WESTLAND DEVELOPMENT CO., INC.

                          Annual Report to Shareholders

                     FOR THE FISCAL YEAR ENDED JUNE 30, 2004

September 28, 2004

Dear Shareholders,

Westland's  business growth  continued  during the past year, and I believe that
the  accomplishments  made during  fiscal 2004 and the past  several  years have
positioned  Westland for continued growth and  profitability  for years to come.
Having said that, you should be aware that  positioning and growth brought on by
the  development  of our new projects  came with some steep costs that will take
some time to recover.  Current debt for the developments  exceeds $11.5 million.
Westland had to borrow $3.5  million for a loan to develop the $7 million  water
facilities for the  properties and other  development  costs.  Fortunately  $3.5
million of the costs has been paid by Westland.  This money will  eventually  be
recovered on a lot by lot basis as the developed lots are sold. Growth continues
along  the I-40  corridor  as  Albuquerque  continued  to expand  westward,  and
Westland's  efforts to take advantage of that growth continued during the fiscal
year.  We  will  continue  that  effort   although  there  are  individuals  and
organizations that want to stop growth on the West Side.

The Petroglyphs will be one of the premier  communities in Albuquerque,  a place
offering affordable,  mid-level,  and high-end housing as well as new employment
centers and schools, however, there is always uncertainty in the marketplace. Of
late, we have become  concerned  with the impact fees the City of Albuquerque is
considering adopting. The impact fees will add a huge cost to the lots and homes
constructed  in The  Petroglyphs  (approximately  $12,000 per lot or $60,000 per
acre). This may serve to slow demand for Westland  subdivisions and could create
serious problems for all developers. I will keep you apprised of this matter.

A major manufacturer, Tempur World, maker of Tempur Pedic mattresses and comfort
products, will construct a manufacturing facility approaching 900,000 sq. ft. in
size.  By way of  comparison,  that is about  the  size of one of  Albuquerque's
regional  malls.  It took a land donation,  well,  water rights,  sewer line and
other  enticements  to attract  this  entity to Westland  land.  Tempur held its
groundbreaking  ceremony on September 16. The company has announced hiring plans
for about 300 employees.  We have had interest from other  manufacturers who may
follow Tempur's lead in setting up shop on Westland property.

During  Fiscal  2004,  it was a pleasure to welcome  four new  directors  to the
board.  Ms.  Georgia  Baca,  Mr. Ray Mares,  Jr., Mr. Randy Sanchez and Mr. Troy
Benavidez bring a fresh  perspective to the company and its operations.  Each of
these individuals  brings a unique background of experience and wisdom that will
be of benefit to the Company and its shareholders.

Thank you for the  opportunity to be of service.  I hope you always feel free to
call me or stop by the office to discuss matters of importance to you.


Sincerely,



Barbara Page
President and CEO

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             Overview of Westland Development Co., Inc. ("Westland")

Westland   Development   Co.,   Inc.,  a  New  Mexico   for-profit   corporation
("Westland"),  is the successor to a community land grant corporation named Town
of Atrisco, which itself was a successor to a Spanish community land grant named
the Atrisco Land Grant.  Information  concerning  the  historical  background of
these predecessor organizations and the conversion in 1967 from a community land
grant corporation into a business corporation can be found in Westland's Form 10
and its  Form  10-K for the  fiscal  year  ended  June 30,  1974.  With  limited
exceptions,  only lineal descendants of the incorporators of the Town of Atrisco
may own shares of Westland's  Common  Stock.  Westland's  executive  offices are
located in its own building at 401 Coors Boulevard, NW, Albuquerque, New Mexico,
87121,  telephone  (505)  831-9600,  on land  which was  originally  part of the
Atrisco Land Grant.

Westland's General Businesses.

Westland  derives  revenues  through  commercial  and land leases,  partnerships
formed for various development projects, the development of residential lots for
sale to homebuilders and bulk land sales to other land developers.

A.  Lands held for Investment.

Westland is the owner of approximately  57,000 acres of land located on the west
side of  Albuquerque,  New Mexico.  Most of its  property is held for  long-term
investment and is leased for cattle grazing.

B.  Land Development and Sale.

Over the past 20 years,  Westland developed six master plans and sold all of the
acreage  included in them.  Those master plans are  identified  as Atrisco Urban
Center and El Rancho  Atrisco,  Phases I through V. These lands,  except for the
Phase  V  master  plan,  which  was  abandoned  due to the  introduction  of the
Petroglyph National Monument, have now been substantially developed and sold.

In 1998 the City of  Albuquerque  and the  County of  Bernalillo  finalized  the
approval of a 6,400 acre  master  plan.  For  Westland  to begin  developing  or
selling  land  within  this  planned  area  (Master  Plan),  the City  must make
available the required  utilities.  In November  1998,  Westland and the City of
Albuquerque  executed a Pre-Annexation  Agreement.  In 2000, the City annexed an
initial  1,665  acres  per  the  terms  of  the  Pre-Annexation  Agreement.  The
Pre-Annexation  Agreement  requires  that Westland  construct,  at its own cost,
sewer and water  utilities  for the initial  1,665 acres  within the Master Plan
area.  Westland will recover these  construction  expenditures  through  Utility
Expansion  Charges  (UEC's) as lots are built out.  Westland has  segregated the
lands within the master plan area for development.

Westland signed a contract for the construction of a pump station, a 4.3 million
gallon   reservoir  and  36-inch   transmission   line  for  the  water  system.
Construction  commenced in May 2003 and was  completed in July of 2004 at a cost
of approximately $7,000,000.  Westland is in the process of conveying the system
to the City of  Albuquerque.  These  construction  costs incurred by the Company
will be recovered  through  utility  expansion  charges charged to each lot when
connected to a City water meter.

An  estimated  $30,000,000  to  $35,000,000  will also be  financed  or borne by
Westland for additional  off-site and on-site water and sewer  distribution  and
collection lines,  drainage  facilities,  and roads within the Master Plan Area.
These  additional  costs will occur in phases  spread  over a number of years as
subdivisions are planned and constructed. The Company has secured a construction
credit  arrangement of approximately  $9,350,000  designated to pay a portion of
construction   cost  of  the  water   system  and  the  initial   infrastructure
improvements  within  the  Master  Plan  Area.   Remaining  funding  will  occur
predominantly through the sale of the lots as the subdivisions are developed.

At this time Westland has started  construction on the first two subdivisions in
the Master Plan Area, named Sundoro  (approximately  58 acres) and Sundoro South
(approximately 34 acres) to be available for sale at approximately the time that
the water  infrastructure  is brought  online  which is expected to occur during
second  quarter of fiscal  2005.  The  Company  is  currently  in the  planning,
approval and design phase of a third  subdivision  in the Master Plan area which
will be know as The  Watershed.  It will  contain  139 upper end  single  family
residential lots.

Additional  costs of  development of the properties for sale, to the extent that
Westland  develops the  properties,  will be borne by Westland for on site water
and sewer  distribution and collection  lines,  drainage  facilities,  and roads
within the  annexed  area with no  reimbursement  for the  development  of lots.
Depending  upon the growth of  development  in this  area,  it may take 10 to 15
years for Westland to build out the annexed area.

Albuquerque is considering  adoption of impact fees for payment of certain other
costs associated with development of the area that may, if adopted, increase the
cost of developing land on Albuquerque's  West Side,  which includes  Westland's
lands.

Management remains committed to the construction of residential,  industrial and
commercial  developments  for  lease  or sale.  Westland's  long  term  business
philosophy  is to create  revenues by  enhancing  the value of  Westland's  land
through careful planning and development,  while retaining  ownership of a major
portion of the land in perpetuity and to provide dividends for its shareholders,
when  consistent with Westland's need for a sufficient cash flow to meet current
and near term operating expenses.

C. Grazing and Oil and Gas Leases.

Approximately  50,000  acres are  leased to  non-affiliated  people  for  cattle
grazing.  Because of the extreme  drought in the area since 1998,  Westland  has
granted rent  abatements  to the tenants in each of the last three fiscal years.
In 2003 Westland  entered into a five-year  lease at $.40 per acre per year with
the heirs of the prior tenant.

Westland has entered into two oil and gas leases on portions of its  properties.
Management  is not  aware  of any  drilling  or  other  activities  having  been
conducted on any of the leased property during the last two fiscal years.

Westland  also owns and  leases  certain  commercial  buildings.  (See  "Revenue
Producing Properties".)

D. Other Projects.

1.   Volcano  Business  Park  consists  of  approximately  22  acres  zoned  for
     industrial  park  uses,  which were  platted  and  developed  into 14 lots.
     Westland,  through  a  partnership  arrangement,  owned  50% of a  172-unit
     self-storage  facility on approximately 1.7 acres of this property.  During
     fiscal 2000, the facility was expanded to provide outdoor storage for motor
     vehicles and boats. During fiscal 2003 the facility was sold.

2.   In Phases 1 and 2 of the Painted Sky Subdivision,  105  single-family  lots
     were planned, constructed and completed during fiscal 2001 and fiscal 2002.
     Construction  of  Painted  Sky  Subdivision  Units 3 and 4,  containing  98
     single-family  residential  lots,  was  completed  during fiscal year 2003.
     Construction  of Units 5 and 6,  the  remaining  two  units  containing  an
     additional 78 single family  residential lots, also commenced during fiscal
     year 2003 and was completed and sold during the current fiscal year.

3.   Westland is also developing three other residential subdivisions in an area
     west of Unser Blvd. and north of I-40, east of the Master Plan area.  These
     are Tierra Oeste Unit 3,  containing 64 lots,  was completed  during fiscal
     year 2003. The Crossing Unit 1,  containing 72 lots,  was completed  during
     fiscal year 2003.  Construction of Unit 2 was completed  during the current
     fiscal  year . The  Crossing  Unit 3, is nearing  completion.  Sales of any
     unsold lots will continue during the current fiscal year.

4.   Construction of the Cielo Oeste  Subdivision,  consisting of 75 residential
     lots, was completed  during the current  fiscal year.  Sales of unsold lots
     will continue during the current fiscal year.

5.   During fiscal year 2001,  Bernalillo  County completed  construction of the
     connection  of Dennis Chavez (Rio Bravo Blvd.) from Coors S.W. to Paseo del
     Volcan  S.W.  During  fiscal  year  2003 the City  approved  annexation  of
     approximately  68 acres of  residential  acreage and 20 acres of commercial
     acreage  owned by Westland,  located  north of Dennis  Chavez and adjoining
     118th St.  Westland.  The 68 residential  acres were sold during the fiscal
     year.

6.   Westland  previously  reported that in 1994 it entered into a  lease/option
     arrangement  related to  approximately  100 acres located one mile north of
     I-40 on Paseo del Volcan (Campos De Suenos Park).  Westland took possession
     and  ownership  of the facility in 1997 as a result of default in the terms
     of the  lease/option.  The Park contains a fully  developed  recreation and
     softball complex. Westland has entered into a one year renewable lease with
     an unrelated third party for an annual rental of $25,000.

7.   During fiscal year 2004 Westland  entered into an option agreement with the
     Albuquerque  Public  Schools  for the sale of 75 acres of land  located  on
     Paseo del Volcan north of I-40 for a possible future high school site.

8.   During  fiscal year 2004  Westland  also entered into a purchase  agreement
     with  the  Albuquerque  Public  Schools  for the  sale of 52  acres of land
     located on Dennis Chavez west of Coors Blvd. for a future high school site.

9.   During fiscal year 2004,  Westland  agreed to  contribute  land to Westside
     Economic  Development,  LLC, a New Mexico Limited Liability Company engaged
     in  developing  an  industrial  park west of Paseo del  Volcan and north of
     I-40. The first project to be built in the industrial park will be a Tempur
     Production USA, Inc. bedding and related items manufacturing plant.

     To facilitate the location of Tempur  Production  USA, Inc. to Albuquerque,
     New Mexico and to the industrial park,  Westland agreed to donate ten acres
     of land,  a water well,  Westland's  interest in a sewer line,  twenty acre
     feet of water and certain  easements  to the County of  Bernalillo  and the
     City of Albuquerque.  Another owner donated approximately 40 acres, and the
     50 acre parcel is being developed to meet the  manufacturer's  needs. It is
     expected  that  the  County  and the City  will  provide  and  subsequently
     maintain water,  sewer and roadways for the Tempur plant and the industrial
     park by the summer of 2005.

10.  The  expected  opening of the Eclipse  plant at Double  Eagle II  Municipal
     Airport  to the north of  Westland's  land on Paseo del  Volcan may have an
     impact on the use of and  planning for  Westland's  land in the vicinity of
     the airport. Management believes the construction of the Eclipse factory at
     Double  Eagle  II  Airport  and  the   construction  of  the  proposed  new
     manufacturing  plant in the same area,  will favorably  impact the value of
     Westland's lands. However, some City Council members are insisting that the
     size of the  connecting  water line be so small as to  prohibit  tie-ins by
     other users, including Westland.

11.  Westland has a continuing  corporate  program of donating land or otherwise
     assisting in projects that Management  believes have a long term beneficial
     effect to the  development and furtherance of the educational and health of
     the community  and  citizens.  In the past it has donated lands for various
     purposes and continues to receive requests, which it has evaluated.  During
     the past year, it donated 10 acres to a manufacturing  company to assist it
     in locating its business to  Albuquerque  (#9 above).  Also,  during fiscal
     year 2004  Westland  agreed to  donate 10 acres to the  Albuquerque  Public
     Schools  located  on Dennis  Chavez  west of Coors for a future  elementary
     school site.

E. Reinvestment Properties

     As part of Westland's  plans to defer the tax burden  arising from the sale
     of its lands to the National Park Service under threat of condemnation  for
     inclusion in the  Petroglyph  National  Monument,  it  reinvested  the sale
     proceeds in the properties  discussed below and two vacant land parcels. As
     a result of these purchases,  Westland has deferred payment of taxes on the
     sales of land to the  National  Park  Service.  Westland  will  continue to
     reinvestment monies received as the result of govermental  condemnations so
     long as tax deferment provisions exist within the tax code.

The Commercial properties are the following:

a)   A commercial building at Coors Boulevard and Sequoia Road in Albuquerque at
     a cost of  $2,630,000,  $1,612,067  of which is subject to a Mortgage  upon
     which Westland must pay monthly payments of $17,970. This building has been
     leased to  Walgreen  Company  for 20 years at a fixed rent of  $19,173  per
     month plus  additional  rent  based  upon a formula of gross  sales up to a
     maximum rent of $460,161 in any one year.

b)   A commercial building in Albuquerque's  Midway Industrial Park at a cost of
     $1,074,000,  $645,361 of which is subject to a Mortgage upon which Westland
     must make  monthly  payments of $6,893.  This  building  has been leased to
     Circuit  City  Stores  for a  term  of 10  years  at an  escalating  rental
     beginning at $4.25 per square foot the first year and  increasing in stages
     to $5.55  per  square  foot in the tenth  year.  The  lessee  has also been
     granted the right to extend the lease for two  additional  5-year  terms at
     escalating  rental rates during each of the years of any extended term. The
     current rent is $10,410 per month.  Although  Circuit City continues to pay
     rent for the building, it currently is subleasing the building.

c)   A commercial  building  located at Coors  Boulevard and Central Avenue at a
     cost of $3,593,000,  which is subject to a mortgage of $2,454,089 requiring
     payments of $24,682  per month.  The  building  has been leased to Walgreen
     Company on a minimum  20-year  lease at a fixed  rent of $26,122  per month
     plus a percentage of gross sales, with the maximum annual rent being capped
     at  $626,922.  Walgreen  Company may  continue the term of the lease for an
     additional 40 years.

d)   A commercial  building located at the SE corner of Eubank and Spain,  N.E.,
     at a cost of  approximately  $1,331,000,  which is subject to a mortgage of
     $838,715  requiring  payments of $9,079 per month.  The  building  has been
     leased to Marie Callender Pie Shops,  Inc., on a minimum 10-year lease at a
     fixed rent of $11,000, plus a Percentage Rent in the amount of 6% of Annual
     Gross  Sales in excess of  $132,000.  The tenant has the right to renew the
     lease for as many as three  5-year  terms.  Although  Marie  Callender  Pie
     Shops,  Inc.,  continues  to pay rent for the  building,  it  currently  is
     subleasing the building.

e)   A commercial  building located in El Paso, Texas at a cost of approximately
     $3,907,000, which is subject to a mortgage of $2,931,275 requiring payments
     of $25,403  per month.  The  building  is leased to  Walgreen  Company on a
     minimum  20-year  lease  at a  fixed  rent of  $28,167  per  month,  plus a
     percentage of gross sales with a maximum annual rent of $676,000.

f)   An  office  building  located  in  Albuquerque,  New  Mexico  at a cost  of
     approximately $1,662.000 was acquired in June, 2004. The purchase price was
     paid in cash from Westland's cash reserves.  The property was  subsequently
     mortgaged to a conventional  lender in September 2003,  thereby  recovering
     Westland's cash outlay. The property is subject to a mortgage of $1,250,000
     requiring payments of $5,243 per month.

Current Real Estate Market Conditions

The market  conditions for the development and sale of properties in Albuquerque
appear  to be  stable  for the near  term.  Westland  has been  able to sell the
residential  properties it has  developed.  Demand  appears to be continuing for
lots in the areas being  developed by Westland,  and  Management is hopeful that
sales will  increase next year if mortgage  interest  rates remain at relatively
low rates.  Management  believes that for the foreseeable  future,  residential,
commercial and industrial  construction  will continue at a moderate pace in the
Albuquerque real estate market.

Competition

Westland's  industrial  parks - Volcano  Business Park and the industrial  lands
within the planned area now compete,  and will  continue to compete,  with other
business and industrial parks in the Albuquerque  area,  including some that are
more established and some that are located nearer the major  population  centers
of Albuquerque.

Residential  subdivisions  on  Westland's  land  compete with other areas in the
Albuquerque  housing  market  (essentially  Bernalillo  County and  portions  of
Sandoval County and Valencia County),  as well as with other subdivisions on the
west  side of the City of  Albuquerque.  A number of large  subdivisions  to the
north of Westland's land are nearly fully sold.  Growth continues in other large
subdivisions  located about five to six miles north of Westland's  lands as well
as properties owned by others located on Albuquerque's Southwest Mesa.

The implementation of certain mandated impact fees being proposed by the City of
Albuquerque may have an adverse effect on Westland's ability to sell property in
competition  with  developers of land located in neighboring  counties and other
parts of Albuquerque,  New Mexico where such impact fees are not assessed.  (See
"Governmental Regulations".)

<PAGE>

Employees

As of  September  30,  2004,  Westland had eight  full-time  and four  part-time
employees.  Westland's  president,  who is  also  a  director,  is a  full  time
employee.  Georgia  Baca,  who is a  part-time  employee,  is  also a  director.
Westland also has contractual  relationships with a person who is an officer and
a director,  who provides  various  services to Westland outside his duties as a
director or officer.  Westland had a similar  contract with another  officer and
director who resigned at the end of December in 2003.

Government Regulations

Westland's ability to undertake an active program of development of its land and
management of its rental  properties  (whether such  development is performed by
Westland  itself or by sale of  Westland's  land to others for  development)  is
dependent on Westland's ability to comply with laws and regulations of the State
of New Mexico,  Bernalillo  County,  and the City of Albuquerque,  applicable to
general  environmental  protection,  land-use planning,  annexation,  zoning and
subdivisions.  Both County and City regulate the  subdivision of land and impose
zoning and building permit  requirements.  The  subdivision  regulations of both
Bernalillo  County  and the  City of  Albuquerque  require,  as a  condition  of
approval  of  proposed  subdivisions,  that  adequate  provision  be made by the
developer  for land use planning,  water (both to quantity and quality),  liquid
waste disposal,  solid waste  disposal,  sufficient and adequate roads and storm
drain management.

During  fiscal  year  2003 the City of  Albuquerque  adopted  a  Planned  Growth
Strategy,  which may have a major  negative  impact  on  Westland's  ability  to
develop its annexed  lands within the City of  Albuquerque  for the  foreseeable
future.

Although  compliance with federal,  state, and local provisions  relating to the
protection  of the  environment,  including  laws  regulating  subdivisions  and
land-use  planning and endangered  species,  has in recent years had no material
effect upon the  capital  expenditures,  earnings  and  competitive  position of
Westland, no assurance can be given that this situation will continue.  Requests
relating  to  drainage,  traffic  flow  and  similar  matters  from  the City of
Albuquerque  have  occasionally  delayed the receipt of necessary  approvals and
required modification of development proposals.

In the past at  Westland's  request,  the City of  Albuquerque  created  Special
Assessment  Districts  affecting the Atrisco Urban Center and El Rancho  Atrisco
areas for the financing of water, sewer,  paving and other street  improvements,
and levied assessment liens on them. This mechanism may provide a way to finance
the  improvements,  and  SAD's  may  be  available  for  future  development  of
Westland's property.  Recently enacted legislation now permits the use of Public
Improvement  District  bonds  (PID's)  for this  purpose  and  this  form of tax
assessment  financing may be available to Westland.  Management  is  researching
this issue and no decision has been made at the time of this report.

A mandate by the State Legislature for  implementation of Impact Fees may result
in  Westland's  lands  being  disadvantaged  because  the fees that  surrounding
counties  charge may be less than those that will be charged by Albuquerque  and
Bernalillo  County.  Bernalillo  County  began  the  assessment  of such fees on
January  1, 1996.  If  Albuquerque  establishes  substantial  fees as  currently
proposed by the City Council  they could have a negative  effect on the sales of
annexed lands.

Availability of Water and Municipal Services

The  unavailability of sufficient water has often been a major inhibiting factor
in the land  development  business in the  Southwest.  The extent of  Westland's
water rights has not been determined, however, Westland retained the services of
two water  specialists to investigate the existence of any Westland water rights
and to otherwise  consult with  Westland on matters  involving  availability  of
water. As a result of these  services,  Westland has declared its ownership of a
certain amount of water rights but the claimed rights have not been  adjudicated
to fully determine their validity. However, lack of ownership of water rights by
Westland would not be an inhibiting factor to the development of Westland's land
if  adequate  water  were  to  be  made  available  through  the  newly  created
City-County Water Utility Authority and/or other water sources or by purchase by
Westland or by a developer  that might  purchase and develop land.  For example,
Tierra West Mobile Home Park was created on land sold by Westland near Nine Mile
Hill and the  recreation  complex  leased or purchased  water rights and drilled
wells to meet their water needs.

Past annexation policies of the City of Albuquerque,  required annexation to the
City before it would  extend  water and sewer  services.  The City and  Westland
reached  the  agreement  discussed  above  relating  to  provisions  for utility
services to a portion of the Master Plan lands annexed by the City.

Since then, the State  Legislature  created a City/County  Water Authority which
now regulates water and sewer extensions. Annexation is no longer mandated prior
to  receiving  utility  services,  however,  as in the  past,  the cost of water
distribution  and sewer lines must be borne by the  developer,  or by subsequent
purchasers of the land.

Most of  Westland's  land  lies  outside  the  municipal  limits  of the City of
Albuquerque and is not furnished with municipal services.  Westland  experienced
little difficulty in having its previous  developments  furnished with services,
but the same  cannot be assumed for other  areas of  Westland's  land and future
developments.

Other Factors Affecting Development of Westland's Land

Various activist groups, as well as neighborhood organizations occasionally take
actions  that  might have some  impact  upon or delay  Westland's  plans for the
development of some of its lands. Management is not aware of any person or group
who have expressed opposition to Westland's current operating plans.

                             Westland's Properties.

The major physical assets owned by Westland are its land,  which is owned in fee
simple.  The  land  is  mostly  comprised  of  approximately   57,000  acres  of
undeveloped land held for long-term  investment.  Approximately  6,400 acres are
located in  Westland's  Master Plan area,  of which 1665 acres have been annexed
into the City of  Albuquerque  and another  900 acre  tract,  called the Atrisco
Terrace, was acquired by the City of Albuquerque for open space.

Westland  also  owns  the  Atrisco  Urban  Center  office  building,  comprising
approximately  11,097 square feet, 4,166 of which is leased to a Bank, while the
remainder  is used by  Westland  for its  executive  offices.  This  building is
collateral for a $712,500 bank line of credit obtained in July,  2002.  Westland
also owns six  commercial  buildings  that are leased to  others.  (See "Item 1.
Business - Reinvestment Properties.")

Interstate Highway I-40, the main east-west highway through Albuquerque, crosses
Westland's land. Access to Westland's land from Interstate 40 is provided by the
Coors  Boulevard  interchange  near the eastern edge of Westland's  land, by the
Unser Boulevard  interchange at the western edge of the Atrisco Urban Center, by
the 98th Street  interchange  to the west of the Atrisco Urban Center and by the
Paseo del Volcan  interchange  where I-40,  Paseo del Volcan and Central  Avenue
meet. Running north from the I-40 interchange,  Paseo del Volcan traverses about
4 1/2 miles of Westland's land to the Double Eagle II Airport. Bernalillo County
has  extended  Paseo del Volcan  south of the I-40  interchange  to the point at
which it intersects  Dennis  Chavez Blvd.  (formerly Rio Bravo) to form an inner
loop for the City's southwest quadrant.

Westland and other  landowners and developers  (the Northwest Loop  Association)
dedicated  land and have paid a portion  of the design  costs for the  Northwest
Loop,  which has been approved by the New Mexico State Highway  Commission.  The
Northwest Loop will extend for  approximately 39 miles and will connect I-40 and
1-25, through New Mexico State Highway 44, and will cross the western portion of
Westland's land lying within the Rio Puerco Valley. In 1995 Westland donated 169
acres for development of the Northwest Loop. Completion of the Northwest Loop is
not expected for about 15 years.

Most of Westland's  land is remote and not readily  accessible,  not serviced by
utilities,  and  Management  believes  that  the  bulk of its  land  will not be
available for  development  in the  foreseeable  future.  A large portion of the
undeveloped land is leased for agricultural uses. (See "Item 1. Business."). The
bulk of Westland's undeveloped land is held for long-term investment.

In the opinion of Westland's  Management,  its developed  property is adequately
covered by insurance.
<PAGE>
           Management's Discussion and Analysis of Financial Condition
                           and Results of Operations.

In the past fiscal  year,  land sales were greater than during the prior year as
the Company  experienced  increased sales of improved  residential  lots and two
large parcel sales.

During fiscal 2004,  Albuquerque continued the growth pattern that has benefited
Westland  during  the past ten  years.  Albuquerque  continues  to be one of the
fastest growing cities in the Southwest and, because of certain geographical and
other  limitations on its growth,  Westland's  lands lie directly in the path of
future predictable growth patterns. Sales of improved residential lots in fiscal
2004 were  approximately  $7,598,000,  and large parcel sales were approximately
$5,013,000.  Westland's  future  revenues will continue to be largely  dependent
upon the sale of land. The Company's assets are illiquid, comprising principally
undeveloped land. Sales are dependent upon the market conditions in Albuquerque.

Westland  anticipates making capital  commitments for land development  projects
over the next few  years as the  economy  and  opportunities  dictate  that such
expenditures  would  be  warranted.  Capital  commitments  may  include  special
assessment  districts  for roads and water and sewer lines on its land.  In some
cases  infrastructure  improvements are paid for by assessments,  which increase
the value of Westland's  land and make further  development  possible.  Westland
intends  to  incur  capital   expenditures   when  management   determines  such
investments will increase the value of the land and generate future revenue.

Land is Westland's  principal  capital  resource,  and is valued,  for financial
accounting purposes, at its 1907 value plus the cost of improvements. Westland's
balance  sheet does not reflect  the actual  current  value of this  asset.  The
Company has no current appraisals of the land and,  therefore,  the actual value
of the land is not known.  The carrying  value of the land was increased  during
each of the last three fiscal years, due to increased  investment.  The carrying
value will be increased or decreased  regularly as Westland  acquires,  sells or
develops parcels of land.  Management  believes the June 30, 2004 carrying value
of the land is  substantially  less than its current  market  value.  Westland's
balance  sheet also  segregates  income-producing  properties,  which consist of
commercial  real estate and  improvements.  The actual value of Westland's  land
varies  depending  on national and local  market  conditions  and the amount and
proximity of roads, utilities and other amenities to the land under development.
As  Albuquerque  continues  to  grow,  the  land  value  of both  developed  and
undeveloped land should increase.

As reported in prior years,  Westland has received  approval of its Master Plan,
now known as The  Petroglyphs,  by both the City of  Albuquerque  and Bernalillo
County.  The  area  lies  north of  Interstate  40 and  south of the  Petroglyph
National Monument between Unser Boulevard and Paseo del Volcan Road. It consists
of  approximately  6,400 acres, but does not include any land located within the
Monument and will have no adverse impact on the Monument. During fiscal 2001 the
City of Albuquerque  annexed the initial 1,665 acres of the master planned area,
which will permit sewer and water  services to be extended in an orderly  manner
to that  acreage as it is  developed.  Westland has agreed with the City that it
will pay the cost of the  infrastructure  normally  paid for by the City for new
development  in the master  planned area and will recover  those costs through a
fee charged by the City as each lot is  connected  to the  services.  Management
anticipates  that development and sale of the initial parcels of land within the
initially  annexed  area will begin in the second  quarter of fiscal  year 2005,
however,  unforeseeable  delays in getting utilities to the lands may cause this
period to be extended beyond that anticipated time.

Westland's  long term  business  philosophy  is to enhance the value of its land
through careful planning and development,  while retaining  ownership of a major
portion of the land in perpetuity  and  simultaneously  increasing  the value of
Westland's stock and to provide dividends for its shareholders,  when consistent
with  Westland's  need for a  sufficient  cash  flow to meet  current  operating
expenses.

Financial Condition:

During fiscal 2004, total assets increased to $40,343,148 from $30,533,485,  and
liabilities  increased  from  $18,137,471  to  $24,496,595.  During  fiscal 2004
Westland invested $1,729,834 in income producing and other assets. Cash and cash
equivalents  increased by  $2,574,002.  Operations  used  $1,296,431  during the
period.  $2,000,000 placed into escrow during 2003 for the Company's  Petroglyph
development was released during 2004. In addition, $4,460,234 was borrowed, net,
from short-term lines of credit and construction loans related to the Petroglyph
development.  $799,822 was paid to shareholders in the form of dividends.  Taken
together,  Land held for  development  and  Income-producing  properties,  which
aggregate   approximately   $30,764,000,   increased  by   $9,171,861,   net  of
depreciation.

At June 30, 2004,  the Company  maintained  lines of credit with two local banks
aggregating $2,712,500,  collateralized by certain real property. The purpose of
these  lines is to provide  funds  necessary  for its  continued  expansion.  At
year-end, the outstanding balances totaled $655,731.

During  fiscal  2005,  the  Company  will  be  obligated  to pay  income  tax of
approximately  $400,000 should replacement  properties  totaling  $996,000,  for
lands sold under condemnation,  not be reinvested.  Management  diligently seeks
income-producing  properties for acquisition as replacement properties and fully
expects to offset this tax obligation.

Management  is unsure if the  uncommitted  balance  of cash,  cash  equivalents,
investments  and its  borrowing  capacity  are  sufficient  to  meet  all of the
Company's  obligations during 2005 without considering  additional revenues that
may be generated  during that period.  Therefore,  additional  borrowings may be
necessary. At June 30, 2004, the two largest segments of the Company's debt were
notes and mortgages payable of $14,255,102 and deferred taxes of $7,305,989. The
mortgage  debt  service is paid from the  receipt of rental  revenue,  and taxes
deferred by the  acquisition of the properties  subject to these  mortgages will
not have to be repaid until and if the  properties  are sold.  In 2003 and 2004,
the Company entered into various construction contracts for the development of a
water  infrastructure  system for new  residential  and  commercial  properties.
Through June 30, 2004 approximately  $6,876,000 had been expended on the project
of which $3,500,000 was financed through bank credit  arrangements.  The project
was completed in August, 2004.

Results of Operations:

In fiscal 2004, land revenues  increased by $160,569 from $12,646,235 in 2003 to
$12,806,804.  During 2004, non-condemnation large parcel land sales increased by
$3,538,131 from $1,475,084 to $5,013,215.  Condemnation  land sales decreased by
$5,287,986 due to a non-recurring  condemnation  sale during 2003 to the City of
Albuquerque for $5,287,986.  Improved lot sales increased by $1,946,600 as sales
from the Painted Sky,  Crossings  and Cielo Oeste  subdivisions  increased.  The
related cost of land revenues  increased by $238,889 from  $3,551,302 in 2003 to
$3,790,191.  The  gross  profit  ratio on all  sales  decreased  from 72% to 71%
because of the  condemnation  sale of $5,287,986  during fiscal year 2003, which
bore very low  improvement  costs.  Rental revenue  decreased from $1,214,920 to
$1,213,190 and the related costs  decreased from $315,377 to $309,596.  General,
administrative  and operating  expense  decreased by $13,860 from  $2,551,625 to
$2,537,765 due to decreased personnel compensation.

Critical Accounting Policies:

Income_recognition_and_cost_allocation:  In  recent  years,  the Company has had
very few installment sales, so income is recognized when a property is sold with
financing provided by the buyer. Some of the sales are basically raw land, which
has little more than its original cost of $2.60 per acre.  Other parcels benefit
from  certain  infrastructure  improvements  such as roads  financed  by Special
Assessment  District  obligations,  which are generally allocated to the subject
property  based on site  location and acreage.  Improved lots bear costs such as
roads,  sewer,  sidewalk,  etc. as they are incurred by  subdivision.  Allocable
costs  such as  engineering  fees and  improvements,  which  benefit  an  entire
project,  are  generally  allocated to units based on number of lots or acreage.
This policy has been consistently applied.

Contingencies:  Management  continues  to be  diligent in  recognizing  possible
liabilities as they become known. In June,  2002, the Company  accrued  $346,000
against  possible  loss  due to a claim  made by  Bernalillo  County  for  costs
allegedly incurred in researching  creation of a new municipality for Westland's
sector  development  plan.  Management  believes this is sufficient to liquidate
alleged damages, if any.

Other than  ordinary  routine  litigation  incidental  to  Westland's  business,
neither  Westland nor any member of  management is the subject of any pending or
threatened legal proceedings.

Asset  Impairment:  Management  periodically  assesses the possibility  that the
carrying value of its assets is greater than its realizable  value. For the most
part,  this  question is obviated  because the carrying cost of land is very low
compared to any  reasonable  sale price.  When  property is improved for sale as
individual lots, a commitment exists by contract  obligating the purchaser prior
to undertaking the  development.  However,  the Company owns several  properties
held for the  production  of income,  designed for a specific  use,  which could
become  impaired if the lessee vacated or rescinded its lease under  bankruptcy.
Management  periodically  determines  by  inspection  that  the  properties  are
suitably  maintained  and insured and that the  lessees  are  conducting  proper
operations.

          Market Price of and Dividends Paid on Westland's Common Stock
                        and Related Stockholder Matters

Because  ownership of Westland's  stock is  restricted  in the manner  discussed
below,  no established  public trading market exists for Westland's  outstanding
shares and, to the best of Westland's knowledge,  no dealer has made, is making,
or is  attempting  to create such a market from which to  determine an aggregate
market  value of any of  Westland's  stock.  In 1989,  Westland  entered into an
arrangement with an independent stockbroker to broker transactions in Westland's
stock between  shareholders.  The broker has informed Westland that the price at
which   Westland's   common  stock  had  been  bought  and  sold  by  Westland's
shareholders  during the ninety (90) days  preceding the date of this report has
been $20 per share.

Since 1982, the outstanding shares have been subject to restrictions  imposed by
a majority  of  Westland's  shareholders  who  amended  Westland's  Articles  of
Incorporation.   Those  Articles  prohibit  (with  certain  limited  exceptions)
transfer  of Westland  stock to persons  other than  lineal  descendants  of the
original incorporators of the Town of Atrisco (a New Mexico Community Land Grant
Corporation).

The following  table sets forth as of September 30, 2004,  the number of holders
of the classes of Westland's shares:

                                                               Number of
             Title of Class                                 Record Holders

         No Par Value Common                                     6021
         $1.00 Par Value Common    Class A                          0
         $1.00 Par Value Common    Class B                         38

Dividends:  During fiscal year ended June 30, 2004 Westland paid cash  dividends
to  shareholders  of $799,822.  Subsequent to June 30, 2004,  the Company paid a
cash  dividend  of $1.00 per  share for an  aggregate  dividend  payment  to the
shareholders of $797,159.
<PAGE>










             Report of Independent Registered Public Accounting Firm


Stockholders
Westland Development Co., Inc.

We have audited the accompanying balance sheet of Westland Development Co., Inc.
as of June 30,  2004,  and the related  statements  of  earnings,  stockholders'
equity  and cash  flows for each of the two years in the  period  ended June 30,
2004.  These  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  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  audits  provide  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 Westland Development Co., Inc.
as of June 30, 2004,  and the results of its  operations  and its cash flows for
each of the two years in the  period  ended  June 30,  2004 in  conformity  with
accounting principles generally accepted in the United States of America.






GRANT THORNTON LLP

Oklahoma City, Oklahoma
September 3, 2004

<PAGE>

                         Westland Development Co., Inc.

                                  BALANCE SHEET

                                  June 30, 2004


   ASSETS

Cash and cash equivalents                                            $ 8,929,809
Receivables
    Real estate contract (note B)                                         53,552
    Other receivables                                                     24,695
Prepaid expenses and other assets                                        252,072
Land and improvements held for future development (notes C and E)     18,140,998
Income-producing properties, net (notes D and E)                      12,622,674

Property and equipment, net of accumulated
    depreciation of $657,358 (note E)                                    319,348

                                                                    $ 40,343,148

   LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable, accrued expenses and other liabilities             $ 1,686,139
Deferred income taxes (note F)                                         7,305,989
Notes and mortgages payable (note E)                                  14,255,102
Income taxes payable                                                   1,249,365

      Total liabilities                                               24,496,595

Commitments and contingencies (notes E and K)                                  -

Stockholders' equity (note G)
    Common stock - no par value; authorized, 736,668 shares;
       issued and outstanding, 709,834 shares                              8,500
    Class B common stock - $1 par value; authorized, 491,112 shares;
       issued and outstanding, 85,100 shares                              85,100
    Additional paid-in capital                                           491,061
    Retained earnings                                                 15,261,892
              Total Stockholders' equity                              15,846,553

                                                                    $ 40,343,148


        The accompanying notes are an integral part of these statements.
<PAGE>

                                           Westland Development Co., Inc.

                                               STATEMENTS OF EARNINGS

                                                 Year ended June 30,

                                                    2004              2003

Revenues
    Land                                        $12,806,804         $12,646,235
    Rentals                                       1,213,190           1,214,920
                                                 14,019,994          13,861,155

Costs and expenses
    Cost of land revenues                         3,790,191           3,551,302
    Cost of rentals                                 309,596             315,377
    Other general, administrative and operating   2,537,765           2,551,625
                                                  6,637,552           6,418,304

       Operating income                           7,382,442           7,442,851

Other (income) expense
    Interest income                                (111,456)            (63,265)
    Gain on sale of joint venture interest                -            (378,736)
    Other income                                   (199,564)            (21,123)
    Interest expense                                492,835             743,432
                                                    181,815             280,308

       Earnings before income taxes               7,200,627           7,162,543

Income tax expense (note F)                       2,889,871           2,861,438

       NET EARNINGS                             $ 4,310,756         $ 4,301,105

Weighted average common shares outstanding,
    basic and diluted                               796,874             804,180

Earnings per common share,
    basic and diluted                           $      5.41         $      5.35


        The accompanying notes are an integral part of these statements.
<PAGE>


                         Westland Development Co., Inc.
                        STATEMENT OF STOCKHOLDERS' EQUITY

                       Years ended June 30, 2004 and 2003

<TABLE>
<CAPTION>
                                                    Common stock          Common stock    Additional
                                                    no par value          $1 par value      paid-in    Retained
                                                  Shares     Amount      Shares   Amount    capital    earnings          Total
                                                  <C>        <C>         <C>     <C>        <C>       <C>            <C>
Balances at July 1, 2002                          714,342    $ 8,500     86,100  $ 86,100   $591,811  $ 7,700,109    $ 8,386,520

Net earnings                                            -          -          -         -          -    4,301,105      4,301,105

Cash dividends paid - $0.31 per share                   -          -          -         -          -     (250,256)      (250,256)

Acquisition and cancellation of common stock       (1,797)         -       (1,000) (1,000)   (40,355)           -        (41,355)

Balances at June 30, 2003                         712,545      8,500     85,100    85,100    551,456   11,750,958     12,396,014

Net earnings                                            -          -          -         -          -    4,310,756      4,310,755

Cash dividends paid - $1.00 per share                   -          -          -         -          -     (799,822)      (799,822)

Acquisition and cancellation of common stock       (2,711)         -            -       -    (60,395)           -        (60,395)

Balances at June 30, 2004                         709,834    $ 8,500     85,100   $ 85,100   $491,061  $15,261,892    $15,846,553

</TABLE>

        The accompanying notes are an integral part of these statements.

<PAGE>

                         Westland Development Co., Inc.

                            STATEMENTS OF CASH FLOWS

                               Year ended June 30,


                                                       2004             2003

Increase in Cash and Cash Equivalents

Cash flows from operating activities
    Cash received from land sales and collections
       on real estate contracts receivable         $ 12,830,361   $  12,594,077
    Development and closing costs paid              (11,585,974)     (5,598,637)
    Cash received from rental operations              1,213,190       1,225,628
    Cash paid for rental operations                      (8,895)        (25,281)
    Cash paid for property taxes                        (42,473)        (91,702)
    Interest received                                   111,456          63,556
    Interest paid                                      (468,865)       (720,577)
    Income tax paid                                  (1,698,598)       (955,827)
    Other general and administrative costs paid      (1,845,947)     (2,156,625)
    Other                                               199,564           6,685

      Net cash (used in) provided by
        operating activities                        (1,296,181)      4,341,297

Cash flows from investing activities
    Cash released from (placed in) escrow             2,000,000      (2,000,000)
    Proceeds from sale of joint venture interest              -         553,073
    Capital expenditures                             (1,729,834)        (10,567)
    Distributions from joint venture                          -          25,450
    Change in note receivable - related party                 -          95,590

      Net cash provided by (used in)
        investing activities                            270,166      (1,336,454)

Cash flows from financing activities
    Borrowings on notes and mortgages                 10,308,007      4,507,718
    Repayments of notes and mortgages                 (5,847,773)    (3,499,131)
    Payment of dividends                                (799,822)      (852,735)
    Purchase of common stock                             (60,395)       (41,355)

       Net cash provided by financing activities       3,600,017        114,497

       NET INCREASE IN CASH AND CASH EQUIVALENTS       2,574,002      3,119,340

Cash and cash equivalents at beginning of year         6,355,807      3,236,467

Cash and cash equivalents at end of year            $  8,929,809   $  6,355,807


        The accompanying notes are an integral part of these statements.
<PAGE>

                         Westland Development Co., Inc.

                      STATEMENTS OF CASH FLOWS - CONTINUED

                               Year ended June 30,

                                                       2004               2003

Reconciliation of Net Earnings to Net Cash
  (Used in) Provided by Operating Activities

Net earnings                                        $ 4,310,755     $ 4,301,105
Adjustments to reconcile net earnings to net cash
  (used in) provided by operating activities
       Depreciation                                     344,999         343,333
       Deferred income taxes                            (22,258)      1,962,026
       Gain on sale of joint venture interest                 -        (378,736)
       Change in
           Income taxes payable                       1,213,532         (56,415)
           Accounts and other receivables                63,574         (87,977)
           Land and improvements held
              for future development                 (7,804,029)     (2,047,335)
           Prepaid expenses and other assets            (66,819)         37,357
           Accounts payable, accrued expenses
              and other liabilities                     683,647         209,660
           Accrued interest payable                      23,970          22,855
           Real estate contracts receivable             (43,552)         35,424

             Net cash (used in) provided by
                operating activities                $(1,296,181)    $ 4,341,297


        The accompanying notes are an integral part of these statements.
<PAGE>


                         Westland Development Co., Inc.

                          NOTES TO FINANCIAL STATEMENTS

                             June 30, 2004 and 2003


NOTE A - NATURE OF OPERATIONS AND SUMMARY OF ACCOUNTING POLICIES

1.   History of Company and Beginning Basis of Financial Reporting

     In 1892,  the  descendants  of the owners of a land grant deeded in 1692 by
     the Kingdom of Spain became incorporators of a land grant corporation named
     Town  of  Atrisco.   Ownership   of  the  Town  of  Atrisco  was  based  on
     proportionate ownership of the land grant. In 1967, the Town of Atrisco was
     reorganized and became Westland Development Co., Inc. (the "Company"), with
     the heirs receiving shares in the Company in proportion to their ancestors'
     interests in the Town of Atrisco Corporation. The net assets of $232,582 at
     the date of reorganization were assigned as follows:

       Value of no par common stock as stated
          in the Articles of Incorporation:                  $  8,500
       Additional paid-in capital                             224,082
                                                             $232,582

     The Company estimated that it owned  approximately  49,000 acres of land at
     the date of  incorporation  as Westland  Development Co., Inc. Such acreage
     was used as the beginning cost basis for financial  reporting  purposes and
     was valued at $127,400 ($2.60 per acre) based on an appraisal in 1973 which
     determined  the   approximate   value  of  the  land  in  1907.  This  date
     approximates  the date that the Patent of  Confirmation  covering  the land
     comprising  the Atrisco  Land Grant was given to the Town of Atrisco by the
     United States of America. Since the date of the Patent of Confirmation, the
     Company's  acreage has increased in market value, but a full  determination
     of such value has not been made.

2.   Nature of Operations

     The Company  develops,  sells or leases its real estate  holdings,  most of
     which are located in or near Albuquerque,  New Mexico.  The Company may use
     joint ventures or participation in limited partnerships to accomplish these
     activities.  Revenue  sources  for the years  ended June 30,  2004 and 2003
     consist   primarily   of   proceeds   from  land  sales  and   governmental
     condemnations and rentals from developed properties,  such as single-tenant
     retail  stores and office  space.  Land sales are  primarily to  commercial
     developers  and others in the  Albuquerque  area and  certain  governmental
     agencies,  and the terms of sale include both cash and, to a lesser extent,
     internal financing by the Company.  Any such financing is collateralized by
     the associated  land. The Company has relied primarily upon cash land sales
     over the past several years due to the collection risk associated with real
     estate contracts.

3.   Cash and Cash Equivalents

     Cash  and  cash   equivalents  are  considered  to  include  highly  liquid
     investments with maturities of three months or less and money market funds.

     The Company  maintains its cash in bank deposit  accounts  which, at times,
     may exceed  federally  insured  limits and in certain other funds which are
     not  federally   insured.   Cash  equivalents  at  June  30,  2004  include
     approximately  $3,145,000  in a money  market  account  with an  investment
     banking  company.   Substantially  all  of  the  Company's  cash  and  cash
     equivalents  are held at one bank.  The  Company  has not  experienced  any
     losses in such  accounts and believes it is not exposed to any  significant
     credit risk on cash and cash equivalents.

<PAGE>

                         Westland Development Co., Inc.

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                             June 30, 2004 and 2003

NOTE A - NATURE OF OPERATIONS AND SUMMARY OF ACCOUNTING POLICIES - CONTINUED

3.   Cash and Cash Equivalents - Continued

     Restricted cash at June 30, 2003 represented  funds escrowed for payment of
     water  infrastructure  construction  contracts for the  development  of new
     residential and commercial  properties.  These escrowed funds were released
     in their  entirety  to the  Company  during its fiscal  year ended June 30,
     2004.

4.   Investments

     Investments  in  partnerships  and  joint  ventures  owned  20% to 50%  are
     accounted for by the equity method.  Accordingly,  the financial statements
     include the Company's  share of the investees' net earnings.  The Company's
     only joint venture was sold in fiscal year 2003.

5.   Land and Improvements Held for Future Development

     Land and improvements held for future  development are recorded at cost not
     to exceed net realizable value. Improvements consist of abstracts, surveys,
     legal fees, master and sector plans,  infrastructure improvements and other
     costs related to land held by the Company which are allocated to respective
     tracts primarily by specific identification of costs.

6.   Income-Producing Properties and Property and Equipment

     Income-producing  properties and property and equipment are stated at cost,
     less accumulated depreciation, computed on a straight-line basis over their
     estimated lives of three to 30 years. The cost of the building in which the
     Company has its offices,  a portion of which is rented to others,  has been
     allocated to  income-producing  properties and property and equipment based
     upon square footage.

7.   Recognition of Income on Real Estate Transactions and Rentals

     The Company  recognizes  the entire gross profit on sales on which the down
     payment is sufficient to meet the requirements for the full-accrual method.
     Transactions  on  which  the down  payment  is not  sufficient  to meet the
     requirements for the full-accrual  method are recorded using the deposit or
     installment method.  Under the deposit method, cash received is recorded as
     a deposit on land sale. Under the installment  method,  the Company records
     the entire contract price and the related costs at the time the transaction
     is  recognized  as a sale.  Concurrently,  the gross  profit on the sale is
     deferred and is subsequently recognized as revenue as payments of principal
     are received on the related contract receivable.

     Rental  income is  recognized  when earned  under lease  agreements.  Rents
     received in advance are  deferred  until  earned.  Revenue from leases with
     escalating rental payments are recognized on a straight-line basis over the
     minimum  lease  term.  For leases with  provisions  for  additional  rental
     payments based on percentage of annual sales,  contingent  rental income is
     recognized when the lessee
<PAGE>

                         Westland Development Co., Inc.

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                             June 30, 2004 and 2003

NOTE A - NATURE OF OPERATIONS AND SUMMARY OF ACCOUNTING POLICIES - CONTINUED

     provides an accounting which reflects the contingent rental income has been
     earned under the terms of the lease agreements.

8.   Income Taxes

     Deferred  income  tax assets or  liabilities  are  determined  based on the
     difference between financial  statement and tax bases of certain assets and
     liabilities  as  measured  by the  enacted  tax rates in  effect  using the
     liability method.  Valuation  allowances are established by management when
     necessary  to reduce  deferred  tax  assets to the  amount  expected  to be
     realized.

9.   Earnings Per Common Share

     Earnings  per common share are based upon the  weighted  average  number of
     common shares outstanding  during the year,  including the number of no par
     value common  shares  which may be issued in  connection  with  eliminating
     fractional shares (which resulted from the determination  made by the Court
     in an heirship case) and the number of no par value common shares for which
     the Court ruled that no incorporator or heirs existed (5,047 total shares).
     The Company has no potential common stock items.

10.  Use of Estimates

     In preparing financial statements in conformity with accounting  principles
     generally  accepted in the United  States,  management  is required to make
     estimates  and  assumptions   that  affect  certain  reported  amounts  and
     disclosures; accordingly, actual results could differ from those estimates.

11.  Long-Lived Assets

     Long-lived  assets  to be  held  and  used  are  reviewed  for  impairment,
     generally on a  property-by-property  basis,  whenever events or changes in
     circumstances  indicate  that  the  related  carrying  amount  may  not  be
     recoverable. When required, impairment losses are recognized based upon the
     estimated fair value of the asset.

NOTE B - REAL ESTATE CONTRACT RECEIVABLE

The real estate contract receivable at June 30, 2004 consists of a contract with
variable  interest  (8% at June  30,  2004),  is due in a  lump-sum  payment  of
principal and interest at maturity in 2006 and is collateralized by land.

<PAGE>

                         Westland Development Co., Inc.

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                             June 30, 2004 and 2003

NOTE C - LAND AND IMPROVEMENTS HELD FOR FUTURE DEVELOPMENT

The Company estimates that it presently owns approximately 57,000 acres of land,
primarily  including  land located  within the boundaries of the Town of Atrisco
Land Grant and land  located  elsewhere  which the  Company has  acquired  since
incorporation.  Improvements  are  currently in process on  approximately  3,500
acres of the Company's land ('Master Plan' residential community).  Improvements
consist  of   abstracts,   surveys,   legal  fees,   master  and  sector  plans,
infrastructure  improvements and other costs related to land held by the Company
which are allocated to respective tracts primarily by specific identification of
costs.  During fiscal years 2004 and 2003, the Company  capitalized  interest in
accordance with FAS 34 of $382,644 and $ 0, respectively.

During the fiscal  year ended June 30,  2004,  the Company  constructed  a water
infrastructure  for the future  development  of new  residential  and commercial
properties.  The  total  project  cost  was  approximately  $7,000,000  and  was
completed in early July 2004. The Company anticipates  transferring ownership of
the system to the City of  Albuquerque  during  October  2004.  The Company will
receive Utilities  Expansion Charge  reimbursements from the City of Albuquerque
at an approximate  rate of $2,619 per  residential  hook up until such time that
the project cost has been recovered.  The Company anticipates a recovery rate of
400 hook ups  ($1,047,600)  per year and  anticipates  full recovery within 7-10
years.

Plans  for  ultimate  development  of  the  remaining  property  have  not  been
finalized.

Land and improvements consist of the following at June 30, 2004:

       Land                                                        $  2,349,402
       Improvements                                                  15,791,596

                                                                    $18,140,998

<PAGE>

                         Westland Development Co., Inc.

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                             June 30, 2004 and 2003

NOTE D - INCOME-PRODUCING PROPERTIES

Income-producing properties consist primarily of five single-tenant retail store
buildings and a portion of the Company's  office  building and are summarized as
follows at June 30, 2004:

       Buildings and equipment                                    $  10,146,683
           Less accumulated depreciation                              2,029,185
                                                                      8,117,498
       Land                                                           4,505,176
                                                                  $  12,622,674

The Company's rentals from income-producing  properties are principally obtained
from  tenants  through  rental  payments  as  provided  for under  noncancelable
operating  leases.  The lease  terms  range  from one to 20 years and  typically
provide for  guaranteed  minimum rent,  five-year  renewals at tenants'  option,
percentage rent and other charges to cover certain operating costs. Three of the
Company's leases with total annual receipts of approximately $881,000 are with a
single national retail drug store chain.

     Minimum future rentals from  income-producing  properties on  noncancelable
     tenant operating leases as of June 30, 2004 are as follows:

            Year ending June 30,

                    2005                                          $   1,424,242
                    2006                                              1,290,151
                    2007                                              1,261,761
                    2008                                              1,180,042
                    2009                                                920,697
                    Thereafter                                        6,898,916

                                                                   $ 12,975,809



<PAGE>

                         Westland Development Co., Inc.

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                             June 30, 2004 and 2003

NOTE E - NOTES AND MORTGAGES PAYABLE

Notes and mortgages payable are summarized as follows at June 30, 2004:

  Promissory note, due in monthly installments of $17,970
  through May 2015, including interest at 9.37%; collateralized
  by income-producing properties                                    $ 1,470,602

  Promissory note, due in monthly installments of $9,079
  through  July 2014, including interest at 8%; collateralized
  by income-producing properties                                        748,280

  Note payable, due in monthly installments of $6,893 through
  September 2015, including interest at 8.75%; collateralized
  by income-producing properties                                        588,221

  Mortgage note, due in monthly installments of $24,682,
  including  interest at 8.52%, due November 1, 2016;
  collateralized by income-producing properties                       2,264,902

  Mortgage note, due in monthly installments of $25,403,
  including  interest at 7.8%, due April 15, 2020;
  collateralized by income-producing properties                       2,766,928

  Revolving line of credit with a bank with borrowings up to
  $2,000,000, variable  interest  payable  quarterly  (4.25%
  at June 30, 2004), payable on demand, if no demand is made
  principal due November 25, 2004; collateralized by real estate        655,731

 Revolving line of credit with a bank with borrowings up to
 $712,500, variable interest payable monthly (5.25%
 at June 30, 2004), payment of all outstanding principal and
 interest due July 26, 2004; collateralized  by real estate.
 The line of credit  was  renewed  in July 2004 to mature on
 July 26, 2005 under terms as described.                                      -

 Mortgage note, due in monthly  installments  of $1,349,
 including  interest at 9%, due January 2007; collateralized by
 specific tracts of land                                                 37,210

 Mortgage note, due in semiannual installments of $11,490,
 including  interest at 9%, due October 2005; collateralized
 by specific tracts of land                                              20,074

 Mortgage  note, interest at 7%, interest due annually in
 installments  of $15,146, lump-sum  payment of all outstanding
 principal and interest due October 4, 2007; collateralized by
 specific tracts of land                                                216,302

 Mortgage note, variable interest payable monthly (5.25% at
 June 30, 2004), quarterly principal payments of $731,250
 beginning January 29, 2005, payment of all outstanding principal
 and interest due  October 29, 2006; collateralized by a
 construction mortgage.                                               1,986,852

 Mortgage  note, variable interest payable  monthly (5.25% at
 June 30, 2004), quarterly principal payments of $271,830
 beginning January 29, 2005, payment of  all outstanding principal
 and interest due October 29, 2007; collateralized by a
 construction mortgage.                                               3,500,000

                                                                   $ 14,255,102

<PAGE>

                         Westland Development Co., Inc.

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                             June 30, 2004 and 2003

NOTE E - NOTES AND MORTGAGES PAYABLE - CONTINUED

Aggregate required principal payments on notes and mortgages payable  as of June
30, 2004 are as follows:

        Year ending June 30
               2005                                                 $ 3,050,723
               2006                                                   2,013,072
               2007                                                   1,517,434
               2008                                                   1,456,142
               2009                                                     498,652
               Thereafter                                             5,719,079

                                                                    $14,255,102

NOTE F - INCOME TAXES

An analysis of the  deferred  income tax assets and  liabilities  as of June 30,
2004 is as follows:

       Deferred tax assets
           Land improvements held for future development           $    181,680
           Land repossession                                            101,783
           Liabilities not currently deductible                          97,033
                                                                        380,496
       Deferred tax liabilities
           Deferred tax gain on involuntary conversion of land        7,686,485

                         Net deferred tax liability                  $7,305,989

    Income tax expense consists of the following:

                                                          Year ended June 30,
                                                          2004           2003
       Current
           Federal                                     $2,294,873     $ 730,207
           State                                          572,740       169,205
                                                        2,867,613       899,412
       Deferred
           Federal                                         17,806     1,709,605
           State                                            4,452       252,421
                                                           22,258     1,962,026

                                                       $2,889,871    $2,861,438


<PAGE>


                                      NOTES TO FINANCIAL STATEMENTS - CONTINUED

                                               June 30, 2004 and 2003

NOTE F - INCOME TAXES - CONTINUED

The income tax provision is reconciled to the tax computed at statutory rates as
follows:

                                                           Year ended June 30,
                                                           2004          2003

       Tax expense at statutory rates                   $2,448,212   $2,435,265
       State income taxes, net of federal benefit          361,472      372,452
       Nondeductible expenses                               33,067       36,499
       Other                                                47,120       17,222

          Total expense                                 $2,889,871   $2,861,438

NOTE G - COMMON STOCK

Under its original Articles of Incorporation  (the "Articles"),  the Company was
authorized to issue 1,964,448 shares of common stock.  During 1999, the Articles
were  amended to eliminate  the  authority  to issue  736,668  shares of Class A
common stock for $1.45 per share. The remaining authorized stock is as follows:

     (a)  736,668  shares  of no par  value  common  stock to  represent  $8,500
          estimated value of land held by the Town of Atrisco;

     (b)  491,112 shares to be sold for a price to be determined by the Board of
          Directors,  designated  as Class B, $1 par  value  common  stock.  The
          holders  of no par value  common  stock have no  preemptive  rights to
          purchase Class B stock.

At June 30,  2004,  5,047  shares of no par value common  stock,  upon  judicial
determination,  can be distributed to  stockholders  of record as of the date of
incorporation.

There is no established market for the Company's common stock. At June 30, 2004,
709,834  shares of the  Company's  no par value  common  stock  were  issued and
outstanding. There are 5,047 shares of no par value common stock issuable; 1,872
shares which may be issued in  connection  with  eliminating  fractional  shares
which  resulted from the  determinations  made by the court in the heirship case
and 3,175 shares which represent shares for which the court in the heirship case
ruled that no incorporator or heirs existed. The Company also has reacquired and
canceled   21,787   shares  of  no  par  value  common  stock  which  have  been
constructively  retired.  These  shares have not been  formally  retired and, as
such, may be issuable to stockholders of record as of the date of incorporation.

During the year ended June 30, 1999, the Board of Directors approved  protection
against takeover  measures whereby a threat of change of three or more directors
in any one year would  result in directors  threatened  with  replacement  being
granted  an  immediate  Class B stock  bonus of 5,000  shares  if in office as a
director ten years or more,  and 2,500 shares of Class B stock if in office as a
director  for less than ten years.  The maximum  number of shares which could be
issued under this agreement at June 30, 2004 is 35,000 shares.

<PAGE>

                         Westland Development Co., Inc.

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                             June 30, 2004 and 2003

NOTE G - COMMON STOCK - CONTINUED

On July 22,  2004,  the Board of  Directors  approved  payment of a $1 per share
dividend to be paid on August 24, 2004 to holders of record on August 10, 2004.

NOTE H - SEGMENT INFORMATION

   The Company operates primarily in two industry segments. They are as follows:

     Land: Operations   involve  the  development  and  sale  of  tracts,   both
           residential  and  commercial.  In addition, included  are  incidental
           revenues from leasing of grazing rights.

     Rentals: Operations involve rentals from five  single-tenant  retail store
           buildings and a portion of the Company's office building.

    Financial information for each industry segment is summarized as follows:

<TABLE>
<CAPTION>
                                          2004                                                     2003
                                                        General                                         General
                               Land        Rentals     corporate     Total       Land        Rentals   corporate     Total
       <C>                  <C>         <C>         <C>          <C>         <C>         <C>          <C>         <C>
       Revenues             $12,806,804 $ 1,213,190 $          - $14,019,994 $12,646,235 $ 1,214,920  $        -  $13,861,155
       Operating income       7,960,567     757,841   (1,335,966)  7,382,442   8,232,435      798,425 (1,588,009)   7,442,851
       Interest income                -           -      111,456     111,456           -            -     63,265       63,265
       Interest expense               -     418,219       74,616     492,835      36,552      700,583      6,297      743,432
       Income tax expense             -           -    2,889,871   2,889,871           -            -  2,861,438    2,861,438
       Identifiable assets   18,194,550  12,622,674    9,525,924  40,343,148  10,411,181   11,254,842  8,867,462   30,533,485
       Capital expenditures           -   1,662,716       67,118   1,729,834           -            -     10,567       10,567
       Depreciation                   -     294,885       50,114     344,999           -      294,885     48,448      343,333

</TABLE>
General corporate assets consist primarily of cash,  furniture,  equipment and a
portion of an office  building,  of which the  remaining  portion is included in
rentals.

NOTE I - BENEFIT PLANS

The Company has certain  defined  contribution  employee  retirement  plans that
provide for employee  and employer  contributions.  The  Company's  contribution
expense for these plans was  approximately  $151,000  and  $124,000 for 2004 and
2003, respectively.


<PAGE>

                         Westland Development Co., Inc.

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                             June 30, 2004 and 2003

NOTE J - SALES TO MAJOR CUSTOMERS

    Sales to major customers are summarized as follows:

     During  the  year  ended  June 30,  2004,  land  sales  to three  customers
     individually accounted for 21%, 14% and 14% of total revenues.

     During  the  year  ended  June 30,  2003,  land  sales  to three  customers
     individually accounted for 38%, 16% and 15% of total revenues.

NOTE K - COMMITMENTS AND CONTINGENCIES

The Company is engaged in various  lawsuits  either as  plaintiff  or  defendant
which  have  arisen in the  conduct of its  business  which,  in the  opinion of
management,  based upon advice of counsel,  would not have a material  effect on
the Company's financial position or results of operations.  The Company also has
certain claims  asserted by other parties in conjunction  with land  development
agreements  totaling  approximately  $1,300,000  with which the Company does not
agree.  The Company  has paid  approximately  $130,000  and is  disputing  other
charges. The Company has accrued approximately  $346,000 as of June 30, 2004 for
what it believes are the only valid other  charges to the  Company.  At June 30,
2003,   the  Company's   balance  sheet   reflected  an  accrued   liability  of
approximately $200,000 for one-half of the estimated unpaid costs of development
by a buyer of a commercial  tract of land for which the Company was responsible.
The  Company  believes  the  buyer  has  not  complied  with  their  contractual
obligations  and the Company  will not pay any  remaining  amounts  until a full
accounting and  settlement is provided by the buyer.  The statute of limitations
has expired on this  contract.  Therefore,  the accrued  liability  was reversed
during fiscal year 2004.  The ultimate  amount to be paid for these  claims,  if
any, is subject to change and management  believes such claims may be settled by
the conveyance of land to the claimants.

The Company has entered into employment contracts with eight of its key officers
and employees for periods from one to five years which are automatically renewed
each  year for one  additional  period.  In the  event of  involuntary  employee
termination,  these  employees  may receive  from one to six times their  annual
compensation.  The remaining  terms under the  agreements  range from one to six
years and the maximum  salaries to be paid under the remaining  contract periods
are approximately $1,612,000.

The Company has deferred gains for tax reporting for the involuntary  conversion
of land by govern-mental authorities resulting in deferred tax liabilities.  The
deferral  requires  that the  Company  replace  the land  with the  proceeds  of
conversion  within specified time limits.  As of June 30, 2004, the Company must
purchase  replacement  property of at least $496,000 by June 30, 2004 (extension
to June 30, 2005 pending),  $500,000 by June 30, 2005 and $5,279,000 by June 30,
2006 in order to comply with the  requirements  of its  election  for income tax
deferral. If replacement property is not purchased,  the Company may be required
to pay income taxes on the conversions of approximately  $200,000,  $200,000 and
$2,110,000 for the years ended June 30, 2004, 2005 and 2006, respectively.

<PAGE>

                         Westland Development Co., Inc.

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                             June 30, 2004 and 2003

NOTE L - FINANCIAL INSTRUMENTS

The following table includes  various  estimated fair value  information,  which
pertains  to the  Company's  financial  instruments,  and  does not  purport  to
represent the aggregate net fair value of the Company.  The carrying  amounts in
the table are the amounts at which the financial instruments are reported in the
financial statements.

All of the  Company's  financial  instruments  are held for purposes  other than
trading.

The following  methods and  assumptions  were used to estimate the fair value of
each class of financial instruments:

     1.   Cash and Cash Equivalents and Other Receivables

          The carrying amount approximates fair value because either the Company
          has the contractual  right to receive  immediate payment or because of
          short maturities of the financial instruments.

     2.   Real Estate Contract Receivable

          This note  receivable  is  collateralized  by real  estate and accrues
          interest  at a variable  rate.  The fair value of the real estate note
          approximates the carrying amount.

     3.   Notes and Mortgages Payable

          For fixed rate notes and mortgages,  the  discounted  amount of future
          cash flows using the Company's  current  incremental rate of borrowing
          for similar liabilities is used to estimate fair value. The fair value
          of  variable  rate notes  approximates  fair value  because  the rates
          adjust to market rate changes.

          The  carrying  amounts  and  estimated  fair  values of the  Company's
          financial instruments at June 30, 2004 are as follows:

                                                   Carrying          Estimated
                                                    amount          fair  value

       Financial assets
           Cash and cash equivalents              $ 8,929,809       $ 8,929,809
           Real estate contract receivable             53,552            53,552
           Other receivables                           24,695            24,695

       Financial liabilities
           Fixed rate notes and mortgages payable   8,112,519         8,723,834
           Variable rate notes payable            $ 6,142,583       $ 6,142,583

<PAGE>


                          WESTLAND'S BOARD OF DIRECTORS

SOSIMO S. PADILLA, Chairman of the Board of Directors, Vice President, Assistant
Secretary/Treasurer and Director. Member of the Executive Committee. Mr. Padilla
is retired from the circulation department of the Albuquerque Publishing Company
and was owner/operator of Western Securities Transportation Corporation for over
thirty years.

BARBARA PAGE, President,  Chief Executive Officer and Director.  Chief Financial
Officer,  Secretary of the Executive Committee. Ms. Page is employed by Westland
Development Co., Inc. as its President.

JOE S. CHAVEZ,  Secretary/Treasurer  and  Director.  Member of the Executive and
Disclaimer   Committees.   Mr.  Chavez  is  employed  at  Galles   Chevrolet  in
Albuquerque, New Mexico.

JOSIE G. CASTILLO,  Director.  Chairman of the Executive Committee and member of
the  Disclaimer  Committee.  Ms.  Castillo  is retired  from the Human  Services
Department of the State of New Mexico.

CHARLES V. PENA,  Director.  Member of the Executive and Disclaimer  Committees.
Mr. Pena formerly owned and operated CJ's New Mexican Food Restaurant.

RAY MARES, JR., Director. Mr. Mares is the Owner/Manager of Briteway Services in
Albuquerque, New Mexico.

TROY  K.BENEVIDEZ,  Director.  Mr. Benavidez is employed as the State Government
Affairs Manager for AstraZeneca Pharmaceuticals, LP, in Albuquerque, New Mexico.

GEORGIA M. BACA, Director.  Ms. Baca has been employed by Westland for more than
the past 10 years,  the past 6 of which she  served  as  Westland's  Shareholder
Representative.  She is the Board's  liaison  with  Shareholders  as the Board's
shareholder representative.

RANDOLPH M. SANCHEZ,  Director. Mr. Sanchez is the Manager of Coronado Center in
Albuquerque.

During  the year the  Company  lost two more of its great  champions  and former
Directors when Lee Anaya and David C. Armijo passed away.  Also during the year,
Mr. Carlos Saavedra retired. All of their counsel and hard work on behalf of the
Company will be greatly missed.