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

                               FORM 10-KSB/A
                              Amendment No. 1

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

For the fiscal year ended June 30, 2005

[ ] 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/A or any amendments
to this Form 10-KSB/A.  [X]

    The issuer's revenues for the year ended June 30, 2005 were $440,000.

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 12, 2005 was $4,887,755.

<PAGE>

The number of shares outstanding of issuer's $.10 Par Value Common Stock, as of
September 12, 2005, was 1,178,210.

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

                     DOCUMENTS INCORPORATED BY REFERENCE: None

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                          EXPLANATORY NOTE

This Amendment No. 1 on Form 10-KSB/A (the "Amendment") is filed by Santa Fe
Financial Corporation (the "Company") to amend Item 8A. of Part II of the
Company's Annual Report on Form 10-KSB for the fiscal year ended June 30, 2005,
as filed on October 18, 2005. The Amendment clarifies the conclusions reached
regarding the effectiveness of the Company's disclosure controls and
procedures. Item 13 of Part III has also been amended to contain currently
dated certifications of the Company's chief executive officer and chief
financial officer pursuant to Sections 302 and 906 of the Sarbanes Oxley Act of
2002, and to correct a typographical error appearing in the text of the
originally filed Section 302 certifications. The updated and amended
certifications are attached to this Amendment as Exhibits 31.1, 31.2, 32.1 and
32.2. The Amendment does not modify or update any other previously filed
financial information or other disclosures set forth in the Company's original
filing on Form 10-KSB on October 18, 2005. This Form 10-KSB/A should be read in
conjunction with the Company's filings made with the Securities and Exchange
Commission subsequent to the filing of its original 10-KSB.

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                            TABLE OF CONTENTS

PART I                                                               PAGE

    Item  1.  Description of Business.                                 3

    Item  2.  Description of Property.                                10

    Item  3.  Legal Proceedings.                                      13

    Item  4.  Submission of Matters to a Vote of Security Holders.    13

PART II

    Item  5.  Market For Common Equity and Related                    13
              Stockholder Matters.

    Item  6.  Management's Discussion and Analysis of Financial       14
              Condition and Results of Operations.

    Item  7.  Financial Statements and Supplementary Data.            25

    Item  8.  Changes in and Disagreements with Accountants on        40
              Accounting and Financial Disclosure.

    Item  8A. Controls and Procedures.                                40

    Item  8B. Other Information.                                      41

PART III

    Item  9.  Directors, Executive Officers, Promoters and            41
              Control Persons; Compliance with Section 16(a)
              of The Exchange Act.

    Item 10.  Executive Compensation.                                 43

    Item 11.  Security Ownership of Certain Beneficial Owners and     45
              Management.

    Item 12.  Certain Relationships and Related Transactions.         47

    Item 13.  Exhibits, Financial Statement Schedules, and            49
              Reports on Form 8-K.

    Item 14.  Principal Accountant Fees and Services.                 51

SIGNATURES                                                            52


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<PAGE>

                                   PART I

Item 1.  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.

Since 1988, the Company's principal source of operating revenue has been, and
continues to be, derived from the management of its 68.8% 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.
Justice was formed in 1967 to acquire real property for the development and
lease of a hotel located at 750 Kearny Street, San Francisco, California (the
"Hotel") and related facilities, including a five level underground parking
garage.  Historically, the Partnership's most significant source of income was
a lease between Justice and Holiday Inn for the Hotel portion of the property.
That lease was amended in 1995, and ultimately assumed by Felcor Lodging Trust,
Inc. ("Felcor", NYSE: FCH) in 1998.  As discussed below, the lease of the Hotel
to Felcor was terminated effective June 30, 2004. The Partnership also derives
income from its lease of the garage portion of the property to Evon and the
lease of approximately 5,400 square feet on the lobby level 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 lease of the parking garage and the spa.

                                    -3-
<PAGE>

The Company also derives income from management fees received by its subsidiary
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. Please see discussion of
Investment Policies under Item 2 below.

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.


SAN FRANCISCO HOTEL LEASE

The Partnership's San Francisco Hotel property has 565 guestrooms and is
located near the Financial District. It was initially leased to Holiday Inns of
America in 1970 and operated as a Holiday Inn brand hotel.  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, effective July 28, 1998 and continued to be operated as a Holiday Inn.

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.  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
lessee's cash available as defined by the Hotel Lease.  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.

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.


                                    -4-
<PAGE>

DOW HOTEL COMPANY MANAGEMENT AGREEMENT

With the termination of the Hotel Lease, Justice assumed the role of an owner
operator of the Hotel on July 1, 2004.  To assist with the operations of the
Hotel, On May 19, 2004, Justice entered into a third party Management Agreement
with Dow Hotel Company, LLC, a Washington limited liability company ("Dow") to
operate and manage the Hotel as an agent of the Partnership, 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 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 of the Hotel.  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.

On March 25, 2005, the Partnership entered into an amendment of the Dow
Management Agreement to cover the period of time the Hotel will be closed for
renovations. Pursuant to that amendment, Dow will be entitled to a fee for
services rendered under the Management Agreement in the amount of $15,000 per
month, which shall be paid as follows: (i) one half ($7,500) payable monthly
and (ii) the other half ($7,500) shall be earned, but payment deferred until
the first month that the Hotel has a positive net operating income sufficient
to make such lump sum payment, but in no event later than April 1, 2006.

HOLIDAY HOSPITALITY FRANCHISING AGREEMENT

Effective July 1, 2004, The Partnership entered into a short term franchise
agreement with Holiday Inn Hospitality Franchising, Inc. to continue to operate
the Hotel as a Holiday Inn Select brand hotel, until such time as the
Partnership was able to secure a replacement hotel brand and operate the Hotel
under a new flag.  Under the terms of that Holiday Inn franchise agreement, the
Partnership paid monthly royalties, marketing and reservation fees of 5%, 1.5%
and 1%, respectively, of the Hotel's gross room revenue for the preceding
calendar month. The Holiday Inn franchise agreement terminated on May 31, 2005
when the Hotel was closed for renovation and will be replaced by a franchise
agreement with Hilton Hotels Corporation.

HILTON HOTELS FRANCHISE LICENSE AGREEMENT

With the termination of the Hotel Lease to Felcor, the Partnership was able to
actively pursuing a franchise agreement with a new nationally recognized brand
in an effort to move the Hotel up-market and become more competitive. After
considering and negotiating with several brands, the Partnership entered into a
Franchise License Agreement with Hilton Hotels Corporation (the "Hilton
Franchise Agreement") on December 10, 2004 for the right to operate the Hotel
as a Hilton brand hotel. The terms of the Hilton Franchise Agreement will
commence upon the final approval of the franchise application and the
completion of the approved product improvement plan. The commencement date of
operation as a Hilton hotel can be no later than June 1, 2006. The term of the
Hilton Franchise Agreement is for 15 years commencing on the opening date of
the Hotel, with an option to extend that Agreement for another five years,
subject to certain conditions. Beginning on the opening date, the Partnership
will pay monthly royalty fees of four percent (4%) of the Hotel's gross room
revenue for the preceding calendar month. The amount of the monthly fee is
subject to change; however, the increase cannot exceed one percent of the Hotel
gross room revenue in any calendar year, and the cumulative increases in the
monthly fee will not exceed five percent of gross room revenue.

                                    -5-
<PAGE>

Prior to operating the Hotel as a Hilton hotel, the Partnership is required to
make substantial renovations to the Hotel to meet Hilton standards in
accordance with a product improvement plan ("PIP") agreed upon by Hilton and
the Partnership, as well as complying with other brand standards.  That project
includes a complete renovation and upgrade of all of the Hotel's guestrooms,
meeting rooms, common areas and restaurant and bar.  The Partnership currently
estimates that the cost of the renovation project will be approximately $34
million.  That amount includes approximately $29 million for the actual cost of
the renovations and approximately $5 million for construction interest and
estimated carrying costs of operations during the
renovation period.

To meet its substantial financial commitments, the Partnership will rely on
additional borrowings to meet its obligations.  As discussed below, the
Partnership has been able to secure financing, collateralized by the Hotel, in
the aggregate amount of up to $40,000,000 to meet those commitments. That
amount of leverage and the associated debt service will create additional risk
for the Partnership and its ability to generate cash flows in the future since
the Hotel asset has been virtually debt free for many years.

TEMPORARY CLOSURE OF HOTEL FOR RENOVATIONS

On March 15, 2005, the Partnership announced its decision to close down its
Hotel operations effective, May 31, 2005, to complete the renovations of the
Hotel as required by the Hilton Franchise Agreement.  The Partnership made this
decision because of, among other things, the scope of the work in the common
areas, engineering factors and potential environmental and safety issues which
made it preferable to temporarily close the Hotel portion of the property.  It
is anticipated that the Hotel will be closed until the first part of 2006
before it reopens as the "Hilton San Francisco Financial District".  The below
ground parking garage and Tru Spa located on the lobby level of the Hotel, both
of which are lessees of the Partnership, will remain open during the renovation
work.

GARAGE LEASE AND OPERATIONS

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 $19,764
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 was operated by Ampco
Systems Parking ("Ampco") pursuant to a sublease agreement.  On July 20, 2005,
Evon gave a 30-day notice to terminate its sublease agreement with Ampco. The
sublease with Ampco terminated on August 31, 2005. Effective September 1, 2005,
Ace Parking Management, Inc. ("Ace Parking") became the new parking garage
operator pursuant to a Parking Facility Management Agreement with the garage
lessee, Evon. That agreement is for a period of sixty two months (62) months
and terminates on October 31, 2010, with a five year option to renew. The
agreement provides that Evon will pay a management fee to Ace of $2,000 per
month, plus an accounting fee of $250 per month, plus 3% of the annual net
profit from the operations of the garage in excess of $100,000.

TRU SPA LEASE

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

                                    -6-
<PAGE>

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.
Minimum rental amounts are subject to adjustment every three years based on any
percentage increase in the Consumer Price Index.  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.  The spa lease is structured
to reimburse the Partnership for those leasehold improvements.  Due to the
certain disruptions of the operations of the spa resulting from the temporary
closing of the Hotel and the renovation work, the Partnership and Tru Spa
entered into a lease amendment that would permit Tru Spa to apply its security
deposit of $35,000 to pay its monthly obligations for June 30, 2005 and July
31, 2005, with the balance to be applied as partial payment of its August 2005
rent. The Partnership reserved the right, in its discretion, to require Tru Spa
to make an additional security deposit in the future.  The Partnership believes
that the spa facilities in the Hotel will help it to be more competitive in the
future by providing greater amenities to its guests.

CHINESE CULTURE FOUNDATION LEASE

On March 15, 2005, the Partnership entered into an amended lease with the
Chinese Culture Foundation of San Francisco (the "Foundation") for the third
floor space of the Hotel commonly known as the Chinese Cultural Center. The
amended lease requires the Partnership to pay to the Foundation a monthly event
space fee in the amount of $4,600, adjusted annually based on the local
Consumer Price Index. The term of the amended lease remains the same as the
current lease, expiring on October 17, 2023, with an automatic extension for
another 10 year term if the property continues to be operated as a hotel. This
amendment will allow Justice to incorporate the third floor into the renovation
of the Hotel resulting in a new ballroom for the joint use of the Hotel and new
offices and a gallery for the Chinese Culture Center.

COMPENSATION OF GENERAL PARTNERS AND REPOSITIONING FEES

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 was 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. This was done to provide adequate compensation to Evon and Portsmouth and
provide incentives to the general partners to encourage excellence in the
performance of their responsibilities.  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

                                    -7-
<PAGE>

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 approximately $69,000 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.  Due to the expanded scope of the renovation project, the additional
time commitments required of the general partners and the increased value
brought to the Partnership as a result of the repositioning of the Hotel, the
Partnership may adjust the amount of such fee.


RECENT DEVELOPMENTS - NEW FINANCING

On July 27, 2005, Justice entered into a first mortgage loan (the "Prudential
Loan") with The Prudential Insurance Company of America in a principal amount
of $30,000,000.  The term of the Loan is for 120 months at a fixed interest
rate of 5.22% per annum. The Loan calls for monthly installments of principal
and interest in the amount of approximately $165,100, calculated on a 360 month
amortization schedule. The Loan is collateralized by a first deed of trust on
the Partnership's Hotel property, including all improvements and personal
property thereon and an assignment of all present and future leases and rents.
The Loan is without recourse to the limited and general partners of Justice.

On July 27, 2005, Justice also obtained a $10,000,000 Revolving Line of Credit
("LOC") from United Commercial Bank. The term of the LOC is for 60 months at an
annual interest rate based on the index selected by Justice at the time of the
request for each advance. The interest rate will either be a variable rate
equal to The Wall Street Journal Prime Rate or the Libor Rate plus 2%, fixed
for the period selected by the Partnership. The LOC is collateralized by a
second deed of trust on the Hotel property. Interest only is payable monthly
with principal and accrued interest due at maturity.

From the proceeds of the Prudential Loan, the Partnership retired its existing
line of credit in the approximate amount of $7,436,000, including accrued
interest, and paid off a short term uncollateralized line of credit from United
Commercial Bank in the amount of $2,007,000, including accrued interest.

Justice believes that the Prudential Loan and the LOC will provide sufficient
financial resources for the Partnership to complete the substantial renovations
to the Hotel required by its Franchise License Agreement with Hilton and to
meet its debt service requirements and operating capital needs through the
reopening of the Hotel in the early part of 2006.  After the reopening of the
Hotel, the Partnership believes that the revenues expected to be generated from
the Hotel operations will be sufficient to meet all of the Partnership's
current and future obligations and financial requirements.

                                    -8-
<PAGE>

COMPETITION

Until May 30, 2004, the Hotel was operated as a Holiday Inn brand hotel and was
part of Holiday Inn's worldwide reservation system.  The Hotel was designed to
Holiday Inn's specifications to serve both business travelers and tourists and
cater to both individuals and tour groups.  It also handled 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, 2001.  Newer and more upscale properties have opened in or near
the Financial District, which provide greater amenities to its guests, making
it difficult for the Hotel to compete.  These competitors are now better
positioned to attract both the business traveler and tourists.

Management believes that the Hotel could not continue to be competitive under
the conditions it operated under while a Holiday Inn Select brand hotel. 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
renovations having been made to the Hotel property during that time. As
discussed above, the Partnership is committed to make substantial improvements
to almost every area of the Hotel before it reopens in the early part of 2006
as the Hilton San Francisco Financial District. The newly renovated Hotel will
feature among other amenities: 552 totally remodeled guest rooms and suites; a
new concierge lounge and common areas; modern and expanded meeting rooms; a new
ballroom; a new restaurant and bar; a new fitness center; and the existing Tru
Spa.  The Partnership believes that this renovation project, coupled with the
strength of the Hilton brand and reservation system, along with the hotel
management expertise of Dow, will allow the Hotel to compete in the top levels
of its market segment.


EMPLOYEES

As of June 30, 2005, the Company had three full-time employees.  The employees
of the Company 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 ("UNITE HERE"). Following the expiration on August
14, 2004 of the city-wide collective bargaining agreement with Local 2 of UNITE
HERE, Local 2 has voted to authorize a strike against a group of some of the
larger hotels in San Francisco and negotiations continue with those hotels
during a "cooling-off period".

In conjunction with the temporary closing of the Hotel on May 31, 2005 for
renovation, Dow, acting as an agent for the Hotel, entered into a memorandum of
understanding with UNITE HERE on June 27, 2005, regarding recall rights and
health and welfare contributions for existing employees to provide health and
welfare eligibility for laid off employees through the end of August.  All
health and welfare benefit coverage obligations of the Hotel will cease
September 1, 2005. In addition, UNITE HERE has agreed not to institute any
strike action against the Hotel for at least six months after its reopening,
regardless of whatever labor actions it may be instituting against other hotels
in San Francisco.  It is expected that Dow will continue to work with

                                    -9-
<PAGE>

the union to resolve any other issues regarding the temporary shut down of
Hotel and will implement contingency plans to minimize the impact on operations
and the renovations should any union action be taken against the Hotel in the
future.


Item 2. Description of Property.

PROPERTIES

As of June 30, 2005, 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 currently contains 565 guest rooms situated on 22 floors as well as a
5,400 square foot Tru Spa health and beauty spa on the lobby level.  The third
floor houses the Chinese Culture Center.  Other features of the Hotel 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, effective June
30, 2004, pursuant to the terms of a Settlement Agreement.  At that time,
possession and operations of the Hotel reverted to the Partnership.  On May 31,
2005, the Hotel portion of the property was temporarily closed for extensive
renovations to meet the requirements of the Hilton Franchise Agreement. The
below ground parking garage and Tru Spa located on the lobby level of the
Hotel, both of which are lessees of the Partnership, will remain open during
the renovation work.


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, 2005, real estate property taxes were
approximately $50,000.  Depreciation is recorded on the straight-line method
based upon an estimated useful life of 30 years. As of June 30, 2005, the
outstanding mortgage balance was $1,837,000.  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,
2005, real estate property taxes were approximately $10,000.  Depreciation

                                    -10-
<PAGE>

is recorded on the straight-line method, based upon an estimated useful life of
39 years.  The outstanding mortgage balance was approximately $444,000 at June
30, 2005 and the maturity date of the mortgage is February 2032.  The interest
rate is 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, 2005, economic occupancy (gross potential rent less below market rent
divided by gross potential rent) for Woodland Village and Acanto was 71% and
99%, respectively.  The physical occupancy for Woodland Village and Acanto was
99% and 100% respectively.


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, and
securities issued by REIT's, 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

                                    -11-
<PAGE>

a periodic basis. As of June 30, 2005, the Company had investments in unlisted
companies (other investments) of $815,000.  The investment is disclosed on the
balance sheet as other investments.

The Company's investment portfolio is diversified with 45 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 17.1% 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, 2005,
the market value of the Company's marketable securities was $12,962,000.

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, 2005, the
Company had obligations for securities sold (equities short) of $2,241,000.
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, 2005, the Company had a margin balance of
$3,105,000.

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, 2005 and June 30, 2004, the Company
paid $61,000 and 618,000, 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.

                                    -12-
<PAGE>

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.


                             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.OB.  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, 2005 and June 30, 2004.


Fiscal 2005                             High            Low
-----------                             -----          -----
First Quarter (7/1 to 9/30)            $13.50         $11.00
Second Quarter (10/1 to 12/31)         $12.00         $11.00
Third Quarter (1/1 to 3/31)            $13.25         $11.46
Fourth Quarter (4/1 to 6/30)           $17.55         $13.40

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


As of September 12, 2005 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

                                    -13-
<PAGE>

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, 2005 and 2004, 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.

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, 2005.



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, the ability of the Partnership to obtain hotel financing for
renovations at favorable interest rates and terms, securities markets and
concentration of risk, litigation and other factors, including natural
disasters, and those discussed in this report 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 68.8% 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.  Justice owns the land,
improvements and leaseholds at 750 Kearny Street, San Francisco, California,
formerly known as the Holiday Inn Select Downtown & Spa (the "Hotel").
Historically, Justice's most significant income source was derived from a lease
between the Partnership and Felcor Lodging Trust, Inc. ("Felcor") 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

                                    -14-
<PAGE>

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 Corporation
("Evon") and from a lease with Tru Spa for a portion of the lobby level of the
Hotel.  The Company also receives management fees from Justice for actively
managing the hotel as a general partner.

On December 10, 2004, Justice entered into a Franchise License Agreement for
the right to operate the Hotel property as a Hilton brand hotel. Prior to
operating the hotel as a Hilton, the Partnership is required to make
substantial renovations to the hotel to meet Hilton standards in accordance
with a product improvement plan agreed upon by Hilton and the Partnership, as
well as complying with other brand standards.  The Partnership currently
estimates that the cost of the renovation project will be approximately $34
million.  That amount includes approximately $29 million for the actual cost of
the renovations and approximately $5 million for construction interest and
estimated carrying costs of operations during the renovation period. The
Agreement requires that those renovations be complete and the Hotel commence
operations as a Hilton hotel no later than June 1, 2006.  The term of the
Agreement is for a period of 15 years commencing on the opening date, with an
option to extend the license term for another five years, subject to certain
conditions.

On March 15, 2005, the Partnership announced its decision to close down its
Hotel operations on or about June 1, 2005 to complete renovations of the Hotel
as required by the Hilton Agreement.  The Partnership made this decision based
on a consideration of relative benefits and detriments of closing the Hotel
during the renovation period.  Among the many factors considered were the
increased costs of construction while maintaining operations, the scope and
timing of the work in the common areas and issues involved in attempting to
maintain guest services during the renovations, engineering factors and
potential environmental, health and safety issues which made it preferable to
temporarily close the Hotel portion of the property.  It is anticipated that
the Hotel will be closed for a period of approximately seven to nine months
before a contemplated reopening in the early part of 2006 as the "Hilton San
Francisco Financial District".  The below ground parking garage and Tru Spa
located on the lobby level of the Hotel, both of which are lessees of the
Partnership, will remain open during the renovation work.

As discussed more fully in the "Financial Condition and Liquidity" section
herein, the Partnership will be expending significant amounts of money to
renovate and reposition the Hotel as Hilton.  During that transition period,
the Hotel will be shut down and revenues to the Partnership will be limited to
rentals received from the parking garage and Tru Spa. Thus, it is expected that
the Partnership will continue to incur losses during that time.  To meet its
substantial financial commitments for the renovation project, Justice will rely
on additional borrowings to meet its obligations.  That amount of leverage and
the associated debt service will create additional risk for the Partnership and
its ability to generate cash flows in the future since the Hotel asset has been
virtually debt free for many years. The Partnership does not anticipate paying
any partnership distributions until some time after operations commence under
the Hilton brand and net income and capital requirements warrant such
distributions. As a result, the Company may have to depend more on the revenues
generated from the investment of its cash and securities assets during that
transition period.

                                    -15-
<PAGE>

RECENT DEVELOPMENTS

On July 27, 2005, Justice entered into a first mortgage loan (the "Prudential
Loan") with The Prudential Insurance Company of America in a principal amount
of $30,000,000.  The term of the Loan is for 120 months at a fixed interest
rate of 5.22% per annum. The Loan calls for monthly installments of principal
and interest in the amount of approximately $165,100, calculated on a 360 month
amortization schedule. The Loan is collateralized by a first deed of trust on
the Partnership's Hotel property, including all improvements and personal
property thereon and an assignment of all present and future leases and rents.
The Loan is without recourse to the limited and general partners of Justice.

On July 27, 2005, Justice also obtained a $10,000,000 Revolving Line of Credit
("LOC") from United Commercial Bank. The term of the LOC is for 60 months at an
annual interest rate based on the index selected by Justice at the time of the
request for each advance. The interest rate will either be a variable rate
equal to The Wall Street Journal Prime Rate or the Libor Rate plus 2%, fixed
for the period selected by the Partnership. The LOC is collateralized by a
second deed of trust on the Hotel property. Interest only is payable monthly
with principal and accrued interest due at maturity.

From the proceeds of the Prudential Loan, the Partnership retired its existing
line of credit in the approximate amount of $7,436,000, including accrued
interest, and paid off a short term uncollateralized line of credit from United
Commercial Bank in the amount of $2,007,000, including accrued interest.

Justice believes that the Prudential Loan and the LOC will provide sufficient
financial resources for the Partnership to complete the substantial renovations
to the Hotel required by its Franchise License Agreement with Hilton and to
meet is debt service requirements and operating capital needs through the
reopening of the Hotel in the early part of 2006. Partnership believes that,
after the reopening of the Hotel, the revenues expected to be generated from
the Hotel operations will be sufficient to meet all of the Partnership's
current and future obligations and financial requirements.


Fiscal Year Ended June 30, 2005 Compared to Fiscal Year Ended June 30, 2004

The Company had a net loss of $2,300,000 for the year ended June 30, 2005
compared to net income of $2,695,000 for the year ended June 30, 2004.
The significant change is primarily attributable to the change in the equity in
net income(loss) of Justice Investors from income to a loss and the change in
net gains(losses) from marketable securities to net losses.  The changes were
partially offset by the decrease in margin interest and trading expenses, the
increase in dividend and interest income, the decrease in the impairment loss
on other investments, the improvement in our real estate operations and the
change in the provision for income taxes to a tax benefit from a tax expense.

Equity in net income (loss) of Justice Investors changed to a loss of
$2,188,000 in fiscal 2005 compared to income of $3,332,000 in fiscal 2004.
Effective July 1, 2004, Justice became the owner operator of the Hotel rather
than a lessor. Thus, Partnership net loss for fiscal 2005 includes the direct
operating results of the Hotel, whereas in the prior year Justice received
rental income from Felcor pursuant to a lease. The net operating loss from the
hotel for fiscal 2005 was approximately $1,734,000, while the Partnership
received approximately $2,617,000 in rent from the Hotel lease in fiscal 2004.
Also, during fiscal 2004, a $5,000,000 settlement payment was made to Justice

                                    -16-
<PAGE>

from the Hotel lessee to resolve disputes regarding certain obligations of
Felcor and others under the terms of the Hotel Lease. 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. Those two nonrecurring payments were included as other income by Justice
in fiscal 2004.

During fiscal 2005, the Justice also recorded a $1,991,000 loss on disposition
of assets as the Hotel was closed for major renovations on May 31, 2005, and
existing furniture and fixtures were disposed of.  It is anticipated that the
Hotel will be closed until the first part of calendar year 2006 before it
reopens as the "Hilton San Francisco Financial District".  The below ground
parking garage and Tru Spa located on the lobby level of the Hotel, both of
which are lessees of the Partnership, will remain open during the renovation
work. Partnership rental income from the parking garage decreased to
approximately $1,005,000 in fiscal 2005 from approximately $1,274,000 in fiscal
2004, primarily due to the closure of the Hotel for the last month of the
fiscal year and lower Hotel occupancy rates in fiscal 2005. A further drop off
in garage rental income is expected while the Hotel is being renovated, with an
anticipated increase in garage rental income after the Hotel reopens as a
Hilton.

Average daily room rates for the Hotel decreased to approximately $90 in fiscal
2005 from approximately $92 in fiscal 2004, while average monthly occupancy
rates decreased to approximately 65% in fiscal 2005 from approximately 71% in
fiscal 2004.  While 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, 2001.  Newer and more upscale properties have
opened in or near the Financial District, which provide greater amenities to
their guests, making it difficult for the Hotel to compete.  These competitors
are now better positioned to attract both the business traveler and tourists
and to achieve higher occupancy and room rates.

Management believes that the Hotel could not continue to be competitive under
the conditions it operated under while a Holiday Inn Select brand hotel. 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 is now approximately 25 years old, with no major renovations
having been made to the property during that time.  The Partnership is
committed to make substantial improvements to almost every area of the Hotel
before it reopens in the early part of 2006 as the Hilton San Francisco
Financial District. The newly renovated Hotel will feature among other
amenities: 552 totally remodeled guest rooms and suites; a new concierge lounge
and common areas; modern and expanded meeting rooms; a new ballroom; a new
restaurant and bar; a new fitness center; and the existing Tru Spa.  The
Partnership believes that this renovation project, coupled with the strength of
the Hilton brand and reservation system, along with the hotel management
expertise of Dow, will allow the Hotel to directly compete with all hotels in
the Financial District.

Net gains(losses) on marketable securities changed to net losses of $2,188,000
for the year ended June 30, 2005 from net gains of $5,000,000 for the fiscal
year ended June 30, 2004.  For the year ended June 30, 2005, the Company had
net unrealized losses of $3,271,000 and net realized gains of $1,083,000.
For the year ended June 30, 2004, the Company had net unrealized gains of
$662,000 and net realized gains of $4,338,000.  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

                                    -17-
<PAGE>

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 $458,000 from $343,000 as a result of
the investment in more income yielding securities.

Margin interest and trading expenses decreased to $587,000 from $1,148,000
primarily due to the decrease in the performance bonus granted to the Company's
CEO based on the results of the Company's investment portfolio.  During the
year ended June 30, 2005, the CEO earned a performance bonus of $61,000
compared with a performance bonus of $618,000 for the year ended June 30, 2004.

During the fiscal year 2005, the Company was able to increase occupancy on its
27-unit apartment complex and at the same time reduce operating expenses.  This
resulted in the Company generating income from real estate operations of
$19,000 in 2005 as compared to a loss of $30,000 in 2004.

Other income increased to $121,000 from $58,000 primarily as the result of the
receipt of $69,000 in additional fees from Justice Investor's for management's
work in the positioning of the hotel.

The provision for income tax benefit(expense) changed to a tax benefit of
$2,207,000 for the year ended June 30, 2005 from a tax expense of $2,749,000
for the year ended June 30, 2004.  The significant change was due to the
significant pre-tax $5,279,000 loss incurred during the year ended June 30,
2005 as compared to pre-tax income of $6,447,000 generated during the year
ended June 30, 2004.

Minority interest benefit(expense) changed to a benefit of $772,000 from an
expense of $1,003,000 as a result of the significant loss incurred by the
Company's subsidiary, Portsmouth during the year ended June 30, 2005. In prior
comparable year, Portsmouth generated significant income that resulted in a
minority interest expense to the Company.


MARKETABLE SECURITIES

The Company's investment portfolio is diversified with 45 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 17.1% 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, 2005, the
market value of the Company's marketable securities was $12,962,000.

                                    -18-
<PAGE>

The following table shows the composition of the Company's marketable
securities by selected industry groups as of June 30, 2005.

                                                             % of Total
                                                              Investment
   Industry Group                      Market Value           Securities
   --------------                      ------------           ----------
   Telecommunications and media       $  4,376,000               33.8%
   Insurance, banks and brokers          2,772,000               21.4%
   REITs, lodging, home builders and
    hotels                               2,103,000               16.2%
   Chemicals, building materials, paper
    machinery, metals and mining         1,547,000               11.9%
   Electric, pipelines, oil and gas        491,000                3.8%
   Other                                 1,673,000               12.9%
                                        ----------              ------
                                      $ 12,962,000              100.0%
                                        ==========              ======

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, 2005, the Company had approximately 33.8% 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, 2005, the
Company had obligations for securities sold (equities short) of $2,241,000.
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, 2005, the Company had a margin balance of
$3,105,000.

                                    -19-
<PAGE>

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, 2005 and 2004.


                                              Year Ended        Year Ended
                                            June 30, 2005     June 30, 2004
                                            -------------     -------------

Net gains(losses) on marketable securities   $(2,188,000)     $  5,000,000
Impairment loss on other investments             (84,000)         (220,000)
Dividend and interest income                     458,000           343,000
Margin interest expense                         (260,000)         (330,000)
Trading and management expenses                 (327,000)         (818,000)
                                              ----------        ----------
Investment income(loss)                      $(2,401,000)     $  3,975,000
                                              ==========        ==========


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.  The Company also receives rental income from its investments
in multi-family real estate properties and income generated from the investment
of its cash and securities assets.  As discussed below, since the Partnership
has closed down the operations of the Hotel and is expending significant
amounts of money to renovate and reposition the Hotel as a Hilton, it will not
be paying any monthly limited partnership distributions until some time after
operations commence under the Hilton brand.  As a result, the Company may have
to depend more on the revenues generated from the investment of its cash and
securities assets during that transition period.

On May 3, 2004, Justice entered into a settlement agreement with the hotel
lessee, Felcor, to resolve disputes regarding certain obligations of Felcor and
others under the terms of the hotel lease. Pursuant to the settlement, Felcor
paid the sum of $5,000,000 to Justice towards the costs of capital repairs,
replacements and maintenance necessary to place the hotel into the condition
required at the end of the lease.  Felcor also agreed to terminate its
leasehold estate and surrendered possession of the hotel to the Partnership on
June 30, 2004, at which time Justice assumed the role as owner-operator of the
property.

To assist in the day-to-day operations of the hotel, Justice entered into a
third party management agreement with Dow Hotel Company, effective July 1,
2004.  The termination of the hotel lease also made it possible for the
Partnership to seek a new franchise agreement for the hotel. Those efforts were
successful and culminated with Justice entering into a Franchise License
Agreement (the "Hilton Franchise Agreement"), on December 10, 2004, for the
right to operate the hotel property as a Hilton brand hotel.

Prior to operating the hotel as a Hilton, the Partnership is required to make
substantial renovations to the hotel to meet Hilton standards in accordance
with a product improvement plan agreed upon by Hilton and the Partnership, as
well as complying with other brand standards.  The Partnership currently
estimates that the cost of the renovation project will be approximately $34

                                    -20-
<PAGE>

million.  That amount includes approximately $29 million for the actual cost of
the renovations and approximately $5 million for construction interest and
estimated carrying costs of operations during the renovation period. The Hilton
Franchise Agreement requires that those renovations be complete and the Hotel
commence operations as a Hilton hotel no later than June 1, 2006.

Effective, May 31, 2005, the Partnership elected to close down its Hotel
operations to complete the renovations of the Hotel as required by the Hilton
Franchise Agreement.  The Partnership made this decision because of, among
other things, the scope of the work in the common areas, engineering factors
and potential environmental and safety issues which made it preferable to
temporarily close the Hotel portion of the property.  It is anticipated that
the Hotel will be closed until the first part of 2006 before it reopens as the
"Hilton San Francisco Financial District".  The below ground parking garage and
Tru Spa located on the lobby level of the Hotel, both of which are lessees of
the Partnership, will remain open during the renovation work.

The employees of the Hotel are part of Local 2 of the Hotel Employees and
Restaurant Employees Union ("UNITE HERE"). Following the expiration on August
14, 2004 of the city-wide collective bargaining agreement with Local 2 of UNITE
HERE, Local 2 has voted to authorize a strike against a group of some of the
larger hotels in San Francisco and negotiations continue with those hotels
during a "cooling-off period". In conjunction with the temporary closing of the
Hotel on May 31, 2005 for renovation, Dow, acting as an agent for the Hotel,
entered into a memorandum of understanding with UNITE HERE on June 27, 2005,
regarding recall rights and health and welfare contributions for existing
employees to provide health and welfare eligibility for laid off employees
through the end of August.  All health and welfare benefit coverage obligations
of the Hotel will cease September 1, 2005. In addition, UNITE HERE has agreed
not to institute any strike action against the Hotel for at least six months
after its reopening, regardless of whatever labor actions it may be instituting
against other hotels in San Francisco.  The Partnership believes that the
agreement reached with the union will help minimize the risk of any labor
unrest when the Hotel reopens and resumes operations.

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.
As a result, cash distributions from Justice decreased to $953,000 in fiscal
2004 and no partnership distributions were paid during fiscal 2005. Justice
estimates that it will take approximately 14 to 20 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 Hilton 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

                                    -21-
<PAGE>

repositioning of the hotel.  Although the Partnership is not expected to see an
improvement in cash flows until the Hotel reopens in the first part of 2006, it
believes that the renovations to the Hotel, the new management
structure and the new Hilton brand will make the Hotel more competitive in the
future.  There will be a negative impact on the revenues from the hotel garage
during the transition period due to the shut down of the Hotel operations. Evon
has entered into a management agreement with a new garage operator, effective
September 1, 2005, and it is expected that the new operator will take
affirmative steps to help minimize the loss of garage revenues during the
transition period.

As discussed above, the Partnership will be expending significant amounts of
money to renovate and reposition the Hotel as Hilton.  During that transition
period, the Hotel will be shut down and revenues to the Partnership will be
limited to rentals received from the parking garage and Tru Spa. Thus, it is
expected that the Partnership will continue to incur losses during that time.
To meet its substantial financial commitments for the renovation project,
Justice will have to rely on additional borrowings to meet its obligations.
The Partnership anticipated that it would be able to finance the necessary
improvements to reposition the Hotel and to meet any operating cash flow needs
during the transition period from the proceeds of the settlement with Felcor
and through additional borrowings secured by the Hotel asset.

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, 2005, the outstanding principal balance on
the Partnership's line of credit was $7,131,000.

Subsequent to the fiscal year end, Justice entered into a first mortgage loan
(the "Prudential Loan") with The Prudential Insurance Company of America in a
principal amount of $30,000,000 on July 27, 2005.  The term of the Loan is for
120 months at a fixed interest rate of 5.22% per annum. The Loan calls for
monthly installments of principal and interest in the amount of approximately
$165,100, calculated on a 360 month amortization schedule. The Loan is
collateralized by a first deed of trust on the Partnership's Hotel property,
including all improvements and personal property thereon and an assignment of
all present and future leases and rents. The Loan is without recourse to the
limited and general partners of Justice.

On July 27, 2005, Justice also obtained a $10,000,000 Revolving Line of Credit
("LOC") from United Commercial Bank. The term of the LOC is for 60 months at an
annual interest rate based on the index selected by Justice at the time of the
request for each advance. The interest rate will either be a variable rate
equal to The Wall Street Journal Prime Rate or the Libor Rate plus 2%, fixed
for the period selected by the Partnership. The LOC is collateralized by a
second deed of trust on the Hotel property. Interest only is payable monthly
with principal and accrued interest due at maturity.

From the proceeds of the Prudential Loan, the Partnership retired its existing
line of credit in the approximate amount of $7,436,000, including accrued
interest, and paid off a short term uncollateralized line of credit from United
Commercial Bank in the amount of $2,007,000, including accrued interest.

                                    -22-
<PAGE>

Justice believes that the Prudential Loan and the LOC will provide sufficient
financial resources for the Partnership to complete the substantial renovations
to the Hotel required by its Franchise License Agreement with Hilton and to
meet is debt service and operating capital needs through the reopening of the
Hotel in the early part of 2006.  Partnership believes that, after the
reopening of the Hotel, the revenues expected to be generated from the Hotel
operations will be sufficient to meet all of its current and future obligations
and financial requirements.

That additional amount of leverage related to the Prudential Loan and the
utilization of the LOC and the associated debt service will create additional
risk for the Partnership and its ability to generate cash flows in the future
since the Hotel asset has been virtually debt free for many years. The
Partnership does not anticipate paying any partnership distributions until some
time after operations commence under the Hilton brand and net income and
capital requirements warrant such distributions.  As a result, the Company may
have to depend more on the revenues generated from the investment of its cash
and securities assets during that transition period.

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,
management believes that its cash, securities assets and capital resources and
the cash flows generated from those assets will be adequate to meet the
Company's current and future obligations.

The Company also does not have any material contractual obligations or
commercial commitments.


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,
          --------------------
                   2006                 $   33,000
                   2007                     36,000
                   2008                     39,000
                   2009                     41,000
                   2010                     45,000
                   Thereafter            2,087,000
                                         ---------
                            Total       $2,281,000
                                         =========


                                    -23-
<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 the hotel lessee 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.


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.

                                    -24-
<PAGE>





Item 7. Financial Statements

INDEX TO FINANCIAL STATEMENTS                                     PAGE

Report of Independent Registered Public Accounting Firm            25

Consolidated Balance Sheet -June 30, 2005                          26

Consolidated Statements of Operations - For
  Year Ended June 30, 2005 and
  Year Ended June 30, 2004                                         27

Consolidated Statements of Shareholders' Equity - For
  Year Ended June 30, 2005 and
  Year Ended June 30, 2004                                         28

Consolidated Statements of Cash Flows - For
  Year Ended June 30, 2005 and
  Year Ended June 30, 2004                                         29

Notes to Consolidated Financial Statements                         30



          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 sheets and the related
consolidated statements of operations, shareholders' equity and cash flows
present fairly, in all material respects, the financial position of Santa Fe
Financial Corporation at June 30, 2005, and the results of its operations and
its cash flows for each of the two years in the period ended June 30, 2005 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.

As discussed in Note 6 to the financial statements, the Company has restated
its June 30, 2003 shareholders' equity.

/s/ PricewaterhouseCoopers LLP

Irvine, California
October 17, 2005

                                    -25-
<PAGE>

                       SANTA FE FINANCIAL CORPORATION
                         CONSOLIDATED BALANCE SHEET


As of June 30,                                                  2005
                                                            ------------
Assets
  Cash and cash equivalents                                 $     72,000
  Investment in marketable securities                         12,962,000
  Investment in Justice Investors                              5,798,000
  Rental properties                                            4,623,000
  Other investments                                              815,000
  Deferred tax asset                                             415,000
  Other assets                                                   794,000
                                                              ----------
    Total assets                                            $ 25,479,000
                                                              ==========


Liabilities and Shareholders' Equity

Liabilities
  Due to securities broker                                  $  3,105,000
  Obligations for securities sold                              2,241,000
  Mortgage notes payable                                       2,281,000
  Accounts payable and accrued expenses                          203,000
                                                              ----------
    Total liabilities                                          7,830,000
                                                              ----------
  Minority interest                                            5,117,000
                                                              ----------

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 $859,000                             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                                            4,541,000
  Treasury stock, at cost, 97,828 shares                        (951,000)
                                                              ----------
    Total shareholders' equity                                12,532,000
                                                              ----------

    Total liabilities and shareholders' equity              $ 25,479,000
                                                              ==========

The accompanying notes are an integral part of the consolidated financial
statements.

                                    -26-
<PAGE>



<TABLE>
                      Santa Fe Financial Corporation
                   Consolidated Statements of Operations

For the year ended June 30,                         2005            2004
                                                ----------      ----------
<S>                                            <C>            <C>
Real estate operations:
  Rental income                                $   440,000    $    415,000
  Property operating expense                      (147,000)       (168,000)
  Mortgage interest expense                       (201,000)       (203,000)
  Depreciation expense                             (73,000)        (74,000)
                                                ----------      ----------
    Income(loss) from real estate operations        19,000         (30,000)
                                                ----------      ----------

  General and administrative expense              (830,000)       (888,000)
                                                ----------      ----------
  Equity in net income(loss) of Justice
   Investors                                    (2,188,000)      3,332,000
                                                 ---------      ----------
Other income(loss):
  Net gains(losses) on marketable securities    (2,188,000)      5,000,000
  Impairment loss on other investments             (84,000)       (220,000)
  Dividend and interest income                     458,000         343,000
  Margin interest and trading expenses            (587,000)     (1,148,000)
  Other income                                     121,000          58,000
                                                ----------      ----------
    Total other income(loss)                    (2,280,000)      4,033,000
                                                ----------      ----------
Income(loss) before income taxes and
 minority interest                              (5,279,000)      6,447,000

Income tax benefit(expense)                      2,207,000      (2,749,000)
                                                ----------      ----------
Income(loss) before minority interest           (3,072,000)      3,698,000

Minority interest benefit(expense)                 772,000      (1,003,000)
                                                ----------      ----------
Net income(loss)                               $(2,300,000)    $ 2,695,000

Preferred stock dividend                           (52,000)        (52,000)
                                                ----------      ----------
Income(loss) available to common shareholders  $(2,352,000)    $ 2,643,000
                                                ==========      ==========
Basic income(loss) per share                   $     (2.00)    $      2.24
                                                ==========      ==========
Weighted average number of shares
  outstanding                                    1,178,210       1,178,210
                                                ==========      ==========
</TABLE>


The accompanying notes are an integral part of the consolidated financial
statements.

                                    -27-
<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
                                                                     (Restated)
                ------  -------   ---------  ---------   ----------   ----------   ---------   -----------
<S>             <C>      <C>      <C>        <C>        <C>          <C>          <C>         <C>
Balance at
June 30, 2003   63,600   $6,000   1,276,038  $128,000   $8,808,000   $4,250,000   $(951,000)  $12,241,000

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   $6,893,000   $(951,000)  $14,884,000


Net loss                                                             (2,300,000)               (2,300,000)

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

                ------  -------   ---------  ---------  ----------   ----------   ---------   -----------
Balance at
June 30, 2005   63,600   $6,000   1,276,038  $128,000   $8,808,000   $4,541,000   $(951,000)  $12,532,000
                ======   ======   =========  ========   ==========   ==========   =========   ===========

</TABLE>


The accompanying notes are an integral part of the consolidated financial
statements.

                                    -28-
<PAGE>




                        Santa Fe Financial Corporation
                     Consolidated Statements of Cash Flows


For the year ended June 30,                            2005          2004
                                                    ----------    ----------
Cash flows from operating activities:
  Net income(loss)                                 $(2,300,000)  $ 2,695,000
  Adjustments to reconcile net income(loss)
   to net cash used in operating activities:
    Equity in net loss(income) of Justice
     Investors                                       2,188,000    (3,332,000)
    Net unrealized losses(gains) on marketable
     securities                                      3,271,000      (662,000)
    Impairment loss on other investments                84,000       220,000
    Minority interest                                 (772,000)    1,003,000
    Depreciation expense                                73,000        74,000
    Changes in operating assets and liabilities:
      Investment in marketable securities           10,530,000    (3,627,000)
      Other investments                                 81,000      (850,000)
      Other assets                                    (478,000)      550,000
      Accounts payable and accrued expenses           (678,000)      257,000
      Deferred income tax                           (1,260,000)    1,160,000
      Due to securities broker                      (7,097,000)    4,367,000
      Obligations for securities sold               (3,672,000)   (2,491,000)
                                                    ----------    ----------
  Net cash used in operating activities                (30,000)     (636,000)
                                                    ----------    ----------
Cash flows from investing activities:
  Cash distributions from Justice Investors                  -       953,000
                                                    ----------    ----------
  Net cash provided by investing activities                  -       953,000
                                                    ----------    ----------
Cash flows from financing activities:
  Principal payments on mortgage payable               (31,000)      (28,000)
  Dividends paid to preferred shareholders             (52,000)      (52,000)
  Dividends paid to minority shareholders                    -      (174,000)
                                                    ----------    ----------
  Net cash used in financing activities                (83,000)     (254,000)
                                                    ----------    ----------
Net increase(decrease) in cash and cash
  equivalents                                         (113,000)       63,000

Cash and cash equivalents at beginning of period       185,000       122,000
                                                    ----------    ----------
Cash and cash equivalents at end of period         $    72,000   $   185,000
                                                    ==========    ==========
Supplemental information
  Income taxes paid, net of refunds                $     4,000   $   120,000
                                                    ==========    ==========
  Interest paid                                    $   461,000   $   533,000
                                                    ==========    ==========

The accompanying notes are an integral part of the consolidated financial
statements.

                                    -29-
<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
the interest of its 68.8%-owned subsidiary, Portsmouth Square, Inc.
("Portsmouth"), in Justice Investors ("Justice" or the "Partnership") 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 76.5% 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.

Portsmouth's primary source of revenue is from its 49.8% interest in Justice
Investors, a California limited partnership ("Justice" or the "Partnership") in
which Portsmouth serves as both a general and limited partner.  Justice owns
the land, improvements and leaseholds at 750 Kearny Street, San Francisco,
California, formerly known as the Holiday Inn Select Downtown & Spa.
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.

With the termination of the Hotel Lease, Justice assumed the role of an owner
operator of the Hotel on July 1, 2004.  On May 19, 2004, Justice entered into a
third party Management Agreement with Dow Hotel Company to operate and manage
the Hotel as an agent of the Partnership, effective July 1, 2004. On December
10, 2004, the Partnership entered into a Franchise License Agreement with
Hilton Hotels Corporation (the "Hilton Franchise Agreement") for the right to
operate the Hotel as a Hilton brand hotel.  Prior to operating as a Hilton, the
Partnership is required to make substantial renovations to the Hotel. The
Partnership elected to shut down the operations of the Hotel, effective May 31,
2005, to complete those renovations and the Hotel is expected to reopen in the
early part of calendar year 2006 as the Hilton San Francisco Financial
District.

During the closure of the Hotel for renovations, there will be no income from
operations of the Hotel and the Partnership expects losses during that period.
The Partnership also has substantial financial commitments to make the
renovations to the Hotel. Justice currently estimates that the cost of the
renovation project will be approximately $34 million.  That amount includes
approximately $29 million for the actual cost of the renovations and
approximately $5 million for construction interest and estimated carrying

                                    -30-
<PAGE>

costs of operations during the renovation period. As discussed for fully in
Note 7, the Partnership obtained a $30,000,000 first mortgage loan and a
$10,000,000 variable rate line of credit on July 27, 2005. The Partnership
believes that these new financings will provide the resources necessary for the
Partnership to complete the renovations to the Hotel required by the Hilton
Franchise Agreement and meet its debt service requirements and operating
capital needs through the reopening of the Hotel in the early part of 2006.

The Partnership also derives income from the lease of the garage portion of the
property to Evon Corporation and from a lease of a portion of the lobby of the
Hotel to Tru Spa.  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.


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

Cash equivalents consist of highly liquid investments with an original maturity
of three months or less when purchased and are carried at cost, which
approximates fair value.

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. These advanced funds
are recorded as a liability.

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.

                                    -31-
<PAGE>

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 fiscal 2005 and 2004.

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.  Portsmouth records 49.8% of any loss or
income from Justice Investors on a quarterly basis and this amount is disclosed
on the statement of operations under equity in net income(loss) of Justice
Investors.

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.

                                    -32-
<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,
2005, the conversion price is below the market value of the Company's common
stock, consequently, the preferred stock is considered dilutive.  As of June
30, 2004, the conversion price is above the market value of the Company's
common stock, consequently, the preferred stock is not considered dilutive. For
the year ended June 30, 2005, the Company had a net loss, as the result, the
basic and diluted earnings per share for the year ended June 30, 2005 and 2004
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.


NOTE 2 - INVESTMENT IN JUSTICE INVESTORS

One of the Company's principal sources of revenue is derived from the
management of its 68.8%-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. ("Felcor") 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, on 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

                                   -33-
<PAGE>


the Hotel. The Partnership also derives income from the lease of the garage
portion of the property to Evon and from a lease on the lobby level of the
Hotel to Tru Spa.  The Company also derives revenue from management fees from
Justice for actively managing the hotel as a general partner.

On December 10, 2004, Justice entered into a Franchise License Agreement for
the right to operate the Hotel property as a Hilton brand hotel. Prior to
operating the hotel as a Hilton, the Partnership is required to make
substantial renovations to the hotel to meet Hilton standards in accordance
with a product improvement plan agreed upon by Hilton and the Partnership, as
well as complying with other brand standards.  The Partnership currently
estimates that the cost of the renovation project will be approximately $34
million.  That amount includes approximately $29 million for the actual cost of
the renovations and approximately $5 million for construction interest and
estimated carrying costs of operations during the renovation period.
The Agreement requires that those renovations be complete and the Hotel
commence operations as a Hilton hotel no later than June 1, 2006.  The term of
the Agreement is for a period of 15 years commencing on the opening date, with
an option to extend the license term for another five years, subject to certain
conditions.

On March 15, 2005, the Partnership announced its decision to close down its
Hotel operations on or about June 1, 2005 to complete renovations of the Hotel
as required by the Hilton Agreement.  It is anticipated that the Hotel will be
closed for a period of approximately seven to nine months before a contemplated
reopening in the early part of 2006 as the "Hilton San Francisco Financial
District".  The below ground parking garage and Tru Spa located on the lobby
level of the Hotel, both of which are lessees of the Partnership, will remain
open during the renovation work.

Condensed financial statements for Justice Investors are as follows:


                            JUSTICE INVESTORS
                         CONDENSED BALANCE SHEET

As of June 30,                                                 2005
                                                            ----------
Assets
Total current assets                                       $ 1,277,000
Property, plant and equipment, net of
  accumulated depreciation of $13,405,000                    5,003,000
Land                                                         1,124,000
Construction in progress                                     7,952,000
Other assets                                                   133,000
                                                            ----------
    Total assets                                           $15,489,000
                                                            ==========

Liabilities and partners' capital
Total current liabilities                                  $ 4,444,000
Long term debt                                               7,131,000
Partners' capital                                            3,914,000
                                                            ----------
    Total liabilities and partners' capital                $15,489,000
                                                            ==========

                                    -34-
<PAGE>


                                JUSTICE INVESTORS
                        CONDENSED STATEMENTS OF OPERATIONS

For the year ended June 30,                    2005            2004
                                            ----------      ----------
Hotel revenue                            $  12,930,000     $         -
Hotel rent                                           -       2,617,000
Garage rent                                  1,005,000       1,274,000
Other income                                    53,000       5,477,000
Operating expenses                         (16,218,000)     (2,506,000)
Loss on disposition of assets               (1,991,000)              -
                                            ----------      ----------
Net income(loss)                         $  (4,221,000)    $ 6,862,000
                                            ==========      ==========


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, 2005, 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, 2005
                         Gross         Gross            Net             Market
Investment   Cost        Unrealized Gain Unrealized Loss  Unrealized Gain     Value
---------- -----------   --------------- ---------------  ---------------  ------------
<S>        <C>            <C>             <C>               <C>            <C>
Corporate
Equities   $11,664,000    $ 1,952,000     ($  654,000)      $1,298,000     $12,962,000

</TABLE>

Of the gross unrealized loss of $654,000, $311,000 of the loss is related to
securities held for over one year.

As of June 30, 2005, the Company had net other investments of $1,119,000.  This
balance includes total other investments of $1,423,000 net an impairment loss
of $304,000.  The investment is presented on the balance sheet as other
investments.

As of June 30, 2005, the Company had obligations for securities sold (equities
short) of $2,241,000.  The Company has no naked short positions.

Included in the net losses on marketable securities of $2,118,000 for the year
ended June 30, 2005, are net unrealized losses of $3,271,000 and net realized
gains of $1,083,000. 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. There were no gross unrealized
positions on any securities held which existed for more than one year.

                                    -35-
<PAGE>

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, 2005, rental
properties included the following:

  Land                                      $ 2,430,000
  Buildings, improvements and equipment       2,566,000
  Accumulated depreciation on buildings,
    improvements and equipment                 (373,000)
                                              ---------
                                             $4,623,000
                                              =========

NOTE 5 - MORTGAGE NOTES PAYABLE

At June 30, 2005, the balance on mortgage notes payable was $2,281,000.
Included in mortgage notes payable balance are two mortgages in the amounts of
$1,837,000 and $444,000.  The mortgages are collateralized by trust deeds on
the respective apartment complexes. The interest rates on the $1,837,000 note
and the $444,000 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, 2005 are approximately as follows:

          Year ending June 30,
          --------------------
                   2006                 $   33,000
                   2007                     36,000
                   2008                     39,000
                   2009                     41,000
                   2010                     45,000
                   Thereafter            2,087,000
                                         ---------
                            Total       $2,281,000
                                         =========


Note 6 - PRIOR PERIOD ADJUSTMENT

The Company has recorded $482,000 of deferred taxes at June 30, 2003 to
recognize the difference between the Company's book and tax basis on its
investment in Justice Investors which arose before June 30, 2003 and were not
previously recorded. This adjustment reduced shareholders' equity by $332,000
and minority interest by $150,000. The adjustment has no impact on the
Company's previously reported statements of operations or statements of cash
flows for the year ended June 30, 2004.

                                    -36-
<PAGE>


NOTE 7 - INCOME TAXES

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

For the year ended June 30,             2005          2004
                                     ----------    ----------
 Federal
   Current                          $         -   $   (95,000)
   Deferred                           1,712,000    (1,940,000)
                                     ----------    ----------
                                      1,712,000    (2,035,000)
                                     ----------    ----------
State
   Current                               38,000      (190,000)
   Deferred                             457,000      (524,000)
                                     ----------    ----------
                                        494,000      (714,000)
                                     ----------    ----------
                                    $ 2,207,000   $(2,749,000)
                                     ==========    ==========


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

For the year ended June 30,                2005          2004
                                         ------        ------
  Statutory federal tax rate              34.0%         34.0%
  State income taxes, net of
   federal tax benefit                     5.7%          6.0%
  Other                                    2.1%          2.6%
                                         ------        ------
                                          41.8%         42.6%
                                         ======        ======


The components of the Company's deferred tax assets and (liabilities) as of
June 30, 2005 are as follows:

  Deferred tax assets
    Net operating loss carryforwards                $ 2,632,000
    Capital losses carryforwards                        374,000
    Investment loss reserves                            130,000
                                                     ----------
                                                      3,136,000
  Deferred tax liability
    Deferred gains on real estate sale                 (852,000)
    Unrealized gains on marketable securities          (468,000)
    Book/tax basis difference in the investment
     In Justice Investors                            (1,378,000)
    State taxes                                         (23,000)
                                                     ----------

  Net deferred tax asset                            $   415,000
                                                     ==========


As of June 30, 2005, the Company had net operating losses (NOL) of $6,600,000
and $4,100,000 for federal and state purposes, respectively. Of this amount,
$4,000,000 and $1,700,000 can be used to offset Santa Fe's taxable income for
federal and state tax purposes, respectively. The remaining $2,600,000 and
$2,400,000 can be used to offset Portsmouth's taxable income for federal and
state tax purposes, respectively.  These carryforwards begin to expire in
varying amounts through 2025.


NOTE 8 - 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.

                                    -37-
<PAGE>

Information below represents reporting segments for the year ended June 30,
2005 and 2004.  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, 2005              PROPERTIES     INVESTORS   TRANSACTIONS     OTHER          TOTAL
                           -----------   -----------   -----------   -----------   ------------
<S>                        <C>           <C>          <C>           <C>            <C>
Operating income           $   440,000   $(2,188,000) $ (1,814,000) $          -   $ (3,562,000)
Operating expenses            (147,000)            -      (587,000)            -       (734,000)
                           -----------   -----------   -----------   -----------   ------------
Income(loss) before
  mortgage interest and
  depreciation                 293,000    (2,188,000)   (2,401,000)            -     (4,296,000)

Mortgage interest expense     (201,000)            -             -             -       (201,000)
Depreciation                   (73,000)            -             -             -        (73,000)
General and administrative
  expenses                           -             -             -      (830,000)      (830,000)
Other income                         -             -             -       121,000        121,000
Income tax benefit                   -             -             -     2,207,000      2,207,000
Minority interest                    -             -             -       772,000        772,000
                           -----------   -----------   -----------   -----------   ------------
Net income(losses)         $    19,000   $(2,188,000) $ (2,401,000)  $ 2,270,000   $ (2,300,000)
                           ===========   ===========   ===========   ===========   ============
Total Assets               $ 4,623,000   $ 5,798,000  $ 13,777,000   $ 1,281,000   $ 25,479,000
                           ===========   ===========   ===========   ===========   ============

</TABLE>
<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 expense     (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>

                                    -38-
<PAGE>

NOTE 9 - 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, 2005 and 2004, the Company paid
preferred stock dividends of $52,000 each year.


NOTE 10 - RELATED PARTY TRANSACTIONS

As of June 30, 2005, InterGroup owned approximately 71.4% of the Company's
outstanding common stock and 100% of the Company's preferred stock for a total
of 72.9% 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, 2005.  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
76.9% 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, 2005 and 2004, the Company and
Portsmouth made payments to InterGroup of approximately $167,000 each year 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, 2005 and 2004, 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, 2005 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.

                                    -39-
<PAGE>

Note 11 - SUBSEQUENT EVENTS

On July 27, 2005, Justice entered into a first mortgage loan (the "Prudential
Loan") with The Prudential Insurance Company of America in a principal amount
of $30,000,000.  The term of the Loan is for 120 months at a fixed interest
rate of 5.22% per annum. The Loan calls for monthly installments of principal
and interest in the amount of approximately $165,100, calculated on a 360 month
amortization schedule. The Loan is collateralized by a first deed of trust on
the Partnership's Hotel property, including all improvements and personal
property thereon and an assignment of all present and future leases and rents.
The Loan is without recourse to the limited and general partners of Justice.

On July 27, 2005, Justice also obtained a $10,000,000 Revolving Line of Credit
("LOC") from United Commercial Bank. The term of the LOC is for 60 months at an
annual interest rate based on the index selected by Justice at the time of the
request for each advance. The interest rate will either be a variable rate
equal to The Wall Street Journal Prime Rate or the Libor Rate plus 2%, fixed
for the period selected by the Partnership. The LOC is collateralized by a
second deed of trust on the Hotel property. Interest only is payable monthly
with principal and accrued interest due at maturity.

From the proceeds of the Prudential Loan, the Partnership retired its existing
line of credit in the approximate amount of $7,436,000, including accrued
interest, and paid off a short term uncollateralized line of credit from United
Commercial Bank in the amount of $2,007,000, including accrued interest.


Item 8. Changes in and Disagreements with Accountants on Accounting and
        Financial Disclosure.
 None.


Item 8A. Controls and Procedures.

(a) Disclosure Controls and Procedures.

During the fourth quarter of fiscal 2005, the Company found that there were
certain book and tax differences in the Company's investment in Justice
Investors which were not effectively reconciled.  As discussed in Note 6 of the
Notes to the Financial Statements, the Company reduced its shareholders' equity
and minority interest at June 30, 2003, to provide for deferred taxes on the
differences between the Company's book and tax basis of its investment in
Justice Investors. The adjustment had no impact on the Company's previously
reported statements of operations or statements of cash flows for the year
ended June 30, 2004.

Subsequent to fiscal year 2003, the Company instituted procedures and controls
to address any deficiencies in its disclosure controls and procedures related
to the determination and reporting of its deferred income tax balances,
including the retention of outside tax consultants and implementing a program
of continuous review and reconciliation of any differences on the book and tax
basis of its assets.

The Company's management, with the participation of the Company's Chief
Executive Officer and the Chief Financial Officer, has evaluated 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/A.  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, including those related to its deferred tax balances, are

                                    -40-
<PAGE>

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.

Management continues to re-evaluate the Company's existing disclosure controls
and procedures and will implement such other changes as may be necessary.

Management's Consideration of the Restatement

Management considered the impact on the Company's internal control over
financial reporting of the restatement related to deferred income taxes as more
fully described in Note 6 of the Notes to the Financial Statements included in
Item 7 of this Annual Report on Form 10-KSB/A.  The Company found that there
were certain book and tax differences in the Company's investment in Justice
Investors which were not effectively reconciled.  The Company completed an
assessment of materiality under Staff Accounting Bulletin ("SAB") No. 99 and as
a result concluded that the restatement related to deferred income taxes was
not material to the balance sheets, the statements of operations, and the
statements of cash flows for the years ended June 30, 2004 and 2005.
Accordingly, because management concluded that a material misstatement did not
occur with respect to this matter, management has concluded that there was not
a material weakness in its internal control over financial reporting as of June
30, 2005.

(b) Changes in 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/A that have materially affected, or are reasonably likely to
materially affect, the Company's internal control over financial reporting.

Item 8B. Other Information.

None.


                               PART III

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

The following table sets forth certain information with respect to the
Directors and Executive Officers of the Company as of June 30, 2005:

<TABLE>

                                  Present
                                  Position           Director
     Name             Age      With the Company        Since       Term to Expire
--------------------------------------------------------------------------------------
<S>                   <C>      <C>                     <C>         <C>
John V. Winfield      58       Chairman, President     1995        2005 Annual Meeting
                               and Chief Executive
                               Officer (1)

William J. Nance      61       Director (1)(2)         1996        2005 Annual Meeting

John C. Love          64       Director (1)(2)         1998        2005 Annual Meeting

Michael G. Zybala     53       Vice President,
                               Secretary, and
                               General Counsel         N/A         N/A

David T. Nguyen       32       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.


                                    -41-
<PAGE>

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.

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 and
hotel broker.  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.

                                    -42-
<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 believes that during fiscal 2005 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, 2005, 2004 and 2003.


                            SUMMARY COMPENSATION TABLE

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

John V. Winfield               2005    $255,000(1)   $ 61,000(2)  $12,000(3)
Chairman, President and        2004    $240,000(1)   $618,000(2)  $12,000(3)
Chief Executive Officer        2003    $200,000(1)   $654,000(2)  $12,000(3)

Michael G. Zybala              2005    $ 63,000(4)   $  6,000           -
Vice President, Secretary,     2004    $ 63,000(4)   $      -           -
and General Counsel            2003    $ 47,000(4)   $  2,000           -
-------------------------

(1) Includes salary received from the Company's subsidiary, Portsmouth, in the
amounts of $128,000, $92,000 and $77,000 for the fiscal years 2005, 2004 and
2003 respectively. Does not include compensation received from Santa Fe's
parent corporation, InterGroup, of $830,000, $1,729,000 and $948,000 for fiscal
years ended June 30, 2005, 2004 and 2003, respectively.

                                    -43-
<PAGE>

(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, 2005, 2004 and 2003. Of the total
amount of the bonus, $4,000 was paid by Portsmouth in fiscal 2005, $407,000 was
paid in fiscal 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 2005, 2004 and 2003,
the Company and Portsmouth also paid combined annual premiums of $42,500, for
each respective year, 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. The premiums associated with that spilt dollar policy are
considered additional compensation to Mr. Winfield.

(4) Approximately $50,000, $50,000, $38,000 of Mr. Zybala's salary and bonus
was allocated to Portsmouth in fiscal years 2005, 2004 and 2003, respectively.
Does not include total compensation received from Santa Fe's parent
corporation, InterGroup, of $23,000, $29,000 and $16,000 for fiscal years ended
June 30, 2005, 2004 and 2003, 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

                                    -44-
<PAGE>

officer and certain other highly compensated officers to the extent that such
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 12, 2005, 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")          93,058(3)                   7.9%
Allied Mutual Insurance
  Services ("AMI")
First Floor, Times Place,
45 Pall Mall
London SW1Y 5GP, UK

The InterGroup Corporation              905,064(4)                  72.9%
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          954,464(5)                  76.9%
  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 12, 2005, plus any securities
    that person has the right to acquire within 60 days pursuant to options,
    warrants, conversion privileges or other rights.

                                    -45-
<PAGE>

 (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,
    or to direct the vote, and to dispose of, or to direct the disposition of,
    93,058 shares of Santa Fe's Common Stock owned of record by AMI.

(4) InterGroup is the beneficial owner of 841,464 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 61.5% 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 12, 2005, 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                        954,464(3)                  76.9%
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             954,464                     76.9%
---------------------------
* 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 12, 2005, plus any securities
    that person has the right to acquire within 60 days pursuant to options,
    warrants, conversion privileges or other rights.

                                    -46-
<PAGE>

 (3) John V. Winfield is the sole beneficial owner of 49,400 shares of Common
    Stock.  InterGroup is the beneficial owner of 841,464 shares of Common
    Stock and 63,600 shares of convertible, voting preferred stock.  As the
    President, Chairman of the Board and a 61.5% 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 3.2% shareholder of InterGroup as well as a
    Director thereof.  John C. Love is also a Director of InterGroup and a
    1.1% shareholder.


Security Ownership of Management in Subsidiary

As of September 12, 2005, Santa Fe was the record and beneficial owner of
505,437 shares of its subsidiary, Portsmouth, and 57,600 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 76.7% 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 12, 2005, Santa Fe and InterGroup owned 76.7% of the common
stock of Portsmouth, and InterGroup and John V. Winfield, in the aggregate,
owned approximately 76.9% 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, 2005 and 2004, the Company
and Portsmouth made payments to InterGroup of approximately $167,000 each year,
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 each of the fiscal years 2005 and 2004, the Company paid $52,000 in
preferred stock dividends to InterGroup.

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

                                    -47-
<PAGE>

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, 2005 and 2004, Mr. Winfield was paid
performance based compensation of $61,000 and $618,000, 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 2005
and 2004, 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 2005 and 2004,
Portsmouth paid annual premiums of $17,000 for a split dollar policy also
covering Mr. Winfield. The premiums associated with that spilt dollar policy
are considered additional compensation to 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.

                                    -48-
<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.

                                    -49-
<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
     -------------------

No Reports on Form 8-K were filed by the Company during the last quarter of the
period covered by this Report.


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

The following financial statements of Justice Investors are included in
Item 13:
                                                              PAGE
                                                              ----
(1) Report on Audit of Financial Statements of
    Justice Investors for the six months ended June 30,
    2005 with the consolidated totals for the year
    ended December 31, 2004:

Report of Independent Registered Public                        F-1
  Accounting Firm dated August 1, 2005

Consolidating Balance Sheets - June 30, 2005 and               F-2
  December 31, 2004

Consolidating Statements of Income and Partners'               F-3
  Capital - six months ended June 30, 2005 and
  year ended December 31, 2004

Consolidating Statement of Cash Flow - six months              F-4
  ended June 30, 2005 and year ended December 30, 2004

Notes to the Consolidating Financial Statements                F-5

Supplemental Schedules                                         F-17


(2) Report on Audits of Financial Statements of
    Justice Investors for the years ended December 31,
    2003 and December 31, 2002:

Independent Auditor's Report Dated January 27, 2004            F-21

Balance Sheets -- December 31, 2003 and 2002                   F-22

Statements of Income and Partners' Capital - Years             F-23
  Ended December 31, 2003 and 2002

Statements of Cash Flows - Years Ended                         F-24
  December 31, 2003 and 2002

Notes to the Financial Statements                              F-25

                                    -50-
<PAGE>

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.


Item 14.  Principal Accountant Fees and Services.

Audit Fees - The aggregate fees billed for each of the last two fiscal years
ended June 30, 2005 and 2004 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
                                       --------------------
                                         2005        2004
                                       --------    --------
        Audit Fees                     $ 99,000    $ 81,000
        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.

                                    -51-
<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: April 25, 2006                          by /s/ John V. Winfield
      --------------                             ---------------------------
                                                 John V. Winfield, President,
                                                 Chairman of the Board and
                                                 Chief Executive Officer

Date: April 25, 2006                          by /s/ Michael G. Zybala
      --------------                             ---------------------------
                                                 Michael G. Zybala,
                                                 Vice President and Secretary

Date: April 25, 2006                          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: April 25, 2006                  /s/ John V. Winfield
      --------------                  ---------------------------------------
                                      John V. Winfield, Chairman of the Board


Date: April 25, 2006                  /s/ John C. Love
      --------------                  ---------------------------------------
                                      John C. Love
                                      Director

Date: April 25, 2006                  /s/ William J. Nance
      --------------                  ---------------------------------------
                                      William J. Nance,
                                      Director

                                    -52-
<PAGE>


                    REPORT OF INDEPENDENT REGISTERED
                       PUBLIC ACCOUNTING FIRM

To the Partners
Justice Investors
San Francisco, California

We have audited the accompanying consolidating balance sheet of Justice
Investors (a limited partnership) as of June 30, 2005, and December 31, 2004,
and the related consolidating statements of income, partners' capital and cash
flows for the six months ended June 30, 2005 and twelve-month ended December
31, 2004.  These consolidating financial statements are the responsibility of
the Partnership's management.  Our responsibility is to express an opinion on
these financial statements based on our audits.

We conducted our audits in accordance with 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 consolidating financial statements.  An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.  We believe
that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidating financial statements referred to above
present fairly, in all material respects, the consolidating financial position
of Justice Investors (a limited partnership) as of June 30, 2005, and December
31, 2004 and the results of its operations and its cash flows for the six
months ended June 30, 2005 and the twelve-months ended December 31, 2004, in
conformity with accounting principles generally accepted in the United States
of America.

Our audit was conducted for the purpose of forming an opinion on the
consolidating financial statements taken as a whole.  The information in
Schedule I-IV is presented for purposes of additional analysis of the
consolidating financial statements and is not required part of the basic
financial statements.  Such information has been subjected to the auditing
procedures applied in the audits of the consolidating financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
consolidating financial statements taken as a whole.

As discussed in Note 1 and 12 to the financial statements, on May 31, 2005, the
Partnership closed down and suspended the Hotel operations during
reconstruction of the Hotel. It was anticipated that the Hotel would reopen
promptly after renovations were completed.


/S/ Burr, Pilger & Mayer LLP

San Francisco, California
August 1, 2005, except for Note 10,
 as to which date is August 12, 2005

                                    F-1

<PAGE>


                                JUSTICE INVESTORS
                          (a limited partnership)
                        CONSOLIDATING BALANCE SHEET
                              June 30, 2005
               with consolidating totals for December 31, 2004

<TABLE>
                                                          2005                             2004
                                       ---------------------------------------------    ---------
                                                                Elimi-     Consoli-      Consoli-
               ASSETS                   Justice      Hotel     nations      dated         dated
                                       ---------   ---------  ---------    ---------    ----------
<S>                                  <C>          <C>       <C>          <C>           <C>
Current assets:
 Cash                                $     7,249  $182,341  $         -  $   189,590   $ 4,580,284
 Accounts receivable (net of
   allowance for doubtful accounts
   of $19,084)                                 -    57,524            -       57,524       604,418
 Rents receivable garage-related
   party                                  62,248         -            -       62,248        76,746
 Rents receivable-other                    6,151         -            -        6,151        26,999
 Inventory                                     -     2,294            -        2,294         1,059
 Prepaid Expenses                        859,708    67,397            -      927,105       219,648
 Deposits                                      -    31,675            -       31,675        31,675
 Advances to hotel                     1,797,813         -   (1,797,813)           -             -
                                      ----------   -------   ----------   ----------    ----------
      Total current assets             2,733,169   341,231   (1,797,813)   1,276,587     5,540,829
                                      ----------   -------   -----------  ----------    ----------
Property and equipment:
 Furniture and equipment (net of         857,530         -            -      857,530       859,352
   accumulated depreciation of
   $331,160 at June 30, 2005 and
   $244,721 at December 31, 2004)
 Building and improvements (net of     4,145,802         -            -    4,145,802     6,232,536
   accumulated depreciation of
   $13,073,705 at June 30, 2005 and
   $13,242,650 at December 31, 2004)
 Construction in progress              7,693,859         -       258,501   7,952,360       646,722
 Land                                  1,124,128         -             -   1,124,128     1,124,128
                                      ----------   -------   -----------  ----------    ----------
      Total property and equipment    13,821,319         -       258,501  14,079,820     8,862,738
                                      ----------   -------   -----------  ----------    ----------
Other assets, net                        133,141         -             -     133,141       106,283
                                     $16,687,629  $341,231  $(1,539,312) $15,489,548   $14,509,850
                                      ==========   =======   ===========  ==========    ==========

 LIABILITIES AND PARTNERS CAPITAL

Current liabilities:
 Trade accounts payable and          $ 3,707,690  $640,335            -  $ 4,348,025   $ 1,893,854
   accrued expenses
 Advance deposits                              -         -            -            -        15,497
 Rent received in advance                  2,183         -            -        2,183             -
 Accrued repositioning fee                61,111         -            -       61,111             -
 Due to management company                     -    15,000            -       15,000        15,715
                                      ----------   -------   ----------   ----------    ----------
      Total current liabilities        3,770,984   655,335            -    4,426,319     1,925,066
                                      ----------   -------   ----------   ----------    ----------
Long-term debt                         7,131,323         -            -    7,131,323     4,779,713
Other long-term liabilities-deposit       17,781         -            -       19,781        35,000
                                      ----------   -------   ----------   ----------    ----------
      Total long-term liabilities      7,149,104         -            -    7,149,104     4,814,713
                                      ----------   -------   ----------   ----------    ----------
      Total Liabilities               10,920,088   655,355            -   11,575,423     6,739,779
Partners' capital                      5,767,541  (314,104) $(1,539,312)   3,914,125     7,770,071
                                      ----------   -------   ----------   ----------    ----------
                                     $16,687,629  $341,231  $(1,539,312) $15,489,548   $14,509,850
                                      ==========   =======   ==========   ==========    ==========
</TABLE>

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

                                    F-2

<PAGE>

                                JUSTICE INVESTORS
                          (a limited partnership)
            CONSOLIDATING STATEMENT OF INCOME AND PARTNERS' CAPITAL
                   for the six months ended June 30, 2005
               with consolidating totals for December 31, 2004

<TABLE>
                                                          2005                             2004
                                       ---------------------------------------------   ----------
                                                                Elimi-     Consoli-      Consoli-
                                        Justice      Hotel     nations      dated         dated
                                       ---------   ---------  ---------    ---------    ----------
<S>                                   <C>         <C>         <C>         <C>         <C>
Operating revenue:
 Rent-garage-related party            $  455,279  $        -  $        -  $  455,279  $ 1,150,709
 Rent-other                               98,301           -           -      98,301      176,539
 Rent-hotel                                    -           -           -           -    1,367,086
 Room revenue                                  -   4,502,233           -   4,502,233    6,745,744
 Food and beverage revenue                     -     494,288           -     494,288      926,827
 Other operating departments                   -     127,289           -     127,289      133,344
                                       ---------   ---------   ---------   ---------   ----------
      Total operating revenue            553,580   5,123,810           -   5,677,390   10,500,249
                                       ---------   ---------   ---------  ----------   ----------
Operating expenses:
 Rooms                                         -   2,478,882           -   2,478,882    2,938,186
 Food and beverage                             -     919,644           -     919,644    1,157,423
 Other operating departments                   -     162,871           -     162,871      188,948
 Depreciation and amortization           305,497           -           -     305,497      572,434
 Lease commission                              -           -           -           -       13,477
 Property taxes                           23,077     137,498           -     160,575      194,636
 General and administrative              642,810     791,048           -   1,433,858    2,317,437
 Credit card commissions                       -      89,328           -      89,328      122,626
 Advertising and sales                         -     396,588           -     396,588      451,158
 Utilities                                     -     333,969           -     333,969      491,842
 Repairs and maintenance                       -     473,903           -     493,903      579,452
 Franchise fees                                -     296,728           -     296,728      438,473
 Management fees                               -     104,477           -     104,477      136,659
 Insurance expense                             -     372,678           -     372,678      369,973
 CEP fee                                       -     102,260    (102,260)          -            -
 Miscellaneous                                 -      13,005           -      13,005       22,664
                                       ---------   ---------   ---------  ----------   ----------
      Total operating expenses           971,384   6,672,879    (102,260)  7,542,003    9,995,388
                                       ---------   ---------   ---------  ----------   ----------
Other income (expense):
 Lease termination settlement income           -           -           -           -    5,000,000
 Write-off of deferred lease costs             -           -           -           -       (7,754)
 Loss on disposition of assets  -
   From 1997 and 2003                 (1,920,139)          -           -  (1,920,139)           -
 Chinese Culture lease expense           (38,633)          -                 (38,633)           -
 Interest expense                        (40,914)          -           -     (40,914)    (166,583)
 Interest income                           8,353           -           -       8,353       35,312
                                      ----------   ---------   ---------  ----------    ---------
      Total other (expense) income    (1,991,333)          -           -  (1,991,333)   4,860,975
                                      ----------   ---------   ---------  ----------   ----------
      Net (loss) income               (2,409,137) (1,549,069)    102,260  (3,855,946)   5,365,836

Capital at beginning of period-
  January 1, 2005 and 2004             8,176,678    (170,896)   (235,711)  7,770,071    3,042,635
Contributions                                  -   1,405,861  (1,405,861)          -            -
Less distributions                             -           -           -           -     (638,400)
                                       ---------   ---------   ---------   ---------   ----------
Capital at end of period-June 30,
 2005 and December 31, 2004           $5,767,541  $ (314,104) $(1,539,312) $3,914,125  $7,770,071
                                       =========   =========   ==========   =========   =========

</TABLE>

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

                                    F-3

<PAGE>

                                JUSTICE INVESTORS
                          (a limited partnership)
                    CONSOLIDATING STATEMENT OF CASH FLOWS
                   for the six months ended June 30, 2005
               with consolidating totals for December 31, 2004

<TABLE>
                                                          2005                             2004
                                    ------------------------------------------------   ----------
                                                                Elimi-     Consoli-      Consoli-
                                     Justice       Hotel       nations      dated         dated
                                    ----------   ----------   ---------   ----------    ----------
<S>                                <C>          <C>          <C>         <C>           <C>
Cash flows from operating
   activities:
 Net (loss) income                 $(2,409,137) $(1,549,069) $  102,260  $(3,855,946)  $5,365,836
 Adjustments to reconcile net
   (loss) income to net cash
   provided by (used in)
   operating activities:
  Allowance for doubtful accounts            -      (12,544)          -      (12,544)      19,084
  Depreciation and amortization        302,355            -           -      302,355      572,434
  Loss on disposition of assets      1,920,139            -           -    1,920,139            -
  Write-off of lease costs                   -            -           -            -        7,754
 Changes in operating assets
   and liabilities:
  Decrease in rents receivable          35,346            -           -       31,530            -
  Decrease (increase) in accounts
   receivable                                -      559,438           -      559,438     (623,502)
  Decrease in accounts receivable
   -Justice                                  -       31,530           -       31,530            -
  Increase in advances to Hotel     (1,467,084)           -   1,467,084            -            -
  Decrease (increase) in
   prepaid expenses                   (829,153)     121,696           -     (707,457)    (219,648)
  Decrease(increase) in inventory            -       59,988     (61,223)      (1,235)      (1,059)
  Increase in deposits                       -            -           -            -      (31,675)
  Increase on other assets             (26,858)           -           -      (26,858)           -
  Increase(decrease) in trade
   accounts payable and
   accrued expenses                  3,385,806     (963,165)          -    2,422,641    1,513,669
  Decrease in rents received
   in advance                                -            -           -            -      (19,592)
  Increase in due to owner                   -      (17,967)     17,967            -            -
  Decrease in due to management              -         (715)          -         (715)      15,715
  Increase in deposits received         43,892            -           -       43,892       35,000
  Decrease in due to partner                 -      (15,497)          -      (15,497)      15,497
  Increase in rents in advance           2,183            -           -        2,183            -
                                    ----------   ----------   ---------   ----------    ---------
   Net cash provided (used in)
    by operating activities            957,489   (1,786,305)  1,526,088      697,272    6,716,086
                                    ----------   ----------   ---------   ----------    ---------
Cash flows from investing
   activities:
  Purchase of property and
   equipment and construction
   in progress                      (7,317,066)           -    (138,800)  (7,455,866)  (2,374,915)
  Proceeds from sale of assets          16,290            -           -       16,290            -
                                    ----------    ---------   ---------   ----------   ----------
   Net cash used in investment
    activities                      (7,300,776)           -    (138,800)  (7,455,866)  (2,374,915)
                                    ----------    ---------   ---------   ----------   ----------

Cash flows from financing
   activities:
 Contributions                               -    1,405,861  (1,405,861)           -            -
 Net proceeds on long-term debt      2,351,610            -           -    2,351,610      877,513
 Distributions to partners                   -            -           -            -     (638,400)
                                    ----------   ----------   ---------   ----------  -----------
   Net cash used in financing
    activities                       2,351,610    1,405,861  (1,405,861)   2,351,610      239,113
                                    ----------   ----------  ----------   ----------  -----------
   Net (decrease) increase
    in cash                         (3,991,677)    (380,444)    (18,573)  (4,390,694)   4,580,284
Cash at beginning of year            3,998,926      562,785      18,573    4,580,284            -
                                    ----------   ----------   ---------   ----------    ---------
Cash at end of year                $     7,249  $   182,341  $        -  $   189,590   $4,580,284
                                    ==========   ==========   =========   ==========    =========
Supplemental disclosures of
   cash flows information-
   cash paid during the year for:

 Interest                          $    18,414  $         -  $        -  $    18,414   $  161,927
                                    ==========   ==========   =========   ==========    =========
 Franchise taxes                   $       800  $         -  $        -  $       800   $      800
                                    ==========   ==========   =========   ==========    =========

</TABLE>

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

                                    F-4

<PAGE>

                              JUSTICE INVESTORS
                           (a limited partnership)
                 Notes to the Consolidating 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 Hotel property was leased
to Felcor Lodging Trust, Inc. (Felcor).  The Partnership leases the parking
garage to Evon Garage Corporation (Evon), the managing general partner.  The
parking garage lease provides for payments of certain percentages of parking
receipts through November 30, 2010.  The Partnership leases space to Tru Spa.
The spa lease provides for minimum and additional rent payments every month
through May 31, 2013.

In the later 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, the manager of the Hotel 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 deferred
maintenance and repairs provisions.

During 2004, the Partnership settled its disputes with Felcor and Holiday Inn
regarding the deferred maintenance and repairs.  The Partnership received a
settlement payment of $5,000,000 in 2004, which is included in miscellaneous
income in the accompanying income statement.  Also, in connection with the
settlement, Holiday Inn was terminated as the manager of the Hotel and the
Hotel lease was terminated effective June 30, 2004.

Effective July 1, 2004, Dow Hotel Company replaced Holiday Inn as the
management company of the Hotel and assumed control of the Hotel's day-to-day
operations.  Prior to July 1, 2004 Justice recorded the rent payment of
$1,250,000 from Felcor as revenue.  As result of the termination of the lease
with Felcor and the change in management company to Dow Hotel Company there
will be no more rent payments as of July 1, 2004.  The operations of the Hotel
are now recorded as part of the Partnership's operations.  The Hotel operations
and Justice's operations will be shown separately in the financial statements
and will be consolidated.

The Partnership entered into a short term franchise agreement with Holiday
Hospitality Franchising, Inc. to continue to utilize the Holiday Inn brand
(flag) until such time as they bring in a replacement flag.

In order to bring in a new flag the Partnership must commit to renovate and
reposition the Hotel.  During December 2004, the Partnership entered into a
franchise agreement (the Hilton agreement) with the Hilton Hotels Corporation
(Hilton).  Prior to operating the Hotel as a Hilton Hotel, the Partnership is
required to make substantial renovations to the Hotel to meet Hilton standards
in accordance with a product improvement plan agreed upon by Hilton and the
Partnership, as well as complying with other brand standards established by
Hilton and generally applicable to the Hotel.  The Partnership estimates that
the cost of the renovations will be approximately $33 million.  This amount
includes $28 million for actual cost of renovation and $5 million for
construction interest and estimated carrying costs of operations.  The Hilton
agreement requires that those renovations be complete and the Hotel commence
operations as a Hilton hotel no later than June 1, 2006.  The Hilton agreement
has a term of 15 years commencing on the opening date, with an option to extend
the Hilton agreement for another five years, subject to certain conditions.

                                Continued

                                   F-5


<PAGE>

                              JUSTICE INVESTORS
                           (a limited partnership)
          Notes to the Consolidating Financial Statements, Continued


1.  Organization, continued

The Partnership considered the benefits and detriments of closing the Hotel
during reconstruction.  The Partnership considered the increased cost of
reconstruction while maintaining operations as opposed to the generation of
income during reconstruction; the anticipated timing of reconstruction while
the Hotel was opened as opposed to closed; the potential liability facing the
Hotel during construction; the advice of the management company of the Hotel;
issues involved in attempting to maintain satisfactory guest services during
the renovation; health and safety concerns relating to construction activities
including the result of an asbestos remediation; issues involved in the health
and safety of Hotel workers; the anticipated lessened duration of the
completion of the renovation work if the Hotel was totally shut down versus
keeping it opened; and other factors.  Based on the presentations made and the
considerations undertaken by the Partnership, the Partnership determined that
it would be in its best interests to suspend Hotel operations during
reconstruction of the Hotel.  The Hotel portion of the property is temporarily
closed for the renovations and it is anticipated that the Hotel will reopen as
the "Hilton San Francisco Financial District" during the first part of 2006.
The below ground parking garage and Tru Spa located on the lobby level of the
Hotel, have remained open during the renovation work.


2.  Summary of Significant Accounting Policies

Basis of Consolidation

The consolidating financial statements include the consolidated accounts of the
Hotel operations and Justice.  All inter-company transactions and accounts have
been eliminated in consolidation.

Allocations

Net profits, losses and cash flows from operations are to be allocated among
the Partners in proportion to their respective Partnership interests.

Cash and Cash Equivalents

The Partnership considers all highly liquid investments with original
maturities of three months or less to be cash equivalents.

Accounts Receivable

The Partnership carries its accounts receivable at cost less an allowance for
doubtful accounts which is based on management's assessment of the
collectibility of accounts receivable.  The Partnership extends unsecured
credit to its customers but mitigates the associated credit risk by performing
ongoing credit evaluations of its customers.  The allowance for doubtful
account policy is 20% of 60-day accounts; 75% of 90-day accounts; 100% of over
90-day accounts.

                                 Continued

                                    F-6

<PAGE>

                             JUSTICE INVESTORS
                           (a limited partnership)
          Notes to the Consolidating Financial Statements, Continued


2.  Summary of Significant Accounting Policies, continued

Rents Receivable

Management believes that all rents receivable are fully collectible.
Therefore, no allowance for doubtful accounts was recorded as of June 30, 2005
and December 31, 2004.

Inventory

Food and Beverage inventories are stated at the lower of cost (first-in, first-
out method) or market.

Property and Equipment

Property and equipment are stated at cost.  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.

Repairs and maintenance are charged to expense as incurred, and costs of
significant renewals and improvements are capitalized.  The cost of assets sold
or retired, and the related accumulated depreciation or amortizations are
removed from the accounts; any resulting gain or loss is included in
operations.

Construction in Progress

Construction in progress at June 30, 2005 and December 31, 2005 consisted of
accumulated incurred costs for the renovation of the Hotel.  These costs are
part of the repositioning of the Hotel and will be placed in service once the
Hotel is rebranded as a Hilton Hotel.

Capitalized interest

The partnership capitalizes interest as a component of construction in progress
held in fixed assets. For the six months ended June 30, 2005 total interest
expense incurred was $133,055. Of these amounts $92,141 were capitalized in
2005, and the remainder was expensed. For the twelve months ended December 31,
2004 the total interest expense incurred was $166,583 and no interest was
capitalized.

Other Assets

Loan fees are stated at cost and amortized over the two-year term of the loan
using the straight-line method.  Deferred lease costs were written off in 2004.
Included in the other assets are franchise fees of $100,000 that were paid to
the Hilton during 2004.  This will be amortized once the Hotel operates as a
Hilton using the straight-line method over the 15 years term of the Hilton
agreement.

                                 Continued

                                    F-7

<PAGE>

                             JUSTICE INVESTORS
                           (a limited partnership)
          Notes to the Consolidating 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 June 30, 2005 and December 31, 2004 is
$1,767,914 and $63,329, respectively, representing the excess of outstanding
checks over cash on deposit at the bank upon which the checks were drawn.

Revenue Recognition

Justice.  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 base rent plus a percentage of the lessees' revenues.
See Note 4-Leasing Arrangements.

Hotel.  Revenues are recognized as earned.  Earned is generally defined as the
date upon which a guest occupies a room and/or utilizes the Hotel's services.
Ongoing credit evaluations are performed and potential credit losses are
expensed at the time the account receivable is estimated to be uncollectible.
Historically, credit losses have not been material to the Hotel's results of
operations.

Advertising Costs

Advertising costs are expensed as incurred.  The advertising costs were $32,170
and $81,224 for the six months ended June 30, 2005 and the twelve months ended
December 31, 2004, respectively.

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.  Cash paid during the year for the taxes
represents the California minimum tax due for limited partnerships.

Fair Value of Financial Instruments

The Partnership's financial instruments are cash, accounts receivable, rents
receivable, inventories, prepaid expenses, accounts payable, accrued expenses
and long-term debt.  The recorded values of cash, accounts receivable, rents
receivable, inventories, prepaid expenses, accounts payable and accrued
expenses approximate their fair values based on their short-term nature.  The
recorded value of long-term debt approximates the fair value at June 30, 2005
and December 31, 2004 as the related interest rate is in line with 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-8

<PAGE>

                             JUSTICE INVESTORS
                           (a limited partnership)
          Notes to the Consolidating Financial Statements, Continued


3.  Long-Term Debt

The Partnership had a $4,470,275 revolving line of credit agreement with a
bank.  During January 2004, the line of credit was replaced by a new line of
credit of $7,500,000 with another bank.  This line of credit will expire on
February 1, 2006.  The line of credit 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.  The interest rate on the line of credit is variable
and is subject to change from time to time based on changes in an index that is
the Bank's prime rate (the Index).  The outstanding balance under the agreement
at June 30, 2005 and December 31, 2004 was $5,131,353 and $4,779,713,
respectively.  The balances were accruing interest at 6.25% and 4.35% at June
30, 2005 and December 31, 2004, respectively.

The Partnership was not in compliance with one of its loan covenants as of June
30, 2005 and  December 31, 2004.  The Partnership received a waiver with
respect to the violation of the covenant.

On June 27, 2005, the Partnership also obtained a $2,000,000 Revolving Line of
Credit (LOC) from United Commercial Bank.  The line of credit expires July 31,
2005 at an annual interest rate equal to the either The Wall Street Journal
Prime Rate or LIBOR plus 2%, as selected by the Partnership, and is secured by
a second deed of trust on the Hotel property.  Interest only is payable monthly
with principal and accrued interest due at maturity.  The outstanding line of
credit at June 30, 2005 was $1,999,970.  The balance was accruing interest at
6.25% at June 30, 2005.

Subsequent to June 30, 2005 both these line of credits were refinanced and
replaced by a new loan and line of credit. See Note 11, Subsequent Events,
Long-Term Debt.


4.  Leasing Arrangements

The Partnership leased the Hotel to Felcor, and leases the parking garage to
Evon and spa facilities to Tru Spa.

In conjunction with settling amounts due from Felcor to the Partnership, the
Hotel lease with Felcor was terminated effective June 30, 2004.  The lease
provided for minimum monthly payments of $208,333 plus an additional percentage
rent.  Prior to the termination, Felcor advised the Partnership that it did not
intend to exercise its option to extend the Hotel lease for an additional
period of five  years, citing as its reasons substantial losses Felcor had
incurred under the Hotel lease in guaranteeing a minimum $2.5 million yearly
(discussed below) in lease payments to the Partnership.  Given the recent poor
performance of Felcor under the Hotel lease, the Partnership Management
unanimously determined that it was in the Partnership's best interest to agree
to the lease termination.  The percentage rent was 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 was 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 were payable monthly and were calculated based on cumulative gross
room revenues on a calendar basis.  Rents due under the 50% of cash available
provision were payable annually in December.  Justice received $1,250,000 as
base rent and $117,086 as additional rent from Felcor for the Hotel for the
period January through June 2004.

                                 Continued

                                    F-9

<PAGE>

                              JUSTICE INVESTORS
                           (a limited partnership)
          Notes to the Consolidating Financial Statements, Continued


4.  Leasing Arrangements, continued

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 for the six months ended June 30, 2005 and the
twelve months ended December 31, 2004 was $336,695 and $913,541, respectively.
See Note 11, Subsequent events, Leasing Arrangements.

The Partnership entered into a lease agreement with Tru Spa for the spa
facilities in July 1, 2002.  The scheduled commencement was May 1, 2003 and the
lease expires on May 31, 2013.  The lease was amended and the amended
commencement date was June 1, 2003.  The minimum rent payments are $11,667 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 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 at June 30, 2005 and December 31, 2004 is $6,151 and
$26,759 that reflects the receivable for deferred rent.  As a result of the
renovations, the lease was amended and the partnership shall apply the security
deposit of $35,000 as follows: $17,219 as rent for June 2005, $17,219 as rent
for July 2005 and $562 as rent for August 2005.

Minimum future rentals to be received under existing noncancelable operating
leases as of June 30, 2005 for each of the next five years and in the aggregate
are:

                                      Garage       Spa         Total
                                    ----------  ----------  ----------
    Six months ending June 30:
             2006                   $  237,168  $  165,000  $  402,168
             2007                      237,168     165,000     402,168
             2008                      237,168     165,000     402,168
             2009                      237,168     165,000     402,168
             2010                      237,168     165,000     402,168
             Thereafter                 98,820     481,250     580,070
                                     ---------   ---------   ---------
                                    $1,284,660  $1,306,250  $2,590,910

5.  Management Agreement

The Partnership entered into a new management contract with Dow Hotel Company
(Dow) on May 19, 2004.  Justice authorized and contracted Dow to operate and
manage the Hotel as its agent.  Dow shall operate and manage the Hotel.  The
management contract with Dow is effective July 1, 2004 and shall continue for
an aggregate term of ten years, unless the agreement is extended or earlier
terminated as provided by the contract.

                                 Continued

                                    F-10

<PAGE>

                             JUSTICE INVESTORS
                           (a limited partnership)
          Notes to the Consolidating Financial Statements, Continued


5.  Management Agreement, continued

The base management fees are calculated as 2.5% of gross operating revenues for
the fiscal year.  Of that amount, 1.75% of the gross operating revenue for an
accounting period shall be paid on or before the 17 days after the month-end of
that accounting period and the balance of 0.75% of the gross operating revenues
shall be deferred, subordinated, and paid only to the extent that the partially
adjusted net operating income (NOI) for the fiscal year exceeds the amount of
the owner's return ($7 million) for the fiscal year and the Partnership has
received from the distributions of NOI for the fiscal year an amount equal to
or greater than its owner's return for such fiscal year.  The NOI did not
exceed the required amount and the management fee was not payable for the six
months ended June 30, 2005 and twelve months ended December 31, 2004.

Subject to the limitation of the total management fee, Dow shall be entitled to
an incentive management fee equal to (i) 5% of the first two million dollars of
fully adjusted NOI for that fiscal year, plus (ii) 10% of the next two million
dollars of the fully adjusted NOI, plus (iii) 15% of the amount by which the
fully adjusted NOI for that fiscal year exceeds four million.  For any partial
year, the dollar amounts shall be prorated; provided that the aggregate
management fee payable (consisting of the base management fee and incentive
management fee) for the each fiscal year shall not exceed 4% of the gross
revenue of the Hotel for that fiscal year.

Management fees for the six months ended June 30, 2005 and the twelve months
ended December 31, 2004, were $104,477 and $136,659 and no incentive management
fees were earned in for the six months ended June 30, 2005 and twelve months
ended December 31, 2004.  At December 31, 2004, management fees payable to Dow
were $15,715.  There were no fees payable to Dow at June 30, 2005.


6.  Related Party Transactions

During the twelve months ended December 31, 2004, the Partnership incurred
expenses for legal services of $2,114 which were rendered by a limited partner.

The contractor that was selected to oversee the garage and the first four
floors' renovation (excluding room upgrades) of the Hotel is the contractor who
originally constructed the Hotel and is affiliated with one of the directors of
a substantial shareholder of Evon Corporation, the managing general partner of
the Partnership.  The contractor is also a board member of Evon Corporation. At
June 30, 2005 and December 31, 2004 there was $706,813 and $9,360, respectively
payable to the contractor.  Included in the construction in progress at June
30, 2005 and December 31, 2004 were $1,170,889 and $9,360, respectively for
services performed by the contractor.  The related party contractor fee to the
Partnership for the renovation is competitive.

The garage lessee, Evon, is the Partnership's managing general partner.  Evon
paid the Partnership $455,279 and $1,150,709 during the six months ended June
30, 2005 and the twelve months ended December 31, 2004, respectively, under the
terms of the lease agreement.  See Note 4-Leasing Arrangements.  Rents
receivable from Evon at June 30, 2005 and December 31, 2004 were $62,248 and
$76,986, respectively.

                                  Continued

                                    F-11

<PAGE>

                             JUSTICE INVESTORS
                           (a limited partnership)
          Notes to the Consolidating Financial Statements, Continued


7.  Concentration of Credit Risk

Rental Revenue and Receivables

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

Hotel Revenue and Receivables

The Hotel's major customers are travel agents and airlines, and at June 30,
2005 they make up 100% of the accounts receivable.  At December 31, 2004 they
make up about 86% of accounts receivable.  The Hotel had four customers who
accounted for 48% of accounts receivable at June 30, 2005 and two customers who
accounted for 24% of Hotel revenue for the six months then ended.  The Hotel
had two customers who accounted for 68% of accounts receivable at December 31,
2004 and two customers who accounted for 17% of Hotel revenue for the year then
ended.

Cash and Cash Equivalents

The Partnership maintains most of its cash balances at one financial
institution.  The Federal Deposit Insurance Corporation insures balances up to
$100,000 in the aggregate per depositor.  At June 30, 2005 and December 31,
2004, the Partnership held cash balances in excess of the FDIC limit in the
amount of $225,482 and $5,017,426, respectively.


8.  Commitments

Administrative Fees-General Partners

The Partnership has entered into an agreement with its two general partners,
Evon and Portsmouth Square, Inc. (Portsmouth) to compensate them for services
provided to the Partnership.  Portsmouth has a 49.8% limited partnership
interest in the Partnership.  In order to plan, implement and administer the
repositioning and major changes in the operations of the Hotel (renovations) it
will be necessary for Evon and Portsmouth to devote substantial time, expertise
and effort in the renovation and in managing Justice's assets.  On July 16,
2004 the Partnership amended the General Partner Compensation Agreement with an
effective date of May 31, 2004.  This was done to provide adequate compensation
to Evon and Portsmouth and provide incentives to the general partners to
encourage excellence in the performance of their responsibilities.

Prior to amendment, the administrative fees were 3% of the first $10,000,000 of
gross rents.  Of the first $150,000 payable, eighty percent was due to Evon and
twenty percent was due to Portsmouth.  Any compensation in excess of $150,000
was split equally between Evon and Portsmouth.  The agreement provided for
monthly minimum administrative fees payable of $10,000 to Evon and $2,500 to
Portsmouth.

                                  Continued

                                    F-12
<PAGE>

                             JUSTICE INVESTORS
                           (a limited partnership)
          Notes to the Consolidating Financial Statements, Continued


8.  Commitments, continued

Administrative Fees-General Partners, continued

There were special provisions in the agreement for the base compensation for
the year ended 2004.  Commencing on the effective date and continuing through
and including December 31, 2004, the base compensation shall be paid in the sum
of $153,125 -(80% or $122,500 to Evon and 20% or $30,625 to Portsmouth).  After
2004, the administrative fees will be 1.5% of gross revenue payable in twelve
equal monthly installments, with the repayment of excess estimated installments
within 30 days after year-end.  The base compensation shall not be less than
the minimum annual base compensation of $262,500 nor shall it be greater than
the maximum annual base compensation.  The partners will also be paid an
incentive compensation based upon 5% of NOI of Justice in excess of $7,000,000
(50% Evon; 50% Portsmouth).

The base administrative fees paid to Evon and Portsmouth for six months ended
June 30, 2005 and the twelve months ended December 31, 2004 are as follows:

                                            2005         2004
                                            ----         ----
        Evon-prior to amendment                 -     $ 50,000
        Evon                             $105,000      122,500
        Portsmouth-prior to amendment           -       12,500
        Portsmouth                         26,250       30,625
                                          -------      -------
                                         $131,250     $215,625

There were no administrative fees payable to the partners as of June 30, 2005
and December 31, 2004 and no incentive management fees were paid in for the six
months ended June 30, 2005 and December 31, 2004.

Repositioning Fees-General Partners

Pursuant to the General Partner Compensation Agreement, the partners shall also
be paid a repositioning fee in the sum of $275,000 as compensation for the
services rendered to Justice with respect to the repositioning of the Hotel.
Repositioning fees of $137,500 each are payable to Evon and Portsmouth.  The
fees are payable in two installments of $68,750, the first installment within
ten days of the execution of this agreement.  The second will be payable at the
time that the renovation is determined in the reasonable discretion of the
general partners to have been substantiality completed.  The repositioning fees
to the general partners for the six months ended June 30, 2005 and the twelve
months ended December 31, 2004 were $92,736 and $106,944, respectively.  At
June 30, 2005 there was a payable of $61,111 for repositioning fees and at
December 31, 2004 there were prepaid repositioning fees of $30,555.

                                 Continued

                                    F-13

<PAGE>


                             JUSTICE INVESTORS
                           (a limited partnership)
          Notes to the Consolidating Financial Statements, Continued


8.  Commitments, continued

Franchise Agreements.

Holiday Hospitality Franchising, Inc.  Total franchise cost incurred by the
Partnership for the six months ended June 30, 2005 and twelve months ended
December 31, 2004 was $296,728 and $438,473.  The Partnership pay monthly
royalties, marketing and reservations fees of 5%, 1.5%, and 1%, respectively,
of the Hotel's gross room revenue for the preceding calendar month.  This
franchise agreement ended on May 30, 2005 when the hotel was closed for
renovation project and the agreement will be replaced by the Franchise
agreement with the Hilton Hotels Corporation.

Hilton Hotels Corporation.  The Partnership entered into a Franchise License
agreement (the License agreement) with the Hilton Hotels Corporation (Hilton)
on December 10, 2004.  The terms of the License agreement would commence upon
final approval of application and the completion of the approved product
improvement plan.  The commence date of operations as a Hilton hotel can be no
later than June 1, 2006.  The term of the License agreement is for a period of
15 years commencing on the opening date, with an option to extend the license
agreement for another five years, subject to certain conditions.  Beginning on
the opening date, the Partnership will pay monthly royalty fees of four percent
of the Hotel's gross room revenue for the preceding calendar month.  The amount
of the monthly fee is subject to change; however the increase can not exceed
one percent of the Hotel gross room revenue in any calendar year, and the
cumulative increases in the monthly fee will not exceed five percent of gross
room revenue.

Hotel Company contractual agreement

Dow, contracted by the partnership and acting as an agent for the Hotel,
entered into a memorandum of understanding with UNITE HERE (union of hotel
employees) on June 27, 2005 whereas the employer (Dow) agrees to extend recall
rights to all active employees employed by the Hotel as of the closure of May
31, 2005.  Recall rights shall be extended for the period of closure, even if
the Hotel is close beyond twelve months.  Recall rights shall be offered by
certified mail at least ten days prior to the first day of work and employees
will have five days to respond by certified mail or in person to the Hotel.
Dow will also provide extended Health and Welfare Contributions.  In the month
following the closure of the Hotel (June 2005), the employer will make
contributions to all funds, based upon hours worked in the prior month per
normal contribution rules and practices.  In the second month following the
closure, the employer will make a monthly contribution, but only to the Health
and Welfare fund for all laid off employees and regardless of hours and shifts
worked.  This is intended to provide Health and Welfare eligibility only, for
laid off employees through the end of August.  All Health and Welfare benefit
coverage will cease September 1, 2005.

                                  Continued

                                    F-14

<PAGE>

                             JUSTICE INVESTORS
                           (a limited partnership)
          Notes to the Consolidating Financial Statements, Continued


9.  Arbitration Settlement

During 2004, 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, and porosity conditions
in the concrete.  The Partnership received a settlement payment of $5,000,000
in 2004 plus base rent of $1,875,000 in 2004.  The settlement payment is
included in miscellaneous income in the accompanying income statement.

10.  Renovation and Construction Commitments

At August 12, 2005, the Partnership has various contracts outstanding with
third parties in connection with the renovation of the Hotel.  The following is
a schedule of the contractual and purchase obligations for the minimum payments
required under the contracts for 2005:

                  Contractual obligations      $12,484,301
                  Purchase obligations           6,839,493
                                                ----------
                                               $19,323,794
                                                ==========

There were no obligations subsequent to 2005.

11.  Subsequent Events

Long-Term Debt

On July 27, 2005, the Partnership, entered into a first mortgage loan (the
Loan) with The Prudential Insurance Company of America (Prudential) in a
principal amount of $30,000,000.  The term of the loan is for 120 months at a
fixed interest rate of 5.22% per annum.  The loan matures on August 5, 2015.
The Loan calls for monthly installments of principal and interest in the amount
of approximately $165,100, calculated on a 360 month amortization schedule.
The loan is secured by a first deed of trust on the Partnership's hotel
property, including all improvements and personal property thereon and an
assignment of all present and future leases and rents.  The loan is without
recourse to the limited and general partners of the Partnership.

On July 27, 2005, Justice Investors also obtained a $10,000,000 Revolving Line
of Credit (LOC) from United Commercial Bank.  The term of the line of credit is
for 60 months at an annual interest rate equal to the either The Wall Street
Journal Prime Rate or LIBOR plus 2%, as selected by the Partnership, and is
secured by a second deed of trust on the Hotel property.  Interest only is
payable monthly with principal and accrued interest due at maturity.

From the proceeds of the loan, the Partnership retired its existing line of
credit with Bank of the West in the approximate amount of $4,521,000, including
accrued interest, and paid off a short term unsecured line of credit from
United Commercial Bank in the amount of $2,007,000, including accrued interest.

                                  Continued

                                    F-15
<PAGE>

                              JUSTICE INVESTORS
                           (a limited partnership)
          Notes to the Consolidating Financial Statements, Continued


11.  Subsequent Events, continued

Long-Term Debt

The Prudential Loan and the line of credit from United Commercial Bank will
provide the financial resources for the Partnership to complete the substantial
renovations to the Hotel required by its Franchise License Agreement with the
Hilton, allowing Justice to operate the Hotel as a Hilton brand hotel.

Leasing Arrangements

Evon, the lessee of the parking garage gave 30 day notice to Ampco System
Parking, their parking facilities operator on July 20, 2005.  The lease will
terminate with Ampco System Parking on August 31, 2005. Ace Parking will be the
new operator effective September 1, 2005. The terms of the new agreement have
been agreed upon in principle and will be finalized by the end of August 2005.


12.  Going Concern

During the closure of the Hotel for renovations, there would be no income from
operations of the Hotel and management anticipates losses.  The Partnership
also has substantial financial commitments to make the renovations.  The
Partnership has received an appraisal of the Hotel property indicating that the
value of the property is adequate to serve as collateral for lending facilities
and the Partnership does not anticipate paying any Partnership distributions
until some time after operations commence under the Hilton brand and net income
and capital requirements warrants such distributions.  The new Prudential Loan
and the line of credit from United Commercial Bank will provide the financial
resources for the Partnership to complete the substantial renovations to the
Hotel required by its Franchise License Agreement with the Hilton, allowing
Justice to operate the Hotel as a Hilton brand hotel.

                                    F-16

<PAGE>

                             JUSTICE INVESTORS
                           (a limited partnership)
                SCHEDULE I - BALANCE SHEETS - JUSTICE INVESTORS
                      June 30, 2005 and December 31, 2004
                            ---------------------

                          ASSETS                      2005           2004
                                                   ----------     ----------
Current assets:
 Cash                                             $     7,249    $ 3,998,926
 Rents receivable garage-related party                 62,248         76,746
 Rents receivable-other                                 6,151         26,999
 Prepaid expenses                                     859,708         30,555
 Advances to hotel                                  1,797,813        330,729
                                                   ----------     ----------
       Total current assets                         2,733,169      4,463,955
                                                   ----------     ----------
Property and equipment:
 Furniture and equipment (net of accumulated          857,530        859,352
   depreciation of $331,160 at June 30, 2005
   and $244,721 at December 31, 2004)
 Building and improvements (net of accumulated      4,145,802      6,232,536
   depreciation of $13,073,705 at June 30, 2005
   and $13,242,650 at December 31, 2004)
 Construction in progress                           7,693,859        527,021
 Land                                               1,124,128      1,124,128
                                                   ----------     ----------
       Total property and equipment                13,821,319      8,743,037
                                                   ----------     ----------
Other assets:
 Loan fees (net of accumulated amortization            33,141          6,283
   of $9,426 at June 30, 2005 and $6,284
   at December 31, 2004)
 Franchise fees                                       100,000        100,000
                                                   ----------     ----------
                                                  $16,687,629    $13,313,275
                                                   ==========     ==========

          LIABILITIES AND PARTNERS' CAPITAL

Current liabilities:
 Trade accounts payable and accrued expenses      $ 3,685,190    $   272,708
 Accounts payable-Hotel                                     -         31,530
 Rent received in advance                               2,183              -
 Accrued interest                                      22,500         17,646
 Accrued repositioning costs                           61,111              -
                                                   ----------     ----------
       Total current liabilities                    3,770,984        321,884
                                                   ----------     -----------

Long-term debt                                      7,131,323      4,814,713
Other long-term liabilities-deposit                    17,781         35,000
                                                   ----------     ----------
       Total long-term liabilities                  7,149,104      4,814,713
                                                   ----------     ----------
       Total liabilities                           10,920,088      5,136,597
Partners' capital                                   5,767,541      8,176,678
                                                   ----------     ----------
                                                  $16,687,629    $13,313,275
                                                   ==========     ==========

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

                                    F-17

<PAGE>
                              JUSTICE INVESTORS
                           (a limited partnership)
                SCHEDULE II - BALANCE SHEETS - HOTEL OPERATIONS
                      June 30, 2005 and December 31, 2004
                            ---------------------

                          ASSETS                      2005           2004
                                                   ----------     ----------
Current assets:
 Cash                                             $   182,341    $   562,785
 Accounts receivable (net of allowance for             57,524        604,418
   Doubtful accounts of $6,540 at June 30,
   2005 and $19,084 at December 31, 2004)
 Accounts receivable-Justice                                -         31,530
 Inventory                                              2,294         62,282
 Prepaid expenses                                      67,397        189,093
 Deposits                                              31,675         31,675
                                                   ----------     ----------
       Total current assets                       $   341,231    $ 1,481,783
                                                   ==========     ==========

            LIABILITIES AND OWNERS' CAPITAL

Current liabilities:
 Trade accounts payable and accrued expenses      $   426,571    $   852,785
 Accrued payroll and related expenses                 213,764        750,714
 Management fee payable                                15,000         15,715
 Due to owners                                              -         17,967
 Advance deposits                                           -         15,497
                                                   ----------     ----------
       Total current liabilities                      655,335      1,652,679

Owners' capital                                      (314,104)      (170,896)
                                                   ----------     ----------
                                                  $   341,231    $ 1,481,783
                                                   ==========     ==========

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

                                    F-18

<PAGE>

                              JUSTICE INVESTORS
                           (a limited partnership)
    SCHEDULE III-STATEMENTS OF INCOME AND PARTNERS' CAPITAL-JUSTICE INVESTORS
                 for the six months ended June 30, 2005
                and for the year ended December 31, 2004
                            ---------------------

                                                    2005          2004
                                                 ----------     ----------
Operating revenue:
 Garage rent-related party                      $   455,279    $ 1,150,709
 Spa                                                 82,704        165,135
 Other                                               15,579         11,404
 Hotel-base rent                                          -      1,250,000
 Hotel-additional rent                                    -        117,086
 Hotel-income distributions                               -        377,813
                                                  ---------      ---------
      Total operating revenue                       553,580      3,072,147
                                                  ---------      ---------
Operating expenses:
 Depreciation and amortization                      305,497        572,434
 Lease commission                                         -         13,477
 Property taxes                                      23,077         45,105
 General and administrative:
   Accounting fees                                    5,785         11,979
   Administrative and office expense                 31,113         12,517
   Administrative fees-general partners             131,250        215,625
   Audit and tax preparation                         40,868         77,453
   Bank charges                                       2,423          5,274
   Business taxes                                         -            268
   Consultants                                            -        197,230
   Donation                                             300          3,550
   Franchise taxes                                      800            800
   Insurance expense                                 37,842         94,833
   Legal fees                                       222,287        495,958
   Repairs and maintenance                            8,436         56,622
   Repositioning costs                               92,736        241,590
   Security                                          65,503        106,392
   Travel and entertainment                           3,467          9,572
                                                  ---------      ---------
      Total operating expenses                      971,384      2,160,679
                                                  ---------      ---------
Other income (expense):
 Lease termination settlement income                      -      5,000,000
 Write-off of deferred lease costs                        -         (7,754)
 Loss on disposition of assets-                  (1,920,139)             -
   from 1997 and 2003
 Chinese Culture lease expense                      (38,633)             -
 Interest expense                                   (40,914)      (166,583)
 Interest income                                      8,353         35,312
                                                  ---------      ---------


      Total other (expense) income               (1,991,333)     4,860,975
                                                  ---------      ---------
      Net (loss) income                          (2,409,137)     5,772,443

Partners' capital at beginning of period-         8,176,678      3,042,635
   January 1, 2005 and 2004
Less distributions to partners                            -       (638,400)
                                                  ---------      ---------
Partners' capital at end of period-             $ 5,767,541    $ 8,176,678
   June 30, 2005 and December 31, 2004


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

                                    F-19

<PAGE>


                              JUSTICE INVESTORS
                           (a limited partnership)
    SCHEDULE III-STATEMENTS OF INCOME AND PARTNERS' CAPITAL-HOTEL OPERATIONS
                 for the six months ended June 30, 2005
                and for the year ended December 31, 2004
                            ---------------------

                                                    2005          2004
                                                 ----------     ----------
Operating revenue:
 Room revenue                                   $ 4,502,233    $ 6,745,744
 Food and beverage revenue                          494,288        926,827
 Other operating departments                        127,289        133,344
                                                  ---------      ---------
      Total operating revenue                     5,123,810      7,805,915
                                                  ---------      ---------

Operating expenses:
 Rooms                                            2,478,882      2,938,186
 Food and beverage                                  919,644      1,157,423
 Other operating departments                        162,871        188,948
 General and administrative                         791,048        787,774
 Credit card commissions                             89,328        122,626
 Advertising and sales                              396,588        451,158
 Utilities                                          333,969        491,842
 Repairs and maintenance                            473,903        579,452
 Franchise and marketing fees                       296,728        438,473
 Management fees                                    104,477        136,659
 Property taxes                                     137,498        149,531
 Insurance expense                                  372,678        369,973
 CEP fee                                            102,260        156,241
 Miscellaneous                                       13,005         22,664
                                                  ---------      ---------
      Total operating expenses                    6,672,879      7,990,950
                                                  ---------      ---------
      Net income                                 (1,549,069)      (183,035)

Owners' capital at beginning of period-
    January 1, 2005 and 2004                       (170,896)             -
Contributions from owners                         1,405,861        768,016
Less distributions to owners                              -       (753,877)
                                                  ---------      ---------
Owners' capital at end of period-
   June 30, 2005 and December 31, 2004          $  (314,104)   $  (170,896)
                                                  =========      =========


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

                                    F-20
<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-21
<PAGE>



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

                                ASSETS                  2003          2002
                                ------                  ----          ----
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
                                                     =========      =========

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

                                     F-22
 <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-23
<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-24
<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-25
<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-26
<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-27
<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-28
<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-29
<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, 2005. 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-30
<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-31