##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


Form 10-K


|           |  |                                                                                             
|---------- |  | --------------------------------------------------------------------------------------------
|(Mark one) |  |                                                                                             
|þ          |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934    
|           |  | For the year ended December 31, 2004                                                        
|Or        
|          
|o          |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934
|           |  | For the transition period
    from           to                                             

Commission File Number 333-105017


VESTIN FUND III, LLC


(formerly RE Investments III, LLC)


(Exact name of registrant as specified in its charter)


|                                                                   |  |                                         
|------------------------------------------------------------------ |  | ----------------------------------------
|NEVADA                                                             |  | 87-0693972                              
|(State or other jurisdiction of
    Incorporation or organization) |  | (I.R.S. Employer
    Identification No.)

8379 W. Sunset Road, Las Vegas, Nevada 89113


(Address of principal executive offices) (Zip Code)


Registrants telephone number, including area code


702.227.0965


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


NONE


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


NONE


þ o


o


o þ














---










TABLE OF CONTENTS


|              |  |                                                                                                |    |      |    | 
|------------- |  | ---------------------------------------------------------------------------------------------- | -- | ---- | -- | 
|              |  |                                                                                                |    | Page |   
|              |  |                                                                                                |    |      |   
|PART I       
|ITEM 1.       |  | BUSINESS                                                                                       |    |      | 2  | 
|ITEM 2.       |  | PROPERTIES                                                                                     |    |      | 16 | 
|ITEM 3.       |  | LEGAL PROCEEDINGS                                                                              |    |      | 16 | 
|ITEM 4.       |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY
    HOLDERS                                        |    |      | 17 | 
|PART II      
|ITEM 5.       |  | MARKET FOR REGISTRANTS COMMON EQUITY
    AND RELATED STOCKHOLDER MATTERS                      |    |      | 17 | 
|ITEM 6.       |  | SELECTED FINANCIAL DATA                                                                        |    |      | 18 | 
|ITEM 7.       |  | MANAGEMENTS DISCUSSION AND ANALYSIS
    OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS      |    |      | 19 | 
|ITEM 7A.      |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES
    ABOUT MARKET RISK                                 |    |      | 31 | 
|ITEM 8.       |  | FINANCIAL STATEMENTS AND SUPPLEMENTARY
    DATA                                                |    |      | 31 | 
|ITEM 9.       |  | CHANGES IN AND DISAGREEMENTS WITH
    ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE       |    |      | 31 | 
|ITEM 9A.      |  | CONTROL AND PROCEDURES                                                                         |    |      | 32 | 
|ITEM 9B.      |  | OTHER INFORMATION                                                                              |    |      | 32 | 
|PART III     
|ITEM 10.      |  | DIRECTORS AND EXECUTIVE OFFICERS OF
    REGISTRANT                                             |    |      | 32 | 
|ITEM 11.      |  | EXECUTIVE COMPENSATION                                                                         |    |      | 34 | 
|ITEM 12.      |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
    OWNERS AND MANAGEMENT RELATED STOCKHOLDER MATTERS |    |      | 34 | 
|ITEM 13.      |  | CERTAIN RELATIONSHIPS AND RELATED
    TRANSACTIONS                                             |    |      | 34 | 
|ITEM 14.      |  | PRINCIPAL ACCOUNTING FEES AND SERVICES                                                         |    |      | 35 | 
|PART IV      
|ITEM 15.      |  | EXHIBITS, FINANCIAL STATEMENT SCHEDULES                                                        |    |      | 35 | 
|EXHIBIT INDEX |  |                                                                                                | 36 |     
|SIGNATURES    |  |                                                                                                | 37 |     
|Exhibit 10.9 
|Exhibit 31.1 
|Exhibit 31.2 
|Exhibit 32   



1



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##### Table of Contents



PART I


Note Regarding Forward Looking Statements









|        |         
|------- | --------
|Item 1. | Business

General








Real Estate Program Objectives






2



---



##### Table of Contents











| |   |                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------
| |  | Provide monthly cash distributions to investors from the lease
    income earned on our properties;
|
| |  | Preserve capital contributions; and                                                                
|
| |  | Realize growth in the value of our properties upon our ultimate
    sale of such properties.       



Mortgage Program Objectives












| |   |                                                                 
| | - | ----------------------------------------------------------------
| |  | Produce revenues from the interest income on our mortgage loans;

3



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##### Table of Contents





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

Acquisition and Investment Policies




Real Estate Program Policies and Guidelines














4



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##### Table of Contents







Leasing




Multifamily.


Office.


Industrial.


Retail.


Assisted Living.


Other Income Producing Properties






5



---



##### Table of Contents





Borrowing Policies






Participation








| |   |                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | review all material contracts;                                                                                                                                                 
|
| |  | cause a sale or refinancing of the property or our interest
    therein subject in certain cases to limitations imposed by the
    participation agreement between the parties;
|
| |  | approve budgets and major capital expenditures, subject to a
    stated minimum amount;                                                                                        
|
| |  | veto any sale or refinancing of a property, or alternately, to
    receive a specified preference on sale or refinancing
    proceeds; and                                     
|
| |  | exercise a right of first refusal on any desired sale or
    refinancing by a participant of its interest in a property
    except for transfer to its affiliate.              





Disposition




6



---



##### Table of Contents







Mortgage Program Policies and Guidelines








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







| |                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. Priority of Mortgages. We anticipate investing at
    least 90% of our assets allocated for mortgages in secured first
    mortgages. First mortgages are mortgages secured by a full or
    divided interest in a first deed of trust secured by the
    property. Other mortgages that we invest on the secured property
    will not be junior to more than one other mortgage. The only
    subordinated mortgages we currently intend to invest in

7



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##### Table of Contents



| |                                                                                                                                                                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | at this time are second mortgages, although in the future we may
    invest in wraparound, or all-inclusive, mortgages.                                                                                                                                                        
|
| | 2. Loan-to-Value Ratio. We do not anticipate the
    amount of our loan combined with the outstanding debt secured by
    a senior mortgage on a security property will exceed the
    following percentage of the appraised value of the security
    property at origination:

|                            |  |                                                
|--------------------------- |  | -----------------------------------------------
|Type of Secured Property    |  | Loan-to-Value Ratio                            
|                            |  |                                                
|Residential                 |  | 75%                                            
|Unimproved Land             |  | 60% (of the anticipated as-if developed value) 
|Acquisition and Development |  | 60% (of the anticipated as-if developed value) 
|Commercial Property         |  | 75% (of the anticipated post-development value)
|Construction                |  | 75% (of the anticipated as-if developed value) 
|Bridge                      |  | 75% (of the anticipated as-if developed value) 
|Leasehold Interest          |  | 75% (of value of leasehold interest)           



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We may deviate from these guidelines under certain
    circumstances. For example, Vestin Mortgage, in its discretion,
    may increase any of the above loan-to-value ratios if, in its
    opinion, a given loan is supported by credit adequate to justify
    a higher loan-to-value ratio, including personal guarantees.
    Occasionally, our collateral may include personal property as
    well as real property. We do not have specific requirements with
    respect to the projected income or occupancy levels of a
    property securing our investment in a particular loan. These
    loan-to-value ratios will not apply to financing offered by us
    to the purchaser of any real estate acquired through
    foreclosure, or to refinance an existing loan that is in default
    when it matures. In those cases, Vestin Mortgage, in its sole
    discretion, shall be free to accept any reasonable financing
    terms it deems to be in our best interest. Nevertheless, in no
    event will the loan-to-value ratio on any loan exceed 80% of the
    independently appraised as-if developed value of the property at
    the time of loan origination. The target loan-to-value ratio for
    our loan portfolio as a whole is approximately 70%.
|
| | Vestin Mortgage will receive an appraisal at the time of loan
    underwriting, which may precede the placement of the loan with
    us. Copies of these appraisals will be available for your review
    at the offices of Vestin Mortgage for a period of six
    (6) years. Generally, these appraisals will be completed
    within twelve months prior to funding of the loan. Also, the
    appraisal may have been previously performed for the borrower.
    The appraisal may be for the current estimated as-if
    developed value of the property. We will use appraisers
    who are licensed or qualified as independent appraisers and
    certified by or hold designations from one or more of the
    following organizations: the Federal National Mortgage
    Association, the Federal Home Loan Mortgage Corporation, the
    National Association of Review Appraisers, the Appraisal
    Institute, the Society of Real Estate Appraisers, M.A.I.,
    Class IV Savings and Loan appraisers or from among
    appraisers with other qualifications acceptable to Vestin
    Mortgage.                                                                                                                                                                  
|
| | However, appraisals are only estimates of value and cannot be
    relied on as measures of realizable value. The appraisal may be
    for the current estimated as-if developed or
    as-if completed value of the property or, in the
    case of acquisition and development loans or construction loans,
    for the estimated value of the property upon completion of the
    project. As-if completed or as-if developed values on raw land
    loans or acquisition and development loans often dramatically
    exceed the immediate sales value and may include anticipated
    zoning changes, selection by a purchaser against multiple
    alternatives, and successful development by the purchaser; upon
    which development is dependent on availability of financing. An
    employee or agent of Vestin Mortgage will review each appraisal
    report and will conduct a physical inspection for each property.
    A physical inspection includes an assessment of the subject
    property, the adjacent properties and the neighborhood but
    generally does not include entering any structures on the
    property.                                                                                                                              
|
| | We depend upon our real estate security to protect us on the
    loans that we make. We depend upon the skill of independent
    appraisers to value the security underlying our loans. However,
    notwithstanding                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

8



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##### Table of Contents



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | the experience of the appraisers, they may make mistakes, or the
    value of the real estate may decrease due to subsequent events.
    In addition, most of the appraisals will be prepared on an
    as if-developed basis. If the loan goes into default
    prior to completion of the project, the market value of the
    property may be substantially less than the appraised value. As
    a result, there may be less security than anticipated at the
    time the loan was originally made. If there is less security and
    a default occurs, we may not recover the full amount of our
    loan, thus reducing the amount of funds available to distribute.
|
| | 3. Terms of Mortgage Loans. Most of our loans will
    range from a six-month term to a five-year term. Our original
    loan agreements, however, will permit extensions to the term of
    the loan by mutual consent. Such extensions will generally be
    provided on loans where the original term was 12 months or
    less and where a borrower requires additional time to complete a
    construction project or negotiate take-out financing.                                                                                                                                                                                                                     
|
| | We anticipate that substantially all of our loans will provide
    for payments of interest only with a balloon payment
    of principal payable in full at the end of the term. In
    addition, we may invest in mortgage loans which require
    borrowers to maintain interest reserves funded from the
    principal amount of the loan for a period of time.                                                                                                                                                                                                                                                                                                         
|
| | 4. Escrow Conditions. Our loans will often be funded
    by us through an escrow account held by a title insurance
    company, subject to the following conditions:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         



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



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5. Purchase of Mortgage Investments from Affiliates.
    We may acquire mortgage loans from our affiliates, including
    Vestin Mortgage. If the loans were acquired to facilitate their
    acquisition by us, provided that such loan is purchased by us
    for a price not in excess of the par value of the note or its
    fair market value, whichever is lower, plus allowable fees and
    expenses in accordance with applicable NASAA guidelines, but
    without the allowance of any other compensation for the loans.
    Except for the compensation paid to Vestin Mortgage described
    elsewhere in this prospectus, all income generated and expense
    associated with the mortgage so acquired shall be treated as
    belonging to us.                                                                                                                                                                                                                                                                                                                       
|
| | 6. Note Hypothecation. We may also acquire
    mortgage loans secured by assignments of secured promissory
    notes. These mortgage loans must satisfy our stated investment
    standards, including our loan-to-value ratios, and also may not
    exceed 80% of the principal amount of the assigned note. For
    example, if the property securing a note we acquire is
    commercial property, the total amount of outstanding debts
    secured by the property must not exceed 75% of the appraised
    as-if developed value of the property, and the
    mortgage loan will not exceed 80% of the principal amount of the
    assigned note. For mortgage loans secured by promissory notes,
    we will rely on the appraised as-if developed value
    of the underlying property, as determined by a written appraisal
    which was conducted within the then-preceding twelve months at
    the time of loan origination. If an appraisal was not conducted
    within that period, then we will arrange for a new appraisal to
    be prepared for the property.
|
| | 7. Participation. We may also participate in loans
    with other lenders, including affiliates as permitted by NASAA
    Guidelines, by providing funds or purchasing an undivided
    interest in a loan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

9



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##### Table of Contents



| |                                                                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | meeting our investment guidelines described above. We will
    directly own any loans purchased jointly with other lenders. We
    would be more likely to participate in loans if, for example:



| |   |                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | we did not have sufficient funds to invest in an entire loan.                                                                                                                                                                                     
|
| |  | we received offering proceeds that were insufficient to
    adequately diversify our portfolio.                                                                                                                                                   
|
| |  | we are seeking to increase the diversification in our loan
    portfolio.                                                                                                                                                                         
|
| |  | Vestin Mortgage originated a loan that fit within our investment
    guidelines, but it would constitute more than 20% of our
    anticipated capital contribution or otherwise be
    disproportionately large given our then existing portfolio.



| |                                                                                                                                                                                                                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | we will participate in loans with non-affiliates if we acquire a
    controlling interest, alone or with any of our publicly
    registered affiliates meeting the requirements below, in such
    participation. A controlling interest would enable us to direct
    or cause the direction of the management and policies of such
    participation, which would include the authority to:



| |   |                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | review all material contracts;                                                                                                                                  
|
| |  | cause a sale of the mortgage or our interest therein subject in
    certain cases to limitations imposed by the participation
    agreement between the parties;
|
| |  | approve budgets and major capital expenditures, subject to a
    stated minimum amount;                                                                         
|
| |  | veto any sale of a mortgage, or alternatively, to receive a
    specified preference on sale or proceeds; and                                                   
|
| |  | exercise a right of first refusal on any desired sale by a
    participant of its interest in a loan except for transfer to its
    affiliate.                  



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In the event of participation with a publicly registered
    affiliate, the investment objectives of the participants shall
    be substantially identical. There shall be no duplicate fees.
    The compensation to the sponsors must be substantially
    identical, and the investment of each participant must be on
    substantially the same terms and conditions. Each participant
    shall have a right of first refusal to buy the others
    interest if the co-participant decides to sell its interest. We
    will not participate in joint ventures or partnerships with
    affiliates that are not publicly registered, except as permitted
    by NASAA Guidelines.
|
| | We will not give Vestin Mortgage, Vestin Group or any of their
    affiliates any consideration similar to rebates or give-backs or
    enter into reciprocal arrangements with Vestin Mortgage or its
    affiliates that might be entered into in lieu of participations.                                                                                                                                                                                                                                                                                                                                                                                                             
|
| | 8. Diversification. The NASAA Guidelines provide
    that we neither invest in nor make mortgage loans on any one
    property which would exceed, in the aggregate, an amount equal
    to 20% of our capital, nor may we invest in or make mortgage
    loans to or from any one borrower which would exceed, in the
    aggregate, an amount greater than 20% of our capital.                                                                                                                                                                                                                                                                                                        
|
| | 9. Reserve Fund. Although the NASAA Guidelines
    require reserves of not less than 1% of the offering proceeds,
    we will establish contingency working capital reserves of
    approximately 3% of the net proceeds of this Offering to cover
    our unexpected cash needs.                                                                                                                                                                                                                                                                                                                                                                                                       
|
| | 10. Credit Evaluations. Before making a loan, Vestin
    Mortgage must first determine a borrower has sufficient equity
    in the security property to meet the loan-to-value ratios
    described above. Vestin Mortgage may also consider the income
    level and creditworthiness of a borrower to determine its
    ability to repay the mortgage loan.                                                                                                                                                                                                                                                                                                                           
|
| | 11. Sale of Mortgage Investments. Although Vestin
    Mortgage has no plan to do so, Vestin Mortgage may sell our
    mortgage loans or interests in our loans to either affiliates or
    non-affiliated parties when Vestin Mortgage believes it is
    advantageous to us to do so. However, as noted elsewhere in this
    prospectus, we do not expect that the loans will be marketable
    or that a secondary market will ever                                                                                                                                                                                                                                                  

10



---



##### Table of Contents



| |                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------
| | develop for them. We may sell our mortgage loans to Vestin
    Mortgage under limited circumstances pursuant to the NASAA
    Guidelines.

Mortgage Loans to Affiliates




Purchase of Loans from Vestin Mortgage and its Affiliates




Types of Loans We Intend to Invest In






| |                              
| | -----------------------------
| | Raw and Unimproved Land Loans





| |                                  
| | ---------------------------------
| | Acquisition and Development Loans





| |                   
| | ------------------
| | Construction Loans



11



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##### Table of Contents







| |                          
| | -------------------------
| | Commercial Property Loans





| |                  
| | -----------------
| | Residential Loans





| |             
| | ------------
| | Bridge Loans





| |           
| | ----------
| | Collateral





| |                    
| | -------------------
| | First Deed of Trust





| |                     
| | --------------------
| | Second Deed of Trust





| |                   
| | ------------------
| | Leasehold Interest



12



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##### Table of Contents



Prepayment Penalties and Exit Fees




Extensions to Term of Loan




Interest Reserves




Balloon Payment




Repayment of Mortgages on Sales of Properties




Variable Rate Loans




13



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##### Table of Contents











Borrowing






| |   |                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------
| |  | to finance our investments in mortgage loans,                                                                   
|
| |  | to prevent a default under mortgage loans that are senior to our
    mortgage loans,                            
|
| |  | to discharge senior mortgage loans if this becomes necessary to
    protect our investment in mortgage loans, or
|
| |  | to operate or develop a property that we acquired under a
    defaulted loan.                                   





No Trust or Investment Company Activities




Various Other Policies and Procedures






| |   |                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------
| |  | issue securities senior to the units or issue any units or other
    securities for other than cash;                                           
|
| |  | invest in the securities of other issuers for the purpose of
    exercising control, except when exercising our rights as a
    secured lender;
|
| |  | underwrite securities of other issuers;                                                                                                        

14



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##### Table of Contents





| |   |                                                                                     
| | - | ------------------------------------------------------------------------------------
| |  | discontinue providing our members with the reports described in
    this prospectus;
|
| |  | offer securities in exchange for property; or                                       
|
| |  | change the nature of our business or our investment policies.                       

Competition and General Economic Conditions




Regulation










Policies on Limitation on Investments




15



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##### Table of Contents









| |   |                                                                                                
| | - | -----------------------------------------------------------------------------------------------
| |  | issue senior securities;                                                                       
|
| |  | acquire property for membership interests;                                                     
|
| |  | issue any units after termination of this Offering or issue
    units in exchange for property;
|
| |  | underwrite securities of other issuers;                                                        
|
| |  | make loans to Vestin Mortgage or its affiliates.                                               



Employees




Available Information


www.vestinfund.com www.vestingroup.com







|        |           
|------- | ----------
|Item 2. | Properties










|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings

Legal matters involving Our Manager






16



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##### Table of Contents







Legal matters involving the Company











|        |                                                    
|------- | ---------------------------------------------------
|Item 4. | Submission of Matters to a Vote of Security Holders



PART II







|        |                                                                          
|------- | -------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity and Related
    Stockholder Matters

Market Information




Holders




Dividend Policy




17



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##### Table of Contents



Recent Sales of Unregistered Securities




Equity Compensation Plan Information




Purchases of Equity Securities by the Issuer and Affiliated
Purchasers


|              |  |                    |         |  |               |                    |       |                 |                    |  |              |  |  |  |      | 
|------------- |  | ------------------ | ------- |  | ------------- | ------------------ | ----- | --------------- | ------------------ |  | ------------ |  |  |  | ---- | 
|              |  |                    |         |  |               |                    |       | Maximum Number  |                   
|              |  |                    |         |  |               |                    |       | (or Approximate |                   
|              |  |                    |         |  |               | Total Number of    |       |                 | Dollar Value) of   | 
|              |  |                    |         |  |               | Units Purchased as |       |                 | Units that May yet | 
|              |  |                    |         |  |               | Part of Publicly   |       |                 | be Purchased Under | 
|              |  | Total Number of    |         |  | Average Price |                    |       | Announced Plans |                    |  | the Plans or | 
|Period        |  | Units Purchased(1) |         |  | Paid per Unit |                    |       | or Programs     |                    |  | Programs     | 
|              |  |                    |         |  |               |                    |       |                 |                    |  |              | 
|October 2004  |  |                    | 280,120 |  |               | $                  | 10.00 |                 |                    |  | None         |  |  |  | None | 
|November 2004 |  |                    | 279,914 |  |               | $                  | 10.00 |                 |                    |  | None         |  |  |  | None | 
|December 2004 |  |                    | 70,850  |  |               | $                  | 10.30 |                 |                    |  | None         |  |  |  | None | 






|    |                                                                                                                                                                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Pursuant to our Operating Agreement, members may request to have
    their units redeemed. However, in order to comply with our
    Operating Agreement and the Internal Revenue Code, we may redeem
    no more than 10% of the aggregate members capital in any
    calendar year.






|        |                        
|------- | -----------------------
|Item 6. | Selected Financial Data

|                                                                                |  |              |            |  |              |   |         |  
|------------------------------------------------------------------------------- |  | ------------ | ---------- |  | ------------ | - | ------- | -
|                                                                                |  | December 31, |            |  | December 31, |  
|                                                                                |  | 2004         |            |  | 2003         |  
|                                                                                |  |              |            |  |              |  
|Balance Sheet Data:                                                             |  |              |            |  |              |   |         |  
|Investments in mortgage loans (net of allowance)                                |  | $            | 13,519,998 |  |              | $ |        |  
|Cash, cash equivalents, certificates of deposits and short-term
    investments |  | $            | 6,285,989  |  |              | $ | 4,952   |  
|Interest and other receivables                                                  |  | $            | 127,263    |  |              | $ |        |  
|Investment in real property                                                     |  | $            | 9,813,977  |  |              | $ |        |  
|Capitalized loan fees (net of allowance)                                        |  | $            | 110,566    |  |              | $ |        |  
|Assets under secured borrowing                                                  |  | $            | 2,590,491  |  |              | $ |        |  
|Deferred offering costs                                                         |  | $            | 926,054    |  |              | $ | 667,437 |  
|Total assets                                                                    |  | $            | 33,374,338 |  |              | $ | 672,389 |  
|Liabilities                                                                     |  | $            | 8,612,004  |  |              | $ | 673,088 |  
|Members capital                                                                |  | $            | 24,762,334 |  |              | $ | (699    | )
|Total liabilities and Members capital                                          |  | $            | 33,374,338 |  |              | $ | 672,389 |  

18



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|                                                                                 |  |              |           |                |                  |   |      |  
|-------------------------------------------------------------------------------- |  | ------------ | --------- | -------------- | ---------------- | - | ---- | -
|                                                                                 |  |              |           | For the Period |                 
|                                                                                 |  | 12 Months    |           |                | from April 16,   |  
|                                                                                 |  | Ended        |           |                | 2003 (Inception) |  
|                                                                                 |  | December 31, |           |                | to December 31,  |  
|                                                                                 |  | 2004         |           |                | 2003             |  
|                                                                                 |  |              |           |                |                  |  
|Income Statement Data:                                                           |  |              |           |                |                  |   |      |  
|Revenues                                                                         |  | $            | 2,359,786 |                |                  | $ |     |  
|Expenses                                                                         |  | $            | 989,853   |                |                  | $ | 699  |  
|Net income (loss)                                                                |  | $            | 1,369,933 |                |                  | $ | (699 | )
|Net income (loss) allocated to Members                                           |  | $            | 1,369,933 |                |                  | $ | (699 | )
|Net income (loss) allocated to Members per weighted average
    membership units |  | $            | 0.78      |                |                  | $ |     |  
|Cash distributions                                                               |  | $            | 1,349,851 |                |                  | $ |     |  
|Cash distributions per weighted average membership units                         |  | $            | 0.77      |                |                  | $ |     |  
|Weighted average membership units                                                |  |              | 1,751,700 |                |                  |   |     |  








|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations

Background








19



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##### Table of Contents



Overview




Summary of Financial Results


|                                                                          |  |              |           |                |                |   |      |  
|------------------------------------------------------------------------- |  | ------------ | --------- | -------------- | -------------- | - | ---- | -
|                                                                          |  |              |           | For the        |               
|                                                                          |  |              |           | Period from    |               
|                                                                          |  |              |           | April 16, 2003 |               
|                                                                          |  | Year Ended   |           |                | (Inception) to |  
|                                                                          |  | December 31, |           |                | December 31,   |  
|                                                                          |  | 2004         |           |                | 2003           |  
|                                                                          |  |              |           |                |                |  
|Total revenues                                                            |  | $            | 2,359,786 |                |                | $ |     |  
|Total expenses                                                            |  |              | 989,853   |                |                |   | 699  |  
|                                                                          |  |              |           |                |                |  
|Net income (loss)                                                         |  | $            | 1,369,933 |                |                | $ | (699 | )
|                                                                          |  |              |           |                |                |  
|Net income allocated to members per Weighted average membership
    units |  | $            | 0.78      |                |                | $ |     |  
|                                                                          |  |              |           |                |                |  
|Annualized rate of return to members(a)                                   |  |              | 8.84      | %              |                |   |     | %
|                                                                          |  |              |           |                |                |  
|Cash distributions                                                        |  | $            | 1,349,851 |                |                | $ |     |  
|                                                                          |  |              |           |                |                |  
|Cash distributions per weighted average membership unit                   |  | $            | 0.77      |                |                | $ |     |  
|                                                                          |  |              |           |                |                |  
|Weighted average membership units                                         |  |              | 1,751,700 |                |                |   |     |  
|                                                                          |  |              |           |                |                |  






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | The annualized rate of return to members is calculated based
    upon the net income allocated to members per weighted average
    units as of December 31, 2004 divided by the number of days
    during the period (323 days from February 12, 2004 the
    day the minimum $10 million was achieved through
    December 31, 2004) and multiplied by three hundred and
    sixty five (365) days, then divided by ten (the $10 cost per
    unit).

Total Revenues.






Total Expenses.


20



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Net Income.


Annualized Rate of Return to Members.


Distributions to Members.


Investments in Mortgage Loans Secured by Real Estate
Portfolio




|                            |  |        |    |  |           |   |            |               |  |           |            |  |         |        |         |  |  |  |        | 
|--------------------------- |  | ------ | -- |  | --------- | - | ---------- | ------------- |  | --------- | ---------- |  | ------- | ------ | ------- |  |  |  | ------ | 
|                            |  | Number |    |  |           |   | Weighted   |               |  |           |            | 
|                            |  | of     |    |  |           |   | Average    |               |  | Portfolio |            |  | Loan to |       
|Loan Type                   |  | Loans  |    |  | Balance** |   |            | Interest Rate |  |           | Percentage |  |         | Value* |        
|                            |  |        |    |  |           |   |            |               |  |           |            |  |         |        |        
|Acquisition and development |  |        | 3  |  |           | $ | 6,319,351  |               |  |           | 10.90%     |  |         |        | 46.49%  |  |  |  | 56.74% | 
|Bridge                      |  |        | 1  |  |           |   | 1,500,000  |               |  |           | 10.00%     |  |         |        | 11.04%  |  |  |  | 50.62% | 
|Commercial                  |  |        | 2  |  |           |   | 3,348,152  |               |  |           | 13.27%     |  |         |        | 24.63%  |  |  |  | 73.28% | 
|Construction                |  |        | 1  |  |           |   | 265,451    |               |  |           | 12.00%     |  |         |        | 1.95%   |  |  |  | 66.53% | 
|Land                        |  |        | 3  |  |           |   | 2,159,544  |               |  |           | 12.81%     |  |         |        | 15.89%  |  |  |  | 71.82% | 
|                            |  |        |    |  |           |   |            |               |  |           |            |  |         |        |        
|                            |  |        | 10 |  |           | $ | 13,592,498 |               |  |           | 11.71%     |  |         |        | 100.00% |  |  |  | 62.73% | 
|                            |  |        |    |  |           |   |            |               |  |           |            |  |         |        |        



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
| | * | Loan to value ratios are based on appraisals obtained at the
    time of loan origination and may not reflect subsequent changes
    in value estimates. Such appraisals, which may be commissioned
    by the borrower, are generally dated no greater than
    12 months prior to the date of loan origination. The
    appraisals may be for the current estimate of the as-if
    developed value of the property, which approximates the
    post-construction value of the collateralized property assuming
    that such property is developed. As-if developed
    values on raw land loans or acquisition and development loans
    often dramatically exceed the immediate sales value and may
    include anticipated zoning changes, selection by a purchaser
    against multiple alternatives, and successful development by the
    purchaser; upon which development is dependent on availability
    of financing. As most of the appraisals will be prepared on an
    as-if developed basis, if a loan goes into default
    prior to any development of a project, the market value of the
    property may be substantially less than the appraised value. As
    a result, there may be less security than anticipated at the
    time the loan was originally made. If there is less security and
    a default occurs, the Company may not recover the full amount of
    the loan. | 

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|                 |  |              |            |  |            |  |         | 
|---------------- |  | ------------ | ---------- |  | ---------- |  | ------- | 
|                 |  | December 31, |            |  |           
|                 |  | 2004         |            |  | Portfolio  | 
|Loan Type        |  | Balance**    |            |  | Percentage | 
|                 |  |              |            |  |            | 
|First mortgages  |  | $            | 11,014,604 |  |            |  | 81.03%  | 
|Second mortgages |  |              | 2,577,894  |  |            |  | 18.97%  | 
|                 |  |              |            |  |            | 
|                 |  | $            | 13,592,498 |  |            |  | 100.00% | 
|                 |  |              |            |  |            | 



|     |  |   |            | 
|---- |  | - | ---------- | 
|2005 |  | $ | 6,109,620  | 
|2006 |  |   | 7,482,878  | 
|     |  |   |           
|     |  | $ | 13,592,498 | 
|     |  |   |           



|           |  |              |            |  |            |  |         | 
|---------- |  | ------------ | ---------- |  | ---------- |  | ------- | 
|           |  | December 31, |            |  |           
|           |  | 2004         |            |  | Portfolio  | 
|           |  | Balance**    |            |  | Percentage | 
|           |  |              |            |  |            | 
|Arizona    |  | $            | 6,864,538  |  |            |  | 50.50%  | 
|California |  |              | 1,648,152  |  |            |  | 12.12%  | 
|Nevada     |  |              | 4,079,808  |  |            |  | 30.02%  | 
|Oklahoma   |  |              | 1,000,000  |  |            |  | 7.36%   | 
|           |  |              |            |  |            | 
|           |  | $            | 13,592,498 |  |            |  | 100.00% | 
|           |  |              |            |  |            | 






|   |                                                                                                                            
|-- | ---------------------------------------------------------------------------------------------------------------------------
|** | The following table reconciles the balance of the loan portfolio
    to the amount shown on the accompanying Balance Sheet.

|                           |  |              |            |  
|-------------------------- |  | ------------ | ---------- | -
|                           |  | December 31, |           
|                           |  | 2004         |           
|                           |  |              |           
|Balance per Loan Portfolio |  | $            | 13,592,498 |  
|Less:                      |  |              |            |  
|Allowance for Loan Losses  |  |              | (72,500    | )
|                           |  |              |           
|Balance per Balance Sheet  |  | $            | 13,519,998 |  
|                           |  |              |           







22



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Investment in Real Property






|                                             |  |   |           |  
|-------------------------------------------- |  | - | --------- | -
|Net income from real estate segment          |  | $ | 91,494    |  
|Add back depreciation and amortization       |  |   | 80,740    |  
|                                             |  |   |          
|Cash yield                                   |  | $ | 172,234   |  
|                                             |  |   |          
|Cash investment                              |  | $ | 4,850,000 |  
|                                             |  |   |          
|Months in operation                          |  |   | 4.5       |  
|                                             |  |   |          
|Annualized cash yield on real estate segment |  |   | 9         | %
|                                             |  |   |          

Asset Quality and Loan Reserves








| |   |                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------
| |  | prevailing economic conditions;                                                                             
|
| |  | historical experience;                                                                                      
|
| |  | the nature and volume of the loan portfolio;                                                                
|
| |  | the borrowers financial condition and adverse situations
    that may affect the borrowers ability to pay;

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| |   |                                                                                                
| | - | -----------------------------------------------------------------------------------------------
| |  | evaluation of industry trends; and                                                             
|
| |  | estimated net realizable value of any underlying collateral in
    relation to the loan amount.





|                            |  |              |   |            |  |   |            |              |      |   |   |  |  |   |        | 
|--------------------------- |  | ------------ | - | ---------- |  | - | ---------- | ------------ | ---- | - | - |  |  | - | ------ | 
|                            |  | Balance at   |   |            |  |   |            | Balance at   |     
|                            |  | December 31, |   |            |  |   |            | December 31, |     
|Description                 |  | 2003         |   | Provisions |  |   | Deductions |              | 2004 |  
|                            |  |              |   |            |  |   |            |              |      |  
|General Valuation Allowance |  | $            |  |            |  | $ | 72,500     |              |      | $ |  |  |  | $ | 72,500 | 
|                            |  |              |   |            |  |   |            |              |      |   |   | 

Off-Balance Sheet Arrangements




Contractual Obligations




|                       |  |                       |           |           |        |   |           |           |           |           |   |         |  |   |   |  |  |   |   | 
|---------------------- |  | --------------------- | --------- | --------- | ------ | - | --------- | --------- | --------- | --------- | - | ------- |  | - | - |  |  | - | - | 
|                       |  | Payment Due by Period
|                       |  |                      
|                       |  |                       |           | Less than |        |   |           |           | More than
|Contractual Obligation |  | Total                 |           |           | 1 Year |   |           | 1-3 Years |           | 3-5 Years |   | 5 Years
|                       |  |                       |           |           |        |   |           |           |           |           |   |        
|Secured borrowings     |  | $                     | 2,590,491 |           |        | $ | 2,590,491 |           |           | $         |  |         |  | $ |  |  |  | $ |  | 

Critical Accounting Estimates


Revenue Recognition




Investments in Mortgage Loans




24



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Allowance for Loan Losses




Investments in Real Property






|                        |  |                
|----------------------- |  | ---------------
|Land                    |  | Not depreciated
|Building                |  | 40 years       
|Building improvements   |  | 10-25 years    
|Land improvements       |  | 20-25 years    
|Tenant improvements     |  | Lease term     
|Intangible lease assets |  | Lease term     



Secured Borrowings


Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities


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Factors Affecting Our Operating Results




| |                                    
| | -----------------------------------
| | Risks of Investing in Real Property



| |   |                                                                                                                                                                                                                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Changes in the general economic or local conditions could have
    an adverse impact on the real estate market in general.                                                                                                                                                                                               
|
| |  | Changes in the supply of or demand for similar or competing
    properties in an area. If we pay a higher price, our
    profitability will be reduced. Additionally, if we are unable to
    sell a property when we determine to do so, it could have a
    significant adverse affect on our cash flow and operations.
|
| |  | Changes in interest rates and availability of permanent mortgage
    funds that may render the sale of a property difficult or
    unattractive.                                                                                                                                                                         
|
| |  | Changes in tax, real estate, environmental and zoning laws may
    require additional material expenditures by us in order to be in
    compliance.                                                                                                                                                                      
|
| |  | Periods of high interest rates and tight money supply may make
    the sale of property more difficult.                                                                                                                                                                                                                  
|
| |  | Tenant turnover could cause us to lose revenue associated with
    that lease and increase costs for tenant improvements.                                                                                                                                                                                                
|
| |  | General overbuilding or excess supply in the market area could
    lead to vacancies. If vacancies occur for a long period of time,
    we may suffer reduced revenues and could diminish the market
    value of the property.                                                                                          



| |                                     
| | ------------------------------------
| | Risks of Investing in Mortgage Loans



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Our Managers underwriting standards and procedures are
    more lenient than conventional lenders in that we will invest in
    loans to borrowers who will not be required to meet the credit
    standards of conventional mortgage lenders.                                                                                                                                                                                                                  
|
| |  | Our Manager approves mortgage loans more quickly then other
    mortgage lenders. Due to the nature of loan approvals, there is
    a risk that the credit inquiry Vestin Mortgage performs will not
    reveal all material facts pertaining to the borrower and the
    security.                                                                                                                                                                              
|
| |  | Appraisals may be performed on an as-if developed
    basis which appraised values dramatically exceed immediate sales
    values. Therefore there is a risk that the borrower will not
    complete development of the project which may affect the
    expected value of the property and the loan to value ratio.
    Also, property may not have value above its as-is value which
    itself may be difficult to realize.                                 
|
| |  | Our results of operations will vary with changes in interest
    rates and with the performance of the relevant real estate
    markets.                                                                                                                                                                                                                                                                                                                         
|
| |  | If the economy is healthy, we expect that more people will be
    borrowing money to acquire, develop or renovate real property.
    However, if the economy grows too fast, interest rates may
    increase too much and the cost of borrowing may become too
    expensive. This could result in a slowdown in real estate
    lending which may mean we will have fewer loans to acquire, thus
    reducing our revenues and the distributions to our members.

26



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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | If, at a time of relatively low interest rates, a borrower
    should prepay obligations that have a higher interest rate from
    an earlier period, investors will likely not be able to reinvest
    the funds in mortgage loans earning that higher rate of
    interest. In the absence of a prepayment fee, the investors will
    receive neither the anticipated revenue stream at the higher
    rate nor any compensation for their loss. This in turn could
    harm our reputation and make it more difficult for us to attract
    investors willing to acquire interest in mortgage loans.



| |                 
| | ----------------
| | Risk of Defaults





| |                               
| | ------------------------------
| | Risks of Interest Rate Changes









| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i) There can be no assurance that this permitted rate
    increase will be adequate if interest rates have increased
    beyond the range contemplated by our loan documents.                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| | (ii) If interest rates rise, borrowers under loans with
    monthly or quarterly principal payments may be compelled to
    extend their loans to decrease the principal paid with each
    payment because the interest component has increased. If this
    happens, there is a higher risk that the borrower may default on
    the extended loan, and the increase in the interest rate on the
    loan may not be adequate compensation for the increased risk.
    Distributions on mortgage loans we place may decline if lenders
    are unable to reinvest at higher rates or if an increasing
    number of borrowers default on their loans.
|
| | (iii) If, at a time of relatively low interest rates, a
    borrower prepays obligations that have a higher interest rate
    from an earlier period, investors will likely not be able to
    reinvest the funds in mortgage loans earning that higher rate of
    interest. In the absence of a prepayment fee, the investors will
    receive neither the anticipated revenue stream at the higher
    rate nor compensation for their loss. This in turn could harm
    our business reputation.                                                                                                                                                   



| |                                         
| | ----------------------------------------
| | Competition for Borrowers and Properties



27



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| |                                      
| | -------------------------------------
| | Effect of Fluctuations in the Economy



Capital and Liquidity






28



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|           |  |   |            | 
|---------- |  | - | ---------- | 
|2005       |  | $ | 871,203    | 
|2006       |  |   | 906,051    | 
|2007       |  |   | 942,293    | 
|2008       |  |   | 979,985    | 
|2009       |  |   | 1,019,185  | 
|Thereafter |  |   | 5,316,833  | 
|           |  |   |           
|           |  | $ | 10,035,550 | 
|           |  |   |           













29



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Segment Information:










|                         |                                        |                |           |           |                |   |         |         |  |   |           |           | 
|------------------------ | -------------------------------------- | -------------- | --------- | --------- | -------------- | - | ------- | ------- |  | - | --------- | --------- | 
|                         |                                        | Investment in  |           |           | Investments in |   |         |        
|                         |                                        | Mortgage Loans |           |           | Real Estate    |   |         | Total   | 
|                         |                                        |                |           |           |                |   |         |         | 
|Revenues:                |                                        |                |           |           |                |   |         |         |  |   |           |          
|                         | Interest income                        |                | $         | 1,955,911 |                |   | $       |        |  |   | $         | 1,955,911 | 
|                         | Rental income                          |                |           |          |                |   |         | 316,625 |  |   |           | 316,625   | 
|                         | Other                                  |                |           | 87,250    |                |   |         |        |  |   |           | 87,250    | 
|                         |                                        |                |           |           |                |   |         |         | 
|Total revenues           |                                        |                | 2,043,161 |           |                |   | 316,625 |         |  |   | 2,359,786 |          
|Operating expenses:      |                                        |                |           |           |                |   |         |         |  |   |           |          
|                         | Management fees                        |                |           | 20,995    |                |   |         | 15,240  |  |   |           | 36,235    | 
|                         | Interest related to secured borrowings |                |           | 630,087   |                |   |         |        |  |   |           | 630,087   | 
|                         | Provision for loan losses              |                |           | 72,500    |                |   |         |        |  |   |           | 72,500    | 
|                         | Professional fees                      |                |           | 36,114    |                |   |         | 26,214  |  |   |           | 62,328    | 
|                         | Other                                  |                |           | 5,026     |                |   |         | 22,961  |  |   |           | 27,987    | 
|                         |                                        |                |           |           |                |   |         |         | 
|Total operating expenses |                                        |                | 764,722   |           |                |   | 64,415  |         |  |   | 829,137   |          
|EBITDA*                  |                                        |                | 1,278,439 |           |                |   | 252,210 |         |  |   | 1,530,649 |          
|                         |                                        |                |           |           |                |   |         |         | 
|Less:                    |                                        |                |           |           |                |   |         |         |  |   |           |          
|                         | Depreciation and amortization          |                |           |          |                |   |         | 80,740  |  |   |           | 80,740    | 
|                         | Interest expense                       |                |           |          |                |   |         | 79,976  |  |   |           | 79,976    | 
|                         |                                        |                |           |           |                |   |         |         | 
|Net income               |                                        | $              | 1,278,439 |           |                | $ | 91,494  |         |  | $ | 1,369,933 |          
|                         |                                        |                |           |           |                |   |         |         | 

30



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|  |                                                                                                                                                                                                                                                     
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | EBITDA represents net earnings before interest expense, income
    taxes, depreciation and amortization. We present EBITDA because
    we consider it an important supplemental measure of our
    performance but it does not represent cash flows.










|         |                                                               
|-------- | --------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures About Market
    Risk














|        |                                            
|------- | -------------------------------------------
|Item 8. | Financial Statements and Supplementary Data








|        |                                                                                                  
|------- | -------------------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with Independent Auditors on
    Accounting and Financial Disclosure



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PART III







|         |                       
|-------- | ----------------------
|Item 9A. | Control and Procedures








|         |                  
|-------- | -----------------
|Item 9B. | Other Information








|         |                                               
|-------- | ----------------------------------------------
|Item 10. | Directors and Executive Officers of Registrant





|                              |  |     |    |  |       |                                                                                         
|----------------------------- |  | --- | -- |  | ----- | ----------------------------------------------------------------------------------------
|Name                          |  | Age |    |  | Title
|                              |  |     |    |  |      
|Michael V. Shustek            |  |     | 46 |  |       | Chairman of the Board, Chief Executive Officer, President and
    Director              
|John Alderfer                 |  |     | 60 |  |       | Chief Financial Officer and Director                                                    
|Ira S. Levine                 |  |     | 44 |  |       | Secretary                                                                               
|Michael J. Whiteaker          |  |     | 55 |  |       | Vice President of Regulatory Affairs                                                    
|Peggy S. Shustek              |  |     | 35 |  |       | Vice President of Vestin Mortgage, a subsidiary of Vestin Group                         
|Daniel B. Stubbs              |  |     | 43 |  |       | Senior Vice President, Underwriting of Vestin Mortgage, a
    subsidiary of Vestin Group
|Robert J. Aalberts            |  |     | 54 |  |       | Director                                                                                
|Fredrick J. Zaffarese Leavitt |  |     | 33 |  |       | Director                                                                                
|Roland M. Sansone             |  |     | 50 |  |       | Director                                                                                





Robert J. Aalberts


32



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##### Table of Contents



th


John W. Alderfer


Ira S. Levine


Peggy S. Shustek


Roland M. Sansone


Michael V. Shustek


33



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##### Table of Contents





Daniel B. Stubbs


Michael J. Whiteaker


Fredrick J. Zaffarese Leavitt







|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation








|         |                                                                   
|-------- | ------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial Owners and
    Management



|                                |  |              |         |               |              |  |      |  
|------------------------------- |  | ------------ | ------- | ------------- | ------------ |  | ---- | -
|                                |  |              |         | Percentage of |             
|                                |  | Units        |         |               | Units        | 
|                                |  | Beneficially |         |               | Beneficially | 
|Name                            |  | Owned        |         |               | Owned        | 
|                                |  |              |         |               |              | 
|Dr. Bernard Greenblatt          |  |              | 200,000 |               |              |  | 8.10 | %
|880 Buffwood Avenue, Las Vegas, |  |              |         |               |              |  |      |  
|Nevada 89123                    |  |              |         |               |              |  |      |  

34



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##### Table of Contents








|         |                                               
|-------- | ----------------------------------------------
|Item 13. | Certain Relationships and Related Transactions

Transactions with Management and Others



















|         |                                       
|-------- | --------------------------------------
|Item 14. | Principal Accounting Fees and Services



|                   |  |                   |        |  |                   |   |        | 
|------------------ |  | ----------------- | ------ |  | ----------------- | - | ------ | 
|                   |  | December 31, 2004 |        |  | December 31, 2003 |  
|                   |  |                   |        |  |                   |  
|Audit Fees         |  | $                 | 59,191 |  |                   | $ | 16,328 | 
|Audit Related Fees |  | $                 |       |  |                   | $ |       | 
|Tax Fees           |  | $                 |       |  |                   | $ |       | 
|All Other Fees     |  | $                 | 8,029  |  |                   | $ |       | 



de minimus


35



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##### Table of Contents



PART IV







|         |                                        
|-------- | ---------------------------------------
|Item 15. | Exhibits, Financial Statement Schedules






EXHIBIT INDEX


|        |    |                         |  |                                                                                                                    
|------- | -- | ----------------------- |  | -------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                        
|No.     |    | Description of Exhibits
|        |    |                        
|        | 3  | .1(1)                   |  | Articles of Organization                                                                                           
|        | 3  | .2(2)                   |  | Certificate of Amendment to Articles of Organization                                                               
|        | 3  | .3(3)                   |  | Amended and Restated Operating Agreement (included as
    Exhibit A to the prospectus)                             
|        | 4  | (4)                     |  | Distribution Reinvestment Plan                                                                                     
|        | 10 | .7(5)                   |  | Purchase and Sale Agreement, dated August 1, 2004, by and
    between Luke Properties, LLC and Vestin Fund III, LLC
|        | 10 | .8(5)                   |  | Assignment and Assumption Agreement dated August 16, 2004
    by and between Vestin Fund III, LLC and VFIII HQ, LLC
|        | 10 | .9                      |  | Office lease agreement dated March 31, 2003 by and between
    Luke Properties, LLC and Vestin Fund III, LLC       
|        | 31 | .1                      |  | Section 302 Certification of Michael V. Shustek                                                                    
|        | 31 | .2                      |  | Section 302 Certification of John Alderfer                                                                         
|        | 32 |                         |  | Certification Pursuant to U.S.C. 18 Section 1350                                                                   






|    |                                                                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Incorporated herein by reference to our Pre-Effective Amendment
    No. 3 to Form S-11 Registration Statement filed on
    September 2, 2003, File No. 333-105017.                   
|   
|(2) | Incorporated herein by reference to our Form 10-Q filed on
    August 16, 2004, File No. 333-105017.                                                                                 
|   
|(3) | Incorporated herein by reference to our Post-Effective Amendment
    No. 1 to Form S-11 Registration Statement filed on
    April 29, 2004, File No. 333-105017.                     
|   
|(4) | Incorporated herein by reference to Exhibit 4.4 of our
    Pre-Effective Amendment No. 3 to Form S-11
    Registration Statement filed on September 2, 2003, File
    No. 333-105017.
|   
|(5) | Incorporated herein by reference to our Form 10-Q filed on
    November 15, 2004, File No. 333-105017.                                                                               

36



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##### Table of Contents






SIGNATURES






| |                                            
| | -------------------------------------------
| | Vestin Fund III, LLC                       
|
| | By: Vestin Mortgage, Inc., its sole Manager



| |     |                       
| | --- | ----------------------
| | By: | /s/ Michael V. Shustek

| |                                                    
| | ---------------------------------------------------
| |                                                    
| | Michael V. Shustek                                 
| | Chief Executive Officer and Director of the Manager
| | (Principal Officer of Manager)                     



| |     |                  
| | --- | -----------------
| | By: | /s/ John Alderfer

| |                                         
| | ----------------------------------------
| |                                         
| | John Alderfer                           
| | (Chief Financial Officer of the Manager)



37



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CONTENTS


|                                                            |                                                |      |     |     | 
|----------------------------------------------------------- | ---------------------------------------------- | ---- | --- | --- | 
|                                                            |                                                | Page |    
|                                                            |                                                |      |    
|REPORT OF INDEPENDENT REGISTERED PUBLIC
    ACCOUNTING FIRM |                                                |      | F-2 |    
|                                                           
|FINANCIAL STATEMENTS                                       
|                                                            | Consolidated Balance Sheets                    |      |     | F-3 | 
|                                                            | Consolidated Statements of Operations          |      |     | F-4 | 
|                                                            | Consolidated Statement of Members
    Equity  |      |     | F-5 | 
|                                                            | Consolidated Statements of Cash Flows          |      |     | F-6 | 
|                                                            | Notes to Consolidated Financial
    Statements |      |     | F-7 | 



F-1



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##### Table of Contents






REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM














| |                                                
| | -----------------------------------------------
| | /s/ Moore Stephens Wurth Frazer and Torbet, LLP





F-2



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##### Table of Contents



VESTIN FUND III, LLC





CONSOLIDATED BALANCE SHEETS


|                                                                                                                                                     |                    |                                       |            |           |                   |   |         |         |         |  
|---------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------ | ------------------------------------- | ---------- | --------- | ----------------- | - | ------- | ------- | ------- | -
|                                                                                                                                                     |                    | December 31, 2004                     |            |           | December 31, 2003 |  
|                                                                                                                                                     |                    |                                       |            |           |                   |  
|ASSETS                                                                                                                                              
|Cash                                                                                                                                                 |                    | $                                     | 6,285,989  |           |                   | $ | 4,952   |        
|Interest receivable                                                                                                                                  |                    |                                       | 127,263    |           |                   |   |        |        
|Investment in mortgage loans, net of allowance for loan losses
    of $72,500 as of December 31, 2004                                                |                    |                                       | 13,519,998 |           |                   |   |        |        
|Investment in real property, net of accumulated depreciation of
    $76,504                                                                          |                    |                                       | 9,813,977  |           |                   |   |        |        
|Capitalized loan fees, net of amortization of $4,236                                                                                                 |                    |                                       | 110,566    |           |                   |   |         |        
|Assets under secured borrowings                                                                                                                      |                    |                                       | 2,590,491  |           |                   |   |        |        
|Deferred offering costs                                                                                                                              |                    |                                       | 926,054    |           |                   |   | 667,437 |        
|                                                                                                                                                     |                    |                                       |            |           |                   |  
|                                                                                                                                                     |                    | $                                     | 33,374,338 |           |                   | $ | 672,389 |        
|                                                                                                                                                     |                    |                                       |            |           |                   |  
|                                                                                                                                                    
|LIABILITIES AND MEMBERS EQUITY                                                                                                                     
|Liabilities                                                                                                                                          |                    |                                       |            |           |                   |   |         |        
|                                                                                                                                                     | Due to Manager     |                                       | $          | 1,093,628 |                   |   | $       | 673,088 |        
|                                                                                                                                                     | Secured borrowings |                                       |            | 2,590,491 |                   |   |         |        |        
|                                                                                                                                                     | Note payable       |                                       |            | 4,927,885 |                   |   |         |        |        
|                                                                                                                                                     |                    |                                       |            |           |                   |  
|                                                                                                                                                     |                    | Total liabilities                     |            |           | 8,612,004         |   |         |         | 673,088 |  
|                                                                                                                                                    
|Members equity  Minimum 1,000,000 units,
    maximum 12,000,000 units issued at $10 per unit,
    2,471,658 units outstanding at December 31, 2004 |                    |                                       | 24,762,334 |           |                   |   | (699    | )      
|                                                                                                                                                     |                    |                                       |            |           |                   |  
|                                                                                                                                                     |                    | Total members equity                 |            |           | 24,762,334        |   |         |         | (699    | )
|                                                                                                                                                     |                    |                                       |            |           |                   |  
|                                                                                                                                                     |                    | Total liabilities and members equity |            | $         | 33,374,338        |   |         | $       | 672,389 |  
|                                                                                                                                                     |                    |                                       |            |           |                   |  



F-3



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##### Table of Contents



VESTIN FUND III, LLC





CONSOLIDATED STATEMENTS OF OPERATIONS


|                                                                                 |                                                    |                          |           |                     |                            |   |      |     |      |  
|-------------------------------------------------------------------------------- | -------------------------------------------------- | ------------------------ | --------- | ------------------- | -------------------------- | - | ---- | --- | ---- | -
|                                                                                 |                                                    |                          |           | For the Period from |                           
|                                                                                 |                                                    | For the Year Ended       |           |                     | April 16, 2003 (Inception) |  
|                                                                                 |                                                    | December 31, 2004        |           |                     | to December 31, 2003       |  
|                                                                                 |                                                    |                          |           |                     |                            |  
|Revenues                                                                         |                                                    |                          |           |                     |                            |   |      |    
|                                                                                 | Interest income from investments in mortgage loans |                          | $         | 1,955,911           |                            |   | $    |    |     
|                                                                                 | Rental income                                      |                          |           | 316,625             |                            |   |      |    |     
|                                                                                 | Other                                              |                          |           | 87,250              |                            |   |      |    |     
|                                                                                 |                                                    |                          |           |                     |                            |  
|                                                                                 |                                                    | Total revenues           |           |                     | 2,359,786                  |   |      |     |     |  
|                                                                                 |                                                    |                          |           |                     |                            |  
|Operating expenses                                                               |                                                    |                          |           |                     |                            |   |      |    
|                                                                                 | Management fees                                    |                          |           | 36,235              |                            |   |      |    |     
|                                                                                 | Interest expense related to secured borrowings     |                          |           | 630,087             |                            |   |      |     |     
|                                                                                 | Interest expense                                   |                          |           | 79,976              |                            |   |      |    |     
|                                                                                 | Provision for loan losses                          |                          |           | 72,500              |                            |   |      |    |     
|                                                                                 | Depreciation and amortization                      |                          |           | 80,740              |                            |   |      |    |     
|                                                                                 | Professional fees                                  |                          |           | 62,328              |                            |   |      |    |     
|                                                                                 | Other                                              |                          |           | 27,987              |                            |   |      | 699 |     
|                                                                                 |                                                    |                          |           |                     |                            |  
|                                                                                 |                                                    | Total operating expenses |           |                     | 989,853                    |   |      |     | 699  |  
|                                                                                 |                                                    |                          |           |                     |                            |  
|                                                                                 |                                                    | NET INCOME (LOSS)        |           | $                   | 1,369,933                  |   |      | $   | (699 | )
|                                                                                 |                                                    |                          |           |                     |                            |  
|Net income (loss) allocated to members                                           |                                                    | $                        | 1,369,933 |                     |                            | $ | (699 | )  
|                                                                                 |                                                    |                          |           |                     |                            |  
|Net income (loss) allocated to members per weighted average
    membership units |                                                    | $                        | 0.78      |                     |                            | $ |     |    
|                                                                                 |                                                    |                          |           |                     |                            |  
|Weighted average membership units                                                |                                                    |                          | 1,751,700 |                     |                            |   |     |    
|                                                                                 |                                                    |                          |           |                     |                            |  



F-4



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##### Table of Contents



VESTIN FUND III, LLC





CONSOLIDATED STATEMENT OF MEMBERS EQUITY


For the Year Ended December 31, 2004


|                                     |  |       |           |   |        |   |            |  
|------------------------------------ |  | ----- | --------- | - | ------ | - | ---------- | -
|                                     |  | Units |           |   | Amount |  
|                                     |  |       |           |   |        |  
|Members equity at December 31, 2003 |  |       |          |   |        | $ | (699       | )
|Issuance of units                    |  |       | 2,425,244 |   |        |   | 24,277,898 |  
|Distributions                        |  |       |          |   |        |   | (1,349,851 | )
|Reinvestments of distributions       |  |       | 47,462    |   |        |   | 475,574    |  
|Members redemptions                 |  |       | (1,048    | ) |        |   | (10,521    | )
|Net income                           |  |       |          |   |        |   | 1,369,933  |  
|                                     |  |       |           |   |        |  
|Members equity at December 31, 2004 |  |       | 2,471,658 |   |        | $ | 24,762,334 |  
|                                     |  |       |           |   |        |  



F-5



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##### Table of Contents



VESTIN FUND III, LLC





CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                      |                                                                                                                                               |                                             |                       |                                           |                               |          |             |         |   |       |       | 
|------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------- | --------------------- | ----------------------------------------- | ----------------------------- | -------- | ----------- | ------- | - | ----- | ----- | 
|                                      |                                                                                                                                               |                                             |                       | For the Period from                       |                              
|                                      |                                                                                                                                               | For the Year Ended                          |                       |                                           | April 16, 2003 (Inception) to |         
|                                      |                                                                                                                                               | December 31, 2004                           |                       |                                           | December 31, 2003             |         
|                                      |                                                                                                                                               |                                             |                       |                                           |                               |         
|Cash flows from operating activities: |                                                                                                                                               |                                             |                       |                                           |                               |          |             |        
|                                      | Net income (loss)                                                                                                                             |                                             | $                     | 1,369,933                                 |                               |          | $           | (699    | )
|                                      | Adjustments to reconcile net income (loss) to net cash provided
    by operating activities:                                                  |                                             |                       |                                           |                               |          |             |         |  
|                                      |                                                                                                                                               | Depreciation                                |                       |                                           | 76,504                        |          |             |         |  |      
|                                      |                                                                                                                                               | Amortization of capitalized loan fees       |                       |                                           | 4,236                         |          |             |         |  |      
|                                      |                                                                                                                                               | Provision for loan losses                   |                       |                                           | 72,500                        |          |             |         |  |      
|                                      |                                                                                                                                               | Change in operating assets and liabilities: |                       |                                           |                               |          |             |         |   |      
|                                      |                                                                                                                                               |                                             | Interest receivable   |                                           |                               | (127,263 | )           |         |   |      |      
|                                      |                                                                                                                                               |                                             | Capitalized loan fees |                                           |                               | (114,802 | )           |         |   |      |      
|                                      |                                                                                                                                               |                                             | Due to Manager        |                                           |                               | 161,923  |             |         |   | 5,651 |      
|                                      |                                                                                                                                               |                                             |                       |                                           |                               |         
|                                      |                                                                                                                                               |                                             |                       | Net cash provided by operating activities |                               |          | 1,443,031   |         |   |       | 4,952 | 
|                                      |                                                                                                                                               |                                             |                       |                                           |                               |         
|Cash flows from investing activities: |                                                                                                                                               |                                             |                       |                                           |                               |          |             |        
|                                      | Investments in mortgage loans on real estate                                                                                                  |                                             |                       | (20,442,020                               | )                             |          |             |        |  
|                                      | Purchase of investments in mortgage loans from Vestin
    Fund II, LLC                                                                        |                                             |                       | (10,000,000                               | )                             |          |             |        |  
|                                      | Proceeds received from sale of mortgage loans to Vestin
    Fund II, LLC                                                                      |                                             |                       | 5,000,000                                 |                               |          |             |        |  
|                                      | Sale of mortgage loans                                                                                                                        |                                             |                       | 2,113,791                                 |                               |          |             |        |  
|                                      | Proceeds from loan payoff                                                                                                                     |                                             |                       | 9,735,731                                 |                               |          |             |        |  
|                                      | Purchase of investment in real property                                                                                                       |                                             |                       | (4,940,481                                | )                             |          |             |        |  
|                                      |                                                                                                                                               |                                             |                       |                                           |                               |         
|                                      |                                                                                                                                               |                                             |                       | Net cash used by investing activities     |                               |          | (18,532,979 | )       |   |       |      | 
|                                      |                                                                                                                                               |                                             |                       |                                           |                               |         
|Cash flows from financing activities: |                                                                                                                                               |                                             |                       |                                           |                               |          |             |        
|                                      | Proceeds from issuance of member units                                                                                                        |                                             |                       | 24,277,898                                |                               |          |             |        |  
|                                      | Payments on notes payable                                                                                                                     |                                             |                       | (22,115                                   | )                             |          |             |        |  
|                                      | Members redemptions                                                                                                                          |                                             |                       | (10,521                                   | )                             |          |             |        |  
|                                      | Distributions, net of reinvestments                                                                                                           |                                             |                       | (874,277                                  | )                             |          |             |        |  
|                                      |                                                                                                                                               |                                             |                       |                                           |                               |         
|                                      |                                                                                                                                               |                                             |                       | Net cash provided by financing activities |                               |          | 23,370,985  |         |   |       |      | 
|                                      |                                                                                                                                               |                                             |                       |                                           |                               |         
|                                      |                                                                                                                                               |                                             |                       | NET CHANGE IN CASH                        |                               |          | 6,281,037   |         |   |       | 4,952 | 
|Cash, beginning                       |                                                                                                                                               |                                             | 4,952                 |                                           |                               |          |            |        
|                                      |                                                                                                                                               |                                             |                       |                                           |                               |         
|Cash, ending                          |                                                                                                                                               | $                                           | 6,285,989             |                                           |                               | $        | 4,952       |        
|                                      |                                                                                                                                               |                                             |                       |                                           |                               |         
|Interest paid during the period       |                                                                                                                                               | $                                           | 79,976                |                                           |                               | $        |            |        
|                                      |                                                                                                                                               |                                             |                       |                                           |                               |         
|Non-cash financing activities:        |                                                                                                                                               |                                             |                       |                                           |                               |          |             |        
|                                      | Offering costs paid by Vestin Mortgage, Inc. recorded as
    deferred offering costs and due to manager on the accompanying
    balance sheet |                                             | $                     | 258,617                                   |                               |          | $           | 667,437 |  
|                                      |                                                                                                                                               |                                             |                       |                                           |                               |         
|                                      | Change in loans funded through secured borrowing                                                                                              |                                             | $                     | 2,590,491                                 |                               |          | $           |        |  
|                                      |                                                                                                                                               |                                             |                       |                                           |                               |         
|                                      | Note payable related to acquisition of investment in real estate                                                                              |                                             | $                     | 4,950,000                                 |                               |          | $           |        |  
|                                      |                                                                                                                                               |                                             |                       |                                           |                               |         



F-6



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##### Table of Contents



VESTIN FUND III, LLC





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


December 31, 2004


Note A  Organization












Note B  Summary of Significant Accounting
Policies




| |                     
| | --------------------
| | Management Estimates



F-7



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##### Table of Contents



VESTIN FUND III, LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                    
| | -------------------
| | Revenue Recognition





| |                              
| | -----------------------------
| | Investments in Mortgage Loans





| |                          
| | -------------------------
| | Allowance for Loan Losses





| |                             
| | ----------------------------
| | Investments in Real Property



F-8



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##### Table of Contents



VESTIN FUND III, LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                        |  |                
|----------------------- |  | ---------------
|Land                    |  | Not depreciated
|Building                |  | 40 years       
|Building improvements   |  | 10-25 years    
|Land improvements       |  | 20-25 years    
|Tenant improvements     |  | Lease term     
|Intangible lease assets |  | Lease term     





| |                        
| | -----------------------
| | Deferred Offering Costs





| |                   
| | ------------------
| | Secured Borrowings

Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities




F-9



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##### Table of Contents



VESTIN FUND III, LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Note C  Investments in Mortgage Loans




|                            |  |        |    |  |           |   |            |               |  |           |            |   |         |        |        |   |  |  |       |  
|--------------------------- |  | ------ | -- |  | --------- | - | ---------- | ------------- |  | --------- | ---------- | - | ------- | ------ | ------ | - |  |  | ----- | -
|                            |  | Number |    |  |           |   | Weighted   |               |  |           |            |  
|                            |  | of     |    |  |           |   | Average    |               |  | Portfolio |            |   | Loan to |       
|Loan Type                   |  | Loans  |    |  | Balance** |   |            | Interest Rate |  |           | Percentage |   |         | Value* |       
|                            |  |        |    |  |           |   |            |               |  |           |            |   |         |        |       
|Acquisition and development |  |        | 3  |  |           | $ | 6,319,351  |               |  |           | 10.90      | % |         |        | 46.49  | % |  |  | 56.74 | %
|Bridge                      |  |        | 1  |  |           |   | 1,500,000  |               |  |           | 10.00      | % |         |        | 11.04  | % |  |  | 50.62 | %
|Commercial                  |  |        | 2  |  |           |   | 3,348,152  |               |  |           | 13.27      | % |         |        | 24.63  | % |  |  | 73.28 | %
|Construction                |  |        | 1  |  |           |   | 265,451    |               |  |           | 12.00      | % |         |        | 1.95   | % |  |  | 66.53 | %
|Land                        |  |        | 3  |  |           |   | 2,159,544  |               |  |           | 12.81      | % |         |        | 15.89  | % |  |  | 71.82 | %
|                            |  |        |    |  |           |   |            |               |  |           |            |   |         |        |       
|                            |  |        | 10 |  |           | $ | 13,592,498 |               |  |           | 11.71      | % |         |        | 100.00 | % |  |  | 62.73 | %
|                            |  |        |    |  |           |   |            |               |  |           |            |   |         |        |       






|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Loan to value ratios are based on appraisals obtained at the
    time of loan origination and may not reflect subsequent changes
    in value estimates. Such appraisals, which may be commissioned
    by the borrower, are generally dated no greater than
    12 months prior to the date of loan origination. The
    appraisals may be for the current estimate of the as-if
    developed value of the property, which approximates the
    post-construction value of the collateralized property assuming
    that such property is developed. As-if developed
    values on raw land loans or acquisition and development loans
    often dramatically exceed the immediate sales value and may
    include anticipated zoning changes, selection by a purchaser
    against multiple alternatives, and successful development by the
    purchaser; upon which development is dependent on availability
    of financing. As most of the appraisals will be prepared on an
    as-if developed basis, if a loan goes into default
    prior to any development of a project, the market value of the
    property may be substantially less than the appraised value. As
    a result, there may be less security than anticipated at the
    time the loan was originally made. If there is less security and
    a default occurs, the Company may not recover the full amount of
    the loan.



|                 |  |              |            |  |            |  |        |  
|---------------- |  | ------------ | ---------- |  | ---------- |  | ------ | -
|                 |  | December 31, |            |  |           
|                 |  | 2004         |            |  | Portfolio  | 
|Loan Type        |  | Balance**    |            |  | Percentage | 
|                 |  |              |            |  |            | 
|First mortgages  |  | $            | 11,014,604 |  |            |  | 81.03  | %
|Second mortgages |  |              | 2,577,894  |  |            |  | 18.97  | %
|                 |  |              |            |  |            | 
|                 |  | $            | 13,592,498 |  |            |  | 100.00 | %
|                 |  |              |            |  |            | 



|     |  |   |            | 
|---- |  | - | ---------- | 
|2005 |  | $ | 6,109,620  | 
|2006 |  |   | 7,482,878  | 
|     |  |   |           
|     |  | $ | 13,592,498 | 
|     |  |   |           

F-10



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##### Table of Contents



VESTIN FUND III, LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|           |  |              |            |  |            |  |        |  
|---------- |  | ------------ | ---------- |  | ---------- |  | ------ | -
|           |  | December 31, |            |  |           
|           |  | 2004         |            |  | Portfolio  | 
|           |  | Balance**    |            |  | Percentage | 
|           |  |              |            |  |            | 
|Arizona    |  | $            | 6,864,538  |  |            |  | 50.50  | %
|California |  |              | 1,648,152  |  |            |  | 12.12  | %
|Nevada     |  |              | 4,079,808  |  |            |  | 30.02  | %
|Oklahoma   |  |              | 1,000,000  |  |            |  | 7.36   | %
|           |  |              |            |  |            | 
|           |  | $            | 13,592,498 |  |            |  | 100.00 | %
|           |  |              |            |  |            | 






|   |                                                                                                                            
|-- | ---------------------------------------------------------------------------------------------------------------------------
|** | The following table reconciles the balance of the loan portfolio
    to the amount shown on the accompanying Balance Sheet.

|                           |  |              |            |  
|-------------------------- |  | ------------ | ---------- | -
|                           |  | December 31, |           
|                           |  | 2004         |           
|                           |  |              |           
|Balance per Loan Portfolio |  | $            | 13,592,498 |  
|Less:                      |  |              |            |  
|Allowance for Loan Losses  |  |              | (72,500    | )
|                           |  |              |           
|Balance per Balance Sheet  |  | $            | 13,519,998 |  
|                           |  |              |           









|                            |  |              |   |            |  |              |        |  |  |   |        | 
|--------------------------- |  | ------------ | - | ---------- |  | ------------ | ------ |  |  | - | ------ | 
|                            |  | Balance at   |   |            |  | Balance at   |       
|                            |  | December 31, |   |            |  | December 31, |       
|Description                 |  | 2003         |   | Provisions |  |              | 2004   | 
|                            |  |              |   |            |  |              |        | 
|General Valuation Allowance |  | $            |  |            |  | $            | 72,500 |  |  | $ | 72,500 | 
|                            |  |              |   |            |  |              |        |  | 



F-11



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##### Table of Contents



VESTIN FUND III, LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Note D  Investment in Real Property








Note E  Leasing Activity




|           |  |   |            | 
|---------- |  | - | ---------- | 
|2005       |  | $ | 871,203    | 
|2006       |  |   | 906,051    | 
|2007       |  |   | 942,293    | 
|2008       |  |   | 979,985    | 
|2009       |  |   | 1,019,185  | 
|Thereafter |  |   | 5,316,833  | 
|           |  |   |           
|           |  | $ | 10,035,550 | 
|           |  |   |           

Note F  Related Party Transactions












F-12



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##### Table of Contents



VESTIN FUND III, LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




Note G  Secured Borrowings








Note H  Note Payable




|                                                                                                                                                                                    |  |              |           | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | --------- | 
|                                                                                                                                                                                    |  | Balance at   |          
|                                                                                                                                                                                    |  | December 31, |          
|                                                                                                                                                                                    |  | 2004         |          
|                                                                                                                                                                                    |  |              |          
|10-year note payable to banking institution secured by real
    property, bearing interest at 5.6% per annum, payable in
    monthly principal and interest installments of $30,694 |  | $            | 4,927,885 | 
|                                                                                                                                                                                    |  |              |          



|           |  |   |           | 
|---------- |  | - | --------- | 
|2005       |  | $ | 94,815    | 
|2006       |  |   | 100,263   | 
|2007       |  |   | 106,024   | 
|2008       |  |   | 112,116   | 
|2009       |  |   | 118,563   | 
|Thereafter |  |   | 4,396,104 | 
|           |  |   |          
|           |  | $ | 4,927,885 | 
|           |  |   |          

Note I  Members Equity




| |                 
| | ----------------
| | Membership Units





F-13



---



##### Table of Contents



VESTIN FUND III, LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                              
| | -----------------------------
| | Allocations and Distributions











| |                         
| | ------------------------
| | Working Capital Reserves





| |                                   
| | ----------------------------------
| | Value of Members Capital Accounts



Note J  Recent Accounting Pronouncements


SFAS No. 151


SFAS No. 153


F-14



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##### Table of Contents



VESTIN FUND III, LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




FAS 109-2


Note K  Legal Matters Involving the Manager








Note L  Legal Matters Involving the Company




F-15



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##### Table of Contents



VESTIN FUND III, LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




Note M  Selected Quarterly Financial Data
(unaudited)




|                                                                            |  |         |           |  |         |   |           |         |  |   |           |  |  |      |           |  |  |   |           | 
|--------------------------------------------------------------------------- |  | ------- | --------- |  | ------- | - | --------- | ------- |  | - | --------- |  |  | ---- | --------- |  |  | - | --------- | 
|                                                                            |  | First   |           |  | Second  |   |           | Third   |  |   | Fourth    |  |  |     
|                                                                            |  | Quarter |           |  | Quarter |   |           | Quarter |  |   | Quarter   |  |  | Year |          
|                                                                            |  |         |           |  |         |   |           |         |  |   |           |  |  |      |          
|Revenues                                                                    |  | $       | 304,338   |  |         | $ | 647,907   |         |  | $ | 686,239   |  |  | $    | 721,302   |  |  | $ | 2,359,786 | 
|Expenses                                                                    |  |         | 122,451   |  |         |   | 360,914   |         |  |   | 252,987   |  |  |      | 253,501   |  |  |   | 989,853   | 
|                                                                            |  |         |           |  |         |   |           |         |  |   |           |  |  |      |          
|Net income                                                                  |  | $       | 181,887   |  |         | $ | 286,993   |         |  | $ | 433,252   |  |  | $    | 467,801   |  |  | $ | 1,369,933 | 
|                                                                            |  |         |           |  |         |   |           |         |  |   |           |  |  |      |          
|Net income allocated to members per weighted average membership
    units   |  | $       | 0.17      |  |         | $ | 0.22      |         |  | $ | 0.25      |  |  | $    | 0.20      |  |  | $ | 0.78      | 
|                                                                            |  |         |           |  |         |   |           |         |  |   |           |  |  |      |          
|Distributions                                                               |  | $       | 52,217    |  |         | $ | 351,617   |         |  | $ | 420,056   |  |  | $    | 525,961   |  |  | $ | 1,349,851 | 
|                                                                            |  |         |           |  |         |   |           |         |  |   |           |  |  |      |          
|Distributions allocated to members per weighted average
    membership unit |  | $       | 0.05      |  |         | $ | 0.27      |         |  | $ | 0.25      |  |  | $    | 0.23      |  |  | $ | 0.77      | 
|                                                                            |  |         |           |  |         |   |           |         |  |   |           |  |  |      |          
|Weighted average membership units                                           |  |         | 1,093,043 |  |         |   | 1,317,948 |         |  |   | 1,712,296 |  |  |      | 2,338,011 |  |  |   | 1,751,700 | 
|                                                                            |  |         |           |  |         |   |           |         |  |   |           |  |  |      |          

Note N  Segment Information








F-16



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##### Table of Contents



VESTIN FUND III, LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                         |                                        |                |           |           |                |   |         |         |  |   |           |           | 
|------------------------ | -------------------------------------- | -------------- | --------- | --------- | -------------- | - | ------- | ------- |  | - | --------- | --------- | 
|                         |                                        | Investment in  |           |           | Investments in |   |         |        
|                         |                                        | Mortgage Loans |           |           | Real Estate    |   |         | Total   | 
|                         |                                        |                |           |           |                |   |         |         | 
|Revenues:                |                                        |                |           |           |                |   |         |         |  |   |           |          
|                         | Interest income                        |                | $         | 1,955,911 |                |   | $       |        |  |   | $         | 1,955,911 | 
|                         | Rental income                          |                |           |          |                |   |         | 316,625 |  |   |           | 316,625   | 
|                         | Other                                  |                |           | 87,250    |                |   |         |        |  |   |           | 87,250    | 
|                         |                                        |                |           |           |                |   |         |         | 
|Total revenues           |                                        |                | 2,043,161 |           |                |   | 316,625 |         |  |   | 2,359,786 |          
|Operating expenses:      |                                        |                |           |           |                |   |         |         |  |   |           |          
|                         | Management fees                        |                |           | 20,995    |                |   |         | 15,240  |  |   |           | 36,235    | 
|                         | Interest related to secured borrowings |                |           | 630,087   |                |   |         |        |  |   |           | 630,087   | 
|                         | Provision for loan losses              |                |           | 72,500    |                |   |         |        |  |   |           | 72,500    | 
|                         | Professional fees                      |                |           | 36,114    |                |   |         | 26,214  |  |   |           | 62,328    | 
|                         | Other                                  |                |           | 5,026     |                |   |         | 22,961  |  |   |           | 27,987    | 
|                         |                                        |                |           |           |                |   |         |         | 
|Total operating expenses |                                        |                | 764,722   |           |                |   | 64,415  |         |  |   | 829,137   |          
|EBITDA*                  |                                        |                | 1,278,439 |           |                |   | 252,210 |         |  |   | 1,530,649 |          
|                         |                                        |                |           |           |                |   |         |         | 
|Less:                    |                                        |                |           |           |                |   |         |         |  |   |           |          
|                         | Depreciation and amortization          |                |           |          |                |   |         | 80,740  |  |   |           | 80,740    | 
|                         | Interest expense                       |                |           |          |                |   |         | 79,976  |  |   |           | 79,976    | 
|                         |                                        |                |           |           |                |   |         |         | 
|Net income               |                                        | $              | 1,278,439 |           |                | $ | 91,494  |         |  | $ | 1,369,933 |          
|                         |                                        |                |           |           |                |   |         |         | 






|  |                                                                                                                                                                                                                                                     
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | EBITDA represents net earnings before interest expense, income
    taxes, depreciation and amortization. We present EBITDA because
    we consider it an important supplemental measure of our
    performance but it does not represent cash flows.





Note O  Subsequent Events






F-17



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##### Table of Contents



VESTIN FUND III, LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




F-18



---



##### Table of Contents



EXHIBIT INDEX


|        |    |       |                         |                                                                                                                    
|------- | -- | ----- | ----------------------- | -------------------------------------------------------------------------------------------------------------------
|Exhibit |    |       |                        
|No.     |    |       | Description of Exhibits
|        |    |       |                        
|        | 3  | .1(1) |                         | Articles of Organization                                                                                           
|        | 3  | .2(2) |                         | Certificate of Amendment to Articles of Organization                                                               
|        | 3  | .3(3) |                         | Amended and Restated Operating Agreement (included as
    Exhibit A to the prospectus)                             
|        | 4  | (4)   |                         | Distribution Reinvestment Plan                                                                                     
|        | 10 | .7(5) |                         | Purchase and Sale Agreement, dated August 1, 2004, by and
    between Luke Properties, LLC and Vestin Fund III, LLC
|        | 10 | .8(5) |                         | Assignment and Assumption Agreement dated August 16, 2004
    by and between Vestin Fund III, LLC and VFIII HQ, LLC
|        | 10 | .9    |                         | Office lease agreement dated March 31, 2003 by and between
    Luke Properties, LLC and Vestin Fund III, LLC       
|        | 31 | .1    |                         | Section 302 Certification of Michael V. Shustek                                                                    
|        | 31 | .2    |                         | Section 302 Certification of John Alderfer                                                                         
|        | 32 |       |                         | Certification Pursuant to U.S.C. 18 Section 1350                                                                   






|    |                                                                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Incorporated herein by reference to our Pre-Effective Amendment
    No. 3 to Form S-11 Registration Statement filed on
    September 2, 2003, File No. 333-105017.                   
|   
|(2) | Incorporated herein by reference to our Form 10-Q filed on
    August 16, 2004, File No. 333-105017.                                                                                 
|   
|(3) | Incorporated herein by reference to our Post-Effective Amendment
    No. 1 to Form S-11 Registration Statement filed on
    April 29, 2004, File No. 333-105017.                     
|   
|(4) | Incorporated herein by reference to Exhibit 4.4 of our
    Pre-Effective Amendment No. 3 to Form S-11
    Registration Statement filed on September 2, 2003, File
    No. 333-105017.
|   
|(5) | Incorporated herein by reference to our Form 10-Q filed on
    November 15, 2004, File No. 333-105017.