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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

Commission File Number 333-32800

VESTIN FUND I, LLC

2901 EL CAMINO AVENUE, LAS VEGAS, NEVADA 89102
(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code 702.227.0965

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

Securities registered pursuant to Section 12(g) of the Act:
NONE

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Sec 229.405) of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [  ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes [  ] No [ X ]

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 the last business day of the registrant’s most recently completed second fiscal quarter. Not applicable.

As of November 30, 2003, the Company had 9,093,748 Units outstanding.

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PART I

Note Regarding Forward Looking Statements

This report and other written reports and oral statements made from time to time by us may contain forward looking statements. Such forward looking statements may be identified by the use of such words as “expects,” “plans,” “estimates,” “forecasts,” “projects,” “anticipates,” “believes” and words of similar meaning. Forward looking statements are likely to address such matters as our business strategy, future operating results, future sources of funding for mortgage loans purchased by us, future economic conditions and pending litigation involving us. Some of the factors which could affect future results are set forth in the discussion under “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Factors Affecting Our Operating Results.”

ITEM 1. BUSINESS

General

We were organized on December 14, 1999 and will continue until December 31, 2019 unless dissolved prior thereto or extended by vote of members in accordance with the provisions of our Operating Agreement. On July 9, 2001, we changed our name from DM Mortgage Investors, LLC to Vestin Fund I, LLC (the “Company”). We do not operate as an “investment company” within the meaning of the Investment Company Act of 1940.

Prior to September 1, 2000, we were a development stage company. On August 23, 2000, our Form S-11/A filed with the Securities and Exchange Commission became effective for the initial public offering of 10,000,000 Units at $10 per Unit (“Unit”). We commenced operations on September 1, 2000. By June 2001, we had sold all of the 10,000,000 Units offered pursuant to our registration statement. No additional Units will be sold; however, current members may continue to participate in our Distribution Reinvestment Plan whereby the members’ distributions may be used to purchase additional Units at $10 per Unit. As of September 30, 2003, an additional 779,092 Units have been purchased under this plan.

Our manager is Vestin Mortgage, Inc., (doing business as Vestin) a licensed mortgage company in the State of Nevada (“Vestin Mortgage,” or “Manager”). Vestin Mortgage is a wholly-owned subsidiary of Vestin Group, Inc., a Delaware corporation, whose common stock is publicly held and traded on the Nasdaq National Market under the ticker symbol “VSTN.” Through its subsidiaries, Vestin Group, Inc. is engaged in asset management, real estate lending and other financial services. The Company issued 100,000 units to its Manager for offering costs paid by them to unrelated third parties on the Company’s behalf. On June 24, 2002, we changed our fiscal year end from December 31 to September 30. The financial statements for the twelve-month period ended September 30, 2002 reflects twelve months of operational activities and are unaudited as a result of the change in fiscal year end.

We invest in mortgage loans throughout the areas in which Vestin Mortgage and its correspondents have experience, primarily Arizona, California, Hawaii, Nevada and Texas. The loans we invest in are selected for us by Vestin Mortgage from among loans originated by Vestin Mortgage or non-affiliated mortgage brokers. When Vestin Mortgage or a non-affiliated mortgage broker originates a loan for us, that entity identifies the borrower, processes the loan application, makes or invests in the loan, and brokers or sells the loan to us. We believe that our loans are attractive to borrowers because of the expediency of Vestin Mortgage’s loan approval process, which takes about ten to 20 days.

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. Because of our increased willingness to fund riskier loans and borrowers, borrowers are willing to pay us an interest rate that is two to five points above the rates charged by conventional lenders. We invest a significant amount of our funds in loans in which the real property being developed is not generating any income to the borrower. The “balloon payment” loans and bridge loans in which we

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invest are riskier because the borrower’s repayment depends on its ability to refinance the loan or develop the property so it can refinance the loan.

Our principal investment objectives are to:

	•		Produce revenues from the interest income on our mortgage loans;
	•		Provide monthly cash distributions from the net income earned on our mortgage loans;
	•		Preserve capital contributions; and
	•		Reinvest, to the extent permissible, payments of principal and sales (net of expenses).

Acquisition and Investment Policies

We seek to invest about 97% of our assets in mortgage loans. Approximately 3% will be held as a working capital cash reserve. We currently have 45% of our assets classified as investments in mortgage loans.

The majority of our collateral on our mortgage loans is the real property that the borrower is purchasing or developing with the funds that we make available. 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 have been made to real estate developers with a lesser proportion of loans involving land loans and bridge financing.

Our mortgage investments are not insured or guaranteed by any government agency.

Vestin Mortgage continuously evaluates prospective investments, selects the mortgages in which we invest and makes all investment decisions on our behalf in its sole discretion. In evaluating prospective mortgage loan investments, Vestin Mortgage considers such factors as the following:

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

Vestin Mortgage 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 Vestin Mortgage to facilitate our purchase of the loans. Vestin Mortgage will sell the loans to us for no greater than Vestin Mortgage’s cost, not including its service fees and compensation. There are no specific requirements or guidelines governing Vestin Mortgage’s discretion in determining which mortgage loans it will place with us and which it will place with other funding sources.

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When selecting mortgage loans for us, Vestin Mortgage adheres to the following guidelines, which are intended to control the quality of the collateral given for our loans:

1.		Priority of Mortgages. Generally, our assets are secured by first mortgages. First mortgages are mortgages secured by a full or divided interest in a first deed of trust secured by the property. Other mortgages that we invest in on the security property will not be junior to more than one other mortgage. As of September 30, 2003, 100% of the principal amount of our outstanding interest in loans was secured by first mortgages.
2.		Loan-to-Value Ratio. The amount of our loan combined with the outstanding debt secured by a senior mortgage on a security property does not exceed the following percentage of the appraised value of the security property at origination:

The target loan-to-value ratio for our loan portfolio as a whole is approximately 70%. However, we may deviate from these guidelines under certain circumstances. For example, Vestin Mortgage, in its discretion, may increase any of the above loan-to-value ratios if a given loan is supported by credit adequate to justify a higher loan-to-value ratio, including personal guarantees. Occasionally, our collateral may include personal property as well as real property. We do not have specific requirements with respect to the projected income or occupancy levels of a property securing our investment in a particular loan. These loan-to-value ratios will not apply to financing offered by us to the purchaser of any real estate acquired through foreclosure, or to refinance an existing loan that is in default when it matures. In those cases, Vestin Mortgage, in its sole discretion, shall be free to accept any reasonable financing terms it deems to be in our best interest.

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

We retain appraisers who are licensed or qualified as independent appraisers and certified by or hold designations from one or more of the following organizations: the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, the National Association of Review Appraisers, the Appraisal Institute, the Society of Real Estate Appraisers, M.A.I., Class IV Savings and Loan appraisers or from among appraisers with other qualifications acceptable to Vestin Mortgage. However, appraisals are only estimates of value and cannot be relied on as measures of realizable value. The appraisal may be for the current estimated “as-if developed” or “as-if completed” value of the property or, in the case of acquisition and development

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loans or construction loans, for the estimated value of the property upon completion of the project. As-if completed or as-if developed values on raw land loans or acquisition and development loans often dramatically exceed the immediate sales value and may include anticipated zoning changes, selection by a purchaser against multiple alternatives, and successful development by the purchaser; upon which development is dependent on availability of financing. An employee or agent of Vestin Mortgage will review each appraisal report and will conduct a physical inspection for each property. A physical inspection includes an assessment of the subject property, the adjacent properties and the neighborhood but generally does not include entering any structures on the property.

3.		Construction Mortgage Loans. We invest in construction loans other than home improvement loans on residential property, when the loan-to-value ratio does not exceed 75% of the appraised, completed value of the security property at origination.
4.		Terms of Mortgage Loans. Our loans in 2003 range from a two-month term to a 30-month term. Most of our loans are for a term of 12 months. Our original loan agreements, however, permit extensions to the term of the loan by mutual consent. Such extensions are generally provided on loans where the original term was 12 months or less and where a borrower requires additional time to complete a construction project or negotiate take out financing. However, the Company’s Manager only grants extensions when a borrower is in full compliance with the terms of the loan, including, but not limited to the borrower’s obligation to make interest payments on the loan.

Currently all of our loans provide for payments of interest only with a “balloon” payment of principal payable in full at the end of the term. In addition, we invest in mortgage loans which require borrowers to maintain interest reserves funded from the principal amount of the loan for a period of time. At September 30, 2003, we had interest reserves in the amount of approximately $6,583,000 related to mortgage loans that if fully funded would have a principal balance of approximately $105,174,000.

5.

Escrow Conditions. Our loans will often be funded by us through an escrow account held by a title insurance company, subject to the following conditions:

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

6.		Purchase of Mortgage Investments from Affiliates. We may acquire mortgage loans from our affiliates, including Vestin Mortgage, for a price not in excess of the par value of the note, plus allowable fees and expenses, but without the allowance of any other compensation for the loans.
7.		Note Hypothecation. We may also acquire mortgage loans secured by assignments of secured promissory notes. These mortgage loans must satisfy our stated investment standards, including our loan-to-value ratios, and also may not exceed 80% of the principal amount of the assigned note upon acquisition. For example, if the property securing a note we acquire is commercial property, the total amount of outstanding debts secured by the property must not exceed 75% of the appraised value of the property, and the mortgage loan will not exceed

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80% of the principal amount of the assigned note. 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 prior to acquisition of the loan.

8.

Participation. We participate in loans with other lenders, including affiliates as permitted by the North American Securities Administrators Association guidelines (“NASAA Guidelines”), by providing funds for or purchasing an undivided interest in a loan meeting our investment guidelines described above. Typically, we participate in loans if:

	•		We did not have sufficient funds to invest in an entire loan.
	•		We are seeking to increase the diversification of our loan portfolio.
	•		Vestin Mortgage originated a loan that fit within our investment guidelines but it would constitute more than 20% of our anticipated capital contribution or otherwise be disproportionately large given our then existing portfolio.

	As of September 30, 2003, 96% of our loans were loans in which we participated with other lenders.

9.		Diversification. The NASAA Guidelines provide that we neither invest in or make mortgage loans on any one property which would exceed, in the aggregate, an amount equal to 20% of our capital nor may we invest in or make mortgage loans to or from any one borrower which would exceed, in the aggregate, an amount greater than 20% of our capital. As of September 30, 2003, we had one mortgage loan which accounted for approximately 5.2% of our member’s equity. The outstanding balance of the loan was approximately $4.5 million. The loan’s maturity date is August 2005.
10.		Reserve Fund. We have established contingency working capital reserves of approximately 3% of our capital to cover our unexpected cash needs.
11.		Credit Evaluations. When reviewing a loan proposal, Vestin Mortgage determines whether a borrower has sufficient equity in the security property. Vestin Mortgage may also consider the income level and creditworthiness of a borrower to determine its ability to repay the mortgage loan.
12.		Sale of Mortgage Investments. Although Vestin Mortgage has no plans to do so, Vestin Mortgage may sell our mortgage loans or interest in our loans to either affiliates or non-affiliated parties when Vestin Mortgage believes that it is advantageous to us to do so. However, we do not expect that the loans will be marketable or that a secondary market will ever develop for them.

Mortgage Loans to Affiliates

We will not invest in mortgage loans made to Vestin Mortgage, Vestin Group or any of our affiliates. However, we may acquire an investment in a mortgage loan payable by Vestin Mortgage when Vestin Mortgage has assumed the obligations of the borrower under that loan, through a foreclosure on the property.

Purchase of Loans from Vestin Mortgage and its Affiliates

In addition to those loans Vestin Mortgage selects for us, we purchase loans that were originated by Vestin Mortgage or other parties and first held for Vestin Mortgage’s own portfolio, as long as the loan is not in default and otherwise satisfies all of our lending criteria. This requirement also applies to any loan originated by an affiliate of Vestin Mortgage, such as Vestin Group, Michael Shustek, Chief Executive Officer of Vestin Group or another principal of Vestin Mortgage. However, we will not acquire a loan from or sell a loan to a mortgage program in which Vestin Mortgage has an interest except in compliance with NASAA Guidelines.

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Types of Loans We Invest In

We primarily invest in loans which are 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.

Raw and Unimproved Land Loans

Approximately 15% to 25% of the loans invested in by us may be loans made for the purchase or development of raw, unimproved land. Generally, we determine whether to invest in these loans based upon the appraised value of the property and the borrower’s actual capital investment in the property. We will generally invest in loans for up to 60% of the as-if developed appraised value of the property and we generally require that the borrower has invested in the property actual capital expenditures of at least 25% of the property’s value. As-if developed values on raw and unimproved land loans often dramatically exceed the immediate sales value and may include anticipated zoning changes, selection of a purchaser against multiple alternatives, and successful development by the purchaser, upon which development is dependent on availability of financing. As of September 30, 2003, approximately 4% of our loans were in this category.

Acquisition and Development Loans

Approximately ten percent to 25% of the loans invested in by us may be acquisition and development loans. These loans enable borrowers to acquire and/or complete the basic infrastructure and development of their property prior to the construction of buildings or structures. Such development may include installing utilities, sewers, water pipes, and/or streets. We will generally invest in loans with a face value of up to 60% of the appraised value of the property. Loan to value ratios on acquisition and development loans are calculated using as-if developed appraisals. Such appraisals have the same valuation limitations as raw and unimproved land loans, described above. As of September 30, 2003, approximately 14% of our loans were in this category.

Construction Loans

Approximately ten percent to 70% of our loans may be construction loans. A construction loan provides funds for the construction of one or more structures on developed land. Funds under this type of loan will generally not be forwarded to the borrower until work in the previous phase of the project has been completed and an independent inspector has verified certain aspects of the construction and its costs. We will typically require material and labor lien releases by the borrower per completed phase of the project. We will review the appraisal of the value of the property and proposed improvements, and will generally finance up to 75% of the appraised value of the property and proposed improvements. Such appraisals have the same valuation limitations as raw and unimproved land loans, described above. As of September 30, 2003, approximately 22% of our loans were in this category.

Commercial Property Loans

Approximately 20% to 50% of the loans invested in by us may be commercial property loans. Commercial property loans provide funds to allow commercial borrowers to acquire income producing property or to make improvements or renovations to the property in order to increase the net operating income of the property so that it may qualify for institutional refinancing. We will review the appraisal of the as-if developed value of the property and will generally invest in loans for up to 75% of such appraised value of the property. As of September 30, 2003, approximately 44% of our loans were in this category.

Residential Loans

A small percentage of the loans invested in by us may be residential loans. Such loans facilitate the purchase or

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refinance of one to four family residential property units provided the borrower uses one of the units on the property as such borrower’s principal residence. We will generally invest in loans for up to 75% of the value of the property. As of September 30, 2003, less than 1% of our loans were in this category.

Bridge Loans

Up to 15% of our loans may be bridge loans. Such loans provide interim financing (12 to 24 months) to enable commercial borrowers to qualify for permanent refinancing. We will review the appraisal of the value of the property and will generally invest in loans of up to 75% of that value of the property. Such appraisals may be based on either an as-is basis or as-if developed basis, depending on the circumstances, and therefore, may not be an accurate indicator of the fair value of the property. As of September 30, 2003, approximately 15% of our loans were in this category.

Collateral

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

First Deed of Trust

Most of our loans are secured by a first deed of trust. Thus as a lender, we will have rights as a first mortgage lender of the collateralized property. As of September 30, 2003, 100% of our loans were secured by a first deed of trust.

Second Deed of Trust

In the future, up to 10% of our loans may be secured by second deeds of trust. 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. As of September 30, 2003, none of our loans were secured by a second deed of trust.

Leasehold Interest

Up to 20% of the loans invested in by us may be in loans where the collateral is an interest in a lease. As of September 30, 2003, we did not have any loans secured by a leasehold interest.

Prepayment Penalties and Exit Fees

Generally, the loans we invest in will not contain prepayment penalties or exit fees. If our loans are at a high rate of interest in a market of falling interest rates, the failure to have a prepayment penalty provision or exit fee in the loan allows the borrower to refinance the loan at a lower rate of interest, thus providing a lower yield to us on the reinvestment of the prepayment proceeds. However, these loans will usually be written with relatively high minimum interest rates, which we would expect to minimize the risk of lower yields.

Extensions to Term of Loan

Our original loan agreements permit extensions to the term of the loan by mutual consent. Such extensions are generally provided on loans where the original term was 12 months or less and where a borrower requires additional time to complete a construction project or negotiate take out financing. However, we only grant extensions when a borrower is in full compliance with the terms of the loan, including, but not limited to, the borrower’s obligation to make interest payments on the loan.

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Balloon Payment

Currently all of the loans we invest in or purchase will require the borrower to make a “balloon payment” on the principal amount upon maturity of the loan. There are no specific criteria used in evaluating the credit quality of borrowers for mortgage loans requiring balloon payments. Furthermore, a substantial period of time may elapse between the review of the financial statements of the borrower and the date when the balloon payment is due. As a result, there is no assurance that a borrower will have sufficient resources to make a balloon payment when due. To the extent that a borrower has an obligation to pay mortgage loan principal in a large lump sum payment, its ability to repay the loan may be dependent upon its ability to sell the property, obtain suitable refinancing or otherwise raise a substantial amount of cash. As a result, these loans can involve a higher risk of default than loans where the principal is paid at the same time as the interest payments.

Repayment of Mortgages on Sale of Properties

We may require 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 require repayment if we determine that repayment appears to be advantageous to us based upon then-current interest rates, the length of time that the loan has been held by us, the creditworthiness of the buyer and our objectives. 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 our 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, our members 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

Occasionally we may acquire variable rate loans. Variable rate loans originated by Vestin Mortgage 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). Vestin Mortgage may negotiate spreads over these indices of 2.5% to 5.5%, depending upon market conditions when the loan is made. As of September 30, 2003, we did not hold any variable rate loans, and all of the loans in the mortgage loans portfolio were fixed rate loans.

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. Vestin Mortgage attempts to minimize this interest rate differential by tying variable rate loans to indices that are sensitive to fluctuations in market rates. Additionally, most variable rate loans originated by Vestin Mortgage contain provisions under which the interest rate cannot fall below the initial rate.

Variable rate loans generally have interest rate caps. We anticipate that the interest rate cap will be a ceiling that is 2% to 4% above the starting rate with a floor rate equal to the starting rate. For these loans there is the risk that the market rate may exceed the interest cap rate.

Variable rate loans of five to ten year maturities are not assumable without the prior consent of Vestin Mortgage. We do not expect to invest in or purchase a significant amount of other assumable loans. To minimize our risk, any borrower assuming an existing mortgage loan will be subject to the same underwriting criteria as the original borrower.

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Borrowing

We may incur indebtedness:

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

Our indebtedness will not exceed 70% of the fair market value of our mortgage loans. This indebtedness may be with recourse to our assets.

In addition, we may enter into structured arrangements with other 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.

Competition

There are hundreds of commercial banks, insurance companies, mortgage brokers, pension funds and other institutional lenders competing to make the type of loans in which we invest. No particular competitor dominates the market. We anticipate substantial competition for investments in mortgages secured by commercial properties, which creates pressure on lenders to lower interest rates. Consequently, we may not be able to obtain as high interest rates on mortgage investments as we would otherwise obtain, which would affect our revenues and the distributions made to our investors.

Regulation

Our operations are conducted by Vestin Mortgage. Vestin Mortgage’s operations as a mortgage company are subject to extensive regulation by federal, state and local laws and governmental authorities. Vestin Mortgage conducts its real estate mortgage business under a license issued by the State of Nevada Mortgage Industry Division. Under applicable Nevada law, the division has broad discretionary authority over Vestin Mortgage’s activities, including the authority to conduct periodic regulatory audits of all aspects of Vestin Mortgage’s operations.

We and Vestin Mortgage are also 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.

Employees

The Company does not have any employees. Our Manager, Vestin Mortgage, and its parent company, Vestin Group, Inc., provide all of the employees necessary for the operations of the Company. As of November 30, 2003, those entities had a total of 82 full-time employees and one part-time employee. All employees are at-will employees and none are covered by collective bargaining agreements.

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Available Information

Our Internet website address is www.vestinfund.com. We make available free of charge through www.vestingroup.com our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission.

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ITEM 2. PROPERTIES

Our Manager, Vestin Mortgage, operates from its executive offices at 2901 El Camino Avenue, Las Vegas, Nevada 89102. The Company does not have any separate offices.

ITEM 3. LEGAL PROCEEDINGS

The Company is involved in a number of legal proceedings concerning matters arising in connection with the conduct of their business activities. The Company believes it has meritorious defenses to each of these actions and intends to defend them vigorously. The Company believes that it is not a party to any pending legal or arbitration proceedings that would have a material adverse effect on the Company’s financial condition or results of operations or cash flows, although it is possible that the outcome of any such proceedings could have a material impact on the Company’s net income in any particular period.

Litigation involving the Manager

Vestin Mortgage, Inc., Vestin Group, Inc., and Del Mar Mortgage, Inc., a company wholly owned by Michael Shustek, the largest shareholder and CEO of Vestin Group, Inc., are defendants in a civil action entitled Desert Land, L.L.C. et al. v. Owens Financial Group, Inc. (the “Action”). The Action was initiated by Desert Land, L.L.C. (“Desert Land”) on various loans arranged by Del Mar Mortgage, Inc. and/or Vestin Mortgage. On April 10, 2003, the United States District Court for the District of Nevada (the “Court”) entered judgment jointly and severally in favor of Desert Land against Vestin Group, Vestin Mortgage and Del Mar Mortgage, Inc. Judgment was predicated upon the Court’s finding that Del Mar Mortgage, Inc. received an unlawful penalty fee from the plaintiffs.

Defendants subsequently filed a motion for reconsideration. The Court denied the motion and, on August 13, 2003, held that Vestin Group, Vestin Mortgage, and Del Mar Mortgage, Inc. are jointly and severally liable for the judgment in the amount of $5,683,312.19 (which amount includes prejudgment interest and attorney’s fees). On August 27, 2003, the Court stayed execution of the judgment against Vestin Group and Vestin Mortgage based upon the posting of a bond in the amount of $5,830,000. The bond was arranged by Michael Shustek and was posted without any cost or obligation to Vestin Group and Vestin Mortgage. Additionally, Del Mar Mortgage, Inc. has indemnified Vestin Group and Vestin Mortgage for any losses and expenses in connection with the Action, and Mr. Shustek has guaranteed the indemnification. On September 12, 2003 all of the defendants held liable to Desert Land appealed the judgment to the Ninth Circuit United States Court of Appeals. The Company is not a party to the Action.

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

None.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information

a.		There is no established public trading market for the trading of Units.
b.		As of September 30, 2003, approximately 1,474 Unit holders held 9,124,566 Units of interest in the Company.
c.		We generally distribute significantly all net income generated by us to Unit holders on a monthly basis. We made distributions of net income to our Unit holders of approximately $10,363,438 (prior to reinvested distributions) during the fiscal year ended September 30, 2003. It is our intention to continue to distribute significantly all net income earned by us to the Unit holders.

ITEM 6. SELECTED FINANCIAL DATA

Vestin Fund I, LLC

The information in this table should be read in conjunction with the accompanying audited financial statements and notes to financial statements included elsewhere in this document.

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Prior to September 1, 2000, we were a development stage company with no operational activities. We commenced the offering of our Units in September 2000; by June 2001, the Company had sold all of the 10,000,000 Units offered. Our financial results reflect the amount of capital we had available for investment in mortgage loans. Our past performance may not be indicative of future results. This discussion should be read in conjunction with our financial statements and accompanying notes and other detailed information regarding the Company appearing elsewhere in this Form 10-K.

RESULTS OF OPERATIONS

OVERVIEW

Our primary business objective is to generate monthly 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. The loan underwriting standards our Manager utilizes are less strict than traditional mortgage lenders. In addition, one of our competitive advantages is our ability to approve loan applications more quickly than traditional lenders. As a result, in certain cases, we may make mortgage loans which are riskier than mortgage loans made by commercial banks. However, in return we seek a higher interest rate and our Manager takes steps to attempt to mitigate the lending risks such as imposing a lower loan to value ratio. While we may assume more risk than traditional mortgage lenders, in return, we seek to generate higher yields from our mortgage loans.

Our operating results are affected primarily by: (i) the amount of capital we have to invest in mortgage loans, (ii) the level of real estate lending activity in the markets we service, (iii) our ability to identify and work with suitable borrowers, (iv) the interest rates we are able to charge on our loans and (v) the level of foreclosures and related loan losses which we may experience. These funds, subject to a 3% reserve, will constitute the bulk of the funds we have available for investment in mortgage loans. We do not have any arrangements in place to materially increase the funds we will have available to invest from any other sources. See discussion - “Capital and Liquidity.”

The US economy has suffered from a mild recession over the recent past few years, and we have experienced a slowdown in commercial real estate lending in the markets which we service. A prolonged recession may continue to dampen real estate development activity, thereby diminishing the market for our loans. In addition, the continuing decline in interest rates, which is largely attributable to the weak economy, may be expected to diminish the interest rates we can charge on our loans. The average interest rate on our loans at September 30, 2003 was 12.3% as compared to 13.8% at September 30, 2002. Moreover, a prolonged recession or poor credit decisions by our Manager may continue the increase in non-performing assets. Non-performing assets total $39.5 million or 34.4% of our total assets as of September 30, 2003 as compared to $13.2 million or 12.5% of our assets as of September 30, 2002. To the extent that the efforts of our borrowers to develop and sell commercial real estate projects are adversely impacted by the status of the economy, we may experience an increase in loan defaults which may reduce the amount of funds we have for distribution to our members. In this regard, it should be noted that the average maturity of our outstanding loans as of September 30, 2003 was 13.0 months, compared to 12.0 months at September 30, 2002. As a of result of these factors, our annualized rate of return to members for the fiscal year September 30, 2003 was 4.5%, compared to 12.3% for the fiscal year ended September 30, 2002.

Adverse economic conditions during the next year could have a material impact on the collectibility of our loans. Recognizing this risk, we seek to maintain a low loan-to-value ratio which, as of September 30, 2003, was 60.6% on a weighted average basis, generally using appraisals prepared on an as-if developed basis in connection with the loan origination. In this manner, we hope to retain sufficient cushion in the underlying equity position to protect the value of our loan in the event of a default. Nevertheless, no assurances can be given that a marked increase in loan

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defaults accompanied by a rapid decline in real estate values will not have a material adverse effect upon our financial condition and operating results.

Historically, our Manager has focused its operations on Nevada and certain Western states. Because our Manager has a significant degree of knowledge with respect to the real estate markets in such states, it is likely most of our loans will be concentrated in such states. As of September 30, 2003, 33.9% of the principal amount of our loans were secured by real estate in Nevada, while 21.1%, 11.7% and 11.0% were secured by real estate in Hawaii, Texas, and California, respectively. Such geographical concentration creates greater risk that any downturn in such local real estate markets could have a significant adverse effect upon our results of operations. Commercial real estate markets in Nevada have continued to prosper, with significant borrowing activity, throughout the current recession. However, the rate of growth appears to be slowing. The commercial real estate markets in Texas, Hawaii and California also appear to be relatively unaffected by the recession. As noted above, if the recession continues for an extended period or deepens, particularly in any of the identified states, our operating results could be adversely affected.

Fiscal Year Ended September 30, 2003 Compared to September 30, 2002 (unaudited)

(a)

The annualized rate of return to members is calculated based upon the net income allocated to members per weighted average units as of September 30, 2003 and 2002 divided by ten (the $10 cost per unit).

Total Revenues. For the fiscal year ended September 30, 2003, total revenues were approximately $10.4 million compared to $13.2 million for the fiscal year ended September 30, 2002, a decrease of $2.8 million or 21.2%. The decline in revenue was mainly due to lower interest income from investment in mortgage loans as a result of the increase in non-performing assets to $39.5 million as of September 30, 2003 compared to $13.2 million as of September 30, 2002 offset by an increase in interest income from assets under secured borrowings. Our average interest yields on our investments in mortgage loans for the year ended September 30, 2003 was 12.3% compared to 13.8% for the year ended September 30, 2002. Our Manager believes that the increase in non-performing assets is primarily the result of the individual circumstances of the borrowers involved. The increase in non-performing assets may also reflect the continued weakness in the economy and the risks inherent in our business strategy which entails more lenient underwriting standards and expedited loan approval procedures. Our revenues will continue to suffer until we are able to convert these non-performing assets into interest paying mortgage loans. We will attempt to accomplish this by working with the borrower where possible and by foreclosing on the underlying property where necessary. We intend to sell properties acquired through foreclosure as soon as practicable, consistent with our objective of avoiding a loss of principal on our loans. However, we cannot predict how quickly we will be able to sell the foreclosed properties.

Total revenues have also decreased due to the increase in the amount of cash and cash equivalents. At September 30, 2003, cash and certificates of deposit totaled $14.9 million compared to $5.5 million at September 30, 2002. Because these assets earn interest at a much lower rate than investments in mortgage loans, revenues are reduced.

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Total Expenses. In fiscal 2003, total expenses were $6.1 million compared to $0.6 million for fiscal 2002, an increase of $5.6 million. The increase in total expenses primarily related to interest expense related to secured borrowing (see Note F), a provision for loan losses (see Note C), losses on real estate held for sale (see Note D) and the write-off of deferred offering costs (see Note H). See also – “Asset Quality and Loan Reserves.”

Net Income. Overall, net income for fiscal 2003 was $4.3 million compared to $12.6 million in fiscal 2002, a decrease of $8.3 million or 65.7%. The decrease was primarily the result of lower revenues because of the increase in non-performing assets and the write-offs recognized during the year ended September 30, 2003.

Annualized Rate of Return to Members. For fiscal 2003, the annualized rate of return to members was 4.5% compared to 12.3% for fiscal 2002. The decrease in annualized rate of return to members was primarily related to the increase in total expenses as outlined above.

Investment in Mortgage Loans

Investment in mortgage loans as of September 30, 2003 was as follows:

Investment in mortgage loans as of September 30, 2002 was as follows:

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

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**

All of the Company’s second mortgages were junior to a first trust deed position held by either the Company or the Company’s Manager.

The following is a schedule of maturities of investments in mortgage loans as of September 30, 2003:

The following is a schedule by geographic location of investments in mortgage loans as of:

Asset Quality and Loan Reserves

Losses may occur from investing in mortgage loans. The amounts of losses will vary as the loan portfolio is affected by changing economic conditions and the financial condition of borrowers.

The conclusion that a mortgage loan is uncollectible or that collectibility is doubtful is a matter of judgment. On a quarterly basis, the Manager evaluates the Company’s mortgage loan portfolio for impairment. The fact that a loan is temporarily past due does not necessarily mean that the loan is impaired. Rather, all relevant circumstances are considered by our Manager to determine impairment and the need for specific reserves. Such evaluation, which includes a review of all loans on which full collectibility may not be reasonably assured, considers among other matters:

	•		prevailing economic conditions;
	•		historical experience;
	•		the nature and volume of the loan portfolio;

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	•		the borrowers’ financial condition and adverse situations that may affect the borrowers’ ability to pay;
	•		evaluation of industry trends; and
	•		estimated net realizable value of any underlying collateral in relation to the loan amount.

Based upon this evaluation, a determination is made as to whether the allowance for loan losses is adequate to cover any potential losses. Additions to the allowance for loan losses are made by charges to the provision for loan losses. Recoveries of previously charged off amounts are credited to the allowance for loan losses. As of September 30, 2003, our Manager had established a general allowance for loan losses of $0.5 million. At September 30, 2003, seven of our loans were non-performing (more than 90 days past due on principal or interest payments) totaling $11.0 million. Our Manager evaluated the loans and concluded that the underlying collateral was sufficient to protect us against a loss of principal or interest with the exception on the loan described below. Our Manager will continue to evaluate these loans in order to determine if any other allowance for loan losses should be recorded.

On June 25, 2003, the Company and Fund II refinanced a $15.2 million note due on August 19, 2003 as a new note with the interest rate reduced from 11.0% to 5.5%. No specific reserve has been provided for this loan based on the underlying collateral value. The new loan has a term of 24 months. Interest income not recognized by the Company during the period as a result of the restructuring was $20,430.

On July 22, 2003, the Company entered into a stipulation with a borrower which among other things reduced the interest rate to 7.0% from 12.5% on the principal balance of $2.0 million (which represents a 10% pari passu interest in a first trust deed of $20.0 million), deferred interest payments through October 31, 2003, and extended the maturity date from June 14, 2003 to June 14, 2005. The borrower filed Chapter 11 Bankruptcy on June 26, 2003. The United States Bankruptcy Court approved the stipulation. The borrower has defaulted on the stipulation and the bankruptcy stay has been lifted. The borrower paid interest payments due on November 15, 2003 and December 15, 2003. The Company has the right to complete the foreclosure, but is in continuing discussions with the borrower.

In addition to the above-mentioned loans, at September 30, 2003, our Manager had granted extensions on 12 loans pursuant to the terms of the original loan agreements which permit extensions by mutual consent. Such extensions are generally provided on loans where the original term was 12 months or less and where a borrower requires additional time to complete a construction project or negotiate take out financing. The aggregate amount due to us from borrowers whose loans had been extended as of September 30, 2003 was approximately $16.4 million. At September 30, 2003, all such loans were performing. Accordingly, our Manager concluded that no additional allowance for loan losses was necessary with respect to such loans.

Because of the fact that any decision regarding the allowance for loan losses reflects a judgment about the probability of future events, there is an inherent risk that such judgments will prove incorrect. In such event, actual losses may exceed (or be less than) the amount of any reserve. To the extent that we experience losses greater than the amount of our reserves, we may incur a charge to our earnings that will adversely affect our operating results and the amount of any distributions payable to our members.

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Nine Months Ended September 30, 2002 Compared to Nine Months Ended September 30, 2001

	(a) The weighted average number of outstanding units for the transition period ended September 30, 2002 is calculated based upon the daily number of outstanding units beginning on January 1, 2002. The weighted average number of outstanding units for the nine months ended September 30, 2001 is calculated based upon the daily number of outstanding units beginning on January 1, 2001.
	(b) The annualized net rate of return to unit holders is calculated based upon the net income allocated to unit holders per weighted average units then divided by the number of months during each period and multiplied by 12 months, then divided by ten (the $10 cost per unit).

Total Revenues. For the nine months ended September 30, 2002, revenues totaled $9.7 million compared to $8.1 million for the same period in 2001, an increase of $1.6 million or 19%. The increase in revenue was primarily due to an increase in our average daily investments in mortgage loans of approximately 26%. Additionally, during the nine months ended September 30, 2002, we did not share in loan origination fees with our manager as we did for the same period in 2001.

Total Expenses. For the nine months ended September 30, 2002, expenses totaled $442,559 compared to $53,272 for the same period in 2001, an increase of $389,287. Increase in total expenses for 2002 primarily related to an approximate $180,000 increase in management’s fees, the provision for loan losses totaling $100,000, and interest expense approximating $114,000 related to secured borrowings.

Net Income. Overall, net income for the nine months ended September 30, 2002 totaled $9.3 million compared to $8.1 million for the same period in 2001, an increase of $1.2 million or 15%.

Annualized Rate of Return to Members. For the nine months ended September 30, 2002, annualized net rate of return to members totaled 12.2% compared to 13.6% for the same period in 2001. The decrease in annualized net rate of return to members was primarily related to an allowance for loan losses of $100,000, which our Manager decided to establish during the transition period ended September 30, 2002. See discussion - “Asset Quality and Loan Reserves.”

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CRITICAL ACCOUNTING POLICIES

Revenue Recognition

Interest is recognized as revenue when earned according to the terms of the loans, using the effective interest method. The Company does not recognize interest income on loans once they are determined to be impaired. 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. Cash receipts will be allocated to interest income, except when such payments are specifically designated by the terms of the loan as principal reduction or when management does not believe the Company’s investment in the loan is fully recoverable. Fee income and other income are recognized as revenue when earned.

Investments in Mortgage Loans

Investment in mortgage loans secured by trust deeds and mortgages are originated by our Manager in accordance with terms contained in our operating agreement. Currently, all of the mortgage loans are fixed rate loans with maturities ranging from two months to 30 months, secured by first and second deeds of trust on properties securing commercial, land, construction, residential, bridge, and acquisition and development loans. Bridge loans provide interim financing (12 to 24 months) to enable commercial borrowers to attempt to qualify for permanent financing. Currently, all of our mortgage loans require interest only payments with a balloon payment of the principal at maturity. We have both the intent and ability to hold mortgage loans until maturity and, therefore, mortgage loans are classified and accounted for as held for investment and are carried at cost.

Allowance for Loan Losses

We maintain an allowance for loan losses on our investment in mortgage loans for estimated and expected credit impairment which is considered inherent to our investment in mortgage loans portfolio. Our Manager’s estimate of expected losses is based on a number of factors including the types and dollar amounts of loans in the portfolio, adverse situations that may effect the borrower’s ability to repay, prevailing economic conditions and the underlying collateral securing the loan. Additions to the reserve are provided through a charge to earnings and are based on an assessment of certain factors including, but not limited to, estimated losses on the loans. Actual losses on loans are recorded as a reduction to the allowance for loan losses. Subsequent recoveries of amounts previously charged off are added back to the reserve. Our Manager believes that the allowance for loan losses totaling $0.5 million as of September 30, 2003, included in the accompanying balance sheet is adequate to address estimated and expected credit impairment.

Real Estate Held For Sale

Real estate held for sale includes real estate acquired through foreclosure and is carried at the lower of the recorded amount, inclusive of any senior indebtedness, or the property’s estimated fair value, less estimated costs to sell. At September 30, 2003 and September 30, 2002, the Company had $26.5 million and $1.5 million, respectively, in real estate held for sale.

FACTORS AFFECTING OUR OPERATING RESULTS

Our business is subject to numerous factors affecting our operating results. In addition to the factors discussed above, our operating results may be affected by:

Risks of Investing in Mortgage Loans

•

Our underwriting standards and procedures are more lenient than conventional lenders in that we will invest in loans to borrowers who will not be required to meet the credit standards of conventional mortgage lenders.

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	•		We approve mortgage loans more quickly than other mortgage lenders. Due to the nature of loan approvals, there is a risk that the credit inquiry our Manager performs will not reveal all material facts pertaining to the borrower and the security.
	•		Our results of operations will vary with changes in interest rates and with the performance of the relevant real estate markets.
	•		If the economy is healthy, we expect that more people will borrow money to acquire, develop or renovate real property. However, if the economy grows too fast, interest rates may increase too much and the cost of borrowing may become too expensive. This could result in a slowdown in real estate lending which may mean we will have fewer loans to acquire, thus reducing the our revenues and the distributions to our members.
	•		If, at a time of relatively low interest rates, a borrower should prepay obligations that have a higher interest rate from an earlier period, investors will likely not be able to reinvest the funds in mortgage loans earning that higher rate of interest. In the absence of a prepayment fee, the investors will receive neither the anticipated revenue stream at the higher rate nor any compensation for their loss. This in turn could harm our reputation and make it more difficult for us to attract investors willing to acquire interest in mortgage loans.

Risk of Defaults

Our performance will be directly impacted by any defaults on the loans in our portfolio. As noted above, we may experience a higher rate of defaults than conventional mortgage lenders. We seek to mitigate the risk by estimating the rate of the underlying collateral and insisting on low loan to value ratios. However, no assurance can be given that these efforts will fully protect us against losses on defaulted loans. Moreover, during the period of time when a defaulted loan is the subject of foreclosure proceedings, it is likely that we will earn less (if any) income from such loans, thereby reducing our earnings.

Competition for Borrowers

We consider our competitors for borrowers to be the providers of non-conventional mortgage loans, that is, lenders who offer short-term, equity-based loans on an expedited basis for higher fees and rates than those charged by conventional lenders and mortgage loans investors, such as commercial banks, thrifts, conduit lenders, insurance companies, mortgage brokers, pension funds and other financial institutions that offer conventional mortgage loans. Many of the companies against which we compete have substantially greater financial, technical and other resources than we do. Competition in our market niche depends upon a number of factors including price and interest rates of the loan, speed of loan processing, cost of capital, reliability, quality of service and support services.

Effect of Fluctuations in the Economy

Our 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 we concentrate our loans, could result in a decline in the demand for real estate development loans. In order to stay fully invested during a period of declining demand for real estate loans, we may be required to make loans on terms less favorable to us or to make loans involving greater risk to us. Declines in economic activity are often accompanied by a decline in prevailing interest rates. Although our lending rates are not directly tied to the Federal Reserve Board’s discount rate, a sustained and widespread decline in interest rates will impact the interest we are able to earn on our loans. Since our loans generally do not have prepayment penalties, declining interest rates may also cause our borrowers to prepay their loans and we 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 our borrowers to complete their projects and obtain take out financing. This in turn could increase the level of defaults we may experience.

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CAPITAL AND LIQUIDITY

Liquidity is a measure of a company’s ability to meet potential cash requirements, including ongoing commitments to fund lending activities and for general operating purposes. Subject to a 3% reserve, we endeavor to use all of our available funds to invest in mortgage loans. Income generated from such loans is paid out to our members unless they have elected to reinvest their dividends. We do not anticipate the need for hiring any employees, acquiring fixed assets such as office equipment or furniture, or incurring material office expenses during the next twelve months because Vestin Mortgage will manage our affairs. We may pay Vestin Mortgage a monthly management fee of up to 0.25% of our aggregate capital contributions.

During the year ended September 30, 2003, cash flows provided by our operating activities approximated $12.5 million. Our investing activities for the year ended September 30, 2003 consisted of investment in loans secured by real estate in the amount of $15.3 million (net of proceeds from payoffs and sales of mortgage loans), and redemption of certificates of deposits of $1.6 million. Our financing activities primarily consisted of member withdrawals of $10.3 million and members’ distributions, net of reinvestments, of $8.0 million. Approximately 377 of our members currently reinvest their distributions.

Any significant level of defaults on outstanding loans could reduce the funds we have available for investment in new loans. Resulting foreclosure proceedings may not generate full repayment of our loans and may result in significant delays in the return of invested funds. This would diminish our capital resources and would impair our ability to invest in new loans. See the discussion “Asset Quality and Loan Reserves.” The mortgage loans in which we invest are not federally insured as are certain bank deposits and are generally illiquid as compared to government and certain corporate bonds. In addition, redemptions by our Members would reduce the capital we have available for investment. Such redemptions are limited by the terms of our operating agreement to not more than 10% per year and not more than $100,000 per member per calendar year and are subject to other conditions.

In addition, redemptions by our members reduce the capital we have available for investment. Such redemptions are limited by the terms of our operation agreement to not more than 10% per year and not more than $100,000 per member per calendar year and are subject to other conditions. Beginning capital as of January 1, 2003 was $97.5 million, which would limit redemptions to $9.75 million for calendar 2003. On June 17, 2003, the Company discontinued accepting requests for the redemption of units for the 2003 calendar year. As of November 30, 2003, the total of redemptions made and redemptions requested and awaiting payments was $9.2 million. All redemptions request received after that date have been logged for redemption beginning in January 2004. As of November 30, 2003, requests to redeem 814,536 Units in 2004, 554,104 Units in 2005 and 302,613 Units in 2006 had been logged.

Our Manager believes that total non-performing assets at September 30, 2003 have increased primarily as a result of factors unique to specific borrowers. Because of the estimated value of the underlying properties, the Company does not believe that any losses beyond those already recognized will be incurred from these assets upon final disposition. However, it is possible that the Company will not be able to realize the full estimated carrying values upon disposition, particularly if continuing economic weakness results in declining real estate values.

As of September 30, 2003, the Company had secured borrowings of $20.3 million related to intercreditor and participation agreements. Pursuant to the intercreditor agreements, the Investor may participate in certain loans with Vestin Mortgage, Vestin Fund II, and the Company (collectively, “the Lead Lenders”). In the event of borrower non-performance, the intercreditor agreements gives the Lead Lenders the right to either (i) continue to remit to the investor the interest due on the participation amount; (ii) substitute an alternative loan acceptable to the investor; or (iii) repurchase the participation from the investor for the outstanding balance of the participation plus accrued interest. Consequently, mortgage loan financing under the intercreditor agreements are accounted for as a secured borrowing in accordance with SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.

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Pursuant to the participation agreements, the Investor may participate in certain loans with Vestin Fund II and the Company (collectively, “the Lead Lenders”). In the event of borrower non-performance, the participation agreements gives the participant the right to require substitution of its interest with another loan, or, if the right of substitution is not exercised and the participant holds more than 50% of the loan, the participant may request that the Lead Lender purchase a portion so that the Lead Lender has at least a 50% pro rata share of the non-performing loan. Consequently, mortgage loan financing under the participation arrangement is accounted for as a secured borrowing in accordance with SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.

As of September 30, 2003, we have only one revolving line of credit, which is from First Hawaiian Bank in the amount of $1,000,000. The balance as of September 30, 2003 for that line of credit was $0. As of September 30, 2003, the Company was in compliance with all applicable covenants related to the line of credit. The line of credit expires on December 31, 2003 and the Company expects to renew the line of credit at that time.

We may seek to expand our capital resources through borrowings from institutional lenders or through securitization of our loan portfolio or similar arrangements. Other than the line of credit mentioned above, we currently do not have in place any commitments to borrow any funds or securitize any of our assets. No assurance can be given that, if we should seek to borrow funds or to securitize our assets we would be able to do so on commercially attractive terms. Our ability to expand our capital resources in this manner is subject to many factors, some of which are beyond our control, including the state of the economy, the state of the capital markets and the perceived quality of our loan portfolio.

We do not currently have any interest in any special purpose entities nor do we have any commitments or obligations which are not reflected on our balance sheet. We do not have any interest in derivative contracts.

We maintain working capital reserves of approximately 3% of aggregate members’ capital accounts in cash and cash equivalents, certificates of deposits and short-term investments. This reserve is available to pay expenses in excess of revenues, satisfy obligations of underlying security properties, expend money to satisfy our unforeseen obligations and for other permitted uses of the working capital. At September 30, 2003, the Company had $13.7 million in cash, $1.2 million in certificates of deposit, and $115.1 million in total assets. It appears the Company has sufficient working capital to meet its operating needs in the near term.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk, primarily from changes in interest rates. We do not deal in any foreign currencies and do not own any options, futures or other derivative instruments. We do not have a significant amount of debt.

Most of our assets consist of investments in mortgage loans. At September 30, 2003, our aggregate investment in mortgage loans was approximately $52,194,617 with a weighted average effective interest rate of 12.3%. Most of the mortgage loans have a term of 12 months; the average term of outstanding loans at September 30, 2003 was 13.0 months. All of the outstanding mortgage loans at September 30, 2003 were fixed rate loans. All of the mortgage loans are held for investment purposes; none are held for sale. We intend to hold such mortgage loans to maturity. None of the mortgage loans have prepayment penalties.

Market fluctuations in interest rates generally do not affect the carrying value of our investment in mortgage loans. However, significant and sustained changes in interest rates could affect our operating results. If interest rates decline significantly, some of the borrowers could prepay their loans with the proceeds of a refinancing at lower interest rates. This would reduce our earnings and funds available for distribution to members. On the other hand, a significant increase in interest rates could result in a slowdown in real estate development activity which would reduce the demand for commercial mortgage loans. As a result, we might encounter greater difficulty in identifying appropriate borrowers. We are not in a position to quantify the potential impact on our operating results from a material change in interest rates.

At September 30, 2003, we also had approximately $14.9 million invested in cash and cash equivalents, and certificates of deposit. Approximately 3% of our assets will be held in such accounts as a cash reserve; additional deposits in such accounts will be made as funds are received from new investors and repayment of loans pending the deployment of such funds in new mortgage loans. We believe that these financial assets do not give rise to significant interest rate risk due to their short-term nature.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements and supplementary data are indexed in Item 15 of this report.

There were no changes in or disagreements on any items dealing with accounting and financial disclosure with the independent auditors during the past two fiscal years.

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PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

The Company does not have any directors or officers. The Company is managed by Vestin Mortgage. Vestin Mortgage is a wholly-owned subsidiary of Vestin Group, Inc., a Delaware corporation, whose common stock is publicly held and is traded on the NASDAQ under the symbol “VSTN.” Through its subsidiaries, Vestin Group, Inc. is engaged in asset management, real estate lending and other financial services.

The directors and executive officers of Vestin Mortgage, Inc. are listed below:

The principal occupation and business experience for each of our officers and directors and key employees, for at least the last five years, are as follows:

Michael V. Shustek has been a director of Vestin Mortgage and Chairman of the Board of Directors, Chief Executive Officer and a director of Vestin Group since April 1999. In 2003, Mr. Shustek became the Chief Executive Officer of Vestin Mortgage. In 1995, Mr. Shustek founded Del Mar Mortgage, and has been involved in various aspects of the real estate industry in Nevada since 1990. In 1993, he founded Foreclosures of Nevada, Inc., a company specializing in non-judicial foreclosures. In 1993, Mr. Shustek also started Shustek Investments, a company that originally specialized in property valuations for third-party lenders or investors and which continues today as the primary vehicle for his private investment portfolio. In 1997, Mr. Shustek was involved in the initial founding of Nevada First Bank, with the largest initial capital base of any new state charter in Nevada’s history. In 2000, Mr. Shustek co-authored a book, Trust Deed Investments, on the topic of private mortgage lending. Mr. Shustek is a guest lecturer at the University of Nevada, Las Vegas, where he also teaches a course in Real Estate Law and Ethics. Mr. Shustek received a Bachelor of Science degree in Finance at the University of Nevada, Las Vegas.

On March 26, 1999, Del Mar Mortgage, Inc. ,the stock of which is wholly-owned by Mr. Shustek, entered into a stipulated court order (the “Order”) with the State of Nevada, Department of Business and Industry, Financial Institutions Division (the “Division”) resolving a dispute regarding Del Mar Mortgage, Inc.’s alleged noncompliance with various Nevada regulatory statutes. Without admitting any facts, and solely to settle these matters, Del Mar Mortgage, Inc. agreed to assure compliance with applicable Nevada law in all of its record keeping, advertising and solicitation of mortgage borrowers and in its making and servicing of mortgage loans. Del Mar Mortgage, Inc. paid the Division an aggregate of $50,000 to cover the Division’s costs. The Order contained no findings of wrongful conduct by Del Mar Mortgage, Inc. or Mr. Shustek. Mr. Shustek was apparently named by the Division because he was the controlling person of Del Mar Mortgage, Inc. In April 1999, Vestin Group (then known as Sunderland Acquisition Corporation) acquired the customer lists, goodwill and certain other intangible assets of Del Mar Mortgage, Inc. and assumed liabilities related to such assets. Neither Vestin Group (then Sunderland Acquisition Corporation) nor Vestin Mortgage (then known as Capsource, Inc.) acquired any loans or other financial assets of Del Mar Mortgage, Inc., which continued to operate as an independent business. In contemplation of such acquisition, Vestin Group (then Sunderland Acquisition Corporation) and Vestin Mortgage (then Capsource, Inc.) agreed to be bound by the terms of the Order.

Peggy S. May has been with Vestin Group since September 1995, and has been the President of Vestin Mortgage since January 2001. From 1997 to 2000, Ms. May was the Senior Vice President of Vestin Mortgage. She is responsible for all new and existing clients, loan packages and manages investor relationships and serves as the administrator of the corporate offices. Ms. May has over ten years of experience in title, escrow and private lending.

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Stephen A. Schneider has been Vice President of Vestin Mortgage since January 2001. From July 2000 to December 2000, Mr. Schneider was the Chief Operation Officer of Vestin Group. Mr. Schneider is responsible for the maintenance of all banking and financial relationships. Mr. Schneider has over 26 years experience in the financial services industry. He worked at US Bank where he managed the bank’s business banking department and underwrote loans for companies with sales of $1 million to $10 million and maintained relationships with the bank’s business customers. Mr. Schneider sits on the boards of Focus Las Vegas and Leadership Las Vegas Youth as well as several other organizations. He is responsible for the Vestin Foundation, a non-profit organization aimed at funding local charitable organizations.

Lance K. Bradford has been the Chief Financial Officer, Treasurer, Secretary and a director of Vestin Mortgage since April 1999. Mr. Bradford has been the Chief Financial Officer, President, Treasurer, and a director of Vestin Group since April 1999. From 1999 to 2000, Mr. Bradford was also the Corporate Secretary of Vestin Group. Since 1992, Mr. Bradford has been a partner in L.L. Bradford & Company, Las Vegas, Nevada, a Certified Public Accounting firm that he founded. From 1988 to 1991, Mr. Bradford served as an accountant with Ernst & Young International. Mr. Bradford received a Bachelor of Science degree in Accounting from the University of Nevada, in Reno, Nevada.

ITEM 11. EXECUTIVE COMPENSATION

Not Applicable.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

No person or entity owns beneficially more than 5% of the ownership interests in us. Our Manager owns approximately 100,000 units or 1.1% of our capital as of September 30, 2003.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Transactions with Management and Others

Management Fee

Our Manager is entitled to receive from us a management fee of up to 0.25% of our aggregate capital contribution, paid monthly in arrears. The amount of management fees incurred to our Manager for the fiscal years ended September 30, 2003 and 2002, approximated $253,000 and $310,000, respectively.

Amount Due to Managing Member

As of September 30, 2003 and September 30, 2002, we owed our Manager approximately $362,000 and $430,000, respectively, for expenses advanced on our behalf and distributions due related to units owned by our Manager.

Purchase of Loans from Vestin Fund II, LLC

During the fiscal years ended September 30, 2003 and 2002, the Company purchased approximately $15,056,000 and $9,100,000 in mortgage loans from Vestin Fund II, LLC, a company managed by our Manager. During the fiscal years ended September 30, 2003 and 2002, the Company sold approximately $27,460,000 and $13,137,000 in mortgage loans to Vestin Fund II, LLC.

Other Transactions with the Manager

During the transition period ended September 30, 2002, the Company purchased $479,000 in mortgage loans from the Company’s Manager at their historical cost pursuant to Section 4.4.1 of the Company’s Operating Agreement.

Accounting Fees

During the year ended September 30, 2003, the Company paid $5,000 to L.L. Bradford & Company, LLC, a certified public accounting firm for accounting services. Vestin Mortgage’s Chief Financial Officer, Treasurer, Secretary and Director is an equity owner in that firm.

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ITEM 14. CONTROL AND PROCEDURES

The Company has evaluated the effectiveness of the design and operation of its disclosure controls and procedures as of September 30, 2003 (the “Evaluation Date”). Such evaluation was conducted under the supervision and with the participation of the Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”) of Vestin Mortgage, Inc., the Company’s Manager, who function as the equivalent of the CEO and CFO of the Company. Based upon such evaluation, the Company’s CEO and CFO have concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures were effective. There have been no significant changes in the Company’s internal controls over financial reporting that occurred during the Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

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PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)		The financial statement are contained on Pages F-2 through F-25 on this Annual Report on Form 10-K, and the list of the financial statement contained herein is set forth on page F-1, which is hereby incorporated by reference.
(b)		The Company did not have any Current Reports on Form 8-K filing during the fourth fiscal quarter of 2003.

EXHIBIT INDEX

Exhibit No.		Description of Exhibits
3.1(1)		Articles of Organization
3.1(2)		Amended and Restated Operating Agreement
31.1		Section 302 Certification of Michael V. Shustek
31.2		Section 302 Certification of Lance K. Bradford
32		Certification Pursuant to U.S.C. 18 Section 1350

(1)		Incorporated herein by reference to our S-11 Registration Statement filed on December 21, 2000.
(2)		Incorporated herein by reference to Amendment No. 2 to our S-11 Registration Statement filed on July 3, 2002.

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SIGNATURES

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

Dated: December 23, 2003

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CONTENTS

F-1

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Report of Independent Auditors

Members of Vestin Fund I, LLC

We have audited the accompanying balance sheets of Vestin Fund I, LLC (the “Company”) as of September 30, 2003 and 2002, and the related statements of income, members’ equity, and cash flows for the year ended September 30, 2003, the nine-month period ended September 30, 2002 and the year ended December 31, 2001. 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 auditing standards generally accepted in the United States. Those standards require that we plan and perform the audits 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 Vestin Fund I, LLC as of September 30, 2003 and 2002, and the results of its operations and its cash flows for the year ended September 30, 2003, the nine-month period ended September 30, 2002, and the year ended December 31, 2001, in conformity with accounting principles generally accepted in the United States.

Our audits were conducted for the purpose of forming an opinion on the financial statements taken as a whole. The Mortgage Loan Rollforward, Mortgage Loans by Type of Property, Mortgage Loan by Lien Position, and Mortgage Loans That Exceed Three Percent of the Portfolio are presented for purposes of additional analysis and are not a required part of the financial statements. Such information has been subjected to the auditing procedures applied in our audits of the financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole.

/s/ Ernst & Young LLP

Phoenix, Arizona
December 18, 2003

F-2

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Vestin Fund I, LLC

BALANCE SHEETS

The accompanying notes are an integral part of these statements.

F-3

Table of Contents

Vestin Fund I, LLC

STATEMENTS OF INCOME

The accompanying notes are an integral part of these statements.

F-4

Table of Contents

Vestin Fund I, LLC

STATEMENTS OF MEMBERS’ EQUITY