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

                                FORM 10-KSB

[x] Annual Report pursuant to Section 13 or 15(d) of the Securities
    Exchange Act of 1934

For the fiscal year ended June 30, 2004

[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
    Exchange Act of 1934

Commission file number 0-6877


                       SANTA FE FINANCIAL CORPORATION
                       ------------------------------
                (Name of Small Business Issuer in Its Charter)

            Nevada                                      95-2452529
   ------------------------------                    ------------------
  (State or Other Jurisdiction of                    (IRS Employer
   Incorporation or Organization)                    Identification No.)


  820 Moraga Drive, Los Angeles, California               90049
  -----------------------------------------             ----------
  (Address of Principal Executive Offices)              (Zip Code)

                               (310) 889-2500
              ----------------------------------------------------
              (Registrant's Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Exchange Act: None

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

                          $.10 Par Value Common Stock
                          ---------------------------
                                (Title of Class)

    Check whether the issuer: (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 pursuant to Item 405
of Regulation S-B contained in this form, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendments to
this Form 10-KSB.  [ ]

    The issuer's revenues for the year ended June 30, 2004 were $3,747,000.

The aggregate market value of the common equity held by non-affiliates of
issuer computed by reference to the price at which the stock last sold prior
to September 22, 2004 was $4,075,886.

<PAGE>

The number of shares outstanding of issuer's $.10 Par Value Common Stock, as
of September 22, 2004, was 1,178,210.

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


                     DOCUMENTS INCORPORATED BY REFERENCE: None


                            TABLE OF CONTENTS

PART I                                                               PAGE

    Item  1.  Description of Business.                                 3

    Item  2.  Description of Property.                                 7

    Item  3.  Legal Proceedings.                                      10

    Item  4.  Submission of Matters to a Vote of Security Holders.    10

PART II

    Item  5.  Market For Common Equity and Related                    11
              Stockholder Matters.

    Item  6.  Management's Discussion and Analysis of Financial       12
              Condition and Results of Operations.

    Item  7.  Financial Statements and Supplementary Data.            19

    Item  8.  Changes in and Disagreements with Accountants on        36
              Accounting and Financial Disclosure.

    Item  8A. Controls and Procedures.                                36

    Item  8B. Other Information.                                      36

PART III

    Item  9.  Directors, Executive Officers, Promoters and            37
              Control Persons; Compliance with Section 16(a)
              of The Exchange Act.

    Item 10.  Executive Compensation.                                 39

    Item 11.  Security Ownership of Certain Beneficial Owners and     41
              Management.

    Item 12.  Certain Relationships and Related Transactions.         43

    Item 13.  Exhibits, Financial Statement Schedules, and            45
              Reports on Form 8-K.

    Item 14.  Principal Accountant Fees and Services.                 47

SIGNATURES                                                            48

                                     -2-
<PAGE>

                                   PART I

Item 1.  Description of Business.

BUSINESS DEVELOPMENT

Santa Fe Financial Corporation ("Santa Fe" or the "Company") was incorporated
under the name of Tri Financial Corporation in the State of Nevada on July 25,
1967 as a wholly owned subsidiary of Crateo, Inc, a public company.  On
October 31, 1969, Crateo issued a one-for-one stock dividend of all of its
shares of Tri Financial to its common shareholders.  On September 17, 1970,
the name of the Corporation was changed to Santa Fe Financial Corporation.

Since 1988, the Company's principal source of operating revenue has been, and
continues to be, derived from the management of its 68.9% owned subsidiary,
Portsmouth Square, Inc. ("Portsmouth"), a public company (OTCBB: PRSI).
Portsmouth has a 49.8% limited partnership interest in Justice Investors, a
California limited partnership ("Justice" or the "Partnership").  Portsmouth
also serves as one of the two general partners of Justice.  The other general
partner, Evon Garage Corporation ("Evon"), acts as the managing general
partner.  As a general and limited partner, Portsmouth has significant control
over the management and operation of the assets of Justice.  All significant
Partnership decisions require the active participation and approval of both
general partners.  The Company and Evon jointly consult and determine the
amount of Partnership reserves and the amount of cash to be distributed to the
limited partners.  There are approximately 92 limited partners in Justice.

Pursuant to the terms of the partnership agreement, voting rights of the
partners are determined according to the partners' entitlement to share in the
net profit and loss of the Partnership.  The Company is not entitled to any
additional voting rights by virtue of its position as a general partner.
The partnership agreement also provides that no portion of the Partnership
real property can be sold without the written consent of the general and
limited partners entitled to more than 72% of the net profit.

The Company owns a controlling 55.4% equity interest in Intergroup Woodland
Village, Inc. ("Woodland Village"), which owns a 27-unit multi-family
apartment complex located in Los Angeles, California.  The Company also owns a
2-unit apartment building located in Los Angeles, California, through its 100%
owned subsidiary, 614 Acanto Properties, Inc. ("Acanto").


BUSINESS OF ISSUER

The Company's principal business is to purchase and manage real estate
operations.  The Company's primary real estate operation is conducted through
its subsidiary, Portsmouth, as a general and limited partner in Justice.  The
Partnership owns the land, improvements and leaseholds at 750 Kearny Street,
San Francisco, California commonly known as the Holiday Inn Select Downtown
and Spa (the "Hotel").  Historically, the Partnership's most significant
source of income was a lease between Justice and Holiday Inn for the hotel
portion of the property.

On March 15, 1995, an amended and restated lease was entered into by Justice
with an effective date of January 1, 1995 (the "Hotel Lease").  The Hotel
Lease was assumed by Felcor Lodging Trust, Inc. ("Felcor", NYSE: FCH),
effective July 28, 1998.  The initial term of the Hotel Lease was for a 10-
year term expiring on December 31, 2004.  The lessee also had an option to
renew the lease for one additional term of five years, which would extend the
lease to December 31, 2009.  Under the terms of the Hotel Lease, the lessee
was to notify the Partnership of its intention to exercise the five-year

                                     -3-
<PAGE>

option by December 31, 2003.  The Hotel Lease required the lessee to pay an
annual rent of the greater of twenty percent (20%) of gross room revenues or
$2,500,000 plus fifty percent (50%) of total revenues from the leased premises
less operating expenses, base rent and capital requirements.  Under the terms
of the Hotel Lease, the lessee was responsible for all maintenance and repairs
to the property, certain capital improvements, taxes and insurance.  The
lessee also had an obligation to convert the hotel property to a "Holiday Inn
Select" and to maintain the property to those standards, at its own cost and
expense.

The Partnership also derives income from its lease of the garage portion of
the property to Evon.  Effective June 1, 2003 Justice leased approximately
5,400 square feet on the lobby floor of the Hotel to Tru Spa, LLC for the
operation of a health and beauty spa.  As a general partner Portsmouth takes
an active role in monitoring and overseeing the operations of the hotel, the
parking garage and the spa as part of the partnership's efforts to enforce
compliance with the leases and to improve revenues.

The Company also derives income from management fees as a general partner in
Justice and from the investment of its cash and securities assets. The Company
has invested in income-producing instruments, equity and debt securities and
will consider other investments if such investments offer growth or profit
potential.  See the discussion of Investment Policies in Item 2.

The Company's operations also include a controlling interest in a 27-unit
multi-family apartment complex and a 2-unit apartment building located in Los
Angeles, California.  The Company also derives income from the investment of
its cash and securities assets.  The Company has invested in income-producing
instruments, equity and debt securities and will consider other investments if
such an investment will offer growth or profit potential.  For further
information on the Company's investments see Item 2 Investment Policies, Item
6 Management's Discussion and Analysis of Financial Condition and Results of
Operations and the Notes to Consolidated Financial Statements.


RECENT BUSINESS DEVELOPMENTS

The Partnership conducted a comprehensive physical inspection of the Hotel as
permitted by the terms of the Hotel Lease. In July 2003, Justice delivered to
the hotel lessee a notice citing certain deficiencies in the physical
condition of the hotel property and in its furniture, fixtures and equipment
and requested that those deficiencies be corrected in accordance with the
lessee's obligations under the Hotel Lease.

On May 3, 2004, Justice entered into a Settlement Agreement with Felcor to
resolve disputes regarding certain obligations of Felcor and others under the
terms of the Hotel Lease.  Pursuant to the terms of the Settlement Agreement,
Felcor was required to pay to Justice $5,000,000 towards the costs of capital
repairs, replacements and improvements necessary to place the hotel in the
condition required by the Hotel Lease at the end of its term.  Felcor also
agreed to transfer to Justice and terminate its leasehold estate and its
option right under the Hotel Lease, effective June 30, 2004. In addition, the
parties to the Settlement agreed to mutual releases and to cooperate for a
smooth transition of the operations of the Hotel.  The Settlement Agreement
was fully effectuated as of June 30, 2004.

On May 19, 2004, Justice entered into third party Management Agreement with
Dow Hotel Company, LLC, a Washington limited liability company ("Dow") for the
management of the Hotel, effective July 1, 2004.  The Management Agreement has
an initial term of 10 years, with an option of Justice to extend the original
term for another 10 year period.  The Management Agreement provides for a base

                                     -4-
<PAGE>

management fee to Dow of up to 2.5% of annual gross operating revenues of the
hotel and incentive fees not to exceed, in the aggregate, 4% of gross
operating revenues.  The Management Agreement can be terminated by Justice
upon at least 60 days written notice, subject to certain termination fees
during the first year of the Agreement.

The Partnership has also been actively pursuing a franchise agreement with a
new nationally recognized brand.  Although the Partnership had previously
reported that it received a letter of intent from Starwood Hotels & Resorts
Worldwide, Inc., and believed that it would be granted a license agreement to
convert the property to a Sheraton Hotel, that transaction did not
materialize.  Justice is currently in discussions with other major brands in
an effort to move the property up-market and become more competitive.

To secure a new brand for the Hotel, it will be necessary for the Partnership
to commit substantial time and resources to meet the product improvement plan
("PIP") requirements of the new brand.  The Partnership anticipates that it
will require approximately $12,000,000 to $18,000,000 in capital commitments,
in addition to the $5,000,000 received from Felcor, to renovate and improve
the Hotel to meet new brand standards.  At this time, the Partnership believes
that it can finance those renovations and improvements through additional
borrowings, but there is no certainty that the full amount necessary will be
available from such borrowings.

There will be a transition period beginning July 1, 2004 as the Partnership
assumes the responsibility for the operations of the Hotel and begins the
process of implementing the PIP necessary to secure the new hotel brand.
During this transition period, the Hotel will continue to operate as a Holiday
Inn Select hotel pursuant to a short-term franchise agreement that will become
a month-to-month agreement beginning in November 2004 with a sixty-day
cancellation clause.  It will also be necessary for the Hotel to limit
operations and have rooms out of service during part of the transition period.

Since the Partnership will not be receiving minimum rent after June 2004 and
will have to commit significant funds to transition the Hotel to a new brand,
Justice determined that its May 2004 monthly limited partnership distribution
would be the last distribution for an indefinite period of time.  Justice
estimates that it will take approximately 18 to 24 months to complete all of
the renovations and for the Partnership to begin to realize the benefits of
the improvements and the increase in cash flows that it anticipates from the
new management structure and new hotel brand.

Due to the termination of the Hotel Lease on June 30, 2004, it was necessary
for the Partnership to amend the agreement by which the general partners of
Justice were compensated since the general partners would be taking on new
responsibilities as Justice assumed the role as owner-operator of the Hotel.
Furthermore the prior agreement was based on a percentage of gross rents,
which the Partnership would no longer be receiving from the Hotel. The
expiring compensation agreement provided that the general partners were
entitled to receive compensation equal to 3% of the annual gross rents of the
partnership.  From the first $150,000 of compensation payable to the general
partners, $120,000 is payable to Evon, as the managing general partner, and
$30,000 is payable to Portsmouth as the other general partner.  Any
compensation in excess of the $150,000 was to be split 50/50 between the
general partners.

On July 16, 2004, Justice entered into a new General Partner Compensation
Agreement (the "Compensation Agreement"), with an effective date of May 31,
2004. The new agreement provides that the general partners will receive annual
base compensation of 1.5% of gross revenues, with a minimum annual base

                                     -5-
<PAGE>

compensation of $262,500, adjusted for inflation. From the minimum annual base
compensation, 80% will be paid to Evon for its services as the managing
general partner and 20% will be paid to Portsmouth as the other general
partner. Base annual compensation in excess of the minimum will be payable in
equal amounts to Evon and Portsmouth. The maximum base annual compensation
that can be earned by the general partners is 1.5% of $40,000,000 of gross
revenues.  The Compensation Agreement also provides for incentive compensation
to the general partners in a sum equal to the 5.0% of the annual net operating
income of Justice, as defined in the Dow Management Agreement that is in
excess of $7,000,000. Incentive compensation shall be payable in equal amounts
to Evon and Portsmouth. In addition, the Compensation Agreement provides that
the general partners are to receive a repositioning fee in the aggregate
amount of $275,000, to be paid in equal amounts to Evon and Portsmouth in two
installments.  The first installment of $68,750 to each of Evon and Portsmouth
was paid within 10 days of the execution of the Compensation Agreement with
the second installment to be paid upon the substantial completion of the
renovation of the Hotel


COMPETITION

The Hotel is still part of Holiday Inn's worldwide reservation system. It was
designed to Holiday Inn's specifications to serve both business travelers and
tourists and caters to both individuals and tour groups.  It also handles
conferences and business meetings, having meeting and dining facilities for
groups of up to 400 people.

The Hotel had traditionally enjoyed a favorable year-round occupancy rate, but
both occupancy and average daily room rates have suffered since fiscal year
ended June 30, 2003.  In November 2001, an Omni Hotel opened in the Financial
District of San Francisco.  The Omni is a more upscale facility providing
greater amenities to its guests, especially the business traveler and is more
centrally located in the financial district.  Two other hotels have since
opened in San Francisco, which can be considered competitive to the Financial
District Holiday Inn.  The San Francisco hotel market has not yet recovered
from the impact of the terrorist attacks of September 11, 2001 and the
downturn in the Bay Area economy due, in part, to the failure of many internet
and technology based companies.  Increased competition from newer and more
upscale properties, such as the Omni, have resulted in lower room rates as
hotel operators struggle to obtain occupancy.

Management believes that the hotel is now in a very challenging market, with
many competitors better positioned to attract the business traveler and
tourists.  As part of the efforts to meet this increased competition, a new
health and beauty spa was built on the lobby level of the hotel and new
meeting rooms were constructed on the fourth floor during the fiscal year
ended June 30, 2003.  By terminating the Hotel Lease with Felcor, and taking
over the operations of the Hotel, the Partnership now has greater ability to
direct the future of the Hotel.  The Hotel property is now approximately 25
years old, with no major renovation having been made to the Hotel property
during that time. The Partnership is committed to make substantial
improvements to the Hotel within the next two years and attract a new upscale
brand to return the property to a competitive place in the market.

All of the multi-family apartment buildings owned by the Company are in areas
where there is substantial competition.  However, management believes that the
properties are generally in a competitive position in their respective
communities.  The Company intends to continue upgrading and improving the
physical condition of its existing properties and to consider selling existing
properties and re-investing in properties that may require renovation but that
offer greater appreciation potential.

                                     -6-
<PAGE>

EMPLOYEES

As of June 30, 2004, the Company had two full-time employees.  The employees
are not part of any collective bargaining agreement, and the Company believes
that its employee relations are satisfactory.

Although the Company is not subject to any collective bargaining agreement,
the employees of the Hotel are part of Local 2 of the Hotel Employees and
Restaurant Employees Union whose contracts with the hotels in San Francisco
expired city-wide on August 14, 2004.  Local 2 has since voted to authorize a
strike but, at this time, has only targeted some of the larger hotels in San
Francisco for work stoppages as negotiations continue.  If the strike does
extend to the Hotel, its operations could be disrupted.  Also, since the other
hourly employees of the Hotel are also union members, they would most likely
honor any picket lines.


Item 2. Description of Property.

PROPERTIES

As of June 30, 2004, Santa Fe's investments in real property consisted of its
interest in the San Francisco Hotel through its subsidiary Portsmouth, and two
apartment buildings located in Los Angeles, California.


San Francisco, California Hotel.

The San Francisco, California Hotel property owned by the Partnership is
located near the Financial District, one block from the Transamerica Pyramid.
The Embarcadero Center is within walking distance.  Chinatown is directly
across the bridge that runs from the hotel to Portsmouth Square Park. The
hotel is a 31-story (including parking garage), steel and concrete, A-frame
building, which contains 565 guest rooms situated on 22 floors as well as a
5,400 square foot health and beauty spa on the lobby level.  One floor houses
the Chinese Culture Center pursuant to a long-term, nominal-rent lease, and
three floors are devoted to a registration desk, lobby shops, dining room,
coffee shop, hotel support facilities, a fitness center, a guest business
center, meeting and banquet rooms and offices.  Other features of the Holiday
Inn include a rooftop swimming pool, 5-storied underground garage and
pedestrian bridge across Kearny Street connecting the hotel and the Chinese
Culture Center with Portsmouth Square Park in Chinatown.  The bridge, built
and owned by the partnership, is included in the lease to the Chinese Culture
Center.  In the opinion of management the property is adequately covered by
insurance.

As discussed above, the Hotel Lease with Felcor was terminated on June 30,
2004 pursuant to the terms of a Settlement Agreement.  At that time,
possession and operations of the Hotel reverted to the Partnership.  To assist
in the operations of the Hotel, Justice entered into a Management Agreement
with Dow effective July 1, 2004.

The garage lease between the partnership and Evon provides for a monthly
rental of sixty percent (60%) of gross parking revenues with a minimum rent of
$21,750 per month.  That lease expires in November 2010.  The lessee is
responsible for insurance, repairs and maintenance, utilities and all taxes
assessed against the improvements to the leased premises. The garage is
operated by Ampco Parking pursuant to a sublease agreement with Evon.

                                     -7-
<PAGE>

During July 2002, Justice Investors entered into a lease with Tru Spa, LLC,
which was amended effective January 1, 2004.  The lease premises consist of
approximately 5,400 square feet of space on the lobby level of the hotel for
the construction and operation of a health and beauty spa.  The term of the
lease is for ten years commencing with the opening of the spa on June 1, 2003,
with a five year option to extend the term.  The spa lease provides for
minimum monthly rent of $11,667, additional rent of $2,072 (up to a total of
$250,000 to help defray certain relocation construction costs) and other
tenant fees.  Under the terms of the lease, Justice was responsible for up to
$1,497,586 in leasehold improvements, which were paid using the partnership's
line of credit.  It is expected that the spa lease will be essentially net
income neutral to the partnership, but should help the hotel to be more
competitive in a difficult marketplace by providing greater amenities to its
guests.  To facilitate the lease to Tru Spa, Felcor surrendered to Justice
sufficient space on the lobby level of the hotel for the construction of the
spa.  In addition, the hotel administrative offices were relocated to the
lobby level to accommodate the addition of new meeting rooms on the fourth
floor of the hotel.


Los Angeles, California Apartment Buildings

The property owned by the Company's 55.4% subsidiary Woodland Village, is a
27-unit apartment complex located Los Angeles, California. The Company's
equity interest in Woodland Village was acquired on September 29, 1999 at a
cost of $4,075,000.  For the year ended June 30, 2004, real estate property
taxes were approximately $37,000.  Depreciation is recorded on the straight-
line method based upon an estimated useful life of 30 years. As of June 30,
2004, the outstanding mortgage balance was $1,862,000.  The mortgage carries a
fixed interest rate of 7.73% and matures in October 2029.  Woodland Village
also has a $365,000 note from the Company.  The interest rate on the note is
fixed at 7.75% and matures in September 2004.  The note was eliminated in
consolidation.

The second Los Angeles property, Acanto, which is wholly owned by the Company,
is a two-story apartment building with 2 units.  The property was acquired on
February 1, 2002 at an initial cost of $785,000.  For the period ended June
30, 2004, real estate property taxes were approximately $8,000.  Depreciation
is recorded on the straight-line method, based upon an estimated useful life
of 39 years.  The outstanding mortgage balance was approximately $450,000 at
June 30, 2004 and the maturity date of the mortgage is February 2032.  The
interest rate is 6.45% for the first 60 months.  Beginning February 2005, the
interest rate will be adjusted to 2.6% in excess of the rate of the savings,
borrowings and advances of the Federal Home Loan Bank of San Francisco to
Eleventh District members.  The interest rate cannot exceed 11.95% or fall
below 6.45%.

Woodland Village and Acanto lease units in the apartment buildings on a short-
term basis, with no lease extending beyond one year.  For the year ended June
30, 2004, economic occupancy (gross potential rent less below market rent
divided by gross potential rent) for Woodland Village and Acanto was 69% and
96%, respectively.  The physical occupancy for Woodland Village and Acanto was
97% and 87% respectively.

                                     -8-
<PAGE>

INVESTMENT POLICIES

The most significant real estate investment of the Company is the San
Francisco Hotel through its control of Portsmouth.  The Company will continue
to explore ways to increase the value of Justice Investors and to improve
operations of the hotel.  The Company has also invested in multifamily
residential properties through its controlling interest in Woodland Village
and its 100% owned subsidiary Acanto.

The Company may also look for new real estate investment opportunities in
hotels, apartments, office buildings and shopping centers.  The acquisition of
any new real estate investments will depend on the Company's ability to find
suitable investment opportunities and the availability of sufficient financing
to acquire such investments.  To help fund any such acquisition, the Company
plans to borrow funds to leverage its investment capital.  The amount of this
mortgage debt will depend on a number of factors including, but not limited
to, the availability of financing and the sufficiency of the project's
projected cash flows to support the operations and debt service.

The Company also invests from time to time in income producing instruments,
corporate debt and equity securities, mortgage backed securities, securities
issued by REIT's and other companies which invest primarily in real estate,
where financial benefit could inure to its shareholders through income and/or
capital gain.

The Company's securities investments are made under the supervision of a
Securities Investment Committee of the Board of Directors. The Committee
currently has three members and is chaired by the Company's Chairman of the
Board and President, John V. Winfield.  The Committee has delegated authority
to manage the portfolio to the Company's Chairman and President together with
such assistants and management committees he may engage.  The Committee has
established investment guidelines for the Company's investments.  These
guidelines presently include: (i) corporate equity securities should be listed
on the New York or American Stock Exchanges or the Nasdaq NMS Market; (ii)
securities should be priced above $5.00 per share; and (iii) investment in a
particular issuer should not exceed 5% of the market value of the total
portfolio. The investment policies do not require the Company to divest itself
of investments, which initially meet these guidelines but subsequently fail to
meet one or more of the investment criteria.  Non-conforming investments
require the approval of the Securities Investment Committee.  The Committee
has in the past approved non-conforming investments and may in the future
approve non-conforming investments.  The Securities Investment Committee may
modify these guidelines from time to time.

The Company also invests, with the approval of the Securities Investment
Committee, in unlisted companies, through private placements.  These
investments in non-marketable securities are carried at cost on the Company's
balance sheet as part of other investments and are reviewed for impairment on
a periodic basis. As of June 30, 2004, the Company had investments in unlisted
companies (other investments) of $980,000.  The investment is disclosed on the
balance sheet as other investments.

The Company's investment portfolio is diversified with 74 different equity
positions.  The portfolio contains four individual equity security positions
that are more than 5% of the total equity value of the portfolio, with the
largest representing approximately 6.5% of the total equity value of the
entire portfolio.  The amount of the Company's investment in any particular
issuer may increase or decrease, and additions or deletions to its securities
portfolio may occur, at any time.  While it is the internal policy of the

                                     -9-
<PAGE>

Company to limit its initial investment in any single equity to less than 5%
of its total portfolio value, that investment could eventually exceed 5% as a
result of equity appreciation or reduction of other positions.  Marketable
securities are stated at market value as determined by the most recently
traded price of each security at the balance sheet date.  As of June 30, 2004,
the market value of the Company's marketable securities was $26,760,000.

As part of its investment strategies, the Company may assume short positions
in marketable securities.  Short sales are used by the Company to potentially
offset normal market risks undertaken in the course of its investing
activities or to provide additional return opportunities.  As of June 30,
2004, the Company had obligations for securities sold (equities short) of
$5,913,000.  The Company has no naked short positions.

In addition, the Company may utilize margin for its marketable securities
purchases through the use of standard margin agreements with national
brokerage firms.  The use of available leverage is guided by the business
judgment of management and is subject to any internal investment guidelines,
which may be imposed by the Securities Investment Committee.  The margin used
by the Company may fluctuate depending on market conditions.  The use of
leverage could be viewed as risky and the market values of the portfolio may
be subject to large fluctuations.  As of June 30, 2004, the Company had a
margin balance of $10,202,000.

On July 18, 2003, the disinterested members of the Board of Directors
established a performance based compensation program for the Company's CEO,
John V. Winfield, to keep and retain his services as a direct and active
manager of the Company's securities portfolio.  The terms of that compensation
arrangement is discussed in detail in Item 10 "Executive Compensation" of this
Report.  During fiscal years ended June 30, 2004 and June 30, 2003, the
Company paid $618,000 and 654,000, respectively, to the Company's CEO as
performance based compensation related to the management of the securities
portfolio.

As Chairman of the Securities Investment Committee, the Company's President
and Chief Executive Officer, John V. Winfield, directs the investment activity
of the Company in public and private markets pursuant to authority granted by
the Board of Directors.  Mr. Winfield also serves as Chief Executive Officer
and Chairman of Portsmouth and InterGroup and oversees the investment activity
of those companies.  Depending on certain market conditions and various risk
factors, the Chief Executive Officer, his family, Portsmouth and InterGroup
may, at times, invest in the same companies in which the Company invests.  The
Company encourages such investments because it places personal resources of
the Chief Executive Officer and his family members, and the resources of
Portsmouth and InterGroup, at risk in connection with investment decisions
made on behalf of the Company.


Item 3.  Legal Proceedings.

The Company is not subject to any legal proceedings requiring disclosure under
this Item.


Item 4.  Submission of Matters to a Vote of Shareholders.

No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this Report.

                                     -10-
<PAGE>


                             PART II

Item 5.  Market For Common Equity and Related Stockholder Matters.

MARKET INFORMATION

Santa Fe's common stock is quoted on the OTC Bulletin Board under the symbol:
SFEF.  The following table sets forth the range of high and low sales prices
for Santa Fe's common stock for each full quarterly period for the fiscal
years ended June 30, 2004 and June 30, 2003.


Fiscal 2004                             High            Low
-----------                             -----          -----
First Quarter (7/1 to 9/30)            $15.49         $ 12.80
Second Quarter (10/1 to 12/31)         $14.69         $ 10.10
Third Quarter (1/1 to 3/31)            $11.58         $ 11.50
Fourth Quarter (4/1 to 6/30)           $11.80         $ 11.00

Fiscal 2003                             High            Low
-----------                             -----          -----
First Quarter (7/1 to 9/30)            $11.51         $ 9.60
Second Quarter (10/1 to 12/31)         $11.00         $ 8.75
Third Quarter (1/1 to 3/31)            $ 8.83         $ 8.71
Fourth Quarter (4/1 to 6/30)           $16.85         $ 8.49


As of September 10, 2004 the approximate number of holders of record of the
Company's Common Stock was 340.  Such number of owners was determined from the
Company's shareholders records and does not include beneficial owners of the
Company's Common Stock whose shares are held in the names of various brokers,
clearing agencies or other nominees.  There are approximately 520 beneficial
shareholders of the Company's Common Stock.

DIVIDENDS

On February 1, 2000, the Board of Directors of the Company determined that it
did not foresee the Company paying any cash dividends on its Common Stock in
the immediate future.  Instead, it is the intent of the Company to deploy its
capital in a manner to increase its operating activities.

On December 31, 1997, the Company issued 31,800 shares of 6% cumulative,
convertible voting preferred stock (the "Preferred Stock") in exchange for a
55.4% interest in Woodland from InterGroup.  As a result of the Company's two-
for-one stock split, the number of Preferred Shares was adjusted to 63,600.
Each share of Preferred Stock has a liquidation preference of $13.50 and is
convertible into one share of restricted common stock of the Company at an
exercise price of $13.50 per share, with an eight-year conversion exercise
period.  The preferred stock has voting rights as if converted into common
stock.  During the years ended June 30, 2004 and 2003, the Company paid
Preferred Stock dividends of $52,000 and $52,000, respectively.


SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

Santa Fe has no securities authorized for issuance under equity compensation
plans.

                                     -11-
<PAGE>

PURCHASES OF EQUITY SECURITIES

Santa Fe did not repurchase any of its own securities during the last quarter
of its fiscal year ending June 30, 2004.


Item 6. Management's Discussion and Analysis of Financial
        Condition and Results of Operations

FORWARD-LOOKING STATEMENTS AND PROJECTIONS

The Company may from time to time make forward-looking statements and
projections concerning future expectations.  When used in this discussion, the
words "estimate," "project," "anticipate" and similar expressions, are
intended to identify forward-looking statements.  Such statements are subject
to certain risks and uncertainties, such as the impact of terrorism and war on
the national and international economies, including tourism and securities
markets, general economic conditions and increased competition in the hotel
industry in the San Francisco area, labor relations and labor disruptions,
partnership distributions, securities markets and concentration of risk,
litigation and other factors, including natural disasters, and those discussed
below, that could cause actual results to differ materially from those
projected.  Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as to the date hereof.  The
Company undertakes no obligation to publicly release the results of any
revisions to those forward-looking statements, which may be made to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.


RESULTS OF OPERATIONS

The Company's principal sources of revenue continue to be derived from the
investment of its 68.9% owned subsidiary, Portsmouth, in the Justice Investors
limited partnership ("Justice" or the "Partnership"), rental income from its
investments in multi-family real estate properties and income received from
investment of its cash and securities assets.  The Partnership derived most of
its income from a lease of its hotel property to Felcor and from a lease with
Evon Garage Corporation. As discussed in the "Recent Business Developments"
section of Item 1 of this Report, the Hotel Lease terminated effective June
30, 2004, at which time the Partnership assumed the role as owner-operator of
the Hotel.


Fiscal Year Ended June 30, 2004 Compared to Fiscal Year Ended June 30, 2003

The Company's net income increased to $2,695,000 for the year ended June 30,
2004 from $992,000 for the year ended June 30, 2003.  This was primarily due
to the increase in equity income from Justice Investors, the increase in net
gains on marketable securities and the increase in dividend and interest
income.  The increase was partially offset by the increase in margin interest
and trading expenses.

Rental revenue remained consistent with the prior year while property
operating expense decreased to $168,000 from $196,000 as the result of
management's efforts to manage the properties more efficiently.

Equity in net income of Justice Investors increased to $3,332,000 in fiscal
2004 from $1,471,000 in fiscal 2003 primarily as a result of an increase in
Partnership revenues to $9,369,000 from $3,971,000, due to two nonrecurring
payments to Justice during the current fiscal year, partially offset by

                                     -12-
<PAGE>

increased partnership costs.  In May of 2004, a $5,000,000 settlement payment
was made to Justice from the hotel lessee to resolve disputes regarding
certain obligations of Felcor and others under the terms of the Hotel Lease.
That settlement payment is being held in a separate partnership account and
will be applied towards the costs of capital repairs, replacements and
improvements necessary to place the hotel in the condition required by the
Hotel Lease at the end of its term.  The Partnership expects to utilize all of
the settlement proceeds for such costs by its December 31, 2004 year end,
which may impact the Company's equity in net income of Justice Investors for
fiscal 2005.  Felcor also agreed to transfer to Justice and terminate its
leasehold estate and its option right under the Hotel Lease, effective June
30, 2004.  In addition, Justice received a payment in December 2003 from the
hotel lessee in the amount $296,000 for part of the replacement costs of the
sloped window system of the Hotel, which was recorded as other income by
Justice.  The Partnership incurred costs and expenses in fiscal 2004 of
$2,507,000 compared to $873,000 in fiscal 2003.  This increase was primarily
attributable to greater partnership costs during the current fiscal year for
consultants, experts and legal services relating the partnership's enforcement
of the lessee's obligations and termination of the Hotel Lease, renovation and
repositioning of the Hotel, and additional depreciation and interest costs
related to the build-out of the new spa and meeting rooms in the Hotel and
other capital improvements.

Average daily room rates for the Hotel increased modestly to approximately $92
in fiscal 2004 from approximately $90 in fiscal 2003, while average monthly
occupancy rates increased to approximately 71% from approximately 67%.  Many
factors continued to significantly impact the operations of the Hotel in
fiscal 2004.  Unlike other areas in California, the Bay Area has been
especially slow to recover from the devastating impact that the terrorist
attacks of September 11, 2001 had on tourism and the hospitality industry. The
continued weakness in the Bay Area due to the failure of numerous internet and
technology companies, has also resulted in a decrease in business travel and a
reduction by airlines in the number of flights into San Francisco.  The hotel
has also faced more competition from new properties and from higher end
properties that provide greater amenities to its guests, especially for the
business traveler. These properties have also reduced room rates as hotel
operators struggle to obtain occupancy.  The Partnership is committed to
making the Hotel competitive in its market by undertaking a significant
renovation of the property and seeking a new, more upscale, brand for the
Hotel.

Net gains on marketable securities increased to $5,000,000 for the year ended
June 30, 2004 from $2,664,000 for the fiscal year ended June 30, 2003.  For
the year ended June 30, 2004, the Company had net unrealized gains of $662,000
and net realized gains of $4,338,000. For the year ended June 30, 2003, the
Company had net unrealized gains of $5,054,000 and net realized losses of
$2,490,000.  There were no gross unrealized positions on any securities held
which existed for more than one year.  Gains and losses on marketable
securities may fluctuate significantly from period to period in the future and
could have a significant impact on the Company's net income.  However, the
amount of gain or loss on marketable securities for any given period may have
no predictive value and variations in amount from period to period may have no
analytical value. For a more detailed description of the composition of the
Company's marketable securities please see the Marketable Securities section.

Dividend and interest income increased to $343,000 from $208,000 as a result
of the Company investing in more income yielding securities.

                                     -13-
<PAGE>

Margin interest and trading expenses increased to $1,148,000 from $908,000
primarily due to the increase in margin interest expense to $330,000 from
$98,000.  The increase in margin interest expense is due to the maintenance of
higher average daily balances in the year ended June 30, 2004 as compared to
the year ended June 30, 2003.  Included in the margin interest and trading
expenses are performance bonuses granted to the Company's CEO based on the
results of the Company's investment portfolio in the amounts of $618,000 and
$654,000, respectively, for the years end June 30, 2004 and 2003.

The impairment loss on other investments increased to $220,000 from $100,000
as the result of an impairment in a $500,000 private investment made during
the year ended June 30, 2004.

The provision for income tax expense increased to $2,749,000 from $999,000 as
the result of higher income generated in the year end June 30, 2004.

Minority interest expense increased to $1,003,000 from $444,000 as a result of
the higher income generated by the Company's subsidiary, Portsmouth during the
year ended June 30, 2004.


MARKETABLE SECURITIES

The Company's investment portfolio is diversified with 74 different equity
positions.  The portfolio contains four individual equity security positions
that are more than 5% of the total equity value of the portfolio, with the
largest representing approximately 6.5% of the total equity value of the
entire portfolio.  The amount of the Company's investment in any particular
issuer may increase or decrease, and additions or deletions to its securities
portfolio may occur, at any time.  While it is the internal policy of the
Company to limit its initial investment in any single equity to less than 5%
of its total portfolio value, that investment could eventually exceed 5% as a
result of equity appreciation or reduction of other positions.  Marketable
securities are stated at market value as determined by the most recently
traded price of each security at the balance sheet date.  As of June 30, 2004,
the market value of the Company's marketable securities was $26,760,000.

The following table shows the composition of the Company's marketable
securities by selected industry groups as of June 30, 2004.

                                                             % of Total
                                                              Investment
   Industry Group                      Market Value           Securities
   --------------                      ------------           ----------
   Telecommunications and media       $  6,733,000               25.2%
   Electric, pipelines, oil and gas      4,767,000               17.8%
   REITs, lodging, home builders and
    hotels                               3,348,000               12.5%
   Airlines and defense                  3,285,000               12.3%
   Pharmaceutical, healthcare and
    medical                              2,873,000               10.7%
   Insurance, banks and brokers          2,733,000               10.2%
   Apparel, food and consumer goods      1,580,000                5.9%
   Semiconductor, software, internet,
    and computer                           814,000                3.0%
   Chemicals, building materials,
    machinery, metals and mining           282,000                1.1%
   Other                                   345,000                1.3%
                                        ----------              ------
                                      $ 26,760,000              100.0%
                                        ==========              ======

                                     -14-
<PAGE>

The Company's securities investments are made under the supervision of a
Securities Investment Committee of the Board of Directors. The Committee
currently has three members and is chaired by the Company's Chairman of the
Board and President, John V. Winfield.  The Committee has delegated authority
to manage the portfolio to the Company's Chairman and President together with
such assistants and management committees he may engage.  The Committee has
established investment guidelines for the Company's investments.  These
guidelines presently include: (i) corporate equity securities should be listed
on the New York or American Stock Exchanges or the Nasdaq NMS Market; (ii)
securities should be priced above $5.00 per share; and (iii) investment in a
particular issuer should not exceed 5% of the market value of the total
portfolio. The investment policies do not require the Company to divest itself
of investments, which initially meet these guidelines but subsequently fail to
meet one or more of the investment criteria.  Non-conforming investments
require the approval of the Securities Investment Committee.  The Committee
has in the past approved non-conforming investments and may in the future
approve non-conforming investments.  The Securities investment Committee may
modify these guidelines at any time from time to time.

As of June 30, 2004, the Company had approximately 25.2% of its marketable
securities portfolio invested in the telecommunications and media industry
group.  While such concentration could be considered a risk factor, that
industry grouping includes a wide range of companies that the Company believes
is consistent with its diversification policies.

As part of its investment strategies, the Company may assume short positions
in marketable securities.  Short sales are used by the Company to potentially
offset normal market risks undertaken in the course of its investing
activities or to provide additional return opportunities.  As of June 30,
2004, the Company had obligations for securities sold (equities short) of
$5,913,000.  The Company has no naked short positions.

In addition, the Company may utilize margin for its marketable securities
purchases through the use of standard margin agreements with national
brokerage firms.  The use of available leverage is guided by the business
judgment of management and is subject to any internal investment guidelines,
which may be imposed by the Securities Investment Committee.  The margin used
by the Company may fluctuate depending on market conditions.  The use of
leverage could be viewed as risky and the market values of the portfolio may
be subject to large fluctuations.  As of June 30, 2004, the Company had a
margin balance of $10,202,000.


The following table shows the net gain or loss on the Company's marketable
securities and the associated margin interest and trading expenses for the
years ended June 30, 2004 and 2003.


                                              Year Ended        Year Ended
                                            June 30, 2004     June 30, 2003
                                            -------------     -------------

Net gain on marketable securities            $ 5,000,000      $  2,664,000
Dividend and interest income                     343,000           208,000
Margin interest                                 (330,000)          (98,000)
Trading and management expenses                 (818,000)         (810,000)
                                              ----------        ----------
Investment income                            $ 4,195,000      $  1,964,000
                                              ==========        ==========

                                     -15-
<PAGE>

FINANCIAL CONDITION AND LIQUIDITY

Historically, the Company's cash flows were primarily generated from
Portsmouth's general and limited partnership interest in the Justice Investors
limited partnership, which derived its income from its lease with Felcor and a
lease with Evon. In addition to its monthly limited partnership distributions
from Justice Investors, the Company also receives monthly management fees as a
general partner.  In the current fiscal year, the Company has had to depend
more on the revenues generated from the investment of its cash and securities
assets as the equity in net income in Justice Investors and Partnership
distributions have declined. The Company also generates rental income from its
ownership and operation of apartments.

Beginning in December 2002, Justice Investors began reducing its monthly
distributions due to the continuing decline in partnership revenues. In August
2003, Justice Investors determined that a further reduction in partnership
distributions was appropriate due to the continuing poor performance of the
hotel operation, costs advanced for the construction of the spa, new meeting
rooms, the relocation of the hotels administrative offices and other
anticipated expenses.  Effective September 2003 through December 2003, monthly
partnership distributions were cut an additional 50% reducing Portsmouth's
monthly distribution amount from approximately $159,000 to $79,000. Justice
also determined that it would not borrow further against its line of credit to
support partnership distributions.  As discussed below, Justice decided that
the May 2004 limited partnership distribution would be the last distribution
for an indefinite period of time.  As a result, cash distributions from
Justice decreased to $953,000 in fiscal 2004 from $1,975,000 in fiscal 2003.

In the latter part of fiscal 2003, the Partnership conducted a comprehensive
physical inspection of the Hotel as permitted by the terms of the Hotel Lease.
In July 2003, Justice delivered to the hotel lessee, Felcor, a notice citing
certain deficiencies in the physical condition of the hotel property and in
its furniture, fixtures and equipment and requested that those deficiencies be
corrected in accordance with the lessee's obligations under the Hotel Lease.

On May 3, 2004, Justice entered into a Settlement Agreement with Felcor to
resolve disputes regarding certain obligations of Felcor and others under the
terms of the Hotel Lease.  Pursuant to the terms of the Settlement Agreement,
Felcor was required to pay to Justice $5,000,000 towards the costs of capital
repairs, replacements and improvements necessary to place the hotel in the
condition required by the Hotel Lease at the end of its term.  Felcor also
agreed to transfer to Justice and terminate its leasehold estate and its
option right under the Hotel Lease, effective June 30, 2004. In addition, the
parties to the Settlement agreed to mutual releases and to cooperate for a
smooth transition of the operations of the Hotel.  That Settlement was fully
effectuated as of June 30, 2004.

On May 19, 2004, Justice entered into a third party Management Agreement with
Dow Hotel Company for the management of the Hotel, Effective July 1, 2004.
The Partnership has also been actively pursuing a franchise agreement with a
new nationally recognized brand.  Justice is currently in discussions with
other major brands in an effort to move the property up-market and become more
competitive.

To secure a new brand for the Hotel, it will be necessary for the Partnership
to commit substantial time and resources to meet the product improvement plan
("PIP") requirements of the new brand.  The Partnership anticipates that it
will require approximately $12,000,000 to $18,000,000 in capital commitments,
in addition to the $5,000,000 received from Felcor, to renovate and improve
the Hotel to meet new brand standards.  The Partnership believes that there is

                                     -16-
<PAGE>

significant equity in the Hotel asset to finance those renovations and
improvements through additional borrowings and that the new debt service
requirements can be met from the rental payments received from the garage
lease.  While the Partnership believes that there is sufficient value in the
Hotel to serve as collateral for new lending facilities, there can be no
assurances that such loan facilities will be available, or if available, will
be on terms acceptable to the Partnership.

There will be a transition period beginning July 1, 2004 as the Partnership
assumes the operations of the Hotel and begins the process of implementing the
PIP necessary to secure the new hotel brand.  During this transition period,
the Hotel will continue to operate as a Holiday Inn Select hotel pursuant to a
short-term franchise agreement that will become a month-to-month agreement
beginning in November 2004 with a sixty day cancellation clause.  It will also
be necessary for the Hotel to limit operations and have rooms out of service
during part of the transition period.

The Hotel may also be subject to labor disruption as the collective bargaining
agreement with Local 2 of the Hotel Employees and Restaurant Employees Union
in San Francisco expired city-wide on August 14, 2004.  Local 2 has since
voted to authorize a strike but, at this time, has only targeted some of the
larger hotels in San Francisco for work stoppages as negotiations continue.
If the strike does extend to the Hotel, its operations could be disrupted.
Also, since the other hourly employees of the Hotel are union members, they
would most likely honor any picket lines. It is expected that Partnership's
hotel management company, Dow, will implement contingency plans to minimize
any loss of business should a strike take place.

Since the Partnership will not be receiving minimum rent after June 30, 2004,
and will have to commit significant funds to transition the Hotel to a new
brand, Justice determined that its May 2004 monthly limited partnership
distribution would be the last distribution for an indefinite period of time.
Justice estimates that it will take approximately 18 to 24 months to complete
all of the renovations and for the Partnership to begin to realize the
benefits of the improvements and the increase in cash flows that it
anticipates from the new management structure and new hotel brand.

On April 20, 2004, as a result of the Partnership discontinuing its monthly
distributions, the Board of Directors of Portsmouth deemed it necessary to
discontinue the Company's regular semi-annual dividend of $.25 per common
share.  It is expected that the Company will not consider a return to a
regular dividend policy until such time that Partnership cash flows and
distributions warrant such consideration.

As the Partnership transitions from a lessor of the hotel to an owner-
operator, cash flows will be dependent on net income from the operations of
the hotel and not from a lease with a guaranteed rent.  That uncertainty
increases the amount of risk for the Company, but also provides an opportunity
for a greater share of the profits in good economic times with the
repositioning of the hotel.  Although the Partnership is not expected to see a
significant improvement in cash flows until sometime in 2006, it believes that
the renovations to the Hotel, the new management structure and a new brand
will make the Hotel more competitive in the future.  While there might be some
negative impact on the revenues of the hotel garage during the transition
period, the Partnership does not anticipate that impact will be significant.

The recovery of tourism, the hotel industry and general economy in the San
Francisco Bay Area continues to lag behind that of many cities.  The increase
in competition has also added additional challenges to an already difficult
business environment.  The Partnership anticipates that it will be able to
finance the necessary improvements to reposition the Hotel and to meet any

                                     -17-
<PAGE>

operating cash flow needs during the transition period from the proceeds of
the settlement with Felcor and through additional borrowings.  Justice
believes that it can service that additional debt from the rentals it receives
from the Hotel garage.  If the Partnership is unable to obtain sufficient
financing, it may have to consider other alternatives such as additional
capital contributions; however, the Partnership considers the necessity for
such alternatives as unlikely.

During January 2004, the Partnership refinanced its existing line of credit by
obtaining a new facility that provides for a line of credit of up to
$7,500,000.  The facility is collateralized by a first deed of trust on the
Partnership property and matures on February 1, 2006. Interest only is payable
monthly at an annual rate equal to the 30-Day LIBOR rate plus 2%. There are no
prepayment penalties. As of June 30, 2004, the outstanding principal balance
on the Partnership's line of credit was $5,036,000.

The Company believes that rental income from its apartment properties will be
sufficient to meet operating expenses and to service the debt related to those
properties.

The Company has invested in short-term, income-producing instruments and in
equity and debt securities when deemed appropriate.  The Company's marketable
securities are classified as trading with unrealized gains and losses recorded
through the statement of operations.

Although the Company has suffered a significant decline in hotel revenues and
may be facing a significant period of time without partnership distributions
and dividends from Portsmouth, management believes that its cash, rental
properties, securities assets and capital resources and the cash flows
generation from those assets will be adequate to meet the Company's current
and future obligations.


OFF-BALANCE SHEET ARRANGEMENTS

The Company has no off balance sheet arrangements.


CONTRACTUAL OBLIGATIONS

The Company's only contractual obligations and commercial commitments are its
mortgages and note payable.  The annual principal payments on the mortgages
and note payable for the five-year period commencing July 1, 2005 are
approximately as follows:

          Year ending June 30,
          --------------------
                   2005                     31,000
                   2006                     33,000
                   2007                     36,000
                   2008                     39,000
                   2009                     41,000
                   Thereafter            2,132,000
                                         ---------
                            Total       $2,312,000
                                         =========

                                     -18-
<PAGE>

IMPACT OF INFLATION

Hotel room rates are typically impacted by supply and demand factors, not
inflation, since rental of a hotel room is usually for a limited number of
nights.  Room rates can be, and usually are, adjusted to account for
inflationary cost increases.  To the extent that Felcor is able to adjust room
rates, there should be minimal impact on partnership revenues due to
inflation.  Partnership revenues are also subject to interest rate risks,
which may be influenced by inflation.  For the two most recent fiscal years,
the impact of inflation on the Company's income is not viewed by management as
material.  The impact of inflation on the Company's multifamily real estate is
also not viewed by management as material as tenant leases are short-term and
expire within twelve months.


CRITICAL ACCOUNTING POLICIES

The Company reviews its long-lived assets, including its investments in rental
properties, and other investments for impairment when circumstances indicate
that a potential loss in carrying value may have occurred.  To the extent that
projected future undiscounted cash flows from the operation of the Company's
hotel property and rental properties are less than the carrying value of the
assets, the carrying value of the assets are reduced to their fair value.  For
other investments, the Company reviews the investment's operating results,
financial position and other relevant factors to determine whether the
estimated fair value of the asset is less than the carrying value of the
asset.

Marketable securities are stated at market value as determined by the most
recently traded price of each security at the balance sheet date.  Marketable
securities are classified as trading with net change in unrealized gains or
losses included in earnings.

The Company's other accounting policies are straightforward in their
application.



Item 7. Financial Statements

INDEX TO FINANCIAL STATEMENTS                                     PAGE

Report of Independent Registered Public Accounting Firm            20

Consolidated Balance Sheet -June 30, 2004                          21

Consolidated Statements of Operations - For
  Year Ended June 30, 2004 and
  Year Ended June 30, 2003                                         22

Consolidated Statements of Shareholders' Equity - For
  Year Ended June 30, 2004 and
  Year Ended June 30, 2003                                         23

Consolidated Statements of Cash Flows - For
  Year Ended June 30, 2004 and
  Year Ended June 30, 2003                                         24

Notes to Consolidated Financial Statements                         25

                                     -19-
<PAGE>

           REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and
Shareholders of Santa Fe Financial Corporation

In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, shareholders' equity and cash flows present
fairly, in all material respects, the financial position of Santa Fe Financial
Corporation at June 30, 2004, and the results of its operations and its cash
flows for each of the two years in the period ended June 30, 2004 in
conformity with accounting principles generally accepted in the United States
of America.  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 of these
statements 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.  An audit 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, and evaluating the overall financial statement
presentation.  We believe that our audits provide a reasonable basis for our
opinion.


/s/ PricewaterhouseCoopers LLP


Irvine, California
October 6, 2004

                                     -20-
<PAGE>

                       SANTA FE FINANCIAL CORPORATION
                         CONSOLIDATED BALANCE SHEET


As of June 30,                                                  2004
                                                            ------------

Assets
  Cash and cash equivalents                                 $    185,000
  Investment in marketable securities                         26,760,000
  Investment in Justice Investors                              7,986,000
  Rental properties                                            4,667,000
  Other investments                                              980,000
  Other assets                                                   344,000
                                                              ----------
    Total assets                                            $ 40,922,000
                                                              ==========


Liabilities and Shareholders' Equity

Liabilities
  Due to securities broker                                  $ 10,202,000
  Obligations for securities sold                              5,913,000
  Mortgage notes payable                                       2,312,000
  Accounts payable and accrued expenses                        1,243,000
                                                              ----------
    Total liabilities                                         19,670,000
                                                              ----------
  Minority interest                                            6,036,000
                                                              ----------

Shareholders' equity:
  6% Cumulative, convertible, redeemable at
    the option of the holder, voting preferred
    stock, par value $.10 per share
    Authorized shares - 1,000,000
    Issued and outstanding - 63,600
    Liquidation preference of $860,000                             6,000
  Common stock, par value $.10 per share
    Authorized shares - 2,000,000
    1,276,038 shares issued and 1,178,210 outstanding            128,000
  Additional paid-in-capital                                   8,808,000
  Retained earnings                                            7,225,000
  Treasury stock, at cost, 97,828 shares                        (951,000)
                                                              ----------
    Total shareholders' equity                                15,216,000
                                                              ----------

    Total liabilities and shareholders' equity              $ 40,922,000
                                                              ==========

See accompanying notes to consolidated financial statements.

                                     -21-
<PAGE>


                    Santa Fe Financial Corporation
                   Consolidated Statements of Operations

For the year ended June 30,                         2004            2003
                                                ----------      ----------
Real estate operations:
  Rental income                                $   415,000    $    419,000
  Property operating expense                      (168,000)       (196,000)
  Mortgage interest expense                       (203,000)       (204,000)
  Depreciation expense                             (74,000)        (70,000)
                                                ----------      ----------
    Loss from real estate operations               (30,000)        (51,000)
                                                ----------      ----------

  General and administrative expense              (888,000)       (926,000)
                                                ----------      ----------
  Equity in net income of Justice
   Investors                                     3,332,000       1,471,000
                                                 ---------      ----------
Other income(loss):
  Net gains on marketable securities             5,000,000       2,664,000
  Dividend and interest income                     343,000         208,000
  Margin interest and trading expenses          (1,148,000)       (908,000)
  Impairment loss on other investments            (220,000)       (100,000)
  Other income                                      58,000          77,000
                                                ----------      ----------
    Total other income                           4,033,000       1,941,000
                                                ----------      ----------
Income before income taxes and
 minority interest                               6,447,000       2,435,000

Income tax expense                              (2,749,000)       (999,000)
                                                ----------      ----------
Income before minority interest                  3,698,000       1,436,000

Minority interest                               (1,003,000)       (444,000)
                                                ----------      ----------
Net income                                     $ 2,695,000     $   992,000

Preferred stock dividend                           (52,000)        (52,000)
                                                ----------      ----------
Income available to common shareholders        $ 2,643,000     $   940,000
                                                ==========      ==========
Basic income per share                         $      2.24     $       .80
                                                ==========      ==========
Weighted average number of shares
  outstanding                                    1,178,210       1,178,210
                                                ==========      ==========


See accompanying notes to consolidated financial statements.

                                     -22-
<PAGE>


<TABLE>
                       SANTA FE FINANCIAL CORPORATION
                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY


                Preferred Stock     Common Stock
                ---------------   --------------------
                                                         Additional
                                                         Paid-In      Retained     Treasury
                Shares   Amount    Shares     Amount     Capital      Earnings     Stock          Total

                ---------------   --------  ---------   ----------   ----------   ---------   -----------
<S>             <C>      <C>      <C>        <C>        <C>          <C>          <C>         <C>
Balance at
June 30, 2002   63,600   $6,000   1,276,038  $128,000   $8,808,000   $3,642,000   $(951,000)  $11,633,000

Net income                                                              992,000                   992,000

Dividend paid
to preferred
shareholders                                                            (52,000)                  (52,000)

                ---------------   --------  ---------   ----------   ----------   ---------   -----------
Balance at
June 30, 2003   63,600   $6,000   1,276,038  $128,000   $8,808,000   $4,582,000   $(951,000)  $12,573,000

Net income                                                            2,695,000                 2,695,000

Dividend paid
to preferred
shareholders                                                            (52,000)                  (52,000)

                ---------------   --------------------   ----------   ----------   ---------   -----------
Balance at
June 30, 2004   63,600   $6,000   1,276,038  $128,000   $8,808,000   $7,225,000   $(951,000)  $15,216,000

                ===============   ========= =========   ==========   ==========   =========   ===========

</TABLE>

See accompanying notes to consolidated financial statements.

                                     -23-
<PAGE>


                        Santa Fe Financial Corporation
                     Consolidated Statements of Cash Flows


For the year ended June 30,                            2004          2003
                                                    ----------    ----------
Cash flows from operating activities:
  Net income                                       $ 2,695,000   $   992,000
  Adjustments to reconcile net income
   to net cash used in operating activities:
    Equity in net income of Justice Investors       (3,332,000)   (1,471,000)
    Net unrealized gains on marketable securities     (662,000)   (5,054,000)
    Impairment loss on other investments               220,000       100,000
    Minority interest                                1,003,000       444,000
    Depreciation expense                                74,000        70,000
    Changes in operating assets and liabilities:
      Investment in marketable securities           (3,627,000)  (12,694,000)
      Other investments                               (850,000)     (150,000)
      Other assets                                     550,000      (650,000)
      Accounts payable and accrued expenses            257,000       757,000
      Deferred income tax                            1,160,000       769,000
      Due to securities broker                       4,367,000     5,743,000
      Obligations for securities sold               (2,491,000)    8,102,000
                                                    ----------    ----------
  Net cash used in operating activities               (636,000)   (3,042,000)
                                                    ----------    ----------
Cash flows from investing activities:
  Cash distributions from Justice Investors            953,000     1,974,000
                                                    ----------    ----------
  Net cash provided by investing activities            953,000     1,974,000
                                                    ----------    ----------
Cash flows from financing activities:
  Principal payments on mortgage payable               (28,000)      (26,000)
  Repayment of mortgage notes payable                        -      (163,000)
  Dividends paid to preferred shareholders             (52,000)      (52,000)
  Dividends paid to minority shareholders             (174,000)     (114,000)
                                                    ----------    ----------
  Net cash used in financing activities               (254,000)     (355,000)
                                                    ----------    ----------
Net increase(decrease) in cash and cash
  equivalents                                           63,000    (1,423,000)

Cash and cash equivalents at beginning of period       122,000     1,545,000
                                                    ----------    ----------
Cash and cash equivalents at end of period         $   185,000   $   122,000
                                                    ==========    ==========
Supplemental information
  Income taxes paid, net of refunds                $   120,000   $   779,000
                                                    ==========    ==========
  Interest paid                                    $   533,000   $   288,000
                                                    ==========    ==========

See accompanying notes to consolidated financial statements.

                                     -24-
<PAGE>


                           SANTA FE FINANCIAL CORPORATION
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES

Description of Business

Santa Fe Financial Corporation ("Santa Fe" or the "Company") was incorporated
under the name of Tri Financial Corporation in the State of Nevada on July 25,
1967 as a wholly owned subsidiary of Crateo, Inc, a public company.  On
October 31, 1969, Crateo issued a one-for-one stock dividend of all of its
shares of Tri Financial to its common shareholders.  On September 17, 1970,
the name of the Corporation was changed to Santa Fe Financial Corporation.

The Company's operations primarily consist of managing a hotel property
through its interest in Justice Investors and its rental properties. The
Company also derives income from the investment of its cash and securities
assets.  On December 31, 1997, the Company acquired a controlling 55.4%
interest in Intergroup Woodland Village, Inc. ("Woodland Village") from a
related party, The InterGroup Corporation ("InterGroup"), which controls
approximately 75.2% of the voting stock of the Company.  Woodland Village's
major asset is a 27-unit apartment complex located in Los Angeles, California.
The Company also owns a two-unit apartment building in Los Angeles,
California.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and
all controlled subsidiaries. All significant inter-company transactions and
balances have been eliminated.

Cash Equivalents

The Company considers all investments purchased with an original maturity of
three months or less to be cash equivalents.

Investment in Marketable Securities

Marketable securities are stated at market value as determined by the most
recently traded price of each security at the balance sheet date.  Marketable
securities are classified as trading securities with all unrealized gains and
losses on the Company's investment portfolio recorded through the statement of
operations.

Other Investments

The Company may also invest, with the approval of the Securities Investment
Committee, in unlisted companies, through private placements.  Those
investments in non-marketable securities are carried at the lower of cost or
estimated fair value on the Company's balance sheet as part of other
investments and reviewed for impairment on a periodic basis.

Due to Securities Broker

Various securities brokers have advanced funds to the Company for the purchase
of marketable securities under standard margin agreements.

                                     -25-

Obligations for Securities Sold

Obligation for securities sold represents the fair market value of shares sold
with the promise to deliver that security at some future date and the fair
market value of shares underlying the written call options with the obligation
to deliver that security when and if the option is exercised.  The obligation
may be satisfied with current holdings of the same security or by subsequent
purchases of that security.  Unrealized gains and losses from changes in the
obligation are included in the income statement.

Rental Properties

Rental properties are stated at cost.  Depreciation of rental property is
provided on the straight-line method based upon estimated useful lives of 5 to
40 years for buildings and improvements and 5 to 10 years for equipment.
Expenditures for repairs and maintenance are charged to expense as incurred
and major improvements are capitalized.

The Company reviews its rental property assets for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable.  If expected future cash flows (undiscounted and excluding
interest costs) are less than the carrying value of the rental asset, the
asset is written down to its fair value.  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, and
the availability of capital. 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 long-lived
asset. No impairment losses have been recorded in 2004 and 2003.

Furniture and Fixtures

Furniture and fixtures are stated at cost.  Depreciation is computed by the
straight-line method over the estimated useful lives of the assets, which
range from 3 to 5 years.

Fair Value of Financial Instruments

The carrying amount of cash and cash equivalents, marketable securities,
amounts due to securities broker and obligations for securities sold
approximates fair value.  The fair value of mortgage notes payable is
estimated using discounted cash flows of future payments based on the
borrowing rates available to the Company for debt with similar terms and
maturities.

Treasury Stock

The Company records the acquisition of treasury stock under the cost method.

Revenue Recognition

The major source of the Company's revenue was through its 49.8% interest in
Justice Investors, a limited partnership which owns and leases a hotel in San
Francisco, California in which the Company's subsidiary, Portsmouth, is both a
limited and general partner.  Portsmouth and the Company account for the
investment under the equity method.

Rental income is recognized when earned.  Revenue recognition from apartment
rentals commences when an apartment unit is placed in service and occupied by
a rent-paying tenant.  Apartment units are leased on a short-term basis, with
no lease extending beyond one year.

                                     -26-
<PAGE>


Earnings Per Share

Basic earnings per share is computed by dividing net income available to
common stockholders by the weighted average number of common shares
outstanding.  The computation of diluted earnings per share is similar to the
computation of basic earnings per share except that the weighted-average
number of common shares is increased to include the number of additional
common shares that would have been outstanding if potential dilutive common
shares had been issued.  The Company's only potentially dilutive common shares
are the 6% cumulative, convertible, voting preferred stock.  As of June 30,
2004 and 2003, the conversion price is above the market value of the Company's
common stock, consequently, the preferred stock is not considered dilutive.
Therefore, basic and diluted earnings per share for the year ended June 30,
2004 and 2003 are the same.

Use of Estimates

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.  Actual results could differ from
those estimates.

Income Taxes

Deferred income taxes are determined using the liability method.  A deferred
tax asset or liability is determined based on the difference between the
financial statement and tax basis of assets and liabilities as measured by the
enacted tax rates, which will be in effect when these differences reverse.

Recently Issued Accounting Standards

In January 2003, the FASB issued its new consolidation accounting model
through FASB Interpretation No. 46 (FIN 46), Consolidation of Variable
Interest Entities. In December 2003, FIN 46 was reissued as FIN 46R, which
contained revisions to address certain implementation issues.  Under generally
accepted accounting principles (GAAP), a company must consolidate any entity
in which it has a "controlling financial interest." The long-standing voting
interest model defined this term as ownership of more than 50 percent of the
entity's voting interests. FIN 46 makes two critical changes: it defines when
a company should base "controlling financial interest" on factors other than
voting rights, and requires that a new "risk and rewards" model be applied in
these situations.

The adoption of FIN 46 as revised by 46R did not have a material impact on the
Company's financial condition or results of operations.

In March 2004, the EITF ratified its consensus on Issue No. 03-1, The Meaning
of Other-Than-Temporary Impairment and Its Application to Certain Investments
(EITF 03-1). On September 30, 2004, the Financial Accounting Standards Board
(FASB) issued a final FASB Staff Position, FSP EITF Issue 03-1-1 that delays
the effective date for the measurement and recognition guidance included in
EITF 03-1.  Disclosures required by EITF 03-1 have not been deferred and the
Company has adopted those disclosures.

                                     -27-
<PAGE>

NOTE 2 - INVESTMENT IN JUSTICE INVESTORS

One of the Company's principal sources of revenue is derived from the
management of its 68.9%-owned subsidiary Portsmouth.  Portsmouth has a 49.8%
interest in Justice Investors, a California limited partnership ("Justice" or
the "Partnership") and also serves as one of the two general partners.  The
other general partner, Evon Garage Corporation ("Evon"), serves as the
managing general partner.  As a general and limited partner, Portsmouth has
significant control over the management and operation of the assets of Justice
Investors.  All significant partnership decisions require the active
participation and approval of both general partners.  The Company and Evon
jointly consult and determine the amount of partnership reserves and the
amount of cash to be distributed to the limited partners.

Historically, Justice's most significant income source was a lease between the
Partnership and Felcor Lodging Trust, Inc. for the Hotel portion of the
property.  Pursuant to a Settlement Agreement entered into on May 3, 2004,
Felcor agreed to terminate its lease and surrender possession of the Hotel to
Justice, effective June 30, 2004. Effective July 1, 2004, Justice became the
owner-operator of the Hotel, with the assistance of a Management Agreement
with Dow Hotel Company, LLC. ("Dow") to perform the day-to day management
functions of the Hotel. The Partnership also derives income from the lease of
the garage portion of the property to Evon Garage Corporation.  The Company
also derives revenue from management fees from Justice for actively managing
the hotel as a general partner and from the investment of its cash and
securities assets. Investment in Justice Investors is recorded on the equity
basis.

Pursuant to the terms of the partnership agreement, voting rights of the
partners are determined according to the partners' entitlement to share in the
net profit and loss of the partnership.  The Company is not entitled to any
additional voting rights by virtue of its position as a general partner.
The partnership agreement also provides that no portion of the partnership
real property can be sold without the written consent of the general and
limited partners entitled to more than 72% of the net profit.

The compensation agreement for the general partners of Justice Investors
provides that the general partners are entitled to receive compensation equal
to 3% of the annual gross rents of the partnership.  From the first $150,000
of compensation payable to the general partners, $120,000 is payable to Evon
Garage Corporation and $30,000 is payable to Portsmouth as the other general
partner.  Any compensation in excess of the $150,000 is split 50/50 between
the general partners.  The partnership makes monthly advances of $10,000 to
Evon and $2,500 to Portsmouth with any balance adjusted at the end of the year
based on annual gross revenues.  For the twelve months ended June 30, 2004 and
2003, the Company received $30,000 in management fees from Justice Investors.

In May of 2004, a $5,000,000 settlement payment was made to Justice from the
hotel lessee to resolve disputes regarding certain obligations of Felcor and
others under the terms of the Hotel Lease.  That settlement payment is being
held in a separate partnership account and will be applied towards the costs
of capital repairs, replacements and improvements necessary to place the hotel
in the condition required by the Hotel Lease at the end of its term.  The
Partnership expects to utilize all of the settlement proceeds for such costs
by its December 31, 2004 year end, which may impact the Company's equity in
net income of Justice Investors for fiscal 2005.

Due to the termination of the Hotel Lease on June 30, 2004, it was necessary
for the Partnership to amend the agreement by which the general partners of
Justice were compensated since the general partners would be taking on new
responsibilities as the Justice assumed the role as owner-operator of the

                                    -28-
<PAGE>

Hotel. Furthermore the prior agreement was based on a percentage of gross
rents, which the Partnership would no longer be receiving from the Hotel.

On July 16, 2004, Justice entered into a new General Partner Compensation
Agreement (the "Compensation Agreement"), with an effective date of May 31,
2004. The new agreement provides that the general partners will receive annual
base compensation of 1.5% of gross revenues, with a minimum annual base
compensation of $262,500, adjusted for inflation. From the minimum annual base
compensation, 80% will be paid to Evon for its services as the managing
general partner and 20% will be paid to Portsmouth as the other general
partner. Base annual compensation in excess of the minimum will be payable in
equal amounts to Evon and Portsmouth. The maximum base annual compensation
that can be earned by the general partners is 1.5% of $40,000,000 of gross
revenues.  The Compensation Agreement also provides for incentive compensation
to the general partners in a sum equal to the 5.0% of the annual net operating
income of Justice, as defined in the Dow Management Agreement that is in
excess of $7,000,000. Incentive compensation shall be payable in equal amounts
to Evon and Portsmouth. In addition, the Compensation Agreement provides that
the general partners are paid a repositioning fee in the aggregate amount of
$275,000, to be paid in equal amounts to Evon and Portsmouth in two
installments.  The first installment of $68,750 to each of Evon and Portsmouth
was to be paid within 10 days of the execution of the Compensation Agreement
with the second installment to be paid upon the substantial completion of the
renovation of the Hotel.

The Company amortizes the step up in the asset values allocable to the
depreciable assets of its investment in Justice Investors over 40 years, which
approximates the remaining life of the primary asset, the hotel building.

For the Company's investment in Justice, to the extent that projected future
undiscounted cash flows from the operation of the Company's hotel property are
less than the carrying value of the asset, the investment would be considered
permanently impaired and the carrying value of the asset would be reduced to
its fair value.

Condensed financial statements for Justice Investors are as follows:


                            JUSTICE INVESTORS
                         CONDENSED BALANCE SHEET

As of June 30,                                                 2004
                                                            ----------
Assets
Total current assets                                       $ 5,234,000
Property, plant and equipment, net of
  accumulated depreciation of $13,204,000                    6,932,000
Land                                                         1,124,000
Construction in progress                                        50,000
Other assets                                                   269,000
                                                            ----------
    Total assets                                           $13,609,000
                                                            ==========

Liabilities and partners' capital
Total current liabilities                                  $   263,000
Long term debt                                               5,208,000
Partners' capital                                            8,138,000
                                                            ----------
    Total liabilities and partners' capital                $13,609,000
                                                            ==========

                                     -29-
<PAGE>

                                JUSTICE INVESTORS
                        CONDENSED STATEMENTS OF OPERATIONS

For the twelve months ended June 30,           2004            2003
                                            ----------      ----------
Revenues                                   $ 9,369,000     $ 3,971,000
Costs and expenses                          (2,507,000)       (873,000)
                                            ----------      ----------
Net income                                 $ 6,862,000     $ 3,098,000
                                            ==========      ==========


NOTE 3 - INVESTMENT IN MARKETABLE SECURITIES AND OTHER INVESTMENTS

The Company's investment portfolio consists primarily of corporate equities.
The Company has also invested in income producing securities, which may
include interests in real estate based companies and REITs, where financial
benefit could inure to its shareholders through income and/or capital gain.

At June 30, 2004, all of the Company's marketable securities are classified as
trading securities.  In accordance with SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," the change in the unrealized gains
and losses on these investments are included earnings.  Trading securities are
summarized as follows:

<TABLE>
AS of June 30, 2004
                             Gross         Gross            Net             Market
Investment   Cost        Unrealized Gain Unrealized Loss  Unrealized Gain     Value
---------- -----------   --------------- ---------------  ---------------  ------------
<S>        <C>            <C>              <C>              <C>            <C>
Corporate
Equities   $20,929,000    $ 6,540,000     ($  709,000)      $5,831,000     $26,760,000

</TABLE>
<TABLE>

AS of June 30, 2003
                             Gross         Gross            Net             Market
Investment   Cost        Unrealized Gain Unrealized Loss  Unrealized Gain     Value
---------- -----------   --------------- ---------------  ---------------  ------------
<S>         <C>           <C>              <C>              <C>            <C>
Corporate
Equities   $17,781,000    $ 5,143,000     ($  449,000)      $4,694,000     $22,475,000

</TABLE>

The Company also invests, with the approval of the Securities Investment
Committee, in unlisted companies, through private placements.  These
investments in non-marketable securities are carried at cost on the Company's
balance sheet as part of other investments and are reviewed for impairment on
a periodic basis. As of June 30, 2004, the Company had investments in unlisted
companies (other investments) of $980,000 with an impairment loss on other
investments of $220,000.  The investment is presented on the balance sheet as
other investments net of the impairment loss.

For other investments, the Company reviews the investment's operating results,
financial position and other relevant factors to determine whether there has
been a permanent impairment in the carrying value of other investments.  If an
impairment is determined to exist, the carrying value or the investment is
reduced to its estimated fair value.

                                     -30-
<PAGE>

As part of the investment strategies, the Company may assume short positions
in marketable securities.  Short sales are used by the Company to potentially
offset normal market risks undertaken in the course of its investing
activities or to provide additional return opportunities.  The Company has no
naked short positions.  As of June 30, 2004, the Company had obligations for
securities sold (equities short) of $5,913,000.

Marketable securities are stated at market value as determined by the most
recently traded price of each security at the balance sheet date.  Marketable
securities are classified as trading with net change in unrealized gains or
losses included in earnings.  Included in the net gains on marketable
securities of $5,000,000 for the year ended June 30, 2004, are net unrealized
gains of $662,000 and net realized gains of $4,338,000. Included in the net
gains on marketable securities of $2,664,000 for the year ended June 30, 2003,
are net unrealized gains of $5,054,000 and net realized losses of $2,490,000.
There were no gross unrealized positions on any securities held which existed
for more than one year.


NOTE 4 - RENTAL PROPERTIES

The Company owns and operates a 27-unit and 2-unit multi-family apartment
complex located in Los Angeles, California.

Units are leased on a short-term basis, with no lease extending beyond one
year.  At June 30, 2004, rental properties included the following:

  Land                                      $ 2,430,000
  Buildings, improvements and equipment       2,536,000
  Accumulated depreciation on buildings,
    improvements and equipment                 (299,000)
                                              ---------
                                             $4,667,000
                                              =========


NOTE 5 - MORTGAGE NOTES PAYABLE

At June 30, 2004, the balance on mortgage notes payable was $2,312,000.
Included in mortgage notes payable balance are two mortgages in the amounts of
$1,862,000 and $450,000.  The mortgages are collateralized by trust deeds on
the respective apartment complexes. The interest rates on the $1,862,000 note
and the $450,000 note are 7.73% and 6.45% respectively.  The notes mature in
October 2029 and February 2032, respectively.

The annual principal payments on the mortgages for the five-year period
commencing July 1, 2004 are approximately as follows:

          Year ending June 30,
          --------------------
                   2005                 $   31,000
                   2006                     33,000
                   2007                     36,000
                   2008                     39,000
                   2009                     41,000
                   Thereafter            2,132,000
                                         ---------
                            Total       $2,312,000
                                         =========

                                     -31-
<PAGE>

NOTE 6 - INCOME TAXES

The Company and Portsmouth file separate tax returns for both federal and
state purposes.  The provision for income taxes expense consists of the
following:


For the year ended June 30,             2004          2003
                                     ----------    ----------
 Federal
   Current                          $   899,000   $    18,000
   Deferred                           1,136,000       727,000
                                     ----------    ----------
                                      2,035,000       745,000
                                     ----------    ----------
 State
   Current                              328,000       212,000
   Deferred                             386,000        42,000
                                     ----------    ----------
                                        714,000       254,000
                                     ----------    ----------
                                    $ 2,749,000   $   999,000
                                     ==========    ==========

A reconciliation of the statutory federal income tax rate to the effective tax
rate is as follows:

For the year ended June 30,                2004          2003
                                         ------        ------
  Statutory federal tax rate              34.0%         34.0 %
  State income taxes, net of
   federal tax benefit                     6.0%          6.0 %
  Other                                    2.6%         (1.0)%
                                         ------        ------
                                          42.6 %         39.0%
                                         ======        ======


The components of the Company's deferred tax assets and (liabilities) as of
June 30, 2004 are as follows:

  Deferred tax assets
    Net operating losses carryforwards              $ 1,281,000
    Capital losses carryforwards                        838,000
    State taxes                                         147,000
    Investment loss reserves                             93,000
                                                     ----------
                                                      2,359,000
  Deferred tax liability
    Deferred gains on real estate sale                 (852,000)
    Unrealized gains on marketable securities        (1,870,000)
                                                     ----------

  Net deferred tax liability                        $  (363,000)
                                                     ==========

                                     -32-
<PAGE>

The net deferred tax liability is included in accounts payable and accrued
expenses on the balance sheet. As of June 30, 2004, the Company had net
operating losses available for carryforward of $3,444,000 for federal income
taxes and $1,240,000 for state purposes.  The net operating loss carryforward
expires in varying amounts through 2024. As of June 30, 2004, the Company also
had net capital losses available for carryforward for federal and state income
tax purposes totaling approximately $1,075,000.  The carryforward expires in
varying amounts through 2006.


NOTE 7 - SEGMENT INFORMATION

The Company operates in three reportable segments, the operations of its
multi-family residential properties, the operation of Justice Investors, and
the investment of its cash and securities assets. These three operating
segments, as presented in the financial statements, reflect how management
internally reviews each segment's performance.  Management also makes
operational and strategic decisions based on this same information.

Information below represents reporting segments for the year ended June 30,
2004 and 2003.  Operating income for rental properties consist of rental
income.  Operating income from Justice Investors consists of the operations of
the hotel and garage included in the equity in net income of Justice
Investors.  Operating income for investment transactions consist of net
investment gains and dividend and interest income.

<TABLE>
                                 REAL ESTATE
                           -------------------------
YEAR ENDED                    RENTAL       JUSTICE     INVESTMENT
JUNE 30, 2004              PROPERTIES    INVESTORS    TRANSACTIONS     OTHER          TOTAL
                           -----------   -----------   -----------   -----------   ------------
<S>                        <C>           <C>          <C>           <C>            <C>
Operating income           $   415,000   $ 3,332,000  $  5,343,000  $          -   $  9,090,000
Operating expenses            (168,000)            -    (1,368,000)            -     (1,536,000)
                           -----------   -----------   -----------   -----------   ------------
Income before
  mortgage interest and
  depreciation                 247,000     3,332,000     3,975,000             -      7,554,000

Mortgage interest expenses    (203,000)            -             -             -       (203,000)
Depreciation                   (74,000)            -             -             -        (74,000)
General and administrative
  expenses                           -             -             -      (888,000)      (888,000)
Other income                         -             -             -        58,000         58,000
Income tax expense                   -             -             -    (2,749,000)    (2,749,000)
Minority interest                    -             -             -    (1,003,000)    (1,003,000)
                           -----------   -----------   -----------   -----------   ------------
Net income(losses)         $   (30,000)  $ 3,332,000  $  3,975,000  $ (4,582,000)  $  2,695,000
                           ===========   ===========   ===========   ===========   ============
Total Assets               $ 4,667,000   $ 7,986,000  $ 27,740,000   $   185,000   $ 40,578,000
                           ===========   ===========   ===========   ===========   ============
</TABLE>

                                     -33-
<PAGE>
<TABLE>
                                 REAL ESTATE
                           -------------------------
YEAR ENDED                    RENTAL       JUSTICE     INVESTMENT
JUNE 30, 2003              PROPERTIES    INVESTORS    TRANSACTIONS     OTHER          TOTAL
                           -----------   -----------   -----------   -----------   ------------
<S>                        <C>           <C>          <C>           <C>            <C>
Operating income           $   419,000   $ 1,471,000  $  2,872,000  $          -   $  4,762,000
Operating expenses            (196,000)            -    (1,008,000)            -     (1,204,000)
                           -----------   -----------   -----------   -----------   ------------
Income before
  mortgage interest and
  depreciation                 223,000     1,471,000     1,864,000             -      3,558,000

Mortgage interest expenses    (204,000)            -             -             -       (204,000)
Depreciation                   (70,000)            -             -             -        (70,000)
General and administrative
  expenses                           -             -             -      (926,000)      (926,000)
Other income                         -             -             -        77,000         77,000
Income tax expense                   -             -             -      (999,000)      (999,000)
Minority interest                    -             -             -      (444,000)      (444,000)
                           -----------   -----------   -----------   -----------   ------------
Net income(losses)         $   (51,000)  $ 1,471,000  $  1,864,000  $ (2,292,000)  $    992,000
                           ===========   ===========   ===========   ===========   ============
Total Assets               $ 4,723,000   $ 5,604,000  $ 22,825,000   $ 2,195,000   $ 35,347,000
                           ===========   ===========   ===========   ===========   ============
</TABLE>


NOTE 8 - SHAREHOLDERS' EQUITY

On December 31, 1997, the Company issued 31,800 shares of 6% cumulative,
convertible voting preferred stock (the "Preferred Stock")in exchange for a
55.4% interest in Woodland Village from InterGroup.  As a result of the
Company's two-for-one stock split, the number of Preferred Shares was adjusted
to 63,600.  Each share of Preferred Stock has a liquidation preference of
$13.50 and is convertible into one share of restricted common stock of the
Company at an exercise price of $13.50 per share, with an eight-year
conversion exercise period.  The preferred stock has voting rights as if
converted into common stock.  For the years ended June 30, 2004 and 2003, the
Company paid preferred stock dividends of $52,000 and $52,000, respectively,
to InterGroup.


NOTE 9 - RELATED PARTY TRANSACTIONS

As of June 30, 2004, InterGroup owned approximately 69.7% of the Company's
outstanding common stock and 100% of the Company's preferred stock for a total
of 71.3% of all outstanding voting stock.  In addition, the Chairman and Chief
Executive Officer of InterGroup, who is also the Company's Chairman and Chief
Executive Officer, owned approximately 4.2% of the Company's outstanding
voting stock as of June 30, 2004.  Effective June 30, 1998, the Company's
Chairman and Chief Executive Officer entered into a voting trust agreement
with InterGroup, giving InterGroup the power to vote the shares that he owns
in the Company.  As a result of that agreement, InterGroup has the power to
vote approximately 75.5% of the voting shares of the Company.

The InterGroup Corporation allocates corporate expenses to the Company and its
subsidiary based on management's estimate of the pro rata utilization of
resources.  During the years ended June 30, 2004 and 2003, the Company and
Portsmouth made payments to InterGroup of approximately $167,000 and $171,000,

                                     -34-
<PAGE>

respectively, for administrative costs and reimbursement of direct and
indirect costs associated with the management of the Companies and their
investments, including the partnership asset.

For the years ended June 30, 2004 and 2003, the Company paid preferred stock
dividends of $52,000 each year to InterGroup.

On July 18, 2003, the disinterested members of the Board of Directors
established a performance based compensation program for the Company's CEO to
keep and retain his services as a direct and active manager of the Company's
securities portfolio.  Pursuant to the criteria established by the Board, Mr.
Winfield is entitled to performance based compensation for his management of
the Company's securities portfolio equal to 20% of all net investment gains
generated in excess of the performance of the S&P 500 Index.  Compensation
amounts are calculated and paid quarterly based on the results of the
Company's investment portfolio for that quarter.  Should the Company have a
net investment loss during any quarter, Mr. Winfield would not be entitled to
any further performance-based compensation until any such investment losses
are recouped by the Company.  On February 26, 2004, the Board of Directors
amended the performance threshold to require an annualized return equal to the
Prime Rate of Interest (as published in the Wall Street Journal) plus 2%
instead of the S&P 500 Index, effective with the quarterly period commencing
January 1, 2004.  During the fiscal years ended June 30, 2004 and 2003, Mr.
Winfield was paid performance based compensation of $618,000 and $654,000,
respectively. This performance based compensation program may be further
modified or terminated at the discretion of the Board.

All of the Company's Directors serve as directors of InterGroup and all three
of the Company's Directors serve on the Board of Portsmouth.

                                     -35-
<PAGE>

Item 8. Changes in and Disagreements with Accountants on Accounting and
        Financial Disclosure.

None.


Item 8A. Controls and Procedures.

(a) Disclosure Controls and Procedures.

The Company's management, with the participation of the Company's Chief
Executive Officer and the Chief Financial Officer, has evaluated of the
effectiveness of the Company's disclosure controls and procedures (as defined
in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the
fiscal period covered by this Annual Report on Form 10-KSB.  Based upon such
evaluation, the Chief Executive Officer and Chief Financial Officer have
concluded that, as of the end of such period, the Company's disclosure
controls and procedures are effective in ensuring that information required to
be disclosed in this filing is accumulated and communicated to management and
is recorded, processed, summarized and reported in a timely manner and in
accordance with Securities and Exchange Commission rules and regulations.

(b) Internal Control Over Financial Reporting.

There have been no changes in the Company's internal control over financial
reporting during the last quarterly period covered by this Annual Report on
Form 10-KSB that have materially affected, or are reasonably likely to
materially affect, the Company's internal control over financial reporting.


Item 8B. Other Information.

None.

                                     -36-
<PAGE>


                               PART III

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

The following table sets forth certain information with respect to the
Directors and Executive Officers of the Company as of June 30, 2004:

<TABLE>

                                  Present
                                  Position           Director
     Name             Age      With the Company        Since       Term to Expire
--------------------------------------------------------------------------------------
<S>                   <C>      <C>                     <C>         <C>
John V. Winfield      57       Chairman, President     1995        2004 Annual Meeting
                               and Chief Executive
                               Officer (1)

William J. Nance      60       Director (1)(2)         1996        2004 Annual Meeting

John C. Love          64       Director (1)(2)         1998        2004 Annual Meeting

Michael G. Zybala     52       Vice President,
                               Secretary, and
                               General Counsel         N/A         N/A

David T. Nguyen       31       Treasurer and           N/A         N/A
                               Controller
</TABLE>
---------------------------

(1)  Member of Securities Investment Committee
(2)  Member of Audit Committee


BUSINESS EXPERIENCE:

The principal occupation and business experience during the last five years
for each of the Directors and Executive Officers of the Company are as
follows:

John V. Winfield - Mr. Winfield was first elected to the Board in May of 1995
and currently serves as the Company's Chairman of the Board, President and
Chief Executive Officer, having been appointed as such in April 1996.  Mr.
Winfield is also the Chairman of the Board, President and Chief Executive
Officer of the Company's subsidiary Portsmouth, having held those positions
since May of 1996.  Mr. Winfield is Chairman of the Board, President and Chief
Executive Officer of The InterGroup Corporation ("InterGroup"), a public
company, and has held those positions since 1987.

William J. Nance - Mr. Nance was first elected to the Board in May of 1996.
Mr. Nance is also a director of Portsmouth.  Mr. Nance is the President and
CEO of Century Plaza Printers, Inc., a company he founded in 1979.  He has
also served as a consultant in the acquisition and disposition of multi-family
and commercial real estate.  Mr. Nance is a Certified Public Accountant and,
from 1970 to 1976, was employed by Kenneth Leventhol & Company where he was a
Senior Accountant specializing in the area of REITS and restructuring of real
estate companies, mergers and acquisitions, and all phases of real estate
development and financing.  Mr. Nance is a Director of The InterGroup
Corporation, a public company, and has held such position since 1984.

                                     -37-
<PAGE>

John C. Love - Mr. Love was appointed a Director of the Company on March 5,
1998.  Mr. Love is an international hospitality and tourism consultant based
in Orinda, California.  He was formerly a partner in the national CPA and
consulting firm of Pannell Kerr Forster.  Mr. Love has extensive experience in
hotel development, acquisition and operations.  He is chairman emeritus of
Golden Gate University in San Francisco.  Mr. Love is also a Director of
Portsmouth, having first been appointed in March 1998, and a Director of
InterGroup, having first been appointed in January 1998.

Michael G. Zybala - Mr. Zybala was appointed as Vice President and Secretary
of the Company on February 20, 1998 and was appointed Treasurer on May 16,
2000, which was a position he held until February 27, 2003.  He is also Vice
President, Secretary and General Counsel of Portsmouth.  Mr. Zybala has served
as the Company's General Counsel since 1995 and has represented the Company as
its corporate counsel since 1978.  Mr. Zybala also serves as Assistant
Secretary and counsel to InterGroup and served as its Vice President
Operations from January 1999 to July 15, 2002.

David T. Nguyen - Mr. Nguyen was appointed as Treasurer of the Company on
February 27, 2003.  Mr. Nguyen also serves as Treasurer of InterGroup and
Portsmouth, having been appointed to those positions on February 26, 2003 and
February 27, 2003, respectively.  Mr. Nguyen is a Certified Public Accountant
and, from 1995 to 1999, was employed by PricewaterhouseCoopers LLP where he
was a Senior Accountant specializing in real estate.  Mr. Nguyen has also
served as the Company's Controller from 1999 to December 2001 and from
December 2002 to present.


Family Relationships:  There are no family relationships among directors,
executive officers, or persons nominated or chosen by the Company to become
directors or executive officers.


Involvement in Certain Legal Proceedings:  No director or executive officer,
or person nominated or chosen to become a director or executive officer, was
involved in any legal proceeding requiring disclosure.


BOARD AND COMMITTEE INFORMATION

Santa Fe is an unlisted company and a small business issuer under the rules
and regulations of the Securities and Exchange Commission ("SEC").  The
majority of its Board of Directors consists of "independent" directors as
independence is defined by the applicable rules of the SEC and the National
Association of Securities Dealers' ("NASD").

AUDIT COMMITTEE AND AUDIT COMMITTEE FINANCIAL EXPERT

Santa Fe is an unlisted company and small business issuer under SEC rules.
The Company's Audit Committee is currently comprised of Messrs. Nance
(Chairperson) and Love, each of whom are independent directors as independence
is defined by the applicable rules of the SEC and the NASD, and as may be
modified or supplemented.  Each of these directors also meets the audit
committee financial expert test.

                                     -38-
<PAGE>

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and each beneficial owner of more than ten percent of
the Common Stock of the Company, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission.  Officers, directors
and greater than ten-percent shareholders are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by the
Company, or written representations from certain reporting persons that no
Forms 5 were required for those persons, the Company is aware of one
delinquent filing by a more than 10% shareholder.  On July 15, 2004, The
InterGroup Corporation filed a Form 5 reporting an acquisition of 9,200 shares
of Santa Fe's common stock on June 30, 2004, which was a Form 4 transaction
not reported on a timely basis. Other than that filing, the Company believes
that during fiscal 2004 all filing requirements applicable to its officers,
directors, and greater than ten-percent beneficial owners were complied with.


Code of Ethics.

The Company has adopted a Code of Ethics that applies to its principal
executive officer, principal financial officer, principal accounting officer
or controller, or persons performing similar functions.  A copy of the Code of
Ethics is filed as Exhibit 14 to this Report.  The Company will provide to any
person without charge, upon request, a copy of its code of ethics by sending
such request to: Santa Fe Financial Corporation, Attn: Treasurer, 820 Moraga
Drive, Los Angeles 90049. The Company does not maintain an Internet website.
The Company will promptly disclose any amendments or waivers to its Code of
Ethics on Form 8-K.


Item 10.   Executive Compensation

The following table provides certain summary information concerning
compensation awarded to, earned by, or paid to the Chief Executive Officer and
any other qualifying Executive Officers and employees who earned more than
$100,000 for all services rendered to the Company and its subsidiary for
fiscal years ended June 30, 2004, 2003 and 2002.


                            SUMMARY COMPENSATION TABLE

                                Annual Compensation
                    ---------------------------------------------
Name and Principal                                              Other Annual
Position                       Year     Salary       Bonus      Compensation
------------------             ----     ------       -----      -------------

John V. Winfield               2004    $240,000(1)   $618,000(2)  $12,000(3)
Chairman, President and        2003    $200,000(1)   $654,000(2)  $12,000(3)
Chief Executive Officer        2002    $230,000(1)   $      -     $12,000(3)

Michael G. Zybala              2004    $ 63,000(4)   $      -           -
Vice President, Secretary,     2003    $ 47,000(4)   $  2,000           -
and General Counsel            2002    $ 88,000(4)   $      -           -
-----------------------------

(1) Includes salary received from the Company's subsidiary, Portsmouth, in the
amounts of $92,000, $77,000 and $88,000 for the fiscal years 2004, 2003 and
2002 respectively. Does not include compensation received from Santa Fe's

                                     -39-
<PAGE>

parent corporation, InterGroup, of $1,729,000, $948,000 and $339,000 for
fiscal years ended June 30, 2004, 2003 and 2002, respectively.

(2) Amounts shown reflect a performance bonus, approved by the disinterested
members of the Board of Directors of the Company and its subsidiary Portsmouth
based on the results of Mr. Winfield's management of the Company's securities
portfolio for the fiscal years ended June 30, 2004 and 2003. Of the total
amount of the bonus, $407,000 was paid by Portsmouth in 2004 and $411,000 was
paid for fiscal 2003.

(3) Amounts shown reflect regular annual director's fees paid by Santa Fe and
Portsmouth, each in the amount of $6,000. During fiscal 2004, 2003 and 2002,
the Company and Portsmouth also paid combined annual premiums of $42,500 and
$42,500, respectively, for a split dollar whole life insurance policy, owned
by, and the beneficiary of which is, a trust for the benefit of Mr. Winfield's
family.  The Company has a secured right to receive, from any proceeds of the
policy, reimbursement of all premiums paid prior to any payments to the
beneficiary.

(4) Approximately $50,000, $38,000 and $71,000 of Mr. Zybala's salary and
bonus was allocated to Portsmouth in fiscal years 2004, 2003 and 2002,
respectively.  Does not include total compensation received from Santa Fe's
parent corporation, InterGroup, of $29,000, $16,000 and $33,000 for fiscal
years ended June 30, 2004, 2003 and 2002, respectively.

As a small business issuer, Santa Fe has no compensation committee. Executive
Officer compensation is set by disinterested members of the Board of
Directors.  Santa Fe has no stock option plan or stock appreciation rights for
its executive officers.  The Company has no pension or long-term incentive
plans.  There are no employment contracts between Santa Fe and any executive
officer, nor is there any termination-of-employment or change-in-control
arrangements.

On July 18, 2003, the disinterested members of the Board of Directors
established a performance based compensation program for the Company's CEO,
John V. Winfield, to keep and retain his services as a direct and active
manager of the Company's securities portfolio.  The Company's previous
experience and results with outside money managers was not acceptable.
Pursuant to the criteria established by the Board, Mr. Winfield was be
entitled to performance compensation for his management of the Company's
securities portfolio equal to 20% of all net investment gains generated in
excess of the performance of the S&P 500 Index.  Compensation amounts will be
calculated and paid quarterly based on the results of the Company's investment
portfolio for that quarter.  Should the Company have a net investment loss
during any quarter, Mr. Winfield would not be entitled to any further
performance-based compensation until any such investment losses are recouped
by the Company.  On February 26, 2004, the Board of Directors amended the
performance threshold to require an annualized return equal to the Prime Rate
of Interest (as published in the Wall Street Journal) plus 2% instead of the
S&P 500 Index, effective with the quarterly period commencing January 1, 2004.
This change was made to make the Company's plan be consistent with that
established by its parent company, InterGroup.  This performance based
compensation program may be further modified or terminated at the discretion
of the Board.


Internal Revenue Code Limitations
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"),
provides that, in the case of a publicly held corporation, the corporation is
not generally allowed to deduct remuneration paid to its chief executive
officer and certain other highly compensated officers to the extent that such

                                     -40-
<PAGE>

remuneration exceeds $1,000,000 for the taxable year. Certain remuneration,
however, is not subject to disallowance, including compensation paid on a
commission basis and, if certain requirements prescribed by the Code are
satisfied, other performance based compensation.  No compensation paid by the
Company to its CEO or other executive officers was subject the deduction
disallowance prescribed by Section 162(m) of the Code.

                            DIRECTOR COMPENSATION

The bylaws of Santa Fe permit directors to be paid a fixed sum for attendance
at each meeting of the Board or a stated salary as director.  Each director is
paid a fee of $1,500 per quarter for a total annual compensation of $6,000.
This policy has been in effect since July 1, 1985. Members of the Company's
Audit Committee also receive a fee of $500 per quarter.



Item 11.    Security Ownership of Certain Beneficial Owners and Management

(a) Security ownership of Certain Beneficial Owners

The following table sets forth, as of September 10, 2004, certain information
with respect to the beneficial ownership of the Company's voting securities
owned by those persons or groups known by the Company to own more than five
percent of any class of the Company's voting securities.


Name and Address of                 Amount and Nature            Percent of
Beneficial Owner                   of Beneficial Owner (1)        Class (2)
-------------------                ----------------------        ----------
Guinness Peat Group plc ("GPG")          89,858(3)                   7.7%
Allied Mutual Insurance
  Services ("AMI")
First Floor, Times Place,
45 Pall Mall
London SW1Y5GP, United Kingdom

The InterGroup Corporation              884,796(4)                  71.3%
820 Moraga Drive
Los Angeles, CA 90049

John V. Winfield                         49,400                      4.2%
820 Moraga Drive
Los Angeles, CA 90049

The InterGroup Corporation and          934,196(5)                  75.2%
  John V. Winfield as a group
------------------------------

(1) Unless otherwise indicated, and subject to applicable community property
    laws, each person has sole voting and investment power with respect to the
    shares beneficially owned.

(2) Percentages are calculated on the basis of 1,178,210 shares of Common
    Stock issued and outstanding as of September 10, 2004, plus any securities
    that person has the right to acquire within 60 days pursuant to options,
    warrants, conversion privileges or other rights.

(3) Based on their Statement on Schedule 13D (Amendment No. 6) dated June 13,
    2001, GPG and its wholly-owned subsidiary AMI claim shared power to vote,

                                     -41-
<PAGE>

    or to direct the vote, and to dispose of, or to direct the disposition of,
    89,858 shares (post stock split) of Santa Fe's Common Stock owned
    beneficially and of record by GPG and through AMI.

(4) InterGroup is the beneficial owner of 821,196 shares of Common Stock and
    63,600 shares of convertible, voting preferred stock, which shares are
    entitled to vote as if converted to Common Stock.

(5) Pursuant to Voting Trust Agreement dated June 30, 1998, InterGroup has the
    power to vote the 49,400 shares of Common Stock owned by Mr. Winfield.  As
    President, Chairman of the Board and a 59.3% shareholder of InterGroup,
    Mr. Winfield has voting and dispositive power over the shares owned
    of record and beneficially by InterGroup.


 (b) Security Ownership of Management

The following table sets forth, as of September 10, 2004, certain
information with respect to the beneficial ownership as to each class of the
Company's equity securities beneficially owned by all directors, each of the
named executive officers and directors and executive officers as a group.


Name and Address of                 Amount and Nature            Percent of
Beneficial Owner                   of Beneficial Owner(1)         Class (2)
-------------------                -------------------           ----------

John V. Winfield                        934,196(3)                  75.2%
820 Moraga Drive
Los Angeles, CA 90049

John C. Love                                  0(4)                      *
820 Moraga Drive
Los Angeles, CA 90049

William J. Nance                              0(4)                      *
820 Moraga Drive
Los Angeles, CA 90049

Michael G. Zybala                             0                         *
820 Moraga Drive
Los Angeles, CA 90049

David T. Nguyen                               0                         *
820 Moraga Drive
Los Angeles, CA 90049

All of the above as a group             934,196                     75.2%
---------------------------
* Ownership does not exceed 1%

(1) Unless otherwise indicated, and subject to applicable community property
    laws, each person has sole voting and investment power with respect to the
    shares beneficially owned.

(2) Percentages are calculated on the basis of 1,178,210 shares of Common
    Stock issued and outstanding as of September 10, 2004, plus any securities
    that person has the right to acquire within 60 days pursuant to options,
    warrants, conversion privileges or other rights.

                                     -42-
<PAGE>


(3) John V. Winfield is the sole beneficial owner of 49,400 shares of Common
    Stock.  InterGroup is the beneficial owner of 821,196 shares of Common
    Stock and 63,600 shares of convertible, voting preferred stock.  As the
    President, Chairman of the Board and a 59.3% shareholder of InterGroup,
    Mr. Winfield has voting and dispositive power with respect to the shares
    of Santa Fe owned of record and beneficially by InterGroup.

(4) William J. Nance is a 3.0% shareholder of InterGroup as well as a
    Director  thereof.  John C. Love is also a Director of InterGroup and a
    less than 1% shareholder.


Security Ownership of Management in Subsidiary

As of September 10, 2004, Santa Fe was the record and beneficial owner of
505,437 shares of its subsidiary, Portsmouth, and 9,200 shares are owned by
Santa Fe's parent company InterGroup. The President and Chairman of the Board
of Santa Fe and InterGroup has voting power with respect to common shares of
Portsmouth owned by Santa Fe and InterGroup which represent 70.1% of the
voting power of Portsmouth.  No other director or executive officer of Santa
Fe has a beneficial interest in Portsmouth's shares.


(c) Changes in Control

There are no arrangements that may result in a change in control of the
Company.

Securities Authorized for Issuance Under Equity Compensation Plans.

Santa Fe has no securities authorized for issuance under any equity
compensation plans.


Item 12. Certain Relationships and Related Transactions

As of September 10, 2004, Santa Fe and InterGroup owned 70.1% of the common
stock of Portsmouth, and InterGroup and John V. Winfield, in the aggregate,
owned approximately 68.8% of the voting stock of Santa Fe.  All of the
Company's Directors serve as directors of InterGroup and all three of the
Company's Directors serve on the Board of Portsmouth.

Certain costs and expenses, primarily administrative salaries, rent and
insurance, are allocated among the Company, its subsidiary, Portsmouth, and
parent InterGroup based on management's estimate of the pro rata utilization
of resources.  During the fiscal years ended June 30, 2004 and 2003, the
Company and Portsmouth made payments to InterGroup of approximately $171,000
and $223,000, respectively, for administrative costs and reimbursement of
direct and indirect costs associated with the management of the Companies and
their investments, including the partnership asset.  During fiscal 2003,
Portsmouth also paid consulting fees to an officer of InterGroup in the amount
of $62,000.

In September 1999, the Company's subsidiary, Woodland Village, obtained a 5-
year interest only note in the amount of $162,563 from InterGroup.  The note
carries a 7.75% interest rate and was scheduled to mature on September 29,
2004. In September 2002, the Company repaid InterGroup $162,563 and assumed
the note.

During each of the fiscal years 2004 and 2003, the Company paid $51,516 in
preferred stock dividends to InterGroup.

                                     -43-
<PAGE>

As Chairman of the Securities Investment Committee, the Company's President
and Chief Executive officer, John V. Winfield, directs the investment activity
of the Company in public and private markets pursuant to authority granted by
the Board of Directors.  Mr. Winfield also serves as Chief Executive Officer
and Chairman of Portsmouth and InterGroup and oversees the investment activity
of those companies.  Depending on certain market conditions and various risk
factors, the Chief Executive Officer, his family, Portsmouth and InterGroup
may, at times, invest in the same companies in which the Company invests.  The
Company encourages such investments because it places personal resources of
the Chief Executive Officer and his family members, and the resources of
Portsmouth and InterGroup, at risk in connection with investment decisions
made on behalf of the Company.

On July 18, 2003, the disinterested members of the Board of Directors
established a performance based compensation program for the Company's CEO to
keep and retain his services as a direct and active manager of the Company's
securities portfolio.  Pursuant to the criteria established by the Board, Mr.
Winfield is entitled to performance compensation for his management of the
Company's securities portfolio equal to 20% of all net investment gains
generated in excess of the performance of the S&P 500 Index.  Compensation
amounts are calculated and paid quarterly based on the results of the
Company's investment portfolio for that quarter.  Should the Company have a
net investment loss during any quarter, Mr. Winfield would not be entitled to
any further performance-based compensation until any such investment losses
are recouped by the Company.  On February 26, 2004, the Board of Directors
amended the performance threshold to require an annualized return equal to the
Prime Rate of Interest (as published in the Wall Street Journal) plus 2%
instead of the S&P 500 Index, effective with the quarterly period commencing
January 1, 2004.  For the fiscal years ended June 30, 2004 and 2003, Mr.
Winfield was paid performance based compensation of $618,000 and $654,000,
respectively. This performance based compensation program may be further
modified or terminated at the discretion of the Board.


In December 1998, Board of Directors authorized the Company to obtain whole
life insurance and split dollar insurance policies covering the Company's
President and Chief Executive Officer, Mr. Winfield.  During fiscal years 2004
and 2003, the Company paid annual premiums of $25,500 for the split dollar
whole life insurance policy, owned by, and the beneficiary of which is, a
trust for the benefit of Mr. Winfield's family.  The Company has a secured
right to receive, from any proceeds of the policy, reimbursement of all
premiums paid prior to any payments to the beneficiary.  During fiscal 2004
and 2003, Portsmouth paid annual premiums of $17,000 for a split dollar policy
also covering Mr. Winfield.

There are no other relationships or related transactions between the Company
and any of its officers, directors, five-percent security holders or their
families which require disclosure.

                                     -44-
<PAGE>

Item 13.  Exhibits and Reports on Form 8-K

(a) Listing of Exhibits by Table Number
    -----------------------------------

Set forth below is an index of applicable exhibits filed with this report
according to exhibit table number.

           Exhibit                                                 Page
           -------                                                 ----

   3.(i)  Articles of Incorporation                                 ***
     (ii) Bylaws (Amended February 15, 2000)                        ****

   4.     Instruments defining he rights of Security Holders,       *
          including indentures (see Articles of Incorporation
          and Bylaws)

   10.    Material Contracts
          (a) Securities Purchase Agreement dated December 20,      **
              1994 between Santa Fe Financial Corporation and
              The InterGroup Corporation

   14.    Code of Ethics

   21.    Subsidiaries:

          (1) Portsmouth Square, Inc. (68.8%)
              Incorporated on July 6, 1967 in California

          (2) Intergroup Woodland Village, Inc. (55.4%)
              Incorporated on August 5, 1993 in Ohio

          (3) 614 Acanto Properties, Inc. (100%)
              Incorporated on November 7, 2001 in California

  31.1    Certification of Chief Executive Officer of Periodic Report
          Pursuant to Rule 13a-14(a) and Rule 15d-14(a).

  31.2    Certification of Chief Financial Officer of Periodic Report
          Pursuant to Rule 13a-14(a) and Rule 15d-14(a).

  32.1    Certification of Chief Executive Officer Pursuant to 18
          U.S.C. Section 1350.

  32.2    Certification of Chief Financial Officer Pursuant to 18
          U.S.C. Section 1350.

*   All exhibits marked by an asterisk have been previously filed with other
    documents, including Registrant's Form 10 filed on October 27, 1967, and
    subsequent filings on forms 8-K, 10-K and 10-Q which are incorporated
    herein by reference.

**  Securities Purchase Agreement dated December 20, 1994 between Santa Fe
    Financial Corporation and The InterGroup Corporation was previously filed
    on March 31, 1995 with Registrant's Form 10-K Annual Report for the year
    ended December 31, 1994 and is incorporated herein by reference.

                                     -45-
<PAGE>

*** Restated Articles of Incorporation, dated August 12, 1997, were previously
    filed on March 31, 1998 with Registrant's Form 10-KSB Annual Report for
    the year ended December 31, 1997 and is incorporated herein by reference.

**** Amendment to Bylaws are incorporated herein by reference to the Company's
     Form 10-KSB filed with the Commission March 29, 2000.


 (b) Reports on Form 8-K
     -------------------

The following Reports on Form 8-K were filed by the Company during the last
quarter of the period covered by this Report:

Date of Report          Item Number             Events Reported
--------------          -----------             ---------------
 May 5, 2004              Item 5          Settlement and termination of
                                          Lease; discontinuance of Partnership
                                          distributions and Company dividends.


(c) Financial Statements and Schedules Required by Regulation S-X

The following financial statements of Justice Investors are included in
Item 13:
                                                              PAGE
                                                              ----

Independent Auditor's Report                                   F-1

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

Statements of Income and Partners' Capital - Years             F-3
  Ended December 31, 2003 and 2002

Statements of Cash Flows - Years Ended                         F-4
  December 31, 2003 and 2002

Notes to the Financial Statements                              F-5

All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable and therefore have been omitted.

                                     -46-
<PAGE>

Item 14.  Principal Accountant Fees and Services.

Audit Fees - The aggregate fees billed for each of the last two fiscal years
ended June 30, 2004 and 2003 for professional services rendered by
PricewaterhouseCoopers LLP, the principal accountant for the audit of the
Company's annual financial statements and review of financial statements
included in the Company's Form 10-QSB or services normally provided by the
accountant in connection with statutory and regulatory filings or engagements
for those fiscal years, were as follows:


                                            Fiscal Year
                                       --------------------
                                         2004        2003
                                       --------    --------
        Audit Fees                     $ 81,000    $ 68,000
        Audit-Related Fees             $      -    $      -
        Tax Fees                       $      -    $      -
        All Other Fees                 $      -    $      -



Audit Committee Pre-Approval Policies

The Audit Committee shall pre-approve all auditing services and permitted non-
audit services (including the fees and terms thereof) to be performed for the
Company by its independent auditor, subject to any de minimus exceptions that
may be set for non-audit services described in Section 10A(i)(1)(B) of the
Exchange Act which are approved by the Committee prior to the completion of
the audit.  The Committee may form and delegate authority to subcommittees
consisting of one or more members when appropriate, including the authority to
grant pre-approvals of audit and permitted non-audit services, provided that
decisions of such subcommittee to grant pre-approvals shall be presented to
the full Committee at its next scheduled meeting.

All of the services described herein were approved by the Audit Committee
pursuant to its pre-approval policies.

None of the hours expended on the principal accountant's engagement to audit
the Company's financial statements for the most recent fiscal year were
attributed to work performed by persons other than the principal accountant's
full-time permanent employees.


                                     -47-
<PAGE>

                                SIGNATURES
                                ----------

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

                                               SANTA FE FINANCIAL CORPORATION
                                                        (Registrant)

Date: October 7, 2004                         by /s/ John V. Winfield
      ---------------                            ---------------------------
                                                 John V. Winfield, President,
                                                 Chairman of the Board and
                                                 Chief Executive Officer

Date: October 7, 2004                         by /s/ Michael G. Zybala
      ---------------                            ---------------------------
                                                 Michael G. Zybala,
                                                 Vice President and Secretary

Date: October 7, 2004                         by /s/ David T. Nguyen
      ---------------                            ---------------------------
                                                 David T. Nguyen, Treasurer
                                                 and Controller
                                                 (Principal Financial Officer)


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


Date: October 7, 2004                 /s/ John V. Winfield
      ---------------                 ---------------------------------------
                                      John V. Winfield, Chairman of the Board


Date: October 7, 2004                 /s/ John C. Love
      ---------------                 ---------------------------------------
                                      John C. Love
                                      Director

Date: October 7, 2004                 /s/ William J. Nance
      ---------------                 ---------------------------------------
                                      William J. Nance,
                                      Director

                                     -48-
<PAGE>


                        Independent Auditors' Report
                        ----------------------------

To the Partners
Justice Investors
San Francisco, California

We have audited the accompanying balance sheets of Justice Investors (a
limited partnership) as of December 31, 2003 and 2002, and the related
statements of income, partners' capital and cash flows for the years then
ended.  These financial statements are the responsibility of the Partnership's
management.  Our responsibility is to express an opinion on these financial
statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Justice Investors (a limited
partnership) as of December 31, 2003 and 2002, and the results of its
operations and its cash flows for the years then ended, in conformity with
accounting principles generally accepted in the United States of America.



/s/ Burr, Pilger & Mayer LLP


San Francisco, California
January 27, 2004



                                    F-1
<PAGE>

<TABLE>
                         JUSTICE INVESTORS
                        (a limited partnership)
                             BALANCE SHEETS
                       December 31, 2003 and 2002
                       --------------------------

                                ASSETS                  2003          2002
                                ------                  ----          ----
<S>                                                 <C>            <C>
Current assets:
  Cash                                              $        -     $    5,469
  Rents receivable:
   Hotel                                                     -        110,687
   Garage-related party                                 93,791        113,395
   Other                                                   240            200
   Spa                                                  41,499              -
  Other receivable                                      34,785              -
  Due from partner                                           -            961
  Prepaid expenses                                           -         10,000
                                                     ---------      ---------
       Total current assets                            170,315        240,712
                                                     ---------      ---------
Property and equipment:
  Furniture, fixtures and equipment (net of
    accumulated depreciation of $81,158 in 2003
    and $5,553 in 2002)                                608,877              -
  Building and improvements on operating
    leases (net of accumulated depreciation of
    $12,870,358 in 2003 and $12,484,823 in 2002)     5,264,451      3,011,179
  Construction in progress                             138,788        481,403
  Land                                               1,124,128      1,124,128
                                                     ---------      ---------
       Total property and equipment                  7,136,244      4,616,710
                                                     ---------      ---------
Other assets:
 Loan fees (net of accumulated amortization
   of $258,700 in 2003 and $229,135 in 2002)            29,557         59,122
 Deferred lease costs (net of accumulated
   amortization of $13,662 in 2003 and
   $12,185 in 2002)                                      8,493          9,970
                                                     ---------      ---------
       Total other assets                               38,050         69,092
                                                     ---------      ---------
                                                    $7,344,609     $4,926,514
                                                     =========      =========

                    LIABILITIES AND PARTNERS' CAPITAL
                    ---------------------------------

Current liabilities:
  Trade accounts payable and accrued expenses       $  367,191     $   25,049
  Rents received in advance                             19,592              -
  Accrued interest                                      12,991          3,895
  Due to partner                                             -            100
                                                     ---------      ---------
       Total current liabilities                       399,774         29,044
Long-term debt                                       3,902,200      1,137,767
                                                     ---------      ---------
       Total liabilities                             4,301,974      1,166,811
Commitments and contingencies
Partners' capital                                    3,042,635      3,759,703
                                                     ---------      ---------
                                                    $7,344,609     $4,926,514
                                                     =========      =========
</TABLE>
The accompanying notes are an integral part of these financial statements.

                                     F-2
<PAGE>


                           JUSTICE INVESTORS
                         (a limited partnership)

                STATEMENTS OF INCOME AND PARTNERS' CAPITAL
                for the years ended December 31, 2003 and 2002
                ----------------------------------------------

                                                       2003           2002
                                                       ----           ----
Rental income:
  Hotel - base rent                                $ 2,500,000   $ 2,500,000
  Hotel - additional rent                                    -       136,961
  Garage - related party                             1,300,317     1,410,698
  Spa                                                   96,171             -
  Other                                                  2,400         2,400
                                                     ---------     ---------
      Total rental income                            3,898,888     4,050,059
                                                     ---------     ---------

Operating expenses:
  Interest                                             106,842        25,613
  Depreciation and amortization                        542,183       369,594
  Lease commission                                      25,000        26,370
  Property taxes                                        43,823        43,286
  General and administrative:
    Administrative fees - general partners             150,000       150,000
    Accounting fees                                     10,000         2,225
    Audit and tax preparation                           54,736        39,161
    Bank charges                                        14,846        12,455
    Consultants                                        190,342        30,313
    Franchise taxes                                        975           971
    Insurance expense                                   92,194        48,619
    Legal fees                                         308,788        14,401
    Office expense                                      13,466         3,710
    Repairs and maintenance                            133,233         8,353
                                                     ---------     ---------
      Total operating expenses                       1,686,408       775,071
                                                     ---------     ---------

Other income:
  Interest income                                           54           135
  Miscellaneous income                                 296,000             -
                                                     ---------     ---------
      Total other income                               296,054           135
                                                     ---------     ---------
      Net Income                                     2,508,534     3,275,123

Partners' capital at beginning of period             3,759,703     4,852,580

Less distributions to partners                      (3,225,602)   (4,368,000)
                                                     ---------     ---------
Partners' capital at end of period                 $ 3,042,635   $ 3,759,703
                                                     =========     =========

The accompanying notes are in integral part of these financial statements.


                                     F-3
<PAGE>

                                JUSTICE INVESTORS
                              (a limited partnership)
                              -----------------------

                             Statements of Cash Flows
                  for the years ended December 31, 2003 and 2002
                  ----------------------------------------------



                                                        2003          2002
                                                        ----          ----
Cash flows from operating activities:
  Net income                                        $ 2,508,534   $ 3,275,123
  Adjustments to reconcile net income to
     net cash provided by operating
     activities-depreciation and amortization           542,183       369,594
  Changes in operating assets and liabilities:
   Decrease in rents receivable and due from
     partner                                             54,928     1,078,769
   Decrease (increase) in prepaid expenses               10,000        (8,131)
   Increase (decrease) in trade accounts payable
     and accrued expenses                               342,142       (23,472)
   Increase (decrease) in rents received in advance      19,592      (206,250)
   Decrease in due partner                                 (100)      (15,871)
   Increase in accrued interest                           9,096         1,546
                                                      ---------     ---------
      Net cash provided by operating activities       3,486,375     4,471,308
                                                      ---------     ---------
Cash flows from investing activities:
  Purchase of property and equipment and
     construction in progress                        (3,030,675)     (481,403)
                                                      ---------     ---------
Cash flows from financing activities:
  Distributions to partners                          (3,225,602)   (4,368,000)
  Net proceeds on long-term debt                      2,764,433       137,767
                                                      ---------     ---------

      Net cash used in financing activities            (461,169)   (4,230,233)

      Net decrease) in cash                              (5,469)     (240,328)

Cash at beginning of year                                 5,469       245,797
                                                      ---------     ---------

Cash and cash equivalents at end of year            $         -   $     5,469
                                                      =========     =========

Supplemental disclosures of cash flows
   information-cash paid during the year for:

  Interest                                          $   97,746    $    24,067
                                                      ========      =========
  Franchise taxes                                   $      975    $       971
                                                      ========      =========


The accompanying notes are in integral part of these financial statements.

                                     F-4
<PAGE>


                            JUSTICE INVESTORS
                             (a limited partnership

                        Notes to the Financial Statements
                        ---------------------------------

1.  Organization
    ------------

Justice Investors, a Limited Partnership (the Partnership), was formed in 1967
to acquire real property in San Francisco, California, for the development and
lease of hotel and related facilities.  The leases became effective during
1970 upon completion of the hotel and parking garage.  The Partnership leases
the hotel to Felcor Lodging Trust, Inc. (Felcor) and is operated under the
name Holiday Inn.  The hotel lease provides for the Partnership to receive
certain percentages of hotel revenue, as defined, to December 31, 2004, with a
five-year renewal option.  The Partnership leases the parking garage to Evon
Garage Corporation (Evon), a general partner.  The parking garage lease
provides for payments of certain percentages of parking receipts through
November 30, 2010. The Partnership completed a spa during the current year and
entered into a new lease agreement. See Note 4-Leasing Arrangements.

The Partnership operates in one business segment, the development and lease of
hotel and related facilities.


2.  Summary of Significant Accounting Policies
    ------------------------------------------

Rents Receivable
----------------
Management believes that all rents receivable are fully collectible.
Therefore, no allowance for doubtful accounts was recorded as of December 31,
2003.

Property and Equipment
----------------------
Property and equipment are stated at cost.  Depreciation on the hotel
facilities is computed using the straight line method over a useful life of 40
years.  Building improvements are being depreciated on a straight line basis
over their useful lives ranging from 5 to 39 years.  Furniture, fixtures and
equipment are being depreciated on a straight line basis over their useful
lives ranging from 5 to 7 years.

Construction in Progress
------------------------
Construction in progress at December 31, 2002 consisted of accumulated
incurred costs through December 31, 2002 for a spa and new meeting rooms that
were completed in 2003. The aggregate costs of construction in progress were
transferred to property and equipment and depreciation was calculated
accordingly. Construction in progress at December 31, 2003 consisted of
accumulated incurred costs through December 31, 2003 for the replacement of
the window paneling of the building. This project was not completed at
December 31, 2003.

Loan Fees and Deferred Lease Costs
----------------------------------
Loan fees are stated at cost and amortized using the straight line method over
10 years.  Deferred lease costs are stated at cost and amortized using the
straight line method over 15 years.

                                 Continued

                                    F-5
<PAGE>


                              JUSTICE INVESTORS
                           (a limited partnership)

                     Notes to the Financial Statements, Continued
                     --------------------------------------------

2. Summary of Significant Accounting Policies, continued
--------------------------------------------------------

Trade Accounts Payable
----------------------
The Partnership's banking system provides for the daily replenishment of bank
accounts from the line of credit as checks are presented.  Accordingly,
included in trade accounts payable at December 31, 2003 and 2002 is $47,940
and $20,970, respectively, representing the excess of outstanding checks over
cash on deposit at the bank upon which the checks were drawn.

Long-Lived Assets
-----------------
In accordance with the provisions of SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, the Partnership evaluates the
potential impairment of long-lived assets when events or changes in
circumstances indicate that the carrying amount of a long-lived asset may not
be recoverable. If it is determined that the carrying value of a long-lived
asset may not be recoverable based upon the relevant facts and circumstances,
the Partnership estimates the future undiscounted cash flows expected to
result from the use of the asset and its eventual disposition. If the sum of
the expected undiscounted future cash flows is less then the carrying value of
the asset, the Partnership will recognize an impairment loss for the
difference between the carrying value of the asset and its fair value.

Revenue Recognition
-------------------
The Partnership recognizes rental income over the lease term as it becomes
receivable according to the provisions of the leases.  The leases contain
provisions for a base rent plus a percentage of the lessees' revenues. See
Note 4-Leasing Arrangements.

Income Tax
----------
No income taxes have been provided in the accompanying financial statements
since the Partnership profits and losses are reportable by the partners on
their individual income tax returns.

Fair value of Financial Instruments
-----------------------------------
The Partnership's financial instruments are cash, accounts receivable,
accounts payable, and long-term debt. The recorded values of cash, accounts
receivable, and accounts payable approximate their fair values based on their
short-term nature.  The recorded value of long term debt approximates the fair
value, as interest approximates market rates.

Use of Estimates
----------------
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires the use
of estimates and assumptions regarding certain types of assets, liabilities,
revenues, and expenses.  Such estimates primarily relate to unsettled
transactions and events as of the date of the financial statements.
Accordingly, upon settlement, actual results may differ from estimated amounts.

                                 Continued

                                    F-6
<PAGE>


                             JUSTICE INVESTORS
                             (a limited partnership)

                    Notes to the Financial Statements, Continued
                    --------------------------------------------

3.  Long-Term Debt
    --------------

The Partnership has a revolving reducing line of credit agreement with a bank
that is collateralized by the first deed of trust on the hotel land and
property and the Partnership's interest in the hotel and garage leases.
Balances accrue interest at either prime rate per annum or at LIBOR plus 2%
per annum to a capped rate of 9.5% on balances up to $4,000,000.  The
outstanding balances under the agreement at December 31, 2003 and 2002 were
$3,902,200 and $1,137,767, respectively.  The balances were accruing interest
at 4.25% and 4% at December 31, 2003 and 2002, respectively.  The line of
credit matures on December 31, 2004.

Under the terms of the agreement, the line of credit is subject to a declining
maximum credit limit as follows:

                     2004                    $4,470,275

The Partnership is currently in the process of finalizing a line of credit of
$7,500,000 with another bank to replace an existing line of credit. This line
of credit will expire two years after the commencement date.


4.  Leasing Arrangements
    --------------------

The Partnership leases the hotel, parking garage and spa facilities under
noncancelable operating leases.

The hotel lease with Felcor provides for minimum monthly payments of $208,333
plus an additional percentage rent. The percentage rent is based on the
greater of a) 20% of the gross room revenue of the lessee or b) $2,500,000
plus 50% of the lessee's cash available. Cash available is defined as the
gross room revenue plus other revenue less operating expenses of the lessee
less the base rent of $2,500,000 less $1,250,000.  Rents due under the 20% of
gross room revenue provision are payable monthly and are calculated based on
cumulative gross room revenues on a calendar basis. Rents due under the 50% of
cash available provision are payable annually in December. There were no
additional hotel percentage rent received during 2003 and the additional rent
for 2002 was $136,961.

The Partnership entered into a tolling agreement with Felcor in December 2003
to terminate their relationship as lessor and lessee under the above lease as
soon as is reasonably practicable. See Note 8-Contingencies.

The parking garage lease with Evon provides for minimum monthly payments of
$19,764 plus an additional percentage rent. The percentage rent is based on
60% of the gross parking revenues and is due monthly. Additional garage
percentage rent received during 2003 and 2002 was $1,063,149 and $1,173,530,
respectively.
                                Continued

                                    F-7
<PAGE>


                            JUSTICE INVESTORS
                             (a limited partnership)

                    Notes to the Financial Statements, Continued
                    --------------------------------------------

4.  Leasing Arrangements, continued
    --------------------------------

The partnership entered into a new lease agreement with Tru Spa for the spa
facilities in July 1, 2002.  The scheduled commencement date was May 1, 2003
and the lease expires on May 31, 2013. The lease has been amended and the
amended commencement date was June 1, 2003. The minimum rent payments are
$11,666.67 per month from June to December 31, 2005 and from January 2006 and
on every third year thereafter, it is the minimum rent plus the percentage
increase in the Consumer Price Index multiplied by the minimum rent.  There is
also an additional rent of $2,072 per month that is payable on the same terms
as the minimum rent. Per the lease agreement the minimum rent and other
charges payable during the first ninety days of the first lease year shall be
deferred.  Beginning on the thirteenth calendar month following such ninety
day period (September 2004), and continuing for eleven consecutive months
thereafter, Tru Spa shall add one-twelfth of the deferred rent to the minimum
rent due hereunder.  Included in the rent receivable is the amount of $41,216
that reflects the receivable for deferred rent.

Minimum future rentals to be received under existing non-cancelable operating
leases as of December 31, 2003 for each of the next five years and in the
aggregate are:

                             Hotel         Garage       Spa         Total
                             -----         ------       ---         -----
Year ending December 31:
    2004                   $2,500,000    $  237,168    $165,000   $2,902,168
    2005                            -       237,168     165,000      402,168
    2006                            -       237,168     165,000      402,168
    2007                            -       237,168     165,000      402,168
    2008                            -       237,168     165,000      402,168
    Thereafter                      -       454,572     728,750    1,183,322
                            ---------     ---------    --------    ---------
                           $2,500,000    $1,604,412   $1,553,750  $5,694,162
                            =========     =========    =========   =========


5.  Related Party Transactions
    --------------------------
During 2003 and 2002, the Partnership incurred expenses for legal services of
$13,174 and $14,401, respectively, which were rendered by a limited partner.

The garage lessee, Evon, is the Partnership's managing general partner. Evon
paid the Partnership $1,300,317 and $1,410,698 during 2003 and 2002,
respectively, under the terms of the lease agreement, see Note 4-Leasing
Arrangements.  Rents receivable from Evon at December 31, 2003 and 2002 were
$93,831 and $113,395, respectively.


                                  Continued

                                     F-8
<PAGE>


                            JUSTICE INVESTORS
                             (a limited partnership)

                Notes to the Financial Statements, Continued
                --------------------------------------------


6.  Concentration of Credit Risk
    ----------------------------

Revenue and Receivables
-----------------------
The Partnership earns rental revenues under three operating leases, see Note
4-Leasing Arrangements.  The Partnership received 100% of its revenue related
to the hotel from Felcor, 100% of its revenue related to the parking garage
from Evon and 100% of its revenue related to the spa from Tru Spa.

Rents receivable at December 31, 2003 and 2002 consist of the amounts due
under the leases as follows:

                                                       2003           2002
                                                       ----           ----

         Hotel receivable-Felcor                  $        -      $  110,687
         Garage receivable-Evon                       93,831         113,395
         Spa- Tru Spa                                 41,499               -
         Other                                           200             200
                                                   ---------       ---------
                                                  $  135,530      $  224,282
                                                   =========       =========

Felcor is a public company that is subject to the periodic reporting
requirements of the Securities and Exchange Act of 1934.


7.  Commitments
    -----------

Administrative Fees-General Partners
------------------------------------
The Partnership has an arrangement with its two general partners, Evon and
Portsmouth Square, Inc. (Portsmouth), under which it pays three percent of the
first $10,000,000 of gross rents to the general partners. Of the first
$150,000 payable, eighty percent is due to Evon and twenty percent is due to
Portsmouth.  Any compensation in excess of $150,000 is split equally between
Evon and Portsmouth.

Administrative fees paid to Evon and Portsmouth for 2003 and 2002 are as
follows:

                                      2003          2002
                                      ----          ----

                 Evon               $120,000      $120,000
                 Portsmouth           30,000        30,000
                                     -------       -------
                                    $150,000      $150,000
                                     =======       =======

As of December 31, 2002, the Partnership had prepaid $10,000 of administrative
fees to Evon. There were no prepaid as of December 31, 2003. As of December
31, 2002, the Partnership had administrative fees payable to the general
partners of $47,762, which is included in accounts payable in the accompanying
balance sheet. There were no administrative fees payable to the partners as of
December 31, 2003.

                                  Continued

                                     F-9
<PAGE>


                             JUSTICE INVESTORS
                             (a limited partnership)

                   Notes to the Financial Statements, Continued
                   --------------------------------------------


7.  Commitments, continued
    ----------------------

Lease Commission
----------------

The Partnership is obligated to pay a lease commission of 1% of rentals
received to December 31, 2004 plus Holiday Inn lease extension, if any, to
December 31, 2009.


8.  Contingencies
    -------------

In the latter part of fiscal 2003, Justice Investors conducted a comprehensive
physical inspection of the hotel as permitted by the terms of the lease.  In
July 2003, Justice delivered to the hotel lessee, Felcor Lodging Trust, Inc.
(Felcor) and Holiday Inn a notice citing certain deficiencies in the physical
condition of the hotel property and in its furniture, fixtures and equipment
and requested that those deficiencies be corrected in accordance with the
lessee's obligations under the lease.  While each of the asserted defaults are
material, the most material default is set out in the Deficiency Report dated
July 30, 2003 asserting an amount of damages of $13,914,958 owing to the
Partnership by Felcor. In addition, in December 2003, the Partnership asserted
another tentative material default with respect to the capital reserve account
which is managed by Felcor totaling an amount in excess of $3,272,000. Most of
the asserted defaults have not yet been cured and from the partners'
perspective, the time period set out in the lease providing for Felcor's cure,
has now elapsed. Certain of the asserted defaults have either been cured, or
the Partnership and Felcor have reached a settlement with respect thereto.

The initial term of the hotel lease expires on December 31, 2004; however, the
lessee has the right to renew the lease for an additional term of five years,
which would extend the lease to December 31, 2009. Under the terms of the
lease, the lessee is required to notify Justice Investors of its intention to
exercise the five-year option by December 31, 2003.  To give the parties the
opportunity to amicably resolve the issues concerning the alleged deficiencies
in the condition of the hotel and other lease obligations, Justice and Felcor
agreed to extend the date by which the lessee must give Justice notice of its
intent to renew from December 31, 2003 to a date thirty days from the date
that either party receives notice that the extension time has been terminated.
As a result of the Partnership's asserted defaults, and Felcor's failure to
cure the same, it is the Partnership's position that it can terminate the
lease and all of Felcor's rights thereunder.

Felcor claims that it is not in default of any provision of the lease.
Accordingly, an interim tolling agreement has been reached between the parties
on December 10, 2003, which provides that the lease and Felcor's relationship
with the Partnership is expected to terminate on or before June 30, 2004. In
addition, as to the claims made by the Partnership against Felcor as set out
in the notices of default, the parties will engage in a process which the
parties intend will result in a settlement of the damages and other claims.


                                  Continued

                                    F-10
<PAGE>


                             JUSTICE INVESTORS
                             (a limited partnership)

                    Notes to the Financial Statements, Continued
                    --------------------------------------------


8.  Contingencies, continued
    ------------------------

If the relationship between the Felcor and the Partnership is terminated, the
Partnership anticipates that it would renovate the hotel property and seek a
third party to manage the Hotel under a recognized brand.  If the Partnership
renovates the property, it is likely that the Hotel may be closed during the
renovation and may not generate revenues. While the Partnership cannot make
any assurances, it may seek to fund the cost or renovations and any
partnership distributions out of borrowings; to the extent that the
Partnership is able to utilize existing loan facilities or to negotiate new
facilities. While the Partnership has received an appraisal of the Hotel
indicating that the value of the property is adequate to serve as collateral
for lending facilities, there can be no assurances that loan facilities will
be available, or that if available, they would be on terms acceptable to the
Partnership.


9.  Arbitration Settlement
    ----------------------

During 2002, the Partnership settled a dispute with Felcor, the hotel lessee,
related to an obligation of Felcor to repair existing deficiencies in the
window system, and certain existing cracks, spalling, porosity conditions in
the concrete. The Partnership received a settlement payment of $296,000 which
is included in miscellaneous income in the accompanying income statement.


                                     F-11