal
or extension,  regardless of whether such  arrangements have explicit renewal or
extension provisions,  based on an entity's historical experience in renewing or
extending  such  arrangements.  In  addition,  FSP No. 142-3  requires  expanded
disclosures  regarding  intangible  assets existing as of each reporting period.
FSP  142-3 is  effective  for  financial  statements  issued  for  fiscal  years
beginning after December 15, 2008, and interim  periods within those years.  The
Company does not expect the adoption of FSP 142-3 to have a  significant  impact
on its financial position, results of operations or cash flows.

In June 2008, the Financial  Accounting Standards Board (FASB) issued FASB Staff
Position  (FSP)  Emerging  Issues  Task Force  (EITF) No.  03-6-1,  "Determining
Whether   Instruments   Granted  in   Share-Based   Payment   Transactions   Are
Participating  Securities." Under the FSP, unvested  share-based  payment awards
that contain rights to receive nonforfeitable dividends (whether paid or unpaid)
are participating securities,  and should be included in the two-class method of
computing  EPS. The FSP is effective for fiscal years  beginning  after December
15, 2008, and interim periods within those years,  and is not expected to have a
significant impact on the Company's results of operations,  financial  condition
or liquidity.

In May 2008, the FASB issued Financial  Accounting  Standard (FAS) No. 162, "The
Hierarchy  of  Generally  Accepted  Accounting  Principles."  The  statement  is
intended to improve  financial  reporting by identifying a consistent  hierarchy
for selecting accounting principles to be used in preparing financial statements
that are prepared in conformance with generally accepted accounting  principles.
Unlike Statement on Auditing  Standards (SAS) No. 69, "The Meaning of Present in
Conformity  With GAAP," FAS No. 162 is  directed  to the entity  rather than the
auditor.  The statement is effective 60 days following the SEC's approval of the
Public Company Accounting  Oversight Board (PCAOB) amendments to AU Section 411,
"The Meaning of Present Fairly in Conformity  with GAAP," and is not expected to
have any impact on the Company's results of operations,  financial  condition or
liquidity.




                                     FS-10
<PAGE>

                            BELLAVISTA CAPITAL, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED SEPTEMBER 30, 2008 AND 2007


3.  LOANS RECEIVABLE SECURED BY REAL ESTATE:

As of September 30, 2008, loans receivable  secured by real estate summarized by
location consisted of the following:

<TABLE>
<CAPTION>
                                           Amount           Recognized           Carrying
Description                               Invested          Impairments           Amount           In Default
                                     ------------------- ------------------ ------------------- ------------------
   <S>                                      <C>                  <C>               <C>    <C>    <C>    <C>
SF Bay Area                               $  10,421,673       $    165,000       $  10,256,673      $   6,858,673
California Central Valley                       210,000                 --             210,000            210,000
Southern California                             185,100                 --             185,100                 --
Other States                                    600,000                 --             600,000                 --
                                     ------------------- ------------------ ------------------- ------------------
Total                                     $  11,416,773       $    165,000       $  11,251,773      $   7,068,673
                                     =================== ================== =================== ==================
</TABLE>

Loans  Receivable  Secured  by Real  Estate  consist  of  loans  to real  estate
developers  which are secured by deeds of trust on real  property,  pay interest
monthly and  generally  have  repayment  guarantees  from the  principals of the
borrowing  entity.  As of  September  30,  2008  $9,445,926  of these loans were
secured by first trust deeds and $1,970,847  were secured by second trust deeds.
Additionally,  at  September  30, 2008 five loans  totaling  $7,068,673  were in
default under the terms of our loans. As of September 30, 2008, we have impaired
loans receivable totaling approximately $165,000 on one of our loans receivable.
Included on the Balance Sheet in Other assets is an allowance for  uncollectible
interest in the amount of $189,849 and zero as of  September  30, 2008 and 2007,
respectively.

4.   JOINT VENTURE INVESTMENTS IN REAL ESTATE DEVELOPMENTS:

As of September 30, 2008, joint venture investments in real estate developments
summarized by location consisted of the following:

<TABLE>
<CAPTION>
                                                                                                   Remaining
                                           Amount                               Carrying            Funding
Description                               Invested           Impairments         Amount            Obligation
                                     ------------------- ------------------ ------------------- ------------------
   <S>                                      <C>                 <C>                 <C>                <C>
SF Bay Area                           $      10,909,306   $      1,964,705   $       9,117,125   $        297,461
Southern California                           7,143,683          6,337,835             827,072            320,000
                                     ------------------- ------------------ ------------------- ------------------
Total                                 $      18,052,989   $      8,302,540   $       9,944,197   $        617,461
                                     =================== ================== =================== ==================
</TABLE>


Joint Venture Investments in real estate  developments  consist of ADC loans and
joint  investments  with  real  estate  developers.  ADC  Loans,  which are loan
arrangements  that are  typically  secured  by real  property,  provide  for the
payment of interest from an interest reserve established from loan funds and may
also,  provide for the payment of an exit fee as a percentage of sales from each
unit in the development or a share of project profits. Joint Venture investments
are  equity  investments  in  operating  entities  formed  for  the  purpose  of
developing  real  estate.  Our  investment  typically  earns a preferred  return
calculated based on our investment  amount at a specific rate during the term of
the investment and a share of the project  profits.  As of September 30, 2008 we
have recognized  impairments totaling approximately $8.3 million on three of our
joint venture investments in real estate developments.







                                     FS-11
<PAGE>

                            BELLAVISTA CAPITAL, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED SEPTEMBER 30, 2008 AND 2007

5.   INVESTMENTS IN REAL ESTATE DEVELOPMENTS:

Investments in Real Estate Developments include real estate development projects
we own, either directly or through a subsidiary  company we own or control.  The
following  table  summarizes  our  Investments  in Real Estate  Developments  by
location as of September 30, 2008:

<TABLE>
<CAPTION>
Description
                                      Amount Invested       Recognized          Carrying           Costs to
                                     (net of payments)      Impairment           Amount            Complete
                                     ------------------ ------------------ ------------------ ------------------
   <S>                                     <C>                  <C>                <C>                <C>
SF Bay Area                           $     19,385,494   $      3,748,223   $     19,026,984   $        331,305
                                     ------------------ ------------------ ------------------ ------------------
         Total                        $     19,385,494   $      3,748,223   $     19,026,984   $        331,305
                                     ================== ================== ================== ==================
</TABLE>


6.  INVESTMENT IN RENTAL PROPERTY:

During the fiscal year ended  September 30, 2008, the Company  acquired  control
and became the 100% owner of the joint  venture  investment  MSB Brighton LLC, a
multi-unit  condominium  conversion in  California.  Management  converted  this
property from a held-for-sale to a rental property as of September 30, 2008. The
rental property is summarized as follows:



Land                                                  $     1,076,589
Building                                                    2,969,348
Furniture and equipment                                        12,530
                                                   -------------------
   Total rental property                                    4,058,467
   Accumulated depreciation                                  (130,038)
                                                   -------------------
    Rental property, net                              $     3,928,429
                                                   ===================

7.  FIXED ASSETS:

During March 2008 the Company  disposed of furniture  and  equipment  with a net
book value of $17,088 and  received  $2,200 in cash.  The $14,888  loss from the
sale is included in the statement of  operations.  Fixed Assets at September 30,
2008 and September 30, 2007 consisted of the following:

                                            As of September 30,
                                   ---------------------------------------
                                          2008                2007
                                   ------------------- -------------------
Computer equipment                    $        18,756     $        88,110
Furniture                                      18,454              39,730
                                   ------------------- -------------------
   Total office equipment                      37,210             127,840
   Accumulated depreciation                   (12,831)            (95,620)
                                   ------------------- -------------------
    Fixed assets, net                 $        24,379     $        32,220
                                   =================== ===================









                                     FS-12
<PAGE>


                            BELLAVISTA CAPITAL, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED SEPTEMBER 30, 2008 AND 2007


8.  CONSOLIDATION OF SUBSIDIARIES AND SUPPLEMENTARY CASH FLOW INFORMATION:

During the year ended  September 30, 2008,  the Company became the 100% owner of
three properties previously classified as joint venture investments. Upon taking
ownership,  the Company  recorded the assets and  liabilities of each entity and
eliminated  the  intercompany  accounts.  Below is a summary  of the  assets and
liabilities  of each  consolidated  entity as of the date of  consolidation,  as
recorded in these financial statements:

 Cummings Park, LLC as of January 1, 2008
 Cash                                                      $          35,106
 Land                                                              1,260,000
 Work in Process                                                  13,534,865
 Deposits                                                             14,930
 Accounts Payable                                                   (511,888)
 Construction loan payable                                       (11,310,302)
 Security Deposits                                                   (32,846)
                                                        ---------------------
 Pre-consolidation investment in joint venture             $       2,989,865
                                                        =====================


 Frank Norris Condominiums Inc., as of July 3, 2008
 Cash                                                      $          45,974
 Accounts Receivable                                                  14,330
 Building                                                          7,544,086
 Accounts Payable                                                     (6,285)
 Loan Payable                                                     (2,521,729)
                                                        ---------------------
 Pre-consolidation investment in real estate               $       5,076,376
                                                        =====================


 MSB Brighton, LLC as of January 1, 2008
 Land                                                      $       1,076,589
 Buildings                                                         7,626,443
 Prepaid property taxes                                               27,324
 Construction loan payable                                       (8,730,356)
                                                        ---------------------
 Pre-consolidation investment in joint venture             $              --
                                                        =====================
 ----------------------------------------------------------------------------


9.  NOTES PAYABLE AND LINE OF CREDIT:

Notes payable as of September 30, 2008 and 2007 consisted of the following:

                                            As of September 30,
                                   ---------------------------------------
                                          2008                2007
                                   ------------------- -------------------
Secured line of credit                $     2,600,000     $            --
Secured loan                                7,331,328                  --
Secured loan                                2,521,729                  --
                                   =================== ===================
   Total                              $    12,453,057     $            --
                                   =================== ===================

The line of  credit of  $2,600,000  represents  the  outstanding  balance  as of
September 30, 2008 on a $3.0 million  revolving line of credit secured by a deed
of trust on one of our investments.  It bears interest at Prime plus 1.0% (5.50%
September  30,  2008).  The line  matured on June 5, 2008,  and was  extended to
April 18, 2009.

The  secured  loan  of  $7,331,328  represents  the  outstanding  balance  as of
September  30, 2008 on a $14.9  million  construction  loan  originated  for the
purpose of financing  the  construction  of a  residential  and retail mixed use
project  in East  Palo  Alto,  California.  The  loan is owed by  Cummings  Park
Associates,   LLC  and  is  secured  by  the  real  property.  The  Company  has

                                     FS-13
<PAGE>

                            BELLAVISTA CAPITAL, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED SEPTEMBER 30, 2008 AND 2007

consolidated the project's financial statements effective January 1, 2008. Prior
to January 1, 2008 the Company  reported its  investment  in this project on the
equity method.  The loan bears interest at Prime plus 2%, (6.0% at September 30,
2008) and matures on March 15, 2009.  Interest-only  payments are due monthly on
the outstanding  balance of the note.  Principal  payments will be made from the
proceeds when units are sold.

The  secured  loan  of  $2,521,729  represents  the  outstanding  balance  as of
September  30, 2008 on an assumed  loan for the Frank  Norris  Condominium  Inc.
property  that is now fully owned by the Company and is secured by the property.
The Company  consolidated the property's  financial statements beginning July 3,
2008.  The loan  bears  interest  at  Prime  plus 1% with a floor of 6.0% (6% at
September  30, 2008) and matures on April 15, 2009.  Interest-only  payments are
due monthly on the outstanding balance of the note.


10.  SHAREHOLDERS' EQUITY:

There is currently no public trading market for our stock.  We are authorized to
issue up to 50,000,000  shares of Common Stock. As of September 30, 2008 we have
repurchased  1,564,097 shares in connection with legal settlements and 6,328,385
shares  under tender  offers at various  prices.  At  September  30, 2008 we had
11,590,870 shares of Common Stock outstanding.

Since June 2005, a group of entities associated with Mackenzie Patterson Fuller,
Inc.  (collectively  "MPF") have acquired an aggregate of 1,388,046 shares as of
September 30, 2008,  through a series of unsolicited  tender offers.  During the
year ended  September 30, 2008,  the Company  responded to tender offers made by
MPF at prices the Company  believed were overly  opportunistic by commencing its
own tender offer to repurchase shares and purchased shares as shown in the table
below:

Offer Date                  Shares           Price per           Total Amount
                          Purchased            share
                        ---------------    ---------------    ----------------
October 1, 2007              1,257,982              $2.00        $  2,515,964
March 20, 2008                 731,687              $2.00           1,463,374
                        ---------------                       ----------------
                             1,989,669                           $  3,979,338
                        ===============                       ================

On October 17, 2007, the Company negotiated  settlements and releases of certain
claims  against the Company and certain of its current and former  officers  and
directors the terms of which provided that the shareholder tender 130,000 shares
of the  Company's  stock to the Company for no  consideration  and  additionally
provided that the Company would  repurchase  25,966 shares of Company stock from
the  shareholder  at a price of $2.25 per share for a total  payment of $58,424.
During the year ended September 30, 2008, the Company negotiated settlements and
releases  of certain  claims  against the Company and certain of its current and
former  officers and  directors  made by certain  shareholders  holding  214,947
shares.  The  settlement  included,  among other terms,  the  repurchase  of the
214,947 shares held by the  shareholders at $3.15 per share for a purchase price
of $677,083, and the dismissal of the claims of the shareholders included in the
complaint   originally   served  on  the  Company  in  April   2006.   Insurance
reimbursements  pertaining  to this  case of  $166,649  have  been  reported  as
miscellaneous income.

In August 2008,  MPF  commenced  another  tender offer to purchase up to 400,000
shares at a price of $1.00 per share. The Company  responded with its own tender
offer to  repurchase  up to  750,000  shares  at a price of $1.75  per share and
completed the repurchase of 419,437 shares at $1.75 per share in October, 2008.

The Company has not declared or paid any  dividends on its capital  stock during
the period from January 1, 2005 through the date of this report.


                                     FS-14
<PAGE>

                            BELLAVISTA CAPITAL, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED SEPTEMBER 30, 2008 AND 2007

11.   INCOME TAXES


At September  30, 2008 and 2007, we had U.S.  federal net  operating  loss carry
forwards of approximately  $101.6 million and $96.7 million,  respectively.  The
net operating loss carry forwards  expire in various  amounts  between the years
2016 and 2028.  If there is a change in ownership,  utilization  of the U.S. net
operating  losses may be subject to  substantial  annual  limitation  due to the
"change in  ownership"  provisions  of the  Internal  Revenue  Code of 1986,  as
amended and similar state  provisions.  The annual  limitation may result in the
expiration of net operating losses before utilization.

Operating Loss Carry forward

Operating loss carry forwards consisted of the following:

                                                Federal          California
                                         Operating Loss      Operating Loss
                                          Carry forward       Carry forward
                                    -------------------- -------------------
September 30, 2008                     $      4,985,411     $     4,981,411
September 30, 2006                            4,413,981           4,411,581
September 30, 2005                           12,485,650          12,485,650
December 31, 2004                            34,098,334          34,098,334
December 31, 2003                            38,176,549          22,905,929
December 31, 2002                             7,488,817           3,915,918
                                    -------------------- -------------------
   Total                               $    101,648,742     $    82,798,823
                                    ==================== ===================

Deferred Taxes

The significant components of the Company's deferred tax assets are as follows:

                                                As of September 30,
                                       ----------------------------------------
                                                     2008               2007
                                       -------------------- -------------------
Net operating loss carry
  forwards                                $     39,391,387     $    37,405,711
Income from real estate
  investments reported
  on tax returns but not
  includible in financial
  statement income                                 965,004           2,328,370
Impairment charges reported
  in financial statements
  but not deducted on tax
  return                                         6,768,366           3,615,978
   Valuation allowance                         (47,124,757)        (43,350,059)
                                       -------------------- -------------------
   Net deferred tax assets                $             --     $            --
                                       ==================== ===================

As of September 30, 2008 and 2007, the Company and its subsidiaries had provided
valuation   allowances  of  approximately   $47.1  million  and  $43.4  million,
respectively,  in respect of deferred tax assets  resulting  from tax loss carry
forwards  and  temporary  timing  differences  in the  reporting of revenues and
expenses  because it is more likely than not that the carry  forwards may expire
unused  and that  future  tax  deductions  may not be  realized  through  future
operations.

The  following  table  presents the income tax  provision  for federal and state
income taxes for the years ended September 30, 2008 and 2007:

                                                Year Ended September 30,
                                       ----------------------------------------
                                                     2008               2007
                                       -------------------- -------------------
Federal                                   $             --     $        20,525
State                                                4,000               6,870
                                       -------------------- -------------------
   Total                                  $          4,000     $        27,395
                                       ==================== ===================


                                     FS-15
<PAGE>

                            BELLAVISTA CAPITAL, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED SEPTEMBER 30, 2008 AND 2007

12.   COMMITMENTS AND CONTINGENCIES:

Capital leases

The following is a schedule, by years, of future minimum payments required under
capital  leases  that have  initial or  remaining  noncancelable  lease terms in
excess of one year as of September 30, 2008:

Year ended September 30, 2009                            $          3,580
Year ended September 30, 2010                                       1,405
                                                       -------------------
   Net minimum lease payments                            $          4,985
                                                       ===================


Litigation

As of September 30, 2008,  the Company was involved in the following  litigation
in which claims for damages  would be material if the  plaintiff  prevailed  and
there is at least a reasonable possibility that a loss may have occurred:

     Richard  Aster  v  BellaVista  Capital,  Inc.  et al.  A  lawsuit  alleging
     construction  defects in the installation of windows and roofing related to
     a single family home that was  purchased by the plaintiff  from the Company
     after the Company acquired the property through  foreclosure.  This lawsuit
     names several defendants, including the Company and the original developer.
     In addition, a lawsuit has been filed by the original developer against the
     Company for indemnification and defense. The Company believes it has strong
     and viable defenses and plans to vigorously defend these actions.

     Aztec  Foreclosure  Corp v Natural  Software,  Inc.  et al. This case is an
     interpleader lawsuit. The Company has been named as a defendant because the
     funds at issue are part of the estate of a creditor  that owes money to the
     Company.  No party in the lawsuit has asserted  claims against the Company.
     The Company  has  elected not to assert a claim in the case  because it has
     determined that the claims of certain other secured creditors are senior in
     priority to that of the Company and these claims in  aggregate  are greater
     than the funds at issue. Therefore,  the Company has no realistic chance of
     collecting any of the funds at issue from the judgment debtor's estate.


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.  Additionally,  we
carry insurance on our direct investments in real estate development. There are,
however, certain types of extraordinary losses that may be either uninsurable or
not economically insurable. Further, all of our investments are located in areas
that are subject to  earthquake  activity,  and we  generally do not require our
borrowers to maintain earthquake insurance.  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.






                                     FS-16
<PAGE>

                            BELLAVISTA CAPITAL, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED SEPTEMBER 30, 2008 AND 2007


13.   SUBSEQUENT EVENTS

Pulgas Property

As of September 30, 2008,  the Company had a loan on a property  located in East
Palo Alto, CA, in the amount of $5 million.  The loan matured on April 30, 2008,
and when the  borrower  was unable to comply with terms of an  extension  of the
loan,  the Company  commenced a foreclosure  proceeding  as of August 2008.  The
process was  completed  and the Company took title to this  property on December
31, 2008 by foreclosure.

Brighton Debt Approval

As of  September  30,  2008,  the Company  owned a 43 unit  townhome  project in
Modesto,  CA. The property is  currently  being held as a Rental  Property.  The
Board of Directors in October 2008  authorized  the Company to borrow up to $1.5
million on a secured credit  facility.  As of December 31, 2008, the Company had
utilized the line of credit and had an outstanding balance of $1.5 million.

Tender Offer

As of September 30, 2008 the Company had an open tender offer.  The tender offer
ended October 20, 2008,  and resulted in the redemption of 419,437  shares.  The
redemption  price  paid by the  Company  was  $1.75  per  share  for a total  of
$734,015.  The Company had a total of 11,171,433  shares  outstanding  after the
redemption was completed.






















                                     FS-17