<PAGE>
                                                             OMB APPROVAL
                                                       OMB Number:     3235-0420
                                                       Expires:   April 30, 2006
                                                       Estimated average burden
                                                       hours per response . 1646
                                                       -------------------------


                                  UNITED STATES
           SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549

                                  FORM 10-KSB/A

(Mark One)

[X]      ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934


                 For the fiscal year ended December 31, 2003____________________

[ ]      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934

              For the transition period from ________________ to _______________

              Commission file number 333-98337__________________________________


Yosemite Mortgage Fund II, LLC
--------------------------------------------------------------------------------
                 (Name of small business issuer in its charter)

California                                  94-3394131
-------------------------------             ------------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)


414 13th Street, Suite 400, Oakland, CA     94612
---------------------------------------     ------------------------------------
(Address of principal executive offices)                 (Zip Code)

Issuer's telephone number (510) 452-9144
                          --------------------------------

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

          Title of each class          Name of each exchange on which registered

None
--------------------------------------------------------------------------------


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

None
--------------------------------------------------------------------------------
                                (Title of class)
--------------------------------------------------------------------------------
                                (Title of class)

         Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]


 PERSONS WHO ARE TO RESPOND TO THE COLLECTION OF INFORMATION CONTAINED IN THIS
 FORM ARE NOT REQUIRED TO RESPOND UNLESS THE FORM DISPLAYS A CURRENTLY VALID OMB
 CONTROL NUMBER.
 SEC 2337 (12-03)

<PAGE>

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant' s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.

      State issuer's revenues for its most recent fiscal year.  $1,254,199
                                                                --------------

         State the aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the price at which the
common equity was sold, or the average bid and asked price of such common
equity, as of a specified date within the past 60 days. (See definition of
affiliate in Rule 12b-2 of the Exchange Act.) Not Applicable

Note: If determining whether a person is an affiliate will involve an
unreasonable effort and expense, the issuer may calculate the aggregate market
value of the common equity held by non-affiliates on the basis of reasonable
assumptions, if the assumptions are stated.


     (ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

         Check whether the issuer has filed all documents and reports required
to be filed by Section 12,13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court. Yes [ ] No [ ]


                    (APPLICABLE ONLY TO CORPORATE REGISTRANTS)

         State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date.

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


                       DOCUMENTS INCORPORATED BY REFERENCE

         If the following documents are incorporated by reference, briefly
describe them and identify the part of the Form 10-KSB (e.g., Part I, Part II,
etc.) into which the document is incorporated: (1) any annual report to security
holders; (2) any proxy or information statement; and (3) any prospectus filed
pursuant to Rule 424(b) or (c) of the Securities Act of 1933 ("Securities Act").
The listed documents should be clearly described for identification purposes
(e.g., annual report to security holders for fiscal year ended December 24,
1990).

         Certain exhibits filed with Registrant's Registration Statement No.
333-98337 are incorporated by reference into Part III.

         Exhibit Index at page 39.

         Transitional Small Business Disclosure Format (Check one):
Yes [X]; No [ ]

<PAGE>

                                     PART I

         The Registrant, a Transitional Small Business Issuer, provides the
following information required by Items 6-11 of Model B of Form 1-A, as well as
the information required by Part II, Part F/S, and Part III, below. The captions
of Items 6-11 are the following: Item 6. Description of Business, Item 7.
Description of Property, Item 8. Directors, Executive Officers and Significant
Employees, Item 9. Remuneration of Directors and Officers, Item 10. Secuirty
Ownership of Management and Certain Securityholders, Item 11. Interest of
Management and Others in Certain Transactions.

                                    BUSINESS

HISTORY AND ORGANIZATION

The Registrant was organized as a California limited liability company on March
19, 2001. (The Registrant will be referred to in this Form 10-SB as "the
Company" or "we.") The Company's registration statement on Form SB-2 covering
its public offering of 5,000,000 units of limited liability company interest
became effective with the Securities and Exchange Commission on March 13, 2003.
Other than organizational, planning and registration activities, we conducted no
business until May 2003, at which time we first acquired mortgage loans for our
portfolio, using the initial proceeds from our public offering. We registered
6,500,000 units, of which 5,000,000 are being offered in the initial public
offering and 1,500,000 units are reserved for possible issuance under the
Company's distribution reinvestment program.

Our Manager is MFP Management LLC, organized as a California limited liability
company on May 4, 2001, and its sole Manager is Steven M. Pontes, who is the
principal owner and Chief Executive Officer of Pontes Financial Group, Ltd., a
California corporation organized in 1987 and a licensed California real estate
broker corporation. All mortgage loans invested in by the Fund are originated by
or through Pontes Financial Group, Ltd., which services those loans for the Fund
and provides it with administrative services. The Manager assigns the fees that
it is entitled to be paid by the Fund to Pontes Financial Group, Ltd.

OUR BUSINESS STRATEGY

Our business strategy is designed to generate current income by investing in
mortgage loans. We believe there is a significant market opportunity to make
mortgage loans to owners and developers of real property whose financing needs
are not met by traditional mortgage lenders. Factors that often preclude such
borrowing are perceived credit risks, based on standards created by the lenders,
bank aversion to cyclical conditions in markets, and certain industry risks,
such as service stations. The traditional underwriting standards and length of
time required by conventional mortgage lenders such as commercial banks also
result in some potential borrowers who are unable to obtain such financing or
who are unwilling to go through the time consuming process often required by
traditional lenders.

We lend funds to such borrowers provided that they have sufficient equity in the
underlying real estate and otherwise meet our lending criteria. In certain cases
we may make mortgage loans which are riskier than the mortgage loans made by
commercial banks. However, in return we anticipate receiving a higher interest
rate and the Manager takes steps intended to mitigate the risks, such as
imposing a lower loan to value ratio (thereby providing us with a bigger equity
cushion if real estate values drop.)

We believe that by focusing on the value of the underlying real estate that
serves as collateral on our mortgage loans, the Manager can expedite the loan
approval process and approve loans to certain borrowers who might not qualify
for loans from traditional mortgage lenders. The Manager will generally spend
not more than 10 days assessing the character and credit history of our
borrowers. Rather, the Manager focuses its underwriting review on the value of
the collateral which secures our loan.

The mortgage loan business is highly competitive, and the Company competes with
numerous established entities, some of which have significantly more financial
resources and experience in the mortgage lending business than does Steven
Pontes, Pontes Financial Group, Ltd. or the Manager. The principal competitors
are Owens Mortgage Investment Fund, Bar K Mortgage Fund, the Redwood Mortgage
Funds, Southern Pacific Thrift, Cascade Financial Corporation and Cushman
Capital. The Company also has competition from banks, insurance companies,
savings and loan associations, mortgage bankers, pension funds, real estate
investment trusts, other mortgage investment funds and lenders with objectives
similar in whole or in part to those of the Company.

RESULTS OF OPERATIONS

Following our receipt from the escrow of the first $1,500,000 of proceeds from
our public offering in May 2003 and until December 31, 2003, the Company
received $32,563,899 in Member contributions from sales of our units in the
public offering. As part of its initial plan of operation, the Company proposed
to purchase approximately $31,583,000 of pre-existing mortgages, primarily from
two private mortgage funds affiliated with our Manager. Due to early payoffs by
borrowers of a portion of those pre-existing mortgages, the amount actually
purchased was $22,650,493.

                                       1
<PAGE>

The pre-existing loans that we purchased, using proceeds from our initial public
offering, are described in the table, Pre-Existing Loans Purchased as of
12/31/03, at page 26. The loans are all fixed interest rates, mostly commercial
loans, with a few that are multi-residential or residential. The borrowers are a
mix of developer entities and individuals.

In addition to the purchase of those pre-existing loans, the Company, as of
December 31, 2003, had purchased newly originated mortgage loans in the total
amount of $10,765,000. As of December 31, 2003, portfolio loans totaling
$4,841,859 had been paid off by borrowers prior to their maturity. In addition,
principal payments in the amount of $78,088 from amortized loans were also
received in 2003. Early payoffs of loans are attributable to generally lower
prevailing mortgage loan interest rates, which have resulted in increases of
cash of the Company, from approximately $4,419,000 as of December 31, 2003 to
$7,538,373 as of June 30, 2004.

The net income of the Company for the year 2003 was $1,074,256 on total revenues
of $1,254,199. Total expenses for the period were $179,943.

The Company acquired or originated loans totaling $1,020,000 and $3,660,126
during the three and six month periods ending March 31 and June 30, 2004,
respectively. The interest rate of these loans range from 9% to 11.75%.

During the quarter ending March 31, 2004, a mortgage loan investment in Loan
Number 3142 in the amount of $250,000 was acquired from the Manager.

During the six months ending June 30, 2004, borrowers paid off the following
loans prior to their maturity dates:

                        Principal            Interest    Payoff
         Loan Number    Amount               Rate        Month/Year
         -----------    ------               ----        ----------
         3041           $236,238             12.75%      6/2004
         3094           $280,966             12.75%      6/2004
         3105           $295,664             11.25%      1/2004
         3108           $265,000             11.75%      6/2004
         3116           $723,684             12.75%      5/2004
         3127           $625,000             11.75%      1/2004
         3131           $310,000             12.00%      3/2004
         3138           $565,000             12.00%      6/2004

As of June 30, 2004, the following loans were in default:

                                   Principal            Interest
                    Loan Number    Amount               Rate
                    -----------    ------               ----

                    3064           $193,594             12.5%
                    3095           $243,782             12.5%
                    3107           $550,000             11.75%
                    3144           $4,975,000           12.75%


Loans 3064 and 3095 are to the same borrower and are secured by the same
property located at 833 Bancroft Ave, Berkeley, CA. The Manager advanced all
payments when due to the Company. On July 9, 2004, the property was sold, and
both loans were paid in full by the borrower, including late fees and default
interest. The Manager was reimbursed for its advanced payments and also received
the late fees and default interest.

Loan #3107 is currently in foreclosure with a sale date scheduled for July 20,
2004. The Manager believes there is adequate equity to repay the loan including
all back payments at the default interest rate plus pay all cost associated with
the foreclosure. Due to the loan being impaired, the Manager has not reflected
any accrued interest in the financial statements.

Loan #3144 is currently in foreclosure with the sale date scheduled for August
19, 2004. The Manager elected to file foreclosure when the borrower missed a
principal payment due February 20, 2004. The Manager believes there is adequate
equity to repay the loan including all back payments at the default interest
rate plus pay all cost associated with the foreclosure. Due to the loan being in
default, the Manager has not reflected any accrued interest in the financial
statements.

                                       2
<PAGE>

The Manager earned compensation from the Company for its mortgage servicing fees
during the six months ended June 30, 2004 in the amount of $29,157, all of which
the Manager has assigned to its affiliate, Pontes Financial Group, Ltd. No other
amounts were received by the Manager or its affiliates for services or
reimbursement of costs or expenses from the Company during the six months ended
June 30, 2004.

OUR PUBLIC OFFERING

As of June 30, 2004 we have sold a total of 3,654,024 units at $10.00 per unit,
for a total amount of $36,540,240. This includes 3,551,840 units sold in our
initial public offering and 102,184 units issued under our Distribution
Reinvestment Program. The net proceeds to the Company after deducting the
expenses of the offering to June 30, 2004 were $36,020,740, which have been
invested in mortgages or retained as cash. Due to payoffs and principal
paydowns, the amount invested in real estate mortgage loans as of June 30, 2004
is $28,853,128, and $7,538,373 is held in cash. No units were sold in the
initial public offering from April 1, 2004 to August 31, 2004, as the Manager
suspended such sales pending availability and selection of mortgage loans
suitable for the Fund's portfolio. We are permitted to continue the initial
public offering of our units, of which 1,448,160 remain unsold, until March 13,
2005, which is two years from the original effective date of our SEC
registration statement.

CURRENT ECONOMIC CONDITIONS

The Company's sole business, making loans secured by real estate, is
particularly vulnerable to changes in macroeconomic conditions. Any significant
decline in economic activity, particularly in the geographical markets in which
the loans are concentrated, results in a decline in the demand for real estate
acquisition and development loans. Declines in economic activity are often
accompanied by a decline in prevailing interest rates. Although the Company's
lending rates are not directly tied to the Federal Reserve Board's discount
rate, a sustained and widespread decline in interest rates impacts the interest
rates the Company is able to obtain on loans. Since the Company's loans
generally do not have prepayment penalties, declining interest rates may
motivate borrowers to prepay their loans and the Company may not be able to
reinvest the amounts prepaid in loans generating a comparable yield. Moreover,
any significant decline in economic activity could adversely impact the ability
of borrowers to complete their projects and obtain take out financing. This in
turn could increase the level of defaults the Company may experience.

In general, mortgage interest rates continued to fall slightly during 2003. This
was partially due to actions by the Federal Reserve Bank to reduce the discount
rate on borrowings charged to member banks, a continuing poor economy and low
threat of inflation. During 2003 many lenders tightened their credit and reduced
their lending exposure in various markets and property types. This credit
tightening from competing lenders would normally provide the Company with
additional lending opportunities at above-market rates. However, as a result of
the poor economy, there have been fewer transactions in the marketplace, which
has reduced the number of lending opportunities to the Company.

With the exception of the reinvestment of distributions, the Fund has been
closed to new investments since April 1, 2004. The Fund has remained closed
during this time because there have not been enough suitable mortgage
investments for the Fund to invest in to allow it to remain fully invested in
loans. Remaining closed to new investments reduces the Company's excess cash
that would have to be invested in available lower yielding investments, which
could have the effect of decreasing the yield paid to existing members.

In June 2004, the Federal Reserve Board increased the discount rate by 1/4%. As
of the date of this Form 10-SB, it is not known whether further increases will
occur in the near future. There are a number of continuing signs, however, that
the economy in general is improving, which normally generates increased
transactions in the real estate marketplace, including demand for loans. The
Manager intends to reopen the Fund for investors on or about September 1, 2004.

TWELVE MONTH PLAN OF OPERATIONS

During the 12 months from January 1, 2004, the Manager and its affiliate, Pontes
Financial Group, Ltd., will be seeking to originate mortgage loans for our
investment portfolio and will also assist us by obtaining, processing and
managing those loans for us. The number of loans in which we invest will depend
upon our available cash, additional gross proceeds raised in our offering, as
well as the availability of suitable loans for our investment portfolio.

We do not anticipate hiring any employees, acquiring any fixed assets such as
office equipment or furniture, or incurring material office expenses during the
next 12 months because we will be utilizing the personnel and office equipment
of Pontes Financial Group, Ltd., at no charge to us. Under our operating
agreement the Manager is entitled to receive a flat, annual management fee of up
to 0.75% of the aggregate capital contributions of our Members and an annual


                                       3
<PAGE>

loan servicing fee of up to 0.25% of the outstanding principal amount of the
mortgages in our portfolio that are serviced by the Manager or Pontes Financial
Group, Ltd. The Manager has waived the management fee for the year 2003 and the
first quarter of 2004 and expects to waive it for the entire year 2004. It has
assigned the loan servicing fee to Pontes Financial Group, Ltd.

Our loans will be a combination of fixed and variable rate, secured loans. We
will not engage in hedging transactions or acquire derivative instruments in an
effort to mitigate risks of interest rate changes. While we believe such hedging
transactions are not necessary in light of the short term nature of our
investments, failure to engage in hedging transactions may expose us to losses
if there are significant changes in prevailing interest rates.

INVESTMENT OBJECTIVES AND POLICIES

As a non-conventional lender, we are more willing to invest in mortgage loans to
borrowers that conventional lenders would not deem to be creditworthy, and we
rely primarily on loan to value ratios. Because of our increased willingness to
fund riskier loan types and borrowers, borrowers have been willing to pay us an
interest rate that is 3-5 points above the rates charged by conventional
lenders.

Our principal investment objectives are to:

         o        Preserve and return your capital contributions;

         o        Produce revenues from the interest income on our mortgage
                  loans;

         o        Provide quarterly cash distributions to you from the net
                  income earned on our mortgage loans; and

         o        Reinvest to the extent permissible payments of principal and
                  proceeds of prepayments, sales and insurance proceeds, net of
                  expenses.

We cannot assure that we will achieve these objectives or that investors'
capital will not decrease. The Manager may change the overall investment
strategy, subject to the fiduciary obligations that it owes to all members.
However, the Manager may not change the investment objectives above, except upon
majority approval of the Members. The Manager has no authority to do anything
that would impair our ability to carry on our ordinary business as a mortgage
investor.

LOAN ACQUISITION AND INVESTMENT POLICIES

We will seek to invest substantially all of our offering proceeds and
distribution reinvestments in mortgage loans, after paying applicable fees and
expenses. Of the offering proceeds, we expect to invest at least 95% in mortgage
loans if the maximum offering is sold, not including approximately 3% that will
be held as a working capital cash reserve.

The majority of our collateral on our mortgage loans will be the real property
that the borrower currently owns. We sometimes refer to these real properties as
the security properties. While we may invest in other types of loans, most of
the loans in which we invest will have been made to real estate developers, with
a lesser proportion of loans involving land loans and bridge financing.

We will not give any rebates or enter into any reciprocal agreement with the
Manager or any of its affiliates that enables the Manager or its affiliates to
receive a rebate. Our mortgage investments are not insured or guaranteed by any
government agency.

The Manager will continuously evaluate prospective investments, select the
mortgages in which we invest and make all investment decisions on our behalf in
its sole discretion, unless the operating agreement provides otherwise. You are
not entitled to act on any proposed investment. In evaluating prospective
mortgage loan investments, the Manager considers such factors as the following:

         o        the ratio of the amount of the investment to the value of the
                  property by which it is secured;

         o        the previous business and borrowing experience of the
                  borrower;

         o        the potential for capital appreciation or depreciation of the
                  property securing the investment;

         o        expected levels of rental and occupancy rates (if applicable);

         o        potential for rental increases (if applicable);

         o        current and projected revenues from the property;

         o        the status and condition of the record title of the property
                  securing the investment;

         o        geographic location of the property securing the investment;
                  and

                                       4
<PAGE>

         o        the financial condition of the borrowers and their principals,
                  if any, who guarantee the loan.

The Manager may obtain our loans from non-affiliated mortgage brokers and
previous borrowers, and by solicitation of new borrowers in those states where
permissible. We may purchase existing loans that were originated by third party
lenders and acquired by the Manager to facilitate our purchase of the loans. The
Manager will sell the loans to us for no greater than the Manager's cost, not
including its service fees and compensation. There are no specific requirements
or guidelines governing the Manager's discretion in determining which mortgage
loans it will place with the Fund and which it will place with other funding
sources.

When selecting mortgage loans for us, the Manager will adhere to the following
guidelines, which are intended to control the quality of the collateral given
for our loans:

1.   Priority of Mortgages. We anticipate investing up to 60% of our assets in
     secured first mortgages, with the balance primarily in second mortgages.
     With rare exceptions, other mortgages that we invest in on the security
     property will not be junior to more than one other mortgage. The only
     subordinated mortgages we currently intend to invest in at this time are
     second mortgages, although in the future we may invest in wraparound, or
     all-inclusive, mortgages, which may be more junior than second mortgages.

2.   Loan-to-Value Ratio. We do not anticipate that the amount of our loans
     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 the time of funding:
<TABLE>
     Type of Secured Property                                     Loan-to-Value Ratio
     -------------------------------                              -------------------------
<S>                                                               <C>
     Residential                                                  70%
     Unimproved Land                                              50%
     Commercial                                                   70%
     Property under Development/Construction Loan                 70% (of anticipated post-development value)
     Leasehold Interest                                           70% (of value of leasehold interest)
</TABLE>

The Manager, in its discretion, may increase any of the above loan-to-value
ratios if 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, the Manager, 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 completed value of the property.
The target loan-to-value ratio for our loan portfolio as a whole is
approximately 65%.

We will obtain an independent appraisal for each property to be security for our
investment. Copies of these appraisals will be available for your review at the
offices of the Manager for a period of six (6) years. We will retain appraisers
who will be licensed or qualified as independent appraisers and be 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
the Manager. However, appraisals are only estimates of value and cannot be
relied on as measures of realizable value. An employee or agent of Pontes
Financial Group, Ltd. will review each appraisal report and will conduct a
comprehensive physical inspection for each property. A comprehensive physical
inspection includes an assessment of the subject property, the adjacent
properties and the neighborhood and includes entering any structures on the
subject property.

3.   Terms of Mortgage Loans. Most of our loans will be for one to five years.
     We anticipate that up to 90% 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.

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:

         o        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.

                                       5
<PAGE>

         o        Borrowers will obtain fire and casualty insurance for all
                  loans secured by improved real property, naming us as loss
                  payee in an amount sufficient to cover the replacement cost of
                  improvements.

         o        All insurance policies, notes, deeds of trust or mortgages,
                  escrow agreements and any other loan document for a particular
                  transaction will name us as payee and beneficiary. Mortgage
                  loans will not be written in the name of the Manager or any
                  other nominee, unless and to the extent, they invest in said
                  loans.

5.   Purchase of Mortgage Investments from Affiliates. We may acquire mortgage
     loans from our affiliates, including the Manager, 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, but without the allowance of any other
     compensation for the loans. Except for the compensation paid to the Manager
     described elsewhere in this prospectus, any affiliate from which we
     purchase mortgage loans will remit to us all income it earns from the
     mortgage loan while the loan is in its portfolio.

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. For
     mortgage loans secured by promissory notes, we will rely on the appraised
     value of the underlying property, as determined by an independent written
     appraisal which was conducted within the then-preceding twelve months. 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 The Mortgage Program Guidelines of the
     North American Securities Administrators Association (NASAA Guidelines), by
     providing funds for or purchasing an undivided interest in a loan meeting
     our investment guidelines described above. We would be likely to
     participate in loans if, for example:

         o        we did not have sufficient funds to invest in an entire loan.

         o        we received offering proceeds that were insufficient to
                  adequately diversify our portfolio.

         o        the Manager originated a loan that fit within our investment
                  guidelines but it would constitute more than 20% of our
                  anticipated capital contributions 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. We
     presently have no publicly registered affiliate. 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:

         o        review all material contracts;

         o        cause a sale of the mortgage or our interest therein subject
                  in certain cases to limitations imposed by the participation
                  agreement between the parties;

         o        approve budgets and major capital expenditures, subject to a
                  stated minimum amount;

         o        veto any sale of a mortgage, or alternatively, to receive a
                  specified preference on sale or proceeds; and

         o        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 invest in joint ventures with or
     purchase interests of affiliates.

     We will not give the Manager or any of its affiliates any consideration
     similar to rebates or give-backs or enter into reciprocal arrangements with
     the Manager or its affiliates that might be entered into in lieu of
     participations.

8.   Diversification. No single mortgage loan will exceed 20% of our anticipated
     capital contributions. Additionally, mortgage loans in favor of any one
     borrower or any one property, in the aggregate, will not exceed 20% of the
     capital to be raised.

                                       6
<PAGE>

9.   Reserve Fund.  We will establish contingency working capital reserves of
     approximately 3% of the gross proceeds of this Offering to cover our
     unexpected cash needs.

10.  Credit Evaluations. Before making a loan, the Manager must first determine
     that a borrower has sufficient equity in the security property to meet the
     loan-to-value ratios described above. The Manager may also consider the
     income level and creditworthiness of a borrower to determine its ability to
     repay the mortgage loan.

NO SALE OF FORECLOSED PROPERTIES TO THE MANAGER.

We will not sell foreclosed properties to the Manager or to any affiliate of the
Manager or to any other mortgage program in which the Manager has an interest.

MORTGAGE LOANS TO AFFILIATES

We will not invest in mortgage loans made to the Manager or any of its
affiliates. However, we may hold an investment in a mortgage loan payable by the
Manager or an affiliate when it has assumed the obligations of the borrower
under that loan, either by purchasing the loan or an interest therein to prevent
a default or foreclosure, or has purchased the loan after a foreclosure.

TYPES OF LOANS WE INTEND TO INVEST IN

We primarily invest in loans which will be secured by first or second mortgages
on real property. Such loans fall into the following categories: raw and
unimproved land, acquisition and development, construction, commercial,
residential and bridge loans, as follows.

         o        COMMERCIAL PROPERTY LOANS

We expect approximately 65% of the loans invested in by us to be commercial
property loans. Commercial loans provide funds to allow property owners the
capital needed for their businesses, renovate and upgrade the property, and
address other current capital needs. Many of the commercial property loans
provided by the Fund may be secured by properties in which the borrowers operate
their businesses. Subject to the Funds' normal underwriting standards, we will
invest in these loans up to 70% of the appraised value of the property.

         o        CONSTRUCTION MORTGAGE LOANS

We anticipate that we will invest in construction loans other than home
improvement loans on residential property, subject to the following guidelines:

We do not anticipate that the loan-to-value ratio on construction loans in which
we invest will exceed 70% of the independently appraised, completed value of the
security property. This serves to mitigate the risk of these loans that a
borrower-developer may not be able to complete the project on the securing
property.

         o        MULTI-RESIDENTIAL LOANS

We intend that approximately 20% of the loans invested in by us will be loans
secured by improved multi-residential properties. These loans typically provide
funds to the borrower to renovate properties, provide capital for short-term
needs, and to pay off existing financing. Subject to the Funds' normal
underwriting guidelines, we will generally invest in these loans up to 70% of
the appraised value of the property.

         o        ACQUISITION AND DEVELOPMENT LOANS

We expect that approximately 15 to 20% of the loans invested in by us may be
acquisition and development loans. The types of properties securing such loans
may be raw land, unimproved land with off-site improvements, and existing
properties deemed appropriate for renovation and re-use renovations. The loans
provide borrowers with the funds necessary to plan, execute, and complete the
development, construction, and renovation plans. We will generally invest in
these loans up to 70% of the appraised value of the property; by doing so, the
Manager seeks to mitigate the risk of non-development of the property.

         o        RESIDENTIAL LOANS

The Fund will not as a general rule pursue single-family residential loans;
however, in many cases the Fund will endeavor to obtain such properties as
additional collateral for other type loans. In some instances they will be the
primary collateral. The Fund may invest in these loans secured by single-family
residences up to 70% of the appraised value.

                                       7
<PAGE>

         o        COLLATERAL

The types of collateral that normally will secure the loans brokered by us
include a first deed of trust, a second deed of trust or a leasehold interest.

         o        FIRST MORTGAGE LOANS

Loans invested in by us that are secured by a first deed of trust on real
property give us rights as a first mortgage lender on the collateralized
property.

         o        SECOND AND WRAPAROUND MORTGAGE LOANS

Up to 60% of the loans invested in by us may be in second mortgage loans and in
wraparound mortgage loans. In a second mortgage loan, the rights of the lender
(such as the right to receive payment on foreclosure) will be subject to the
rights of the first mortgage lender. In a wraparound loan, the lender's rights
will be comparably subject to the rights of a first mortgage lender, but the
aggregate indebtedness evidenced by the loan documentation will be the first
mortgage loan plus the new funds the lender invests. The lender would receive
all payments from the borrower and forward to the senior lender its portion of
the payments the lender receives. The increased risk carried by other than first
mortgage loans is sought to be mitigated by the Manager by maintaining a loan to
value of 70% or less.

         o        THIRD MORTGAGE LOANS

On rare occasions, we may invest in a loan that is subject to the rights of the
first and second lender.

         o        INTEREST-ONLY LOANS WITH BALLOON PAYMENTS AT MATURITY

Balloon payment loans carry the risk that the borrower may not be able to make
the balloon payment when due at the end of the loan. The Manager seeks to
mitigate this risk by emphasis on adequate value of the securing property.

         o        LEASEHOLD INTEREST

Loans on leasehold interests are secured by an agreement of the borrower's
leasehold interest in the particular real property. Leasehold interest loans are
usually combined with first or second mortgage loans secured by additional
collateral to mitigate the risk from leasehold interest-only loans.

REPAYMENT OF MORTGAGES ON SALES OF PROPERTIES

We require by contract a borrower to repay a mortgage loan upon the sale of the
mortgaged property rather than allow the buyer to assume the existing loan. We
will either invest our net proceeds from any capital transaction in new mortgage
loans, hold the net proceeds as cash or distribute them to the members. These
net proceeds will also include the principal of a loan deemed to be repaid for
tax purposes as a result of the nature of a loan modification or loan extension.
Our operating agreement provides that whether we choose to distribute the
proceeds or reinvest them, you will be deemed to have received a distribution of
capital and recontributed the same amount to us. Capital transactions include
payments of principal, foreclosures and prepayments of mortgages, to the extent
classified as a return of capital under the Internal Revenue Code, and any other
disposition of a mortgage or property.

VARIABLE RATE LOANS

Variable rate loans originated by the Manager may use as indices the one and
five year Treasury Constant Maturity Index, the Prime Rate Index and the Monthly
Weighted Average Cost of Funds Index for Eleventh District Savings Institutions
(Federal Home Loan Bank Board). The Manager may negotiate spreads over these
indices of 2.5% to 5.5%, depending upon market conditions when the loan is made.

It is possible that the interest rate index used in a variable rate loan will
rise (or fall) more slowly than the interest rate of other loan investments
available to us. The Manager attempts to minimize this interest rate
differential by tying variable rate loans to indices that are sensitive to
fluctuations in market rates. Additionally, variable rate loans originated by
the Manager contain provisions under which the interest rate cannot fall below
the initial rate.

                                       8
<PAGE>

INTEREST RATE CAPS

Our variable rate loans usually have interest rate caps. We anticipate that the
interest rate cap will be a ceiling that is 2-4% above the initial rate with a
floor rate equal to the start rate. For these loans there is the risk that the
market rate may exceed the interest cap rate.

BORROWING

We may borrow money:

         o        to finance our investments in mortgage loans,

         o        to prevent a default under mortgage loans that are senior to
                  our mortgage loans,

         o        to discharge senior mortgage loans if this becomes necessary
                  to protect our investment in mortgage loans, or

         o        to operate or develop a property that we acquired under a
                  defaulted loan.

At no time will our indebtedness exceed 70% of the fair market value of our
mortgage loans. This indebtedness may be with recourse to our assets. As of the
date of this Form 10-SB, we have not created any indebtedness and have no plan
to do so at this time.

In addition, we may enter into structured arrangements with lenders in order to
provide them with a senior position in mortgage loans which we might jointly
fund. For example, we might establish a wholly-owned special purpose corporation
which would borrow funds from an institutional lender under an arrangement where
the resulting mortgage loans would be assigned to a trust, and the trust would
issue a senior certificate to the institutional lender and a junior certificate
to the special purpose corporation. This would assure the institutional lender
of repayment in full prior to our receipt of any repayment on the jointly funded
mortgage loans.

NO TRUST OR INVESTMENT COMPANY ACTIVITIES

We have not qualified as a real estate investment trust under the Internal
Revenue Code, and therefore we are not subject to the restrictions on its
activities that are imposed on real estate investment trusts. We believe that we
conduct our business so that we are not an investment company within the meaning
of the Investment Company Act of 1940, which provides an exemption from
registration and regulation to us and companies like us that operate real estate
and mortgage investment funds and that do not redeem their outstanding
securities at net asset value. We do, however, repurchase limited amounts of our
units from our members under certain circumstances. See page 44, Repurchase of
Units, Withdrawal From the Fund.

VARIOUS OTHER POLICIES AND PROCEDURES

Without approval of a majority of the members, we will not:

         o        issue securities senior to the units or issue any units or
                  other securities for other than cash;

         o        invest in the securities of other issuers for the purpose of
                  exercising control, except when exercising our rights as a
                  secured lender; or

         o        underwrite securities of other issuers.

REGULATION

Our operations are conducted by the Manager, which is affiliated with Pontes
Financial Group, Ltd., a licensed real estate broker with the California
Department of Real Estate. Our loans secured by California real property will be
acquired through the services of Pontes Financial Group, Ltd. The supervision of
Pontes Financial Group, Ltd. by the California Department of Real Estate
involves the filing of reports and inspections of its records.

We and the Manager are subject to the Equal Credit Opportunity Act of 1974,
which prohibits creditors from discriminating against loan applicants on the
basis of race, color, sex, age or marital status, and the Fair Credit Reporting
Act of 1970, which requires lenders to supply applicants with the name and
address of the reporting agency if the applicant is denied credit. We are also
subject to various other federal and state securities laws regulating the
issuance and sale of securities, as well as the Employee Retirement Income
Security Act of 1974.

                                       9
<PAGE>

Should the Manager not adhere to these regulations, it or the Company could face
potential disciplinary or other civil action that could have a material adverse
effect on our business. The Manager believes that these regulations are being
complied with. The indemnification provisions described in Item 5 Part II of
this Form 10-SB, which allow the Manager to obtain repayment of its liabilities
and costs from the Fund that it incurs on the Fund's behalf in limited
circumstances, do not allow any such indemnification where the Manager's damages
result from its negligence or misconduct.

LOANS PURCHASED FROM AFFILIATES OF THE MANAGER AND NON-AFFILIATED PERSONS

The following table describes as of December 31, 2003, the pre-existing mortgage
loans that the Fund has purchased. These loans, or interests in the loans, were
owned by PFG, Ltd. Sterling 1995 Limited Partnership, a California limited
partnership, whose general partner was Steven Pontes, and Yosemite Mortgage
Fund, LLC, a California limited liability company, whose manager was Pontes
Financial Group, Ltd., and other non-affiliated loan investors. Pontes Financial
Group, Ltd. paid cash for and owned less than a 1% capital interest in Yosemite
Mortgage Fund, LLC, and Steven Pontes paid cash for and owned a 1% capital
interest in PFG Ltd. Sterling 1995 Limited Partnership. The limited partnership
and limited liability company were liquidated and dissolved as of December 31,
2003, following the Fund's purchase of their mortgage loan portfolios.

                                       10
<PAGE>
<TABLE>
                                                      PRE-EXISTING LOANS PURCHASED AS OF 12/31/03

                                                                                                                 ORIGINAL
  LOAN                                            DATE                                          LOAN              LOAN      PURCHASE
 NUMBER BORROWER             PROPERTY LOCATION   ORIG(a)  LTV(b)  INT(c)  MAT. DATE(d)  PT(e)  TYPE(f) SP(g)     AMOUNT     PRICE(h)
------------------------------------------------------------------------------------------------------------------------------------
<S>     <C>                  <C>                <C>        <C>    <C>       <C>           <C>   <C>     <C>     <C>        <C>
 3041   Morton               Taft, CA           07/31/98   58%    12.75      8/1/2003     C     Amrt.   1; 2      675,000    387,349
 3053   Stuvland             Berkeley, CA       07/15/99   57%    13.00      9/1/2004     MR    Int.     1        425,000    325,000
 3054   Dry Creek Inn        Healdsburg, CA     07/15/99   58%    12.75      7/1/2006     C     Amrt.    2      1,600,000  1,409,196
 3055   Ratanjee             Antioch, CA        09/09/99   61%    12.50     10/1/2004     C     Amrt.    2      1,270,000    726,679
 3064   Ellis                Berkeley, CA       01/25/00   59%    12.50      2/1/2007     C     Amrt.   1; 2      470,000    401,995
 3073   Homewood             Homewood, CA       08/16/00   49%    12.00      9/1/2005     C     Int.    1; 2    2,500,000  1,424,400
 3077   SF Rawhide           San Francisco, CA  11/09/01   63%    12.75     12/1/2005     C     Int.    1; 2    1,150,000    965,217
 3080   Olivet               Oakland, CA        02/09/01   65%    12.75      3/1/2006     C     Amrt.   1; 2      200,000    188,907
 3081   Olivet               Oakland, CA        02/09/01   65%    12.75      3/1/2006     C     Amrt.   1; 2      650,000    607,469
 3092   Flag City            Lodi, CA           05/04/01   41%    12.75      5/1/2004     C     Int.     1        775,000    775,000
 3094   Morton               Taft, CA           05/17/01   60%    12.75      8/1/2003     C     Amrt.   1; 2      302,258    280,966
 3095   Ellis                San Francisco, CA  05/16/01   43%    12.50      2/1/2007     C     Amrt.   1; 2      290,000    262,192
 3096   Goldenberg           Napa, CA           08/30/01   59%    13.00     10/1/2006     C     Int.    1; 2    1,385,000    755,000
 3099   Gandhi               Pleasanton, CA     07/18/01   66%    13.75      9/1/2006     R     Int.     2        485,000    235,000
 3101   Thomas               San Leandro, CA    08/08/01   61%    11.75      9/1/2006     MR    Int.     1        730,000    430,000
 3102   Danelen              Watsonville, CA    02/12/02   67%    10.75      3/1/2007     C     Amrt.    1        465,000    450,882
 3105   Alexander            Oakland, CA        11/30/01   66%    10.25     12/1/2006     R     Int.     1      1,430,000    295,664
 3107   Manhattan Beach      Rockaway Beach, OR 02/28/02   66%    11.00      2/1/2008     R     Int.     1        550,000    550,000
 3108   Thomas               San Leandro, CA    03/06/02   49%    11.75      3/1/2007     MR    Int.     2        265,000    265,000
 3110   Porto Bodega         Bodega Bay, CA     05/10/02   66%    11.75      5/1/2004     C     Int.     1      2,250,000  1,405,000
 3111   Azari                Berkeley, CA       05/08/02   57%    11.00     11/1/2002     C     Int.    1; 2      650,000    650,000
 3112   Jackson-Encinal      Oakland, CA        04/30/02   60%    12.00      5/1/2007     C     Int.    1; 2    2,000,000  1,000,000
 3115   Mattos               Hayward, CA        07/03/02   63%    12.50      8/1/2007     C     Int.     2        655,000    418,500
 3116   Stadium-Aldar        Berkeley, CA       07/17/02   64%    12.75      8/1/2005     C     Int.    1; 2    1,900,000  1,250,000
 3118   Napa Valley Athletic Napa, CA           08/16/02   65%    11.50      9/1/2007     C     Int.     2      1,070,000  1,070,000
 3119   Willett              Oakland, CA        10/08/02   64%    12.75     9/16/2007   R, MR   Int.     2        650,000     96,076
 3121   Dosanjh              Hayward, CA        09/26/02   65%    12.00     9/23/2007     C     Int.     1        715,000    415,000
 3125   Spencer              Tulare, CA         01/24/03   60%    11.75      2/1/2006     C     Int.    1; 2    2,550,000  2,000,000
 3126   Danelen              San Jose, CA       02/14/03   22%    10.00      3/1/2005     C     Int.     1        570,000    425,000
 3127   Punla                San Francisco, CA  03/04/03   67%    11.75      3/1/2008     C     Int.     2        750,000    125,000
 3128   Weber                Alamo, CA          02/27/03   51%    11.25      3/1/2003    R, C   Int.     2      2,000,000  1,050,000
 3129   OSR Investors        Napa, CA           04/01/03   67%     9.75      4/1/2008     C     Int.     1      1,650,000    350,000
 3131   Nappaland, Inc.      St. Helena, CA     02/27/03   47%    12.00      4/1/2008     C     Int.     2        300,000    310,000
 3133   Brugnara             San Francisco, CA  03/21/03   42%    11.75     10/1/2004     R     Int.     1      2,500,000  1,350,000

                                                                                                                          22,650,492
                                                                                                                          ----------

a  DATE ORIG: ORIGINATION DATE                                     f  LOAN TYPE: AMRT. - AMORTIZED PAYMENTS OF PRINCIPAL & INTEREST;
b  LTV (Loan to Value): The ration of the amount of loan to                Int. - Payments of interest only, balloon principal
     the underwritten value of the property securing the loan                     payment
c  Int:  Interest rate                                             g  SP (Secured Position):  1 - First mortgage;
d  Mat Date: Maturity Date                                                                    2 - Second mortgage
e  PT (Property Type): C - Commercial; M - Multi-Residential;      h  Purchase Price: Amount paid by the Company to purchase
                       R - Residential                                                the loan.
</TABLE>

                                                                11
<PAGE>

                                   MANAGEMENT

OUR MANAGEMENT

Steven M. Pontes, age 49, is the sole manager of MFP Management, LLC, a
California limited liability company organized on May 31, 2001 for the primary
purpose of acting as the Manager of the Fund. Mr. Pontes has been the chief
executive officer and principal owner of Pontes Financial, Group, Ltd., a
financial services firm and a California licensed real estate broker
corporation, since it was founded in 1987. Mr. Pontes also founded PFG
Investment Services, Inc. in 1996, which registered with the SEC as an
investment adviser on March 22,2001. Mr. Pontes has been a director of that
company since its founding, but he does not participate in the day-to-day
conduct of its business. He holds a life and disability insurance agent license
from the California Department of Insurance.

Pontes Financial Group, Ltd. and PFG Investment Services, Inc. provide financial
advisory and investment management services to individuals, families,
corporations and other institutions. Their offices are in a seven-story downtown
Oakland office building owned by Real Estate Recovery Associates-13th Street,
LLC, an affiliate of Mr. Pontes, and together they employ approximately ten
people. There is no lease or other agreement for the office space. Among the
business activities of Pontes Financial Group, Ltd. is twenty years in real
estate mortgage lending. During that period, they and their clients have
participated in placing and investing in more than $150 million in real estate
secured loans in California. As part of these investments, Mr. Pontes and Pontes
Financial Group, Ltd. have sponsored and managed several private mortgage
lending limited partnerships and limited liability companies in California. For
more information, see this prospectus under Management - Prior Experience on
page 29.

Mr. Pontes devotes more than 40% of his full working time and efforts to
management activities for Yosemite Mortgage Fund II, LLC. Loss of Mr. Pontes'
services would require that, if the other owners of MFP Management LLC, our
Manager, do not replace Mr. Pontes, the Company would be required to either
designate a successor manager, requiring a majority vote of the Members (see
page 41, Voting and Other Rights of Members), or liquidate and dissolve the
Fund.

<TABLE>
<S>     <C>

CHART OF INTERRELATIONSHIPS AMONG AFFILIATES OF MANAGER

                                             --------------------------------------
                                                       Steven M. Pontes
                                                         (Individual)
                                             --------------------------------------
                                             |                |                    |
                                           |                  |                      |
                                         |                    |                        |
------------------------------------------   --------------------------------------  ----------------------------------
      Pontes Financial Group, Ltd.                    MFP Management LLC               PFG Investment Services, Inc.
        (California corporation)                       (California LLC)                  (California corporation)
Steven Pontes, CEO and controlling owner          Steven Pontes, sole Manager             Steven Pontes, Director
                                                    and 30% interest owner,                    and 50% owner
                                                  as trustee of family trust             Bradley Sasser, President,
                                                                                                 Director
------------------------------------------   --------------------------------------  ----------------------------------
                                        |                      |
                        Mortgage Services |                 Manager
                                            |                  |
                                             --------------------------------------
                                                Yosemite Mortgage Fund II, LLC
                                                       (California LLC)
                                                 MFP Management, LLC, Manager
                                             --------------------------------------
</TABLE>
THE MANAGER'S ROLE

The Manager manages and controls our affairs and has responsibility and final
authority in almost all matters affecting our business. These duties include
dealings with members, accounting, tax and legal matters, communications and
filings with regulatory agencies and all other needed management and operational
duties. The Manager has complete authority and responsibility for:

         o        evaluating and choosing the mortgage loans in which we will
                  invest;

         o        deciding what agreements we will enter into and whether we
                  will enter into joint ventures with other companies to invest
                  in mortgage loans;

         o        originating, servicing and managing our mortgage loan
                  investments; and

         o        managing all our other operations.

Notwithstanding that the Manager has the broad authority described above,
neither it directly nor Mr. Pontes indirectly may do any of the following:

                                       12
<PAGE>

         o        impair our ability to carry on or change the nature of our
                  business;

         o        admit a Manager without prior approval of a majority of the
                  members;

         o        sell all or over 50% of our assets or dissolve the Fund
                  without prior majority approval; and

         o        anything else not permitted in the Operating Agreement.

You have no right to participate in the management or control of our business or
affairs other than to exercise the limited voting rights provided for members in
the operating agreement. The Manager has primary responsibility for the initial
selection, evaluation and negotiation of our mortgage loans. The Manager,
through its affiliate, Pontes Financial Group, Ltd., will provide all executive,
supervisory and administrative services for our operations, including servicing
the mortgage loans we hold. Our books and records are maintained by the Manager,
subject to audit by independent certified public accountants.

The Manager is required to maintain a minimum financial net worth of $1,000,000,
in accordance with a provision in our operating agreement. As of December 31,
2003, the financial net worth of the Manager is $1,025,990.

The Manager will cease to be our manager upon its removal, withdrawal or
dissolution, or if it is found to be bankrupt. A majority, excluding the
Manager's interest, can remove MFP Management, LLC as our Manager upon the
following conditions:

         o        if the members have not previously elected an additional
                  Manager, the removal will not become effective for at least
                  120 days following the consent or authorizing vote by the
                  majority;

         o        during the 120 days set forth above, a majority can agree in
                  writing to continue our business and, within six months
                  following the termination date of the last remaining Manager,
                  elect and admit a new Manager who agrees to continue our
                  existence; and

         o        the substitution of a new manager shall be effective when the
                  new manager accepts in writing the duties and responsibilities
                  of a manager.

By majority vote, we may terminate the Manager's interest in the Fund by paying
an amount equal to the then-present fair market value of its interest in the
Fund, which would be its outstanding capital account at such time. The Manager
presently holds no capital account in the Fund, although Pontes Financial Group,
Ltd., as the initial Member, has made a $1,000.00 capital contribution to the
Fund. All payments to a terminated Manager must be fair and must protect our
solvency and liquidity.

If a majority does not designate and admit a new manager within the time
specified, we will dissolve. The Manager may assign its interest, if any, in the
Fund, but our Manager may not be changed except as set forth above.

The Manager, acting through its General Manager, Steven Pontes, considers and
evaluates prospective loans for us. In that regard, the Manager evaluates the
credit of prospective borrowers, analyzes the return to us of potential mortgage
loan transactions, reviews property appraisals and determines which types of
transactions appear to be most favorable to us. We will not establish our own
underwriting standards and will solely rely on the Manager to provide such
services.

The Manager identifies a potential loan and then Pontes Financial Group, Ltd.
processes the application. When processing a loan, Pontes Financial Group, Ltd.
will -

         o        order and review a property title search,

         o        perform a comprehensive property inspection,

         o        obtain an appraisal which is reviewed for reasonableness,

         o        conduct its own in-house appraisal, and

o perform credit underwriting through borrower interviews, credit reports and
review of borrower and principals' financials.

After Pontes Financial Group, Ltd. processes the loan, the Manager will acquire
the loan for the Fund from Pontes Financial Group, Ltd. or directly from the
borrower.

                                       13
<PAGE>

After we acquire mortgage loans, the Manager also manages our mortgage loan
portfolio. The Manager is responsible for:

         o        reviewing loans;

         o        recommending changes in loans;

         o        employing and supervising employees who handle the loans;

         o        preparing and reviewing projected performance;

         o        reviewing reserves and working capital;

         o        collecting and maintaining all loans;

         o        creating and implementing investment policies in furtherance
                  of those contained in the operating agreement;

         o        preparing and reviewing budgets, economic surveys, cash flow
                  and taxable income or loss projections and working capital
                  requirements;

         o        preparing and reviewing reports for securities filings,
                  distribution to our members or otherwise;

         o        communicating with members;

         o        supervising and reviewing our bookkeeping, accounting and
                  audits;

         o        supervising and reviewing the preparation of our state and
                  federal tax returns; and

         o        supervising professionals employed by us, including attorneys,
                  accountants and appraisers.

PRIOR EXPERIENCE

Pontes Financial Group, Ltd. is licensed in California as a real estate broker
corporation, and Steven M. Pontes is the corporation's licensed broker and
designated officer with the California Department of Real Estate. The Department
of Real Estate monitors the mortgage lending activities of the corporation and
Mr. Pontes, and they are subject to on-site examinations and record maintenance
and report filing requirements. The mortgage lending activities that they
conduct for the Fund are subject to those same requirements.

Pontes Financial Group, Ltd. and Mr. Pontes have been engaged in the real
estate-backed lending business in Northern California since 1987. During that
time, they have originated and serviced approximately $150,000,000 of real
estate mortgage loans. These loans were either sold to individual investors
directly or to four non-public mortgage investment funds, sponsored by Pontes
Financial Group, Ltd. or Mr. Pontes since 1992. These investment funds are
described below and in Tables I, II, IIIa, IIIb and IV that follow.

Pontes Financial Group, Ltd. obtains borrowers through the loan brokerage and
banking community, advertisement, repeat business and referrals. Upon obtaining
a request for a loan, Pontes Financial Group, Ltd. processes the application by

         o        ordering and reviewing a property title search;

         o        inspecting the property;

         o        conducting its own appraisal, at times obtaining an
                  independent appraisal which is always reviewed for
                  reasonableness (all loans to be acquired by the Fund have an
                  independent appraisal); and

         o        performing credit-worthiness and character evaluations through
                  borrower interviews, credit reports and review of borrower's
                  financial data.

The primary focus of Pontes Financial Group, Ltd. and Steven Pontes in their
choice of loans has been and will continue to be on their assessment of market
value of the real property securing the loan. In addition to their own and third
party appraisals, they base their valuations on current economic and business
conditions, as well as possible future negative conditions. Various assumptions
of future conditions are projected on each property before the loan commitment
is made.

                                       14
<PAGE>

In addition to appraising the value of the underlying property, Pontes Financial
Group, Ltd. and Mr. Pontes assess the character and reliability of the applicant
borrower by reviewing available financial records and seeking other information
about the borrower's background and track record, both personal and
professional.

Beginning in 1992, Mr. Pontes offered to California investors participating
interests in a California limited partnership of which he was the general
partner. In 1993 and 1995, the second and third of similar mortgage investment
fund limited partnerships were started. In 1996, a fourth similar fund was
started as a California limited liability company, with Pontes Financial Group,
Ltd. as its manager. The first two of these funds ceased doing business, in
accordance with their original plans, and made liquidating distributions to
their limited partners in 1996 and 2000, respectively. The third and fourth
funds, PFG, Ltd. Sterling 1995 Mortgage Fund and Yosemite Mortgage Fund, LLC,
liquidated and dissolved as of December 31, 2003.

These four mortgage investment funds raised a combined total of about
$32,000,000 from about 300 investors, many of whom invested in more than one of
the funds. The funds themselves were invested in a combined total of 98 loans in
the amount of about $61,340,077, including amounts invested in new loans from
the capital proceeds from matured or early pay-off of existing loans.

The investment objectives of the four funds were the same as ours - to generate
above average yields from investing in mortgages and managing expenses in order
to pass through in excess of 95% of gross income to their investors. As shown in
the tables below, the four funds consistently earned in excess of 10% per annum
after all expenses and distributed those earnings to their investors. There is
no assurance that we will achieve similar results.

Pontes Financial Group, Ltd. and its affiliates have obtained their compensation
primarily from the origination, processing and servicing fees charged and paid
by borrowers. These fees have ranged between three and six percent of the loan
amount and an annual servicing fee of usually three quarters of one percent.

About 95% of the loans invested in by the prior four mortgage investment funds
were secured by properties located in California, and the rest were in Nevada
and Oregon. In 1991 California experienced a general economic downturn that
caused erosion in real estate values, lasting through 1996. Factors causing this
were the 1989 Loma Prieta earthquake, the September 1991 Oakland hills fire,
several military base closings and drastic cuts in the aerospace and defense
spending arenas. Despite these negative factors, no losses of principal were
experienced on any of the mortgage loans held by the four prior mortgage funds.
Before 1991, one loan originated by Mr. Pontes went into foreclosure with
resulting loss of some of the principal amount.

In the last three years Yosemite Mortgage Fund, LLC invested $23,366,949 in 34
loans totaling $35,514,449. The breakdown is as follows:

                       ------------------------------- -----------
                       Commercial                      88.25%
                       ------------------------------- -----------
                       Residential                     11.75%
                       ------------------------------- -----------

In the same three-year period, PFG, Ltd. Sterling 1995 Mortgage Fund invested
$5,520,000 in 13 loans totaling $9,530,000. The breakdown is as follows:

                       ------------------------------- -----------
                       Commercial                      55.34%
                       ------------------------------- -----------
                       Residential                     44.66%
                       ------------------------------- -----------

                                       15
<PAGE>

                    COMPENSATION TO THE MANAGER AND AFFILIATE

ORGANIZATION AND OFFERING STAGE

Pontes Financial Group, Ltd advanced or paid all of our expenses incurred
through December 31, 2003 in connection with our organization and the planning
and preparation for this offering. These expenses included accounting and legal
fees, registration fees with the SEC, and filing fees with the National
Association of Securities Dealers, Inc. and the states in which we have filed to
register our units for offer and sale. There are also printing, reproduction and
mailing costs for the prospectus to be used in the offering. As of December 31,
2003, the total of these expenses was $507,648, which we have repaid to Pontes
Financial Group, Ltd. in full. Pontes Financial Group, Ltd. contributed capital
in the amount of $1,000 as the Initial Member of the Company, for which it
received 100 units at $10.00 per unit. It owns no other units of record or
beneficially. Neither the Manager or Steven Pontes directly owns units of the
Company.

PUBLIC OFFERING EXPENSES

We anticipate additional offering expenses during 2004 to include the following
approximate amounts, which also may be advanced by Pontes Financial Group, Ltd.
and reimbursed to it:

                              State registration fees              $5,000
                              Legal                                $25,000
                              Accounting                           $5,000
                              Prospectus Costs and Other           $15,000
                                                                   -------
                                                          Total    $50,000

OPERATIONAL STAGE

Where the fees below are described as competitive fees or based on local market
conditions, that means the fees are determined by price competition within a
given market. Additionally, the amount of the fees is dependent upon the size of
a particular loan. To ensure that our fees remain competitive, we will directly
contact our competition, such as major banks in the local market or other
relevant commercial lenders. We expect that the interest rate on the loans in
which we invest will be 3-5 points higher than comparable loans made by banks
and that the fees paid to the Manager or its affiliates will be 3-4 points
higher than similar fees charged by conventional lenders. We believe that this
rate structure is consistent with rates and fees charged by other
non-conventional lenders. References below to local law also contemplate
additional requirements imposed by local or state law, such as usury laws.

<TABLE>
PAID BY BORROWERS

<S>                                                               <C>
o        Loan Placement Fees for Loan Selection and  Brokerage    3%-6% of each loan, the percentage shall be a competitive fee
                                                                  based on local market conditions.  These fees are paid by the
                                                                  borrower no later than when the loan proceeds are distributed.

o        Service Fee for Administering the Loan                   Pontes Financial Group, Ltd. or its affiliates may receive
                                                                  borrower-paid mortgage service fees of up to 1/2%, which when
                                                                  added to all other fees paid in connection with the servicing
                                                                  of a particular mortgage, including the 1/4% to be paid by us,
                                                                  does not exceed three-fourths of one percent (3/4%) of the
                                                                  principal outstanding on such loan. These fees will be paid by
                                                                  the borrower either annually or added to the monthly payment.

o        Loan Extension or Modification Fee                       3%-6% of outstanding principal, as permitted by local market
                                                                  conditions.  The amount to be received is not determinable at
                                                                  this time.


PAID BY US

o        Annual Management Fee                                    Up to 0.75% of our aggregate capital contributions, paid
                                                                  monthly in arrears. The Manager may in its discretion waive
                                                                  all or a part of the management fee to the extent it deems
                                                                  appropriate to do so. It has waived this fee for the year 2003
                                                                  and the first two quarters of 2004. The maximum such fee that
                                                                  was otherwise payable to the Manager for the year 2003 was
                                                                  $239,460. In making such an assessment, the Manager will


                                       16
<PAGE>
                                                                  review our performance and the impact of the fees on our
                                                                  performance. The Manager assigns this fee to Pontes Financial
                                                                  Group, Ltd. for its services to the Fund, which will consist
                                                                  of all administrative services for our operation, including
                                                                  servicing the mortgage loans we hold. No portion of this fee
                                                                  will be used to reimburse Pontes Financial Group, Ltd. for any
                                                                  selling commissions that it pays in the offering of our units.

o        Promotional Interest                                     An annual, non-cumulative payment of up to 25% of our cash
                                                                  available for distribution to members that for each year
                                                                  exceeds 12% of members' payment for their units. No
                                                                  promotional interest has been earned to date.

o        Service Fee for Administering Loans                      Up to 0.25% of the principal amount of each loan serviced,
                                                                  which the Manager assigns to Pontes Financial Group, Ltd. The
                                                                  amount of this fee, which was paid by us to Pontes Financial
                                                                  Group, Ltd., was $32,581 for the year 2003.

o        Property Management Fee                                  If the Manager or an affiliate manages property obtained by
                                                                  the Fund from foreclosure of any loan, fees shall be the
                                                                  lesser of competitive fees or 5% of revenues from residential
                                                                  property; 6% of revenues from commercial properties where the
                                                                  Manager or its affiliate performs leasing-type services or 3%
                                                                  if not; 1% from 10-year or longer leases of commercial
                                                                  property, plus a one-time initial leasing fee of 3% of such
                                                                  lease revenues, payable over the first 5 years of the lease.
                                                                  No portion of this fee will be used to reimburse Pontes
                                                                  Financial Group, Ltd. for any selling commissions that it pays
                                                                  in the offering of our units. There have been no such fees
                                                                  earned or paid to date.

o        Competitive Real Estate Commission to Pontes Financial   The total compensation paid to all persons for the sale of
         Group, Ltd. for Resales of Foreclosed Property           property held by us as a result of foreclosure shall be
                                                                  limited to a competitive real estate brokerage commission not
                                                                  to exceed six percent (6%) of the contract price for the sale
                                                                  of the property. Pontes Financial Group, Ltd. shall be
                                                                  entitled to receive up to 1/2 or a maximum of 3% of such
                                                                  commission where it substantially contributed to the sale, but
                                                                  only if the members of the Fund have been paid their capital
                                                                  contributions in the form of distributions of income from the
                                                                  Fund that are cumulatively equal to their capital
                                                                  contributions, plus an amount that is at least 6% of their
                                                                  capital contributions per year cumulatively. No foreclosed
                                                                  property will be sold to the Manager or any of its affiliates.
                                                                  There have been no such fees earned or paid to date.
</TABLE>

The Manager will make arrangements with the respective borrowers for payment to
it of fees owing from those borrowers. The Manager anticipates that borrowers
will pay its compensation out of the proceeds of loans or upon closing the
relevant transaction. For loan servicing fees, the Manager will receive these
fees monthly in arrears along with the payments it receives on loans that we
have acquired.

The Manager may, in its sole discretion, share with us the loan placement fees
it receives from borrowers. The Manager is under no obligation to share its
placement fees and investors should not assume that any placement fees will be
shared with the Fund.

                              CONFLICTS OF INTEREST

The relationships among us, the Manager and other affiliates of Steven M. Pontes
will result in various conflicts of interest. Pontes Financial Group, Ltd. and
its affiliates are engaged in business activities involving real estate lending,
and they anticipate engaging in similar activities in the future that could be
competitive with us. The Manager will exercise its fiduciary duties to us and to
you in a manner it believes will preserve and protect your rights as a member.
Additionally, our operating agreement contains provisions that limit our ability
to enter into transactions with the Manager and its affiliates.

                                       17
<PAGE>

We expect to purchase mortgage loans from Pontes Financial Group, Ltd. if they
were acquired by it for the purpose of facilitating our acquisition of such
loans. Pontes Financial Group, Ltd. must sell such loans to us for a price no
greater than the lesser of Pontes Financial Group, Ltd.'s cost, excluding
certain service fees and compensation, or the fair market value of such loans.
However, we will not sell our mortgage loans to the Manager, Pontes Financial
Group, Ltd. or any of its affiliates, nor acquire mortgage loans from, or sell
mortgages to, a program in which one of them has an interest, except as
permitted under our operating agreement.

We may participate in mortgage loans with publicly registered affiliates if the
investment objectives of the participants are substantially identical, there are
no duplicate fees, the sponsors receive substantially identical compensation,
the investment of each participant is on substantially the same terms, and the
participants have a right of first refusal with regard to the sale of any
participant's interest in such loans. In addition, we will not participate in
mortgage loans with non-publicly registered affiliates, except as permitted
under the NASAA Guidelines. The Manager and Pontes Financial Group, Ltd. do not
presently contemplate organizing or operating publicly registered affiliates of
the Fund.

The numbered paragraphs below describe material conflicts of interest that may
arise in the course of the Manager's management and operation of our business.
The list of potential conflicts of interest reflects our knowledge of the
existing or potential conflicts of interest as of the date of this prospectus.
We cannot assure you that no additional conflicts of interest will arise in the
future.

         1. Payment of Fees and Expenses. Pontes Financial Group, Ltd. will
receive substantial fees and expenses from the proceeds of the Offering and our
ongoing operations, including:

o        Paid by Borrowers:

         o        loan placement fees of 3% to 6% of each loan for brokerage,
                  selection and processing

         o        loan servicing fees of 1/2% of each loan

         o        loan extension or modification fees of 3% to 6% of each loan
                  extended or modified

o        Paid by Us:

         o        annual management fee,

         o        loan serving fees of 1/4% of each loan,

         o        subordinated promotional interest, and

         o        subordinated real estate brokerage commissions payable upon
                  the resale of foreclosed properties.

All management fees and the 1/4% loan servicing fees charged to us will be
payable even if we are not profitable or the particular transaction causes us to
incur a loss. During the first twelve months of loans, the aggregate percentages
of each of our loans that it is anticipated will be paid to Pontes Financial
Group, Ltd. by borrowers and by us is from 3.75% to 6.75%. Annual loan servicing
fees beyond the first year will increase these percentages. We will pay an
annual management fee to Pontes Financial Group, Ltd., an Affiliate of the
Manager, of up to 0.75% of the aggregate capital contributions to the Fund.
Pontes Financial Group, Ltd. will pay and will not be reimbursed by us for any
general or administrative overhead expenses it incurs in connection with
managing the operation of the Fund even if such amounts exceed its annual
management fee. However, Pontes Financial Group, Ltd. may be reimbursed for
expenses paid to non-affiliates on our behalf. We anticipate such expenses will
consist of legal, accounting, tax preparation fees and other customary
operational expenses. Such amounts will be paid from available cash. In the
event available cash is inadequate to cover such expenses, Pontes Financial
Group, Ltd. shall advance such expenses on our behalf and will be repaid for
such advances when there are adequate funds in the cash reserve.

         2. Purchase of Mortgage Notes from Pontes Financial Group, Ltd. We will
acquire our mortgage loans from or through Pontes Financial Group, Ltd.. Pontes
Financial Group, Ltd. is in the business of obtaining, processing, making,
brokering and selling, and managing and servicing mortgage loans. All our
mortgage loans purchased from Pontes Financial Group, Ltd. will be at prices no
higher than the lesser of the cost of the mortgage loan to Pontes Financial
Group, Ltd. or the then current market value of the mortgage loan. Steven
Pontes, General Manager of our Manager, makes all decisions concerning the
mortgage loans in which we will invest or purchase. Because the Manager's fees
are generated by the volume of the mortgage loans we purchase, the Manager will
face a conflict of interest in determining whether a loan not squarely within
our investment guidelines is appropriate for our loan portfolio.

         3. Non-Arm's Length Agreements. Our agreements and arrangements for
compensating the Manager are not the result of arm's-length negotiations.

                                       18
<PAGE>

Pontes Financial Group, Ltd. believes it has sufficient staff to be capable of
discharging its responsibility to us and to all other entities to which it or
its officers or affiliates are responsible. However, if there are times when we
and the other businesses are handling a high volume of loans, a conflict will
arise as to which company's loan processing to complete first.

         4. Competition between the Fund, the Manager and Pontes Financial
Group, Ltd. The Manager anticipates that it or its affiliates will engage in
businesses which are or may be competitive with ours or which have the same
management as we do. To the extent that these other entities with similar
investment objectives have funds available for investment when we do and a
potentially suitable investment has been offered to us or one of these programs,
conflicts of interest will arise as to which entity should acquire the
investment.

If any conflict arises between us and any affiliate of Pontes Financial Group,
Ltd., as to whether the Fund or another entity will have the right to invest in
a particular mortgage loan or other investment, the Manager will make the
determination largely based on a review of the respective loan portfolios. The
Manager will also base the decision on factors such as the amount of funds
available for investment, yield, portfolio diversification, type and location of
the property on which Pontes Financial Group, Ltd. will make the mortgage loan,
and proposed loan or other transaction terms.

The Manager is subject to a fiduciary duty to deal fairly with us and our
members. Subject to this fiduciary duty, neither the Manager nor its affiliates
will be obligated to present to us any particular investment opportunity that
comes to their attention, even if the opportunity is of a character that might
be suitable for us.

         5. Lack of Separate Representation. We are represented by the same
legal counsel as the Manager and its affiliates, and we anticipate that this
multiple representation by our attorneys will continue in the future. If a
dispute arises between us and the Manager or any of its affiliates, the Manager
or the affiliate will either obtain separate counsel or facilitate our retaining
separate counsel for such matters. However, we do not anticipate obtaining
separate counsel should there be a need in the future to negotiate or prepare
contracts or other agreements between us and the Manager for services including
those contemplated by this prospectus, and as a result these agreements will not
reflect arm's length bargaining.

         6. Rights of Affiliates. The Manager, Pontes Financial Group, Ltd. and
any other affiliate may acquire, own, hold and dispose of units for its
individual account and may exercise all rights of a member, except for voting
rights with respect to the Manager, to the same extent and in the same manner as
if he were not an affiliate of ours.

         7. We May Co-Invest in Mortgages Acquired by the Manager. If the
Manager determines that an entire loan is not suitable for our loan portfolio,
we may co-invest in the loan with the Manager, Pontes Financial Group, Ltd. or
an affiliate. If we co-invest in a loan with the Manager, Pontes Financial
Group, Ltd. or an affiliate, our investment will be on substantially the same
terms as those of that other person. A conflict of interest may arise between us
and the Manager or its affiliate if the borrower defaults on the loan and each
of us seeks to protect our interests in the loan and in the security property.
Also, we will have no written or oral agreement or understanding with the
co-investor concerning our relative priority when a borrower defaults; as a
result, you must rely on the Manager to act in accordance with its fiduciary
duty under the operating agreement to protect your interest.

                       GENERAL INFORMATION AS TO PROMOTERS

The Manager, Steven M. Pontes, its General Manager, and Pontes Financial Group,
Ltd. are the promoters of the Fund. Mr. Pontes owns the controlling interest in
Pontes Financial Group, Ltd.

                            FIDUCIARY RESPONSIBILITY

MFP Management, LLC, our Manager, is a fiduciary for you and the Fund. As a
fiduciary, the Manager must exercise good faith and integrity when handling our
affairs. The Manager must not take advantage of us, and must make full
disclosure of any conflicts of interest or benefit to it in its dealings with
us. As set forth in the operating agreement, the Manager has fiduciary
responsibility for the safekeeping and use of all of our funds and assets and
the Manager will not use, or permit another to use our funds or assets in any
manner except for our exclusive benefit. The Manager will not allow our assets
to be commingled with its assets or the assets of any other person or company.
The Manager and its affiliates may engage in activities similar to or identical
with our business, but the Manager must devote sufficient time to our business
as it determines, in good faith, to be reasonably necessary. Pontes Financial
Group, Ltd., an affiliate of the Manager, is also the manager of other
non-publicly traded mortgage funds and it may act for its own account as a real
estate broker. In connection with this activity, it brokers, arranges and
services mortgage loans for investors that it obtains in the ordinary course of
its brokerage business, including by way of seminars, general solicitations and
referrals. When it acts in those capacities, it has a fiduciary duty to each as
set forth in the respective organizational documents and under applicable law,
and is bound to treat each fairly and with appropriate access to investment
opportunities.

                                       19
<PAGE>

Additionally, the Manager could change our investment guidelines when a
reasonably prudent person would do likewise, subject to its fiduciary duties to
our members. However, the Manager can only change our investment objectives upon
approval of a majority of our members.

The above described fiduciary duty is both contractual, arising by virtue of our
operating agreement, and imposed by California limited liability company law.

You have the following legal rights and remedies concerning the Manager and the
conduct of our operations:

         o        you may bring individual actions on behalf of yourself or
                  class actions on behalf of yourself and other members to
                  enforce your rights under our operating agreement and
                  California limited liability company law, including for
                  breaches by the Manager of its fiduciary duty;

         o        a majority of our members may remove MFP Management, LLC as
                  our Manager, as described elsewhere in this prospectus;

         o        you may bring actions on our behalf for claims we might have
                  as derivative actions, if the Manager refuses to bring suit;
                  and

         o        you may bring actions under federal or state securities laws,
                  either individually or as part of a class of members, if the
                  Manager has violated those laws in connection with the offer
                  and sale, or repurchase of units.

This is a rapidly changing and developing area of law. If you have questions
concerning the fiduciary duties of MFP Management, LLC in its role as our
Manager, you should consult with your own legal counsel.

INDEMNIFICATION

We may indemnify the Manager or hold it harmless under certain circumstances. We
will not indemnify the Manager or any of its affiliates, agents, attorneys, nor
any person acting as securities broker or dealer for any loss or liability
suffered by the Fund, unless all of the following conditions are met:

         o        the Manager has determined in good faith, that the course of
                  conduct which caused the loss or liability was in the best
                  interests of the Fund;

         o        the Manager was acting on behalf of or performing services for
                  the Fund;

         o        such liability or loss was not the result of negligence or
                  misconduct by the Manager; and

         o        such indemnification or agreement to hold harmless is
                  recoverable only out of the assets of the Fund and not from
                  the members.

Notwithstanding the statements regarding indemnification in the preceding
paragraph, we will not indemnify the Manager or any of its affiliates, agents,
or attorneys, nor any person acting as securities broker or dealer for the units
from any liability, loss or damage incurred by them arising due to an alleged
violation of federal or state securities laws unless:

         o        there has been a successful adjudication on the merits of each
                  count involving alleged securities law violations as to the
                  particular party;

         o        the claims have been dismissed with prejudice on the merits by
                  a court of competent jurisdiction as to the particular party;
                  or

         o        a court of competent jurisdiction approves a settlement of the
                  claims against the particular party and finds that
                  indemnification of the settlement and related costs should be
                  made.

Before seeking a court approval for indemnification, the party seeking
indemnification must apprise the court of the position of the Securities and
Exchange Commission concerning indemnification for securities violations, which
is that indemnification for liabilities arising under the Securities Act of 1933
is against public policy and therefore unenforceable.

We will not purchase any insurance that protects a party from any liability for
which we could not indemnify that party.

We will advance funds to the Manager or its affiliates for legal expenses and
other costs incurred as a result of any legal action if the following conditions
are satisfied:

                                       20
<PAGE>

         o        the legal action relates to acts or omissions with respect to
                  the performance of duties or services on our behalf;

         o        the legal action is initiated by a third party who is not a
                  member, or the action is initiated by a member and a court
                  specifically approves such advancement; and

         o        the Manager or its affiliates undertake to repay the advanced
                  funds to us in the event the Manager or its affiliates is not
                  entitled to indemnification.

   SUMMARY OF OPERATING AGREEMENT, RIGHTS OF MEMBERS AND DESCRIPTION OF UNITS

This is a summary of our operating agreement and does not contain all the
information that may be important to you. Furthermore, you will be bound by the
operating agreement by purchasing your units. Consequently, you should read
carefully both this prospectus and the operating agreement, which is attached as
Exhibit A to this prospectus.

YOUR STATUS

Our acceptance of your subscription agreement is effective when the Manager
countersigns it on our behalf. Subscriptions will be accepted or rejected no
sooner than 5 business days after the date of the subscription agreements and
within 30 days of their receipt. If we reject your subscription agreement, your
funds will be returned to you within 10 business days. If we accept your
subscription and payment for units, you will receive units in, and be a member
of, the Fund within 5 business days after we accept your subscription. We will
promptly send you a confirmation of the number of units you have acquired. This
will be evidence that you are a member of the Fund. As a member, you have the
rights that are outlined in this prospectus.

LIMITED LIABILITY OF MEMBERS

The California statute under which the Fund has been formed provides that
members are not personally liable for the obligations of their limited liability
company. The operating agreement also provides that every written agreement
entered into by us is not enforceable against our members personally.

TERM OF THE FUND

The Fund will cease operating on December 31, 2021 and commence an orderly
liquidation of its assets. Before then, the members may vote by a majority to
extend its life or to dissolve it sooner. Additionally, we may dissolve earlier
if the Manager ceases serving as the Manager and the members cannot agree on a
new Manager within six months.

MEETINGS

Either the Manager or members owning capital accounts with at least 10% of the
amounts in all capital accounts may call meetings of the members. The Manager
has informed us that it has no present intention of calling any meetings of the
members. Any voting by the members is anticipated to be by written consent.

VOTING AND OTHER RIGHTS OF MEMBERS

The Manager may amend the operating agreement without your consent to

         o        remedy any ambiguity or formal defect or omission,

         o        conform it to applicable laws and regulations, and

         o        make any change which, in the judgment of the Manager, is not
                  to the prejudice of the members.

We require the vote or consent of a majority of members (excluding the Manager
or its affiliates) to do any of the following:

         o        amend the operating agreement, except in the instances
                  mentioned above,

         o        dissolve the Fund and wind up our business,

         o        add or remove a Manager,

         o        cause us to merge with another company, and

                                       21
<PAGE>

         o        approve or disapprove the sale of more than 50% of our assets.

You may inspect certain of our books and records at our principal office during
our regular business hours. We also maintain a copy of each appraisal for the
security property where we have invested in a mortgage loan at our principal
office for at least six years after the last date that we held the related
mortgage. You may inspect and copy these appraisals during our regular business
hours. We may charge you a fee for copying them.

DESCRIPTION OF THE UNITS

Each unit represents an undivided equity interest in a California limited
liability company. The units in the Fund are not evidenced by a certificate.
Units are non-assessable and are entitled to a pro rata share of the Fund's
profits and losses in accordance with the terms of the operating agreement.
There are various limitations on transfer of units. The Manager may reject any
proposed transfer which would jeopardize the tax status of the Fund as a
partnership for Federal tax purposes. Owners of units must hold their units for
at least one year. After the one year holding period, an owner may redeem
his/her units by submitting a written request for redemption to our Manager,
subject to our having adequate funds available to make the requested redemption
and subject to an overall cap that not more than 10% of the units may be
redeemed in any 12 month period. There are no outstanding securities senior to
the units and senior securities may only be issued with the approval of a
majority of the holders of the units. Each holder of units is entitled to vote
on matters pertaining to the Fund in accordance with the terms of the operating
agreement.

CAPITAL ACCOUNTS

The Manager will credit the capital account it establishes for you when we
receive your initial investment after the escrow ends. We will allocate to your
capital account the percentage of our income, gains, losses and distributions
that the amount in your capital account bears to all members' capital accounts.
Your capital account will increase by the amount of additional capital
contributions you make, including distribution reinvestments, and by your share
of income and gains realized by us. Your capital account will decrease by your
share of losses realized by us and any income or capital we distribute to you.
Increases and decreases in your capital account do not depend on the number of
units you own.

Except for when we write down our investments, we do not adjust capital accounts
to reflect unrealized appreciation or depreciation of our underlying assets.
Consequently, the amount in your capital account may not reflect the portion of
the fair market value of our underlying assets attributed to your units. This is
a continuous offering in which allocations will be made based on the
proportionate interest of capital accounts. As a result, depending upon when
units are purchased, the units purchased by our members for ten dollars will
likely have:

         o        different rights to distributions and income from our mortgage
                  loans, and

         o        different proportionate interests in the fair market value of
                  our underlying assets.

If the fair market value of our assets is less than the cost of the assets on
our books when you make a capital contribution, then the value of your units'
interest in the fair market value of our underlying assets may be less than ten
dollars per unit. Conversely, if the fair market value of our assets is greater
than the cost of the assets on our books when a new member makes a capital
contribution, then your units' interest in the realized gains in the fair market
value of our assets will be shared with the new members making the contribution
or reinvestment. This will result in a dilution in the value of your units'
interest in the fair market value of our underlying assets. These principles
apply equally for when a member makes a distribution reinvestment.

UNIT REPURCHASES AND DEEMED DISTRIBUTIONS

The number of units you hold will decrease when we return capital to you and
will increase when you contribute or are deemed to recontribute capital. If we
return capital to you, we will treat it as a redemption of units in an amount
proportionate to the amount in your capital account. We will provide statements
to you reflecting the number of units that we have redeemed and the number of
units that you still own as a result of the redemption.

Additionally, for tax purposes you will be deemed to have received a return of
capital and recontributed to us any proceeds we receive from loan repayments,
foreclosures or other capital transactions, or any loan modifications or
extensions treated as a disposition for tax purposes. While we believe that this
characterization will not affect the tax liability of our members, if the
Internal Revenue Service unexpectedly were to disagree, you may have a tax
liability with no cash distributions to pay that liability.

                                       22
<PAGE>

WRITE-DOWN OF INVESTMENTS

As indicated above, we make annual downward adjustments if the fair market value
of our assets has declined during that year, to reflect then-current market
conditions. We refer to these downward adjustments as write-downs. We will make
any necessary write-downs within 30 days following the end of each year. Our
accountants will then confirm that the write-down conforms with generally
accepted accounting principles. If a write-down is required, the write-down
shall be effective on the last day of the calendar quarter and the capital
accounts of all members on that date shall be reduced accordingly.

MEMBERS' RETURN ON INVESTMENT

Our mortgage loans will generate monthly payments of interest and/or principal
to us. We intend to distribute these interest payments to you as described
below. These distributions will be paid quarterly in arrears in cash or via
reinvestment. We will not accumulate assets other than mortgage notes or similar
instruments and we will not usually accumulate cash on hand, except for working
capital reserves of approximately 3% of capital contributions except when the
Manager elects to return additional cash pending investment in mortgage loans in
which cash funds will be held in short-term liquid investments. Our first
distribution to you will be your share of our distribution for the quarter in
which your contribution is actually received by us and invested. We calculate
the amount of your distributions on a pro rata basis, based upon the return, if
any, on all of our assets, the size of your capital account and, if applicable,
when during the quarter we received your contribution.

We will distribute all net income attributable to interest we receive from
borrowers. When we distribute net income attributable to these payments, all
distributions will be made to the members in proportion to their contributed
capital.

Net proceeds will include the proceeds from the repayment of principal or the
prepayment of a mortgage loan, or the net proceeds of a foreclosure sale. Net
proceeds will be distributed during the period that is within 36 months of the
scheduled termination of the Fund, December 31, 2021. The Manager may consider
the alternatives listed below in determining whether and how much of the net
proceeds to distribute in cash.

         o        reinvesting in new loans,

         o        improving or maintaining any properties that we acquire
                  through foreclosure,

         o        paying permitted operating expenses, or

         o        distributing to the members.

Before making a distribution, we will pay our expenses and other liabilities and
confirm that our working capital reserves are adequate. If net proceeds are to
be retained and not distributed, there must be sufficient cash distributed, to
the extent available, to pay any anticipated state and federal taxes (assuming a
specified tax bracket applicable to all Members) created by the disposition or
refinancing of a mortgage loan.

DISTRIBUTION REINVESTMENT PLAN

You can elect to participate in the distribution reinvestment plan by so
indicating in your completed subscription agreement, or you can later elect to
become a participant. We will treat you as a distribution reinvestment plan
participant on the date we actually receive your initial investment, if you
indicate in your subscription agreement that you want to participate in the
plan. You may also make an election or revoke a previous election at any time by
sending us written notice. Units purchased under the plan will be credited to
your capital account as of the first day of the calendar quarter following the
calendar quarter in which the reinvested distribution was made. If you notify us
prior to 10 days before the end of any given quarter, you will be removed from
the reinvestment plan during that quarter and any distribution you receive that
quarter will be paid in cash. If you notify us within ten days of the end of the
quarter, you will need to wait until the following quarter to receive cash
instead of units.

Your continued participation in the plan depends on whether you meet our
investor suitability standards. While you are a participant, for each $10.00 in
distributions you reinvest, you will acquire one unit. The Manager may terminate
or reinstate, as applicable, the distribution reinvestment plan at any time.

If you choose to reinvest your distributions in units, we will send you a report
within 30 days after each time you receive units describing the distributions
you received, the number of units you purchased, the purchase price per unit,
and the total number of units accumulated. We will also send you a current
prospectus and tax information for income earned on units under the reinvestment
plan for the calendar year when you receive annual tax information from us. You
must pay applicable income taxes upon all distributions, whether the
distribution is paid in cash or reinvested.

No reinvestment participant shall have the right to draw checks or drafts
against his distribution reinvestment account.

Units you acquire through the distribution reinvestment plan carry the same
rights as the units you acquired through your original investment. However, as
previously noted, the proportional net asset value of the new units issued for
ten dollars will not necessarily be the same as those previously acquired for
ten dollars.

                                       23
<PAGE>

We may amend or end the distribution reinvestment plan for any reason at any
time by mailing a notice to you at your last address of record at least 30 days
before the effective date of our action. The Manager specifically reserves the
right to suspend or end the distribution reinvestment plan if:

         o        the Manager determines that the distribution reinvestment plan
                  impairs our capital or operations;

         o        the Manager determines that an emergency makes continuing the
                  plan unreasonable;

         o        any governmental or regulatory agency with jurisdiction over
                  us requires us to do so;

         o        in the opinion of our counsel, the distribution reinvestment
                  plan is no longer permitted by federal or state law;

         o        if transactions involving units within the previous twelve
                  (12) months would result in our being considered terminated
                  under Section 708 of the Internal Revenue Code; or

         o        the Manager determines that allowing any further reinvestments
                  would create a material risk that we would be treated as a
                  publicly traded partnership within the meaning of Section 7704
                  of the Internal Revenue Code.

REINVESTMENT OF PROCEEDS OF CAPITAL TRANSACTIONS

We will either invest our net proceeds from any capital transaction in new
mortgage loans, hold the net proceeds as cash or distribute them to the members.
Capital transactions include payments of principal, foreclosures and prepayments
of mortgages, to the extent classified as a return of capital under the Internal
Revenue Code, and any other disposition of a mortgage or property. Net proceeds
of capital transactions will also include the principal of a loan deemed to be
repaid for tax purposes as a result of a loan modification or loan extension.
Our operating agreement provides that if we reinvest the proceeds, you will be
deemed to have received a distribution of capital and recontributed the same
amount to us for tax purposes. We will not reinvest proceeds from a capital
transaction unless we have sufficient funds to pay any state or federal income
tax in connection with the disposition or refinancing of mortgages. Units
purchased by virtue of a deemed recontribution of distributed capital will be
credited to your capital account as of the day when the distribution was deemed
to be made. Units you acquire through the deemed recontribution of capital carry
the same rights as the units you acquired through your original investment.
However, as previously noted, the proportionate net asset value of the new units
issued for ten dollars will not necessarily be the same as those previously
acquired for ten dollars.

ASSIGNMENT AND TRANSFER OF UNITS

Your rights to sell or transfer units are limited. There is no public market in
which you may sell your units and none will develop anytime in the future. You
may not sell parts of units unless required by law and you may not transfer any
units if, as a result, you would own fewer than 1,000 units. You may transfer
your units using a form approved by the Manager and must obey all relevant laws
when you are permitted to transfer units. Any person who buys units from you
must meet the investor suitability requirements in his home state. The Manager
must approve any new members and all transfers of membership must comply with
the operating agreement. The Manager's consent to transfers will be withheld to
the extent needed to prohibit transfers that would cause us to be classified as
a publicly traded partnership under the Internal Revenue Code. In the event the
Manager approves of such transfers or assignment, our records will be amended to
reflect such transfer or assignment within one month of the transaction.

REPURCHASE OF UNITS, WITHDRAWAL FROM THE FUND

You may withdraw, or partially withdraw, from the Fund and obtain the return of
all or part of your capital account within 61 to 91 days after you deliver
written notice of withdrawal to the Manager, subject to the following additional
conditions:

         o        You may not withdraw from the Fund until one year after you
                  purchased units.

         o        We can only make cash payments in return of an outstanding
                  capital account from net proceeds of capital transactions and
                  capital contributions.

         o        The Manager must determine that your proposed withdrawal will
                  not impair the capital or operation of the Fund.

         o        We are not required to sell any portion of our assets to fund
                  a withdrawal.

         o        The amount to be distributed to you depends solely on your
                  capital account on the date of the distribution, even if this
                  is not the same as your proportionate share of the then fair
                  market value of our assets.

                                       24
<PAGE>

         o        We will not permit more than 10% of the outstanding capital
                  accounts of members to be withdrawn during any calendar year,
                  except upon dissolution of the Fund.

         o        If your capital account is reduced below $10,000 due to any
                  withdrawal payment, we may distribute all remaining amounts in
                  your capital account to you in cancellation of your units, and
                  you will then cease to be a member.

         o        All payments to meet requests for withdrawal are on a
                  first-come, first-served basis. If the sums needed to fund
                  withdrawals in any particular month exceed the amount of cash
                  available for withdrawals, funds will be distributed first to
                  the member whose request we received first, until his
                  withdrawal request is paid in full.

                                       25
<PAGE>

                                     PART II

ITEM 1.  MARKET PRICE, DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND OTHER
         SHAREHOLDER MATTERS

         There is no public trading market for the Registrant's units of limited
liability company interest. As of June 30, 2004, there were 360 members of the
Registrant. The cumulative amount of interest distributions allocated to members
as of June 30, 2004 is $2,247,966, which provided a return on investments of a
range of 6% to 9%, depending on when an investment was made.

ITEM 2.  DESCRIPTION OF EXHIBITS

         2.       Limited Liability Company Articles of Organization.

         3.       Limited Liability Company Fourth Amended Operating Agreement.

         31.      Rule 13a-14a/15d-14a Certification.

         32.      Section 1350 Certification.

ITEM 3.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

         Not applicable.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         Not applicable.

ITEM 5.  COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

         Not applicable.

ITEM 6.  REPORTS ON FORM 8-K

         No report on Form 8-K was filed during the last quarter of the period
covered by this report.


                                       26
<PAGE>

                                    PART F/S


                          INDEPENDENT AUDITORS' REPORT


To the Manager and Members of
Yosemite Mortgage Fund II, LLC

We have audited the accompanying balance sheets of Yosemite Mortgage Fund II,
LLC (a California limited liability company) as of December 31, 2003 and 2002,
and the related statements of operations, members' equity, and cash flows for
the years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

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

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


/s/  Burr, Pilger & Mayer LLP



San Francisco, California
January 9, 2004, except for Note 2,
     as to which the date is February 5, 2004


                                       27
<PAGE>
<TABLE>

                                        YOSEMITE MORTGAGE FUND II, LLC
                                   (A CALIFORNIA LIMITED LIABILITY COMPANY)

                                                BALANCE SHEETS




                                                                         December 31,     December 31,
                                                                             2003             2002
                                                                         ------------     ------------

                                                    ASSETS

<S>                                                                      <C>              <C>
Loans receivable (Note 4)                                                $28,495,649      $        --
Cash                                                                       4,419,769            1,000
Interest receivable                                                          271,448               --
Late fee receivable                                                              187               --
Deferred offering costs, net of accumulated amortization of $62,524
         and $0 at December 31, 2003 and 2002, respectively                  406,408          407,238
Software                                                                      36,982               --
                                                                         ------------     ------------

         Total assets                                                    $33,630,443      $   408,238
                                                                         ============     ============


                                        LIABILITIES AND MEMBERS' EQUITY

Liabilities:
   Accounts payable                                                      $    11,523      $        --
   Deposits from pending members                                             137,000               --
   Service fees payable to related party (Note 3)                              5,796               --
   Due to affiliate (Note 3)                                                      --          407,238
   Distribution payable                                                      264,278               --
                                                                         ------------     ------------


         Total liabilities                                                   418,597          407,238
                                                                         ------------     ------------

Members' equity:
   Initial member                                                                824            1,000
   Members                                                                33,211,022               --
                                                                         ------------     ------------

         Total members' equity                                            33,211,846            1,000
                                                                         ------------     ------------


         Total liabilities and members' equity                           $33,630,443      $   408,238
                                                                         ============     ============

                  The accompanying notes are an integral part of these financial statements.
</TABLE>
                                                      28
<PAGE>

                         YOSEMITE MORTGAGE FUND II, LLC
                    (A CALIFORNIA LIMITED LIABILITY COMPANY)

                            STATEMENTS OF OPERATIONS

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



                                        For the year ended   For the year ended
                                         December 31, 2003    December 31, 2002
                                         -----------------    -----------------

Revenue:
   Interest on loans receivable                $1,249,566           $       --
   Late fee income                                  2,887                   --
   Other interest                                   1,746                   --
                                               -----------          -----------

Total revenue                                   1,254,199                   --
                                               -----------          -----------
Expenses:
   Accounting                                      50,904                   --
   Amortization                                    62,524                   --
   Taxes, licenses and fees                        15,187                   --
   Legal fees                                      11,515                   --
   Printing                                        10,004                   --
   Service fees (Note 3)                           26,785                   --
   Other                                            3,024                   --
                                               -----------          -----------

         Total expenses                           179,943                   --
                                               -----------          -----------

Net income                                     $1,074,256           $       --
                                               ===========          ===========



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

                                       29
<PAGE>
<TABLE>

                         YOSEMITE MORTGAGE FUND II, LLC
                    (A CALIFORNIA LIMITED LIABILITY COMPANY)

                          STATEMENTS OF MEMBERS' EQUITY

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



                                 Initial Member        Members              Total
                                 -------------      -------------      -------------
<S>                              <C>                <C>                <C>
Balance, January 1, 2002                   --                 --                 --

Contributions                           1,000                 --              1,000
                                 -------------      -------------      -------------

Balance, January 1, 2003                1,000                 --              1,000

Contributions                              --       $ 32,563,899         32,563,899

Distributions                              --           (427,309)          (427,309)

Net (loss) income allocated              (176)         1,074,432          1,074,256
                                 -------------      -------------      -------------

Balance, December 31, 2003       $        824       $ 33,211,022       $ 33,211,846
                                 =============      =============      =============

</TABLE>

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


                                       30
<PAGE>
<TABLE>

                                             YOSEMITE MORTGAGE FUND II, LLC
                                        (A CALIFORNIA LIMITED LIABILITY COMPANY)

                                                STATEMENTS OF CASH FLOWS

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


                                                                           For the year ended      For the year ended
                                                                            December 31, 2003       December 31, 2002
                                                                            -----------------       -----------------
<S>                                                                             <C>                     <C>
Cash flows from operating activities:
   Net income                                                                   $  1,074,256            $         --
   Amortization of deferred offering costs                                            62,524                      --
   Adjustments to reconcile net income to net cash provided by operations:
     Interest receivable                                                            (271,448)                     --
     Late fees receivable                                                               (187)                     --
     Deferred offering costs                                                         (61,694)                     --
     Accounts payable                                                                 11,523                      --
     Deposits from pending members                                                   137,000                      --
     Service fees payable                                                              5,796
     Payable to affiliate                                                           (407,238)                     --
                                                                                -------------           -------------
         Net cash provided by operating activities                                   550,532                      --
                                                                                -------------           -------------

Cash flows from investing activities:
   Purchase of loans                                                             (28,495,649)                     --
   Purchase of software                                                              (36,982)                     --
                                                                                -------------           -------------
         Net cash used in investing activities                                   (28,532,631)                     --
                                                                                -------------           -------------

Net cash from financing activities:
   Members' contributions                                                         32,563,899                   1,000
   Members' distributions                                                           (163,031)                     --
                                                                                -------------           -------------
         Net cash provided by financing activities                                32,400,868                   1,000
                                                                                -------------           -------------

Increase in cash                                                                   4,418,769                   1,000

Cash at beginning of year                                                              1,000                      --
                                                                                -------------           -------------

Cash at end of year                                                             $  4,419,769            $      1,000
                                                                                =============           =============


                       The accompanying notes are an integral part of these financial statements.
</TABLE>
                                                           31
<PAGE>

                         YOSEMITE MORTGAGE FUND II, LLC
                    (A CALIFORNIA LIMITED LIABILITY COMPANY)

                          NOTES TO FINANCIAL STATEMENTS

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


1.     NATURE OF OPERATIONS AND DEVELOPMENT-STAGE OPERATIONS

       Yosemite Mortgage Fund II, LLC (the Company) was formed on March 19, 2001
       under the California Beverly-Killea Limited Liability Company Act (the
       Act), to conduct any lawful business for which a limited liability
       company may be organized under the Act, including investment of the
       Company's cash and the purchase and sale of notes, mortgages, and deeds
       of trust, secured by interests in real estate.

       The Company's operating agreement provides that the term of the Company
       shall continue until December 31, 2021, unless terminated earlier.

       The Company began operations in May of 2003. Fiscal year 2003 is the
       first year during which the Company is considered an operating company.
       Prior to fiscal year 2003, the company had been in the development stage.

       The Manager is MFP Management LLC (a California limited liability
       company) formed on May 14, 2001 under the Act and is engaged in business
       as an investor in real estate secured loans. MFP Management LLC is an
       affiliate of Pontes Financial Group, Ltd. a California corporation, and
       Steven M. Pontes, General Manager of MFP Management LLC.

       The fiscal year end of the Company is December 31.

       The Profit or Loss of the Company is allocated to the Members in
       proportion to their respective Percentage Interest. The Manager is
       required to allocate to the Members all Profits and Losses realized by
       the Company during any quarter as of the close of business on the last
       day of each calendar quarter, in accordance with their respective
       Interests and in proportion to the number of days during the calendar
       quarter that they owned the Interests.

       The Manager and its Affiliates are entitled to receive fees, compensation
       and expense reimbursements from the Company, such as Management Fee,
       Mortgage Service Fees, Company Expenses, Promotional Interest, Property
       Management Fee, and Real Estate Brokerage Commissions.

       The Manager is entitled to receive from the Company a Management Fee
       payable monthly, in amounts determined by the Manager from time to time,
       up to a maximum of three-quarters of one percent (0.75%) per annum of the
       Base Amount. For any portion of the Capital Contributions not included in
       the Base Amount, the Management Fee shall not exceed 0.5% per annum.

       The Manager is entitled to receive a Promotional Interest in the Company,
       as an additional Management Fee, that is equal to twenty-five percent
       (25%) of the amount of Cash Available for Distributions that exceeds
       twelve percent (12%) of Capital Contributions, for each and every Fiscal
       Year of the Partnership on a noncumulative basis.


                                       32
<PAGE>

                         YOSEMITE MORTGAGE FUND II, LLC
                    (A CALIFORNIA LIMITED LIABILITY COMPANY)

                          NOTES TO FINANCIAL STATEMENTS

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

1.     NATURE OF OPERATIONS AND DEVELOPMENT-STAGE OPERATIONS, continued

       If the Manager or an Affiliate performs property management services with
       respect to a foreclosed residential property, the maximum Property
       Management Fee, including all rent-up, leasing, and re-leasing fees and
       bonuses, and leasing related services paid to any Person, shall be five
       percent (5%) of the gross revenues from such property. For individual and
       commercial property, the maximum Property Management Fee from such leases
       shall be six percent (6%) of the gross revenues where the Manager or its
       Affiliates includes leasing, re-leasing, and leasing-related services.
       Conversely, the maximum Property Management Fee from such leases shall be
       three percent (3%) of the gross revenues where the Manager or its
       Affiliates do not perform leasing, re-leasing, and leasing-related
       services with respect to the property. For industrial and commercial
       properties which are leased on a long-term basis, the maximum Property
       Management Fee from such leases shall be one percent (1%) of the gross
       revenues, except for a one-time initial leasing fee of three percent (3%)
       of the gross revenues on each lease payable over the first five full
       years of the original term of the lease.

       The total compensation paid to all Persons for the sale of a property
       held by the Company as a result of a foreclosure shall be limited to a
       competitive real estate commission, not to exceed six percent (6%) of the
       contract price for the sale of the property.

       All capitalized items used in this Note 1 are defined in the Company's
       operating agreement.

2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         BASIS OF ACCOUNTING

         The financial statements of the Organization have been prepared on the
         accrual basis of accounting and accordingly reflect all significant
         receivables, payables, and other liabilities.

         ESTIMATES

         The preparation of financial statements in conformity with accounting
         principals generally accepted in the United States of America requires
         management to make estimates and assumptions that affect the reported
         amounts of assets and liabilities and disclosure of contingent assets
         and liabilities at the date of the financial statements and the
         reported amounts of revenues and expenses during the reporting period.
         Actual results could differ from those estimates.

         INCOME (LOSS) ALLOCATION

         Quarterly profits and losses are allocated to the members based upon
         each member's respective interest in proportion to the number of days
         during the quarter in which each member owned the interest. Net losses
         allocable to the period before the admission of additional members are
         allocated to the initial member. During the first quarter of 2003, the
         initial member was the only member; accordingly, the first quarter's
         net loss of $176 was allocated to the initial member. Terms of the
         Limited Liability Company Operating Agreement call for prospective
         profits and losses to be allocated only to the members with no
         allocation to the initial member.

         INCOME TAXES

         The Company is treated as a partnership for federal and California
         income tax purposes. Consequently, all tax effects of the Company's
         income or loss are passed through to the members individually, and no
         federal or California income taxes are provided for in the financial
         statements of the Company. The Company pays an annual California tax of
         $800 and an annual California LLC fee based upon its total annual
         income.

         REVENUE RECOGNITION

         Interest is recognized as revenue when earned according to the terms of
         the loan.

                                       33
<PAGE>

                         YOSEMITE MORTGAGE FUND II, LLC
                    (A CALIFORNIA LIMITED LIABILITY COMPANY)

                          NOTES TO FINANCIAL STATEMENTS

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

2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

         CAPITALIZED SOFTWARE

         Capitalized software is stated at cost. At December 31, 2003, the
         software was still in the development stage. Once the software is
         placed in service, depreciation will be computed using the
         straight-line method over three years.

         All long-lived assets are reviewed for impairment when events or
         changes in circumstances indicate that the carrying amount of the asset
         may not be recoverable. Impairment losses are recorded if the asset's
         carrying amount is not recoverable through its undiscounted cash flows.
         An impairment loss is recognized and recorded in current earnings to
         the extent the carrying amount of an asset exceeds its estimated fair
         value.

         LOANS SECURED BY TRUST DEEDS

         Loans secured by trust deeds are selected by the Manager and originated
         by or through Pontes Financial Group, Ltd., a California licensed real
         estate broker corporation, and are recorded at cost. Interest income on
         loans will be accrued by the simple interest method. The Company will
         not recognize interest income on loans once they are determined to be
         impaired until the interest is collected in cash. A loan is impaired
         when, based on current information and events, it is probable that the
         Company will be unable to collect all amounts due according to the
         contractual terms of the loan agreement, and a specific reserve is
         recorded. Cash receipts will be allocated to interest income, except
         when such payments are specifically designated as principal reduction
         or when management does not believe the Company's investment in the
         loan is fully recoverable.

         At December 31, 2003, three of the loans were delinquent. A Notice of
         Default was filed on two of these loans (PFG Loan #'s 3064 and 3095).
         These two loans are loans to the same borrower. In February 2004 the
         borrower subsequently sold one of the properties collateralizing the
         loans, and the loans are now current. The Manager was one of the
         purchasers of the sold property.

         The third loan in default, PFG Loan #3107, in the amount of $550,000,
         has been delinquent since October 1, 2003. The Company intends to file
         a Notice of Default in the near future. Because the loan is considered
         impaired, the company has not accrued interest income during the months
         of November and December 2003. The loan is secured by a property
         located in Oregon, and the Company believes that there is adequate
         collateral to cover the full value of the loan plus all unpaid interest
         and late fees.

         There were no investments in mortgage loans as of December 31, 2002.

         ALLOWANCE FOR LOAN LOSSES

         The Manager regularly reviews the mortgage loan portfolio to assess
         whether a loan loss reserve is necessary. Borrower payment history, the
         value of the property by which the loan is secured, and other economic
         and geographical conditions are considered. In addition to these
         factors the Manager believes its underwriting standard to fund only
         those loans not greater than 70% of the collateral provides an adequate
         reserve against risk posed by market deterioration and/or delinquent
         payments. The Manager does not accrue any interest income for any loans
         delinquent or otherwise in default. The Manager regularly reviews its
         portfolio particularly any loans that are delinquent to determine
         whether a loan loss reserve is necessary. At December 31, 2003, the
         Manager determined that no loan loss reserves were required.

         DEFERRED OFFERING COSTS

         During the Company's development stage, all costs associated with the
         offering of the Company's securities were capitalized. These deferred
         offering costs, totaling $468,932 are amortized using the straight-line
         method over five years.

                                       34
<PAGE>

                         YOSEMITE MORTGAGE FUND II, LLC
                    (A CALIFORNIA LIMITED LIABILITY COMPANY)

                          NOTES TO FINANCIAL STATEMENTS

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

3.     RELATED PARTY TRANSACTIONS

         DUE TO AFFILIATE

         Pontes Financial Group, Ltd., the Initial Member, has advanced offering
         costs and paid certain expenses on behalf of the Company and was
         entitled to receive reimbursement from the Company. As of December 31,
         2003, outstanding offering costs and expenses payable to Pontes
         Financial Group, Ltd. have been paid. As of December 31, 2002,
         outstanding offering costs of $407,238 were due to Pontes Financial
         Group, Ltd. The Manager or its Affiliates received $507,648 and $0 for
         the reimbursement of costs or expenses from the registrant during 2003
         and 2002, respectively.

         MANAGEMENT FEES

         Under the Operating Agreement, the Manager is entitled to receive from
         the Company and assign to its affiliate a Management Fee payable
         monthly, in amounts determined by the Manager from time to time, up to
         a maximum of three-quarters of one percent (0.75%) per annum of capital
         contributions committed to investment in mortgage loans. The Management
         Fee was waived by the Manager for the years ending December 31, 2003
         and 2002. Had the Manager accepted the management fee, the maximum
         management fee expenses charged to the Company would have been $239,460
         and $0 for the years ending December 31, 2003 and 2002, respectively.

         LOAN SERVICING FEES

         The Manager and its Affiliates are also entitled to receive monthly
         Mortgage Servicing Fees on loans which it service in the amount of
         three-quarters of one percent (0.75%) per annum of the principal
         outstanding in each loan. One quarter of one percent (0.25%) of the
         total fees were paid by the Company and the remaining one-half of one
         percent (0.5%) of the total fees were paid by the borrowers. Loan
         servicing fees, representing the one-quarter of one percent paid to the
         Company, were $26,785 for the year ended December 31, 2003 and $0 for
         the year ended December 31, 2002. Service fees payable to the Manager
         from the Company as of December 31, 2003 and December 31, 2002 were $
         5,796 and $0, respectively.

         BORROWER'S COSTS

         The Manager receives loan origination fees and other fees normally
         associated with the loan placement and paid by the borrowers. These
         fees are paid directly to the Manager by borrowers and are not included
         in the income and expenses of the Company.

         LOANS PURCHASED FROM AFFILIATES OF THE MANAGER

         The Company purchased loans, in whole or in part, from affiliates of
         the Manager and certain members of the Company. Payments of interest
         and principal for loans purchased are due on the first of the following
         month. As of December 31, 2003 and as of December 31, 2002 there were
         no outstanding amounts payable for the loans purchased during the
         quarter.

4.     LOANS RECEIVABLE

       All loans receivable are secured by deeds of trust, and ownership of some
       loans is partially shared with related parties (See Note 3). Loans
       receivable as of December 31, 2003 consist of the following:
<TABLE>

<S>                                                                                  <C>
         Loan #3041, due in monthly installments of $5,447 including principal
         and interest at 12.75% matured in August 2003. The Company did not
         demand payment at the time the loan matured, and the borrower has
         continued to make timely monthly payments. The face amount of this loan
         is $512,668. The Company owns 75.56% of this loan.                          $ 387,349

                                       35
<PAGE>

                         YOSEMITE MORTGAGE FUND II, LLC
                    (A CALIFORNIA LIMITED LIABILITY COMPANY)

                          NOTES TO FINANCIAL STATEMENTS

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

4.       LOANS RECEIVABLE, continued

         Loan #3053, due in monthly installments of $4,604 of interest only at
         13.00% maturing in September 2004. The face amount of this loan is
         425,000. The Company owns 76.47% of this loan.                                325,000

         Loan #3054, due in monthly installments of $18,865 including principal
         and interest at 12.75% maturing in July 2006. The face amount of this
         loan is $1,500,000. The Company owns 100%of this loan.                      1,370,502

         Loan #3064, due in monthly installments of $6,316 including principal
         and interest at 12.50% maturing in February 2007. The face amount of
         this loan is $470,000. The Company owns 100% of this loan.                  $ 386,680

         Loan #3077, due in monthly installments of $11,793 of interest only at
         12.75%. The principal balance is due in December 2005. The face amount
         of the loan is $1,110,000. The Company owns 86.96% of this loan.              965,217

         Loan #3080, due in monthly installments of $2,498 including principal
         and interest at 12.75% maturing in March 2006. The face amount of this
         loan is $200,000. The Company owns 100% of this loan.                         185,362

         Loan #3081, due in monthly installments of $8,117 including principal
         and interest at 12.75% maturing in March 2006. The face amount of this
         loan is $650,000. The Company owns 100% of this loan.                         602,427

         Loan #3092, due in monthly installments of $8,234 of interest only at
         12.75%. The principal balance is due in May 2004. The face amount of
         the loan is $775,000. The Company owns 100% of this loan.                     775,000

         Loan #3094, due in monthly installments of $2,985 including principal
         and interest at 12.75% matured on August 2003. The face amount of this
         loan is $302,258. The Company owns 100% of this loan.                         280,966

         Loan #3095, due in monthly installments of $4,097 including principal
         and interest at 12.50% maturing in February 2007. The face amount of
         this loan is $290,000. The Company owns 100% of this loan.                    252,327

         Loan #3101, due in monthly installments of $7,148 of interest only at
         11.75% maturing in September 2006. The face amount of this loan is
         $730,000. The Company owns 58.91% of this loan.                               430,000

         Loan #3102, due in monthly installments of $5,158 including principal
         and interest at 11.00% maturing in March 2007. The face amount of this
         loan is $465,000. The Company owns 100% of this loan.                         444,581

         Loan #3105, due in monthly installments of $9,909 of interest only at
         11.25% maturing in December 2006. The face amount of this loan is
         $1,430,000. The Company owns 27.97% of this loan.                             295,664

         Loan #3107, due in monthly installments of $5,385 of interest only at
         11.75% maturing in February 2008. The face amount of this loan is
         $550,000. The Company owns 100% of this loan.                                 550,000


                                       36
<PAGE>

                         YOSEMITE MORTGAGE FUND II, LLC
                    (A CALIFORNIA LIMITED LIABILITY COMPANY)

                          NOTES TO FINANCIAL STATEMENTS

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

         4.  LOANS RECEIVABLE, continued

         Loan #3108, due in monthly installments of $2,596 of interest only at
         11.75% maturing in March 2007. The face amount of this loan is
         $265,000. The Company owns 100% of this loan.                                 265,000

         Loan #3110, due in monthly installments of $23,906 of interest only at
         12.75%. The principal balance is due in May 2004. The face amount of
         this loan is $2,250,000. The Company owns 62.44% of this loan.           $  1,405,000

         Loan #3112, due in monthly installments of $20,000 of interest only at
         12.00%. The principal balance is due in May 2007. The face amount of
         this loan is $2,000,000. The Company owns 50% of this loan.                 1,000,000

         Loan #3115, due in monthly installments of $4,423 of interest only at
         12.68%. The principal balance is due in August 2007. The face amount of
         this loan is $418,500. The Company owns 100% of this loan.                    418,500

         Loan #3116, due in monthly installments of $20,188 of interest only at
         12.75%. The principal balance is due in August 2005. The face amount of
         this loan is $1,900,000. The Company owns 65.79% of this loan.              1,250,000

         Loan #3118, due in monthly installments of $10,447 of interest only at
         11.75% maturing in September 2007. The face amount of this loan is
         $1,070,000. The Company owns 100% of this loan.                             1,070,000

         Loan #3119, due in monthly installments of $1,424 of interest only at
         12.75% maturing in October 2007. The face amount of this loan is
         $134,000. The Company owns 71.70% of this loan.                                96,074

         Loan #3121, due in monthly installments of $7,150 of interest only at
         12.00%. The principal balance is due in October 2007. The face amount
         of this loan is $715,000. The Company owns 58.04% of this loan.               415,000

         Loan #3125, due in monthly installments of $5,463 of interest only at
         11.50% maturing in March 2005. The face amount of this loan is
         $570,000. The Company owns 74.56% of this loan.                               425,000

         Loan #3126, due in monthly installments of $24,969 of interest only at
         11.75% maturing in February 2006. The face amount of this loan is
         $2,550,000. The Company owns 78.43% of this loan.                           2,000,000

         Loan #3127, due in monthly installments of $7,344 of interest only at
         11.75%. The principal balance is due in March 2008. The face amount of
         this loan is $625,000. The Company owns 100% of this loan.                    625,000

         Loan #3129, due in monthly installments of $13,406 interest only at
         9.75%. The principal balance is due in April 2008. The face amount of
         this loan is $1,650,000. The Company owns 21.21% of this loan.                350,000

         Loan #3131, due in monthly installments of $4,100 interest only at
         12.00%. The principal balance is due in April 2008. The face amount of
         this loan is $410,000. The Company owns 75.61% of this loan.                  310,000

                                       37
<PAGE>

                         YOSEMITE MORTGAGE FUND II, LLC
                    (A CALIFORNIA LIMITED LIABILITY COMPANY)

                          NOTES TO FINANCIAL STATEMENTS

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

4.     LOANS RECEIVABLE, continued

         Loan #3132, due in monthly installments of $2,231 interest only at
         12.75%. The principal balance is due in July 2006. The face amount of
         this loan is $210,000. The Company owns 100% of this loan.                $   210,000

         Loan #3133, due in monthly installments of $24,479 of interest only at
         11.75%. The principal balance is due in October 2004. The face amount
         of this loan is $2,500,000. The Company owns 54.40% of this loan.           1,350,000

         Loan #3137, due in monthly installments of $5,688 of interest only at
         9.75%. The principal balance is due in May 2008. The face amount of
         this loan is $700,000. The Company owns 100% of this loan.                    700,000

         Loan #3138, due in monthly installments of $5,650 of interest only at
         12.00%. The principal balance is due in December 2004. The face amount
         of this loan is $565,000. The Company owns 100% of this loan.                 565,000

         Loan #3140, due in monthly installments of $19,284 of interest only at
         12.75%. The principal balance is due in November 2008. The face amount
         of this loan is $1,815,000. The Company owns 36.64% of this loan.             665,000

         Loan #3142, due in monthly installments of $15,938 of interest only at
         12.50%. The principal balance is due in November 2004. The face amount
         of this loan is $1,500,000. The Company owns 66.67% of this loan.           1,000,000

         Loan #3143, due in monthly installments of $37,188 of interest only at
         12.75%. The principal balance is due in November 2008. The face amount
         of this loan is $2,500,000. The Company owns 87.86% of this loan.           2,150,000

         Loan #3144, due in monthly installments of $64,547 of interest only at
         12.75%. The principal balance is due in May 2005. The face amount of
         this loan is $6,075,000. The Company owns 81.89% of this loan.              4,975,000
                                                                                   -----------

                                                                                   $28,495,649
                                                                                   ===========
</TABLE>
         As of December 31, 2002, there were no loans receivable.

5.     CONCENTRATIONS

         CASH AND CASH EQUIVALENTS

         Financial instruments that potentially subject the Company to
         concentrations of credit risk consist of bank balances in excess of the
         FDIC insured amount of $100,000. At December 31, 2003 and December 31,
         2002, the Company had approximately $4,384,000 and $0, respectively, of
         cash that exceeded this limit and thus was not covered by federal
         depository insurance.

         LOANS RECEIVABLE

         At December 31, 2003, approximately 61% of the Company's loans
         receivable were collateralized by properties located in Northern
         California. At December 31, 2002, there were no investments in mortgage
         loans.

                                       38
<PAGE>

                                    PART III

ITEM 1.  INDEX TO EXHIBITS

         The following exhibits are listed according to the numbers assigned to
them in Part III of Form 1-A:

         2.       Limited Liability Company Articles of Organization,
                  incorporated by reference to Exhibit 3 to Registrant's Form
                  SB-2 registration statement number 333-98337.

         3.       Limited Liability Company Fourth Amended Operating Agreement,
                  incorporated by reference to Exhibit 4.1 to Form SB-2/A,
                  amended registration statement filed February 21, 2003, number
                  333-98337.

         31.      Rule 13a-14a/15d-14(a) Certification.

         32.      Section 1350 Certification.


                                       39
<PAGE>


                                   SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized, in the capacities and on the date indicated.


                                             Yosemite Mortgage Fund II, LLC


                                        By:   /s/ Steven M. Pontes
                                             -----------------------------------
                                             Steven M. Pontes, General Manager
                                             MFP Management, LLC,
                                             Manager

                                             Principal Executive Officer
                                             Principal Financial Officer


                                             Date:    August 27, 2004


                                       40