S-4/A 1 v172872_s4a.htm

As filed with the Securities and Exchange Commission on February 16, 2010

Registration No. 333-164087

 

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549



 

AMENDMENT NO. 2 TO

FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933



 

IMH FINANCIAL CORPORATION

(Exact Name of Registrant as Specified in its Governing Instrument)

   
Delaware   6162   81-0624254
(State or Other Jurisdiction of
incorporation or Organization)
  (Primary Standard Industrial
Classification Code Number)
  (I.R.S. Employer
Identification No.)

4900 N. Scottsdale Rd #5000
Scottsdale, Arizona 85251
(480) 840-8400

(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant’s Principal Executive Offices)



 

Shane C. Albers
Chief Executive Officer
IMH Financial Corporation
4900 N. Scottsdale Rd #5000
Scottsdale, Arizona 85251
(480) 840-8400

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service)



 

Copy to:
Peter T. Healy, Esq.
O’Melveny & Myers LLP
Two Embarcadero Center, 28th Floor
San Francisco, CA 94111
(415) 984-8833



 

Approximate Date of Commencement of Proposed Sale of the Securities to the Public: As soon as practicable after the effective date of this Registration Statement.

If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. o

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 
Large accelerated filer o   Accelerated filer o
Non-accelerated filer x (Do not check if a smaller reporting company)   Smaller reporting company o

Each membership unit in IMH Secured Loan Fund, LLC, $10,000 per unit stated value, will be exchanged for 246.4471 shares of Class B or Class C common stock of IMH Financial Corporation, or a combination thereof.

The shares of Class B, Class C and Class D common stock of IMH Financial Corporation are not, and will not be, listed on any national securities exchange.



 

The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until this registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 


 
 

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The information in this consent solicitation/prospectus is not complete and may be changed. IMH Financial Corporation may not distribute or issue the securities being registered pursuant to the registration statement of which this consent solicitation/prospectus is a part until the registration statement that is filed with the Securities and Exchange Commission is effective. This consent solicitation/prospectus is not an offer to distribute these securities and we are not soliciting offers to receive these securities in any jurisdiction where such offer or distribution is not permitted.

 
Consent Solicitation/Prospectus   SUBJECT TO COMPLETION, DATED FEBRUARY 16, 2010

[GRAPHIC MISSING]

Strategic Transaction Proposed — Your Vote is Important

Dear IMH Secured Loan Fund, LLC Member:

On behalf of IMH Secured Loan Fund, LLC, or the Fund, it is my pleasure to request your written consent to a series of proposed transactions, or the Conversion Transactions, that will restructure the Fund’s financial and operational affairs. The manager of the Fund, Investors Mortgage Holdings Inc., or the Manager, believes these transactions will:

position the Fund to become a publicly traded corporation listed on the New York Stock Exchange, or NYSE;
create the opportunity for liquidity for members;
cause the Fund to be internally managed, which would eliminate conflicts and more fully align the interests of the Fund, the Manager and IMH Holdings, LLC, which is a holding company for other affiliates of the Manager;
create the opportunity for us to raise additional capital in the public markets, thereby enabling us to better acquire and originate commercial mortgage loans and other real estate related investment opportunities;
create the opportunity to achieve long term value for our stockholders through dividends and capital appreciation; and
create a board of directors comprised of a majority of independent directors, which will enhance our corporate governance.

The Conversion Transactions involve (i) the merger of the Fund, which is currently a Delaware limited liability company, into a newly-formed Delaware corporation named IMH Financial Corporation, and (ii) the acquisition by IMH Financial Corporation of all of the outstanding shares of the Manager, as well as all of the outstanding membership interests of IMH Holdings, LLC, or Holdings. In connection with the Conversion Transactions, the Manager has also approved a stock incentive plan, which we refer to as the 2010 IMH Financial Corporation Stock Incentive Plan, or the 2010 Stock Incentive Plan. Upon the consummation of the Conversion Transactions, we intend to raise capital through an initial public offering of IMH Financial Corporation common stock and to list our common stock on the NYSE; however, the initial public offering and listing of our common stock are not conditions to the consummation of the Conversion Transactions.

Enclosed you will find the notice of consent solicitation, consent solicitation/prospectus and consent to approve (i) the Conversion Transactions, including a merger and contribution agreement to implement the Conversion Transaction by and among the Fund, IMH Financial Corporation, the Manager and its stockholders, and Holdings and its members, which we refer to as the merger agreement, and (ii) the 2010 Stock Incentive Plan. The Manager has approved the Conversion Transactions and the 2010 Stock Incentive Plan, has determined that they are advisable and in the best interests of the Fund and its members, and recommends that you vote “FOR” their approval.

As a result of the merger of the Fund into IMH Financial Corporation, your membership units will be exchanged, at your election, for shares of Class B or Class C common stock of IMH Financial Corporation, or a combination thereof. The Class B common stock will be held by a custodian and divided into three separate series of Class B common stock, which will become convertible into common stock, and subject to restrictions on transfer that lapse, at predetermined intervals of six, nine or 12 months following the consummation


 
 

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of an initial public offering. All shares of Class B common stock not previously converted to common stock and still outstanding on the 12-month anniversary of the consummation of an initial public offering will be entitled to a special dividend of $0.95 per share of Class B common stock, or the Special Dividend, subject to the availability of legally distributable funds at that time and representation to the custodian that the holder has complied with the applicable transfer restrictions. At any time after the expiration of the applicable transfer restriction period, any holder of Class B common stock may convert its Class B common stock into common stock by submitting a notice of conversion to the custodian and representing to the custodian that the holder has complied with the applicable transfer restrictions. Following the 12-month anniversary of the consummation of an initial public offering, each remaining outstanding share of Class B common stock will automatically convert into one share of common stock of IMH Financial Corporation.

There will be one series of Class C common stock which will also be held by the custodian and will either be redeemed for cash or converted into Class B common stock, as discussed below. Following the consummation of an initial public offering, we intend, in our sole discretion, to use up to 30% of the net proceeds from the offering (up to an aggregate of $50 million) to effect a pro rata redemption of Class C common stock (based upon the number of shares of Class C common stock held by each stockholder) at the initial public offering price, less selling commissions and discounts paid or allowed to the underwriters in the initial public offering. In the event that you elect to receive shares of Class C common stock and any of those shares of Class C common stock are redeemed, we expect that the amount you will receive per share will be less than the amount of your original investment in the Fund per unit and less than the current net asset value of the Fund per unit held by you. All shares of Class C common stock that are not so redeemed will automatically convert into shares of Class B common stock.

As a result of the Conversion Transactions, the current executive officers of the Manager will become the executive officers of IMH Financial Corporation. In addition, IMH Financial Corporation will purchase the ownership interests of the Manager and Holdings from the stockholders of the Manager and the members of Holdings in exchange for an aggregate of 995,750 shares of Class B common stock of IMH Financial Corporation, a portion of which will be issued to holders of outstanding stock appreciation rights of the Manager in exchange for cancellation of those rights, which will represent approximately 5.2% of the fully-diluted common stock of IMH Financial Corporation and will not be eligible to convert into common stock of IMH Financial Corporation for 12 months following the consummation of an initial public offering. In addition, Mr. Meris and I have agreed to enter into lock-up agreements pursuant to which the shares of Class B common stock received by Mr. Meris and myself would be subject to transfer restrictions that would be released over a three year period. We believe the Class B common stock held by the executive officers will more fully align their interests with IMH Financial Corporation in an internally managed structure.

Based on the number of outstanding membership units of the Fund as of February 11, 2009, we expect that IMH Financial Corporation will issue an aggregate of approximately 19 million shares of Class B and Class C common stock in the Conversion Transactions.

Pursuant to this consent solicitation/prospectus, the Fund is asking you to approve:

(i) the Conversion Transactions, including the adoption of the merger agreement, and
(ii) the adoption of the 2010 Stock Incentive Plan.

At least a majority of the issued and outstanding membership units of the Fund entitled to vote must cast votes in favor of these proposals in order for them to be approved. The Manager (i) has approved the


 
 

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Conversion Transactions, the merger agreement and the 2010 Stock Incentive Plan, (ii) has determined that the Conversion Transactions, the merger agreement and the 2010 Stock Incentive Plan are advisable and in the best interests of the Fund and its members, and (iii) recommends that you vote “FOR” the approval of the Conversion Transactions, the merger agreement and the 2010 Stock Incentive Plan.

It is very important that your membership units in the Fund be represented in the consent solicitation. Therefore, you should complete and sign the enclosed consent and return it as soon as possible, and in any event no later than the date which is 30 days from the mailing date of this consent solicitation/prospectus in the enclosed postage-paid envelope, or vote via the Internet by visiting www.dfking.com/imh. This will ensure that your membership units in the Fund are represented in the tabulation of the votes.

The accompanying consent solicitation/prospectus contains important details about the Conversion Transactions and our business plans in the future. We encourage you to read carefully this entire consent solicitation/prospectus, including all of its annexes, and the section entitled “Risk Factors” beginning on page 40.

Sincerely,
  
/s/ Shane C. Albers

Shane C. Albers
Chief Executive Officer
Investors Mortgage Holdings Inc.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved the securities or passed upon the accuracy or adequacy of the disclosures contained in this consent solicitation/prospectus. Any representation to the contrary is a criminal offense.

This consent solicitation/prospectus is dated       , 2010, and is being first mailed to members on or about       , 2010.


 
 

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IMH Secured Loan Fund, LLC



 

NOTICE OF CONSENT SOLICITATION



 

NOTICE IS HEREBY GIVEN that the members of IMH Secured Loan Fund, LLC are being requested to consider and vote on the following matters:

1. a proposal to approve the Conversion Transactions, including the adoption of a merger and contribution agreement, by and among IMH Secured Loan Fund, LLC, IMH Financial Corporation, Investors Mortgage Holdings Inc. and its stockholders, and IMH Holdings, LLC and its members, or the merger agreement; and
2. a proposal to adopt the 2010 IMH Financial Corporation Stock Incentive Plan.

The proposed Conversion Transactions are (i) the merger of IMH Secured Loan Fund, LLC with and into IMH Financial Corporation, with IMH Financial Corporation as the surviving entity, and (ii) the acquisition by IMH Financial Corporation of all of the outstanding shares of Investors Mortgage Holdings Inc. and all of the outstanding membership interests of IMH Holdings, LLC, in each case in exchange for shares of Class B common stock of IMH Financial Corporation. IMH Secured Loan Fund, LLC, through its manager, Investors Mortgage Holdings Inc., reserves the right to cancel or defer the Conversion Transactions even if the members of the Fund vote to approve the Conversion Transactions and the other conditions to the consummation of the Conversion Transactions are satisfied or waived.

Investors Mortgage Holdings Inc., the manager of IMH Secured Loan Fund, LLC, has (i) approved the Conversion Transactions, the merger agreement and adoption of the 2010 Stock Incentive Plan, and (ii) determined that the Conversion Transactions, the merger agreement and the 2010 Stock Incentive Plan are advisable and in the best interests of IMH Secured Loan Fund, LLC and its members, and (iii) recommends that the members of IMH Secured Loan Fund, LLC vote “FOR” the proposals to approve the Conversion Transactions and adopt the 2010 Stock Incentive Plan.

To ensure that your membership units in IMH Secured Loan Fund, LLC are represented, please complete, sign and date the enclosed consent and mail the consent promptly and in any event no later than       , 2010 in the enclosed, postage-paid envelope, or vote via the Internet by visiting www.dfking.com/imh. IMH Secured Loan Fund, LLC reserves the right to extend, one or more times, the final date for receipt of written consents beyond           , 2010, in the event that consents approving the Conversion Transactions and the 2010 Stock Incentive Plan have not been obtained by that date from holders of a sufficient number of membership units in the Fund to approve the Conversion Transactions and the 2010 Stock Incentive Plan. Any such extensions may be made without notice to members of the Fund. Once all conditions to the Conversion Transactions have been satisfied or waived, the consent solicitation will conclude. Any executed but unmarked consents will be voted “FOR” the proposals to approve the Conversion Transactions and adopt the 2010 Stock Incentive Plan. A member of IMH Secured Loan Fund, LLC may generally revoke a returned consent until the earlier to occur of (i) the final date for receipt of written consents (including any extensions thereof) and (ii) receipt of a sufficient number of consents to approve the Conversion Transaction and the 2010 Stock Incentive Plan. If you wish to change or revoke a previously given consent before that time, you may do so by delivering a written notice of revocation to IMH Secured Loan Fund, LLC or by delivering a new written consent with a later date. If your broker holds your membership units in IMH Secured Loan Fund, LLC in street name, you must either direct your broker on how to vote your membership units in the Fund or obtain a proxy from your broker to vote your


 
 

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membership units by completing the enclosed consent. Please check the voting form used by your broker for information on how to submit your instructions for membership units held in street name.

THE ADOPTION OF THESE PROPOSALS REQUIRES THAT THEY ARE APPROVED BY THE AFFIRMATIVE VOTE OF A MAJORITY OF THE OUTSTANDING MEMBERSHIP UNITS IN IMH SECURED LOAN FUND, LLC ENTITLED TO VOTE THEREON.

Important details concerning the matters upon which you are being asked to vote are set forth in the accompanying consent solicitation/prospectus for your inspection.

Investors Mortgage Holdings Inc. has fixed the close of business on           , 2010 as the record date for the determination of members of the Fund entitled to vote upon the proposals. Only the holders of record of membership units in IMH Secured Loan Fund, LLC as of the close of business on           , 2010, are entitled to notice of, and to vote on, the proposals.

Members of IMH Secured Loan Fund, LLC are encouraged to carefully read the accompanying consent solicitation/prospectus and complete the accompanying consent.

Your vote is important, no matter how many or how few membership units you own in IMH Secured Loan Fund, LLC.

By Order of the Board of Directors of
Investors Mortgage Holdings Inc.,
  
/s/ Steven Darak
Corporate Secretary

          , 2010
Scottsdale, Arizona


 
 

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ADDITIONAL INFORMATION

This document, which is sometimes referred to as this consent solicitation/prospectus, constitutes a consent solicitation of IMH Secured Loan Fund, LLC, or the Fund, with respect to the solicitation of votes by the Fund for the proposals described within, and a prospectus of IMH Financial Corporation for the Class B and Class C common stock of IMH Financial Corporation to be issued in the Conversion Transactions. See the section entitled “Where You Can Find Additional Information” beginning on page 280. You may also obtain copies of the documents that we file with the Securities and Exchange Commission, or SEC, without charge, from the Fund by writing or calling:

IMH Secured Loan Fund, LLC
4900 N. Scottsdale Rd Suite 5000
Scottsdale, Arizona 85251
Attention: Investor Relations
(480) 840-8400

You also may obtain any documents incorporated by reference into this consent solicitation/prospectus by requesting them in writing or by telephone from the consent solicitor for the Conversion Transactions at the following address and telephone number:

D.F. King & Co., Inc.
48 Wall Street
New York, New York 10005
(800) 966-8932

To receive timely delivery of requested documents in advance of the voting deadline, you should make your request no later than           , 2010.

VOTING

The members of record of the Fund as of the close of business on the record date may submit their votes by completing the enclosed consent, signing and dating the consent and returning the consent in the enclosed, postage-paid envelope. You may also vote via the Internet by visiting www.dfking.com/imh. Members of the Fund may vote to approve the Conversion Transactions and the 2010 Stock Incentive Plan on or before           , 2010, the final date for receipt of written consents. The Fund reserves the right to extend, one or more times, the final date for receipt of written consents beyond           , 2010, in the event that consents approving the Conversion Transactions and the 2010 Stock Incentive Plan have not been obtained by that date from holders of a sufficient number of membership units in the Fund to approve the Conversion Transactions and the 2010 Stock Incentive Plan. Any such extensions may be made without notice to members of the Fund. Once all conditions to the Conversion Transactions have been satisfied or waived, the consent solicitation will conclude.

If your membership units in the Fund are held in the name of a broker, bank or other nominee, then you are not the member of record and you must either direct your broker on how to vote your membership units in the Fund or obtain a proxy, executed in your favor, from the record holder. Please note that members who hold their membership units in the Fund in “street-name” (i.e., through a bank, broker or other nominee) may also be able to provide voting instructions to their street name holders by telephone or via the Internet by following the instructions provided by such nominee. The votes entitled to be cast by the holders of membership units in the Fund represented by properly authorized consents will be cast as indicated.


 
 

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QUESTIONS AND ANSWERS ABOUT THE CONSENT SOLICITATION AND THE CONVERSION TRANSACTIONS     1  
SUMMARY     16  
General     16  
Our Company     17  
Structure of the Conversion Transactions     19  
Board of Directors of IMH Financial Corporation; Manager of IMH Financial Corporation     21  
Recommendation of the Manager     21  
Interests of Certain Persons in the Conversion Transactions     22  
Special Dividend     24  
Distribution Policy Following the Consummation of the Conversion
Transactions
    24  
Proposed Initial Public Offering of Our Common Stock Following the Consummation of the Conversion Transactions     24  
NYSE Listing     24  
Redemption of Class C Common Stock in Connection with an Initial Public Offering     25  
Exchange of Class C Common Stock for Common Stock if the Board of Directors Decides Not to Pursue an Initial Public Offering     25  
Material U.S. Federal Income Tax Consequences of the Conversion Transactions and of Holding IMH Financial Corporation Common Stock     25  
Section 362(e) Tax Election     25  
Members Entitled to Vote     26  
Votes Required to Approve the Conversion Transactions and the Adoption of the 2010 Stock Incentive Plan; No Dissenters’ Rights     26  
Regulatory Approvals     26  
Comparison of Rights of Holders of Membership Units in the Fund and Stockholders of IMH Financial Corporation     27  
Comparison of Rights of the Holders of Common Stock, Class B Common Stock and Class C Common Stock of IMH Financial Corporation     27  
SELECTED HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL INFORMATION     28  
IMH Secured Loan Fund, LLC Selected Historical Financial Information     28  
Investors Mortgage Holdings Inc. and IMH Holdings, LLC Selected Historical Financial Information     35  
IMH Financial Corporation Summary Unaudited Pro Forma Condensed Combined Financial Information     37  
SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS     38  
RISK FACTORS     40  
Risks Related to the Conversion Transactions     40  
Risks Related to Our Investment Strategy Following the Consummation of Conversion Transactions     49  
Other Risks Related to Our Operations     60  
Other Risk Factors     70  

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VOTING AND CONSENTS     76  
Date and Time to Tabulate Consents     76  
Matters to be Considered     76  
Recommendation of the Manager     77  
Who May Vote     77  
Vote Required     77  
How to Vote Your Membership Units in the Fund     77  
Absence of Dissenter’s Rights     78  
Revocation of Consents     78  
Consent Solicitation and Tabulation of Votes     78  
Other Matters     78  
PROPOSAL NO. 1: THE CONVERSION TRANSACTIONS     79  
General     79  
Our Company     79  
Structure of the Conversion Transactions     82  
BACKGROUND OF THE CONVERSION TRANSACTIONS     84  
OUR REASONS FOR THE CONVERSION TRANSACTIONS     86  
INTERESTS OF CERTAIN PERSONS IN THE CONVERSION TRANSACTIONS     93  
TERMS OF THE CONVERSION TRANSACTIONS     96  
Structure and Consummation of the Conversion Transactions     96  
Issuance of IMH Financial Corporation Stock     97  
Terms of the IMH Financial Corporation Common Stock Exchanged in the Conversion Transactions     98  
Restrictions on Sales of IMH Financial Corporation Shares Issued to Affiliates Pursuant to the Conversion Transactions     100  
Conditions to Consummation of the Conversion Transactions     100  
Termination of the Merger Agreement     101  
DIVIDEND AND DISTRIBUTION POLICY     103  
Dividend and Distribution Policy of IMH Financial Corporation     103  
Historical Distribution Policy of IMH Secured Loan Fund, LLC     104  
OUR BUSINESS     106  
Our Company     106  
Information Regarding Our Current Portfolio     108  
Industry Dynamics and Market Opportunities     109  
Our Competitive Strengths     110  
Our Investment Strategy     113  
Our Target Assets     114  
Current Portfolio Disposition Strategy     116  
Acquisition and Origination Policy     116  
Resolution of Potential Conflicts of Interest in Allocation of Investment Opportunities     118  
Investment Sourcing     119  
Investment Process     120  

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Properties     122  
Competition     123  
Employees     123  
Regulation     124  
Legal Proceedings     126  
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION     128  
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF IMH SECURED LOAN FUND, LLC     142  
Our Company     142  
Selected Financial Data     144  
Factors Affecting our Financial Results     150  
Results of Operations for the Nine and Three Months Ended September 30, 2008 and 2009     154  
Results of Operations for the Years Ended December 31, 2006, 2007 and 2008     166  
Important Relationships Between Capital Resources and Results of Operations     180  
Off-Balance Sheet Arrangements     193  
Contractual Obligations     194  
Liquidity and Capital Resources     194  
Critical Accounting Policies     202  
Quantitative and Qualitative Disclosures About Market Risk of IMH Secured Loan Fund, LLC     207  
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF INVESTORS MORTGAGE HOLDINGS INC. AND IMH HOLDINGS, LLC     212  
Overview of the Business     212  
Selected Financial Data     214  
Results of Operations for the Nine Months Ended September 30, 2008 and 2009     214  
Results of Operations for the Years Ended December 31, 2006, 2007 and 2008     218  
Liquidity and Capital Resources     221  
Critical Accounting Policies     222  
Recent Accounting Pronouncements     224  
Quantitative and Qualitative Disclosures About Market Risk     226  
OUR OFFICERS     227  
General     227  
The Manager     227  
Removal of Investors Mortgage Holdings Inc. as Manager     227  
Officers and Key Employees     228  
Investment Committee     229  

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BOARD OF DIRECTORS OF OUR MANAGER     231  
Directors of the Manager     231  
Compensation of Directors     231  
CORPORATE GOVERNANCE     232  
Committees of the Board     232  
Audit Committee     232  
Compensation Committee     232  
Compensation Committee Interlocks and Insider Participation     233  
Nominating and Corporate Governance Committee     233  
Corporate Governance Guidelines     233  
Communications with the Board of Directors     234  
Director Attendance at Annual Meeting     234  
Code of Business Conduct and Ethics     234  
EXECUTIVE COMPENSATION     235  
Compensation Discussion and Analysis     235  
Current Compensation of the Manager     235  
Discussion and Analysis of Current Compensation Program     237  
IMH Financial Corporation’s Intended Compensation Programs Following Consummation of the Conversion Transactions     240  
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS     244  
DESCRIPTION OF IMH FINANCIAL CORPORATION’S CAPITAL STOCK     246  
General     246  
Capital Stock     246  
Delaware Law     253  
Certificate of Incorporation and Bylaws     253  
COMPARISON OF RIGHTS OF HOLDERS OF IMH SECURED LOAN FUND, LLC AND IMH FINANCIAL CORPORATION     255  
LIMITATION OF LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS     268  
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS     269  
PROPOSAL NO. 2: APPROVAL OF THE 2010 IMH FINANCIAL CORPORATION EMPLOYEE STOCK INCENTIVE PLAN     273  
LEGAL MATTERS     280  
EXPERTS     280  
MEMBER PROPOSALS     280  
OTHER MATTERS     280  
WHERE YOU CAN FIND ADDITIONAL INFORMATION     280  
INDEX TO FINANCIAL STATEMENTS OF IMH SECURED LOAN FUND, LLC     F-1  
INDEX TO FINANCIAL STATEMENTS OF INVESTORS MORTGAGE HOLDINGS INC.     F-70  

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ANNEXES

 
ANNEX A   Merger And Contribution Agreement, by and among IMH Secured Loan Fund, LLC, IMH Financial Corporation, Investors Mortgage Holdings, Inc. and its Stockholders, IMH Holdings, LLC and its Members.
ANNEX B   Form of Amended and Restated Certificate of Incorporation of IMH Financial Corporation.
ANNEX C   Form of Bylaws of IMH Financial Corporation.
ANNEX D   Form of 2010 IMH Financial Corporation Employee Stock Incentive Plan.
ANNEX E   Form of Notice of Conversion.
ANNEX F   Fairness Opinion of Sutter Securities Incorporated.
ANNEX G   Form of Lock-Up Agreement.

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QUESTIONS AND ANSWERS ABOUT THE CONSENT SOLICITATION
AND THE CONVERSION TRANSACTIONS

Q: Why am I receiving this consent solicitation/prospectus?
A: Investors Mortgage Holdings Inc., the manager of IMH Secured Loan Fund, LLC, or the Manager, has approved a plan to merge IMH Secured Loan Fund, LLC, or the Fund, a Delaware limited liability company, with and into a newly incorporated Delaware corporation named IMH Financial Corporation, and to internalize the management of the Fund by acquiring all of the outstanding shares of common stock of the Manager, and all of the membership interests of IMH Holdings, LLC, or Holdings, a holding company for other affiliates of the Manager, as a result of which the Manager and Holdings would become wholly-owned subsidiaries of IMH Financial Corporation. We refer to these transactions as the Conversion Transactions. This document is a consent solicitation because it is being used by the Fund to solicit consents from the members of the Fund to approve the Conversion Transactions and the 2010 Stock Incentive Plan. It is a prospectus because IMH Financial Corporation is offering shares of Class B and Class C common stock in exchange for membership units in the Fund if the Conversion Transactions are consummated. The Fund is seeking approval from the holders of membership units in the Fund necessary to approve the Conversion Transactions.
Q: What am I being asked to vote on?
A: You are being asked to vote to approve (i) the Conversion Transactions, including adoption of the related merger agreement, as described below, and (ii) the 2010 Stock Incentive Plan.
Q: Why are we undertaking the Conversion Transactions?
A: The Manager’s reasons for undertaking the Conversion Transactions include, without limitation, the following:
to position the Fund to become a publicly traded corporation listed on the New York Stock Exchange, or NYSE:
to create the opportunity for liquidity for members of the Fund, who are currently restricted from redeeming their membership units in the Fund and have significant restrictions on their ability to transfer their membership units in the Fund;
to cause the Fund to be internally managed, which would eliminate conflicts and more fully align the interests of the Fund, the Manager and Holdings;
to create the opportunity for us to raise additional capital in the public markets, thereby enabling us to better acquire and originate commercial real estate mortgage loans and other real estate related investment opportunities;
to create the opportunity to achieve long term value for our stockholders through dividends and capital appreciation;
to create a board of directors comprised of a majority of independent directors, which will enhance our corporate governance;
to allow the members of the Fund to benefit from potential management fees, origination fees and points associated with the origination of new commercial mortgage loans, penalty fee, gains pertaining to portfolio assets and other income historically retained by the Manager and its affiliates;

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to provide holders electing to receive Class C common stock in the Conversion Transactions with the potential to be redeemed in whole or in part if sufficient net proceeds are raised in an initial public offering; and
to provide the members of the Fund with what we believe to be a more efficient corporate structure within which to operate our business going forward.
Q: What are the primary steps in the Conversion Transactions?
A: The Conversion Transactions will be implemented through the following:
the merger of the Fund with and into IMH Financial Corporation, the Fund’s wholly-owned subsidiary, with IMH Financial Corporation as the surviving entity, pursuant to which each membership unit you hold in the Fund will be exchanged, at your election, for 246.4471 shares of Class B common stock or 246.4471 shares of Class C common stock of IMH Financial Corporation or a combination thereof; and
the acquisition by IMH Financial Corporation of all of the outstanding shares of the Manager and all of the outstanding membership interests in Holdings, in exchange for an aggregate of 995,750 shares of Class B-3 common stock in IMH Financial Corporation, a portion of which will be issued to holders of outstanding stock appreciation rights of the Manager in exchange for cancellation of those rights, as a result of which the Manager and Holdings will become wholly-owned subsidiaries of IMH Financial Corporation.

We have attached a copy of a merger and contribution agreement, by and among IMH Secured Loan Fund, LLC, IMH Financial Corporation, Investors Mortgage Holdings Inc. and its stockholders, and IMH Holdings, LLC and its members, or the merger agreement, as Annex A. Copies of the forms of IMH Financial Corporation’s amended and restated certificate of incorporation and bylaws are attached as Annex B and Annex C, respectively, to this consent solicitation/prospectus.

Q: What happens to the outstanding assets, liabilities and business of the Fund, the Manager and Holdings pursuant to the Conversion Transactions?
A: Pursuant to the Conversion Transactions, the Fund’s assets, liabilities and business will become the assets, liabilities and business of IMH Financial Corporation. The assets, liabilities and business of the Manager and Holdings remain the respective assets, liabilities and business of the Manager and Holdings, but as a result of the Conversion Transactions, the Manager and Holdings will become wholly-owned subsidiaries of IMH Financial Corporation.
Q: Are there other events and transactions expected to occur in connection with the Conversion Transactions?
A: Yes. Following the consummation of the Conversion Transactions, we contemplate, among other things, that:
IMH Financial Corporation will apply to have its common stock listed on the NYSE;
IMH Financial Corporation will seek to raise capital through an initial public offering of its common stock;
after the consummation of an initial public offering, IMH Financial Corporation intends, in its sole discretion, to use up to 30% of the net proceeds from the initial public offering (up to an aggregate of $50 million) to effect a pro rata redemption of Class C common stock (based upon

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the number of shares of Class C common stock held by each stockholder) at the initial public offering price, less selling commissions and discounts paid or allowed to the underwriters in the initial public offering; all shares of Class C common stock that are not so redeemed will automatically be converted into shares of Class B common stock;
IMH Financial Corporation will adopt an investment policy that we believe will be more reflective of the current and anticipated opportunities and market conditions relevant to IMH Financial Corporation;
the executive officers of the Manager will become the executive officers of IMH Financial Corporation and enter into employment agreements with IMH Financial Corporation;
IMH Financial Corporation will appoint a seven-person board of directors, which we expect will be comprised of the two existing directors of the Manager, Shane Albers and William Meris, and as soon as practicable, five new directors who are expected to be considered independent under the rules of the New York Stock Exchange, or NYSE, and the Securities and Exchange Commission, or SEC.
the 2010 Stock Incentive Plan will be approved by the members of the Fund and implemented;
subject to the discretion of the board, IMH Financial Corporation will set a dividend policy that will provide for the payment of a quarterly dividend beginning after the first full quarter after the consummation of the Conversion Transactions and an initial public offering;
IMH Financial Corporation will have the right to issue in private transactions five year warrants which will become exercisable in equal installments over the three year period following the consummation of an initial public offering for up to an aggregate of 200,000 shares in exchange for termination of selling agreements with certain broker-dealers who assisted the Manager in raising equity capital for the Fund and in lieu of paying the broker-dealers a portion of the late fees, penalties or net proceeds received by the Manager pursuant to the Fund’s operating agreement from the sale of foreclosed or related assets of the Fund; and
IMH Financial Corporation will seek to pay a Special Dividend of $0.95 per share of Class B Common Stock outstanding on the one year anniversary of the consummation of an initial public offering, subject to availability of legally distributable funds at that time.

The consummation of an initial public offering is not a condition to the Conversion Transactions. If we do not raise additional capital through the consummation of an initial public offering or otherwise, however, we may not be able to acquire or originate new loans or invest in other real estate related opportunities as contemplated, institute a dividend policy, or pay the Special Dividend.

Q: What will I receive in connection with the Conversion Transactions?
A: If the Conversion Transactions are consummated as contemplated, you will receive, at your election, 246.4471 shares of Class B or Class C common stock of IMH Financial Corporation, or a combination thereof, in exchange for each membership unit in the Fund that you own on the record date. You may choose any combination of Class B or Class C common stock. If you elect to receive shares of Class B common stock in the Conversion Transactions, 25% will be shares of Class B-1 common stock, 25% will be shares of Class B-2 common stock, and 50% will be shares of Class B-3 common stock. No fractional shares of IMH Financial Corporation Class B or Class C common stock will be issued in the Conversion Transactions and no certificate for any fractional shares will be issued. After aggregating all fractional share amounts of a particular holder in the Conversion Transactions into one

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or more whole shares of Class B-3 common stock, any remaining fractional share interest will either be (i) rounded up to the nearest whole share if the fractional interest is equal to or greater than 0.5 of a share, in which case one additional share of Class B-3 common stock will be issued to the holder, or (ii) rounded down to the nearest whole share if the fractional interest is less than 0.5 of a share.
Q: In general, what are the key terms of the Class B and Class C common stock in IMH Financial Corporation that will be issued in the Conversion Transactions?
A: In general, the key terms of the IMH Financial Corporation Class B and Class C common stock to be issued in the Conversion Transactions include, without limitation, the following:
each share of Class B-1, Class B-2, Class B-3 and Class C common stock will be initially issued to a custodian for the benefit of the respective holders, each share of Class C common stock will be non-transferable, and each share of Class B common stock will be subject to certain restrictions on transfer or sale for six, nine or 12 months following the earlier of (i) the consummation of an initial public offering, and (ii) the 90th day after the board of directors of IMH Financial Corporation determines that it will not pursue an initial public offering, as described below;
after the consummation of an initial public offering, IMH Financial Corporation may, in its sole discretion, use up to 30% of the net proceeds of the initial public offering (up to an aggregate of $50 million) to effect a pro rata redemption of Class C common stock (based upon the number of shares of Class C common stock held by each stockholder) at the initial public offering price, less selling commissions and discounts paid or allowed to the underwriters in the initial public offering; no fractional shares will be redeemed; all shares of Class C common stock that are not so redeemed will automatically be converted into shares of Class B common stock as follows: 25% of the outstanding shares of Class C common stock will convert into shares of Class B-1 common stock; 25% will convert into shares of Class B-2 common stock; and 50% will convert into shares of Class B-3 common stock; members of the Fund will not know the per share redemption price of the Class C common stock at the time they elect to receive shares of Class B or Class C common stock;
at any time after the six-month anniversary of the earlier of (i) the consummation of an initial public offering, and (ii) the 90th day after the board of directors of IMH Financial Corporation determines that it will not pursue an initial public offering, all shares of Class B-1 common stock will be eligible to convert, at the option of the respective holders, into shares of IMH Financial Corporation common stock that will not be subject to restrictions on transfer under the certificate of incorporation of IMH Financial Corporation, and may be so converted by a holder of Class B-1 common stock by sending a notice of conversion to the custodian and representing to the custodian that the holder has complied with the applicable transfer restrictions;
at any time after the nine-month anniversary of the earlier of (i) the consummation of an initial public offering, and (ii) the 90th day after the board of directors of IMH Financial Corporation determines that it will not pursue an initial public offering, all shares of Class B-2 common stock will be eligible to convert, at the option of the respective holders, into shares of IMH Financial Corporation common stock that will not be subject to restrictions on transfer under the certificate of incorporation of IMH Financial Corporation, and may be so converted by a holder of Class B-2 common stock by sending a notice of conversion to the custodian and representing to the custodian that the holder has complied with the applicable transfer restrictions;

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following the earlier of the twelve-month anniversary of the earlier of (i) the consummation of an initial public offering, and (ii) the 90th day after the board of directors of IMH Financial Corporation determines not to pursue an initial public offering, all outstanding shares of Class B-1, Class B-2 and Class B-3 common stock will automatically convert into shares of IMH Financial Corporation common stock that will not be subject to restrictions on transfer under the certificate of incorporation of IMH Financial Corporation;
if, at any time after the five-month anniversary of the consummation of an initial public offering, our common stock price is greater than or equal to 125% of the offering price in an initial public offering for 20 consecutive trading days, all shares of Class B common stock, will be eligible to convert, at the option of the respective holders, into shares of IMH Financial Corporation common stock that will not be subject to restrictions on transfer under the certificate of incorporation of IMH Financial Corporation, if the holder has submitted a notice to the custodian that the holder has complied with the applicable transfer restrictions;
the shares of Class B and Class C common stock will also automatically convert into shares of IMH Financial Corporation common stock that will not be subject to restrictions on transfer under the certificate of incorporation of IMH Financial Corporation, upon consummation of any “change in control” transaction, which generally includes (i) a merger of IMH Financial Corporation in which the IMH Financial Corporation’s holders of record do not immediately after such merger hold a majority of the voting power of the surviving corporation, (ii) any transaction in which 50% or more of IMH Financial Corporation’s voting power is transferred, or (iii) a sale of all or substantially all of the assets of IMH Financial Corporation, except to one or more affiliates of IMH Financial Corporation;
on the twelve-month anniversary of an initial public offering, we intend to pay, subject to the availability of legally distributable funds at that time, a one-time dividend equal to $0.95 per share of for each share of Class B common stock then outstanding, which we refer to as the “Special Dividend” (the Special Dividend will not be payable if we do not consummate an initial public offering);
if any holder of Class B common stock submits a notice of conversion to the custodian but does not represent to the custodian that the holder has complied with the applicable transfer restrictions, the conversion will not be effected, and if the holder represents that it has not complied with the applicable transfer restrictions, all of the shares of Class B common stock owned by the holder will be automatically converted into Class D common stock and will not be entitled to the Special Dividend and will not be convertible into common stock until the 12 month anniversary of the consummation of the Conversion Transactions, and then, only if the holder submits a representation to the custodian that the holder has complied with the applicable transfer restrictions for the 90 days prior to such representation and is not currently in violation of those transfer restrictions;
similarly, if a holder’s shares of Class B common stock have been automatically converted into common stock on the 12 month anniversary as described above, then to withdraw or transfer those shares, the holder must provide a representation to the custodian that the holder has complied with the applicable transfer restrictions, and if the holder represents to the custodian that it has not complied with the applicable transfer restrictions then the custodian (i) will not release the shares for a period of 90 days thereafter, and then, only upon receipt of a representation that

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the holder has complied with the restrictions for the 90 days prior to such representation and is not currently in violation, and (ii) will return to IMH Financial Corporation the Special Dividend (if it has been declared and paid); and
if the board of directors of IMH Financial Corporation determines that it will not pursue an initial public offering, it may, beginning 90 days after that determination, convert up to 20% of the outstanding shares of Class C common stock into shares of freely tradeable common stock, with the remaining shares of Class C common stock automatically converting into shares of Class B common stock on the following basis: 25% would convert into Class B-1 common stock, 25% would convert into Class B-2 common stock and 50% would convert into Class B-3 common stock. The restrictions on transfer of the Class B Shares will continue for six, nine or 12 months following the 90th day after the board of directors makes the determination not to pursue an initial public offering.

Holders of Class B common stock may not be notified when their shares of Class B common stock become eligible for conversion.

Q: How do the shares of Class B and Class C common stock differ from the common stock that we intend to issue in an initial public offering or other financing?
A: Except as summarized in the answer to the immediately preceding question and as set forth in more detail under the section entitled “Description of IMH Financial Corporation’s Capital Stock,” IMH Financial Corporation Class B and Class C common stock will generally have the same powers, preferences, limitations and restrictions as IMH Financial Corporation common stock . However, while it is anticipated that shares of IMH Financial Corporation common stock will become listed and traded on a national securities exchange, shares of Class B and Class C common stock are subject to transfer restrictions and we do not plan to list the Class B or Class C common stock on any exchange, nor do we intend to include the Class B or Class C common stock in any automated quotation system. Therefore, we anticipate that no trading market for Class B and Class C common stock will develop. Rather, Class B common stock will become eligible for conversion to common stock at periodic intervals over a twelve-month period following consummation of an initial public offering. Unlike Class B common stock, the Class C common stock will be subject to redemption, in our discretion, following an initial public offering and will not be eligible for the Special Dividend, as discussed under the section entitled “Description of IMH Financial Corporation’s Capital Stock.” Our intent by establishing Class B and Class C common stock is to differentiate those stockholders who wish to become eligible to have all or a portion of their shares of common stock redeemed by us following consummation of the initial public offering, as compared to those who wish to hold their position, as well as become eligible for the Special Dividend.
Q: Can members of the Fund choose to receive either Class B or Class C common stock in the Conversion Transactions?
A: Yes. In connection with the consent solicitation, the members of the Fund may designate the percentage of whole shares of Class B and Class C common stock they wish to receive in exchange for their membership units. The members of the Fund may choose to receive any combination of Class B and Class C common stock by indicating in the consent attached to this consent solicitation/prospectus, subject to the limitation that each member will receive 246.4471 aggregate shares of Class B or Class C common stock in exchange for each membership unit in the Fund they hold. Even if a member of the Fund chooses not to vote on, or chooses not to vote in favor of, the Conversion Transactions or the 2010 Stock Incentive Plan, the member should still indicate its preference for the allocation of shares

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of Class B or Class C common stock in the consent attached to this consent solicitation/prospectus, and may not be given another opportunity to do so.
Q: What happens if a member fails to elect to receive either Class B or Class C common stock?
A: If the Conversion Transactions are consummated, the members who do not specify whether to receive any shares of Class B or Class C common stock will automatically receive shares of Class B common stock in exchange for their membership units in the Fund.
Q: Why do the shares of Class B common stock and Class C common stock have transfer restrictions?
A: Because member redemptions have been suspended since October 1, 2008, absent such transfer restrictions, we are concerned that the sudden potential liquidity resulting from the Conversion Transactions could prevent the orderly marketing of our shares of common stock in an initial public offering and prevent the development of a sustainable trading market thereafter. Accordingly, we have adopted a conversion schedule, whereby all shares of Class B common stock will systematically become eligible to convert to common stock at predetermined intervals over a 12 month period. To reward owners of Class B common stock for their patience, we propose to declare and pay, subject to the availability of legally distributable funds, a Special Dividend of $0.95 for each share of then outstanding Class B common stock to the holders of record on the one-year anniversary of the consummation of an initial public offering.
Q: Once the transfer restrictions no longer apply to my shares of Class B common stock, how can I convert them into shares of common stock of IMH Financial Corporation?
A: Once the applicable six or nine month transfer restrictions lapse, a holder of shares of Class B common stock may convert some or all of its shares of Class B common stock into shares of IMH Financial Corporation common stock that will not be subject to restrictions on transfer under the certificate of incorporation of IMH Financial Corporation, by sending a notice of conversion to the custodian and representing to the custodian that the applicable holder has complied with the transfer restrictions. Any shares of Class B common stock converted prior to the record date for the Special Dividend will not be eligible for the Special Dividend. If any holder of Class B common stock submits a notice of conversion to the custodian, but represents to the custodian that the holder has not complied with the applicable transfer restrictions, all shares of Class B common stock owned by the applicable holder will be converted into Class D common stock which may not be transferred or converted until the 12 month anniversary of the Conversion Transactions, and then, only if the applicable holder submits a representation to the custodian that the applicable holder has complied with the applicable transfer restrictions for the 90 days prior to such representation and is not currently in violation.
Q: If my shares of Class B common stock automatically convert to shares of common stock, how do I transfer them from the custodian?
A: If a holder’s shares of Class B common stock have been automatically converted into common stock as described above, then to withdraw or transfer those shares, the holder must provide a representation to the custodian that the holder has complied with the applicable transfer restrictions; if the holder represents that it has not complied with the applicable transfer restrictions then the custodian (i) will

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not release the shares for a period of 90 days thereafter, and then only upon receipt from the holder of a representation that the holder has complied with the transfer restrictions for the 90 days prior to such representation and is not currently in violation, and (ii) will return to IMH Financial Corporation the Special Dividend (if it has been declared and paid).
Q: What are some of the risks associated with the Conversion Transactions?
A: The risks associated with the Conversion Transactions include, without limitation, the following:
the potential conflicts of interest between the Fund and the Manager in approving the Conversion Transactions and valuing the Fund, the Manager and Holdings in the Conversion Transactions;
the absence of any arm’s length negotiation among the parties involved regarding the value or terms applicable to the Conversion Transactions;
the costs associated with seeking to effect the Conversion Transactions, whether or not the Conversion Transactions are consummated as contemplated;
the risk that the Conversion Transactions may not be consummated, which could harm the value of your membership units in the Fund;
the continued lack of liquidity in your investment in the membership units in the Fund and the stock of IMH Financial Corporation for a period of time, because of the limits on transferability and conversion after the consummation of the Conversion Transactions;
the potential volatility in the trading price of IMH Financial Corporation’s common stock following consummation of the Conversion Transactions;
as of the date of the consummation of the Conversion Transactions, the value of IMH Financial Corporation’s Class B or Class C common stock that you receive upon consummation of the Conversion Transactions in exchange for your membership units in the Fund will likely be less than your original investment in the membership units and the current net asset value per unit;
the possibility that the Conversion Transactions may not qualify for non-recognition treatment under the Internal Revenue Code of 1986, as amended, or the Code;
the expectation that the per-share price of an initial public offering will be less than both your original investment amount per unit in the Fund and the current net asset value per unit of the Fund;
the potential inability of IMH Financial Corporation to pay the Special Dividend to holders of Class B common stock that hold Class B common stock on the one-year anniversary of the consummation of an initial public offering;
the possibility that an initial public offering is not consummated on a timely basis, or at all, and the possibility that the initial public offering price or offering size may be unattractive to the holders of shares of common stock in IMH Financial Corporation;
there are important differences between your rights as an IMH Financial Corporation stockholder and your rights as a holder of membership units in the Fund as discussed under the section entitled “Comparison of the Rights of Holders of IMH Secured Loan Fund, LLC and IMH Financial Corporation”;

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the raising of additional capital through the sale by IMH Financial Corporation of shares of its common stock will be dilutive to you; and
certain other risks described in this consent solicitation/prospectus under the section entitled “Risk Factors” beginning on page 40.

For more information regarding risks associated with the Conversion Transactions and IMH Financial Corporation, see the section entitled “Risk Factors” beginning on page 40.

Q: Will the Conversion Transactions change the Fund’s business plan?
A: Yes. As we have communicated to the members of the Fund, the Manager has recently sought to manage the assets of the Fund with an aim to preserve capital and potentially distribute cash to the members. As part of the proposed Conversion Transactions, the Manager intends to continue to manage the assets to preserve capital and liquidity in order to pursue IMH Financial Corporation’s revised investment policy. Under this policy, we expect to continue to focus on generating revenues and capital gains through the acquisition, origination and management of commercial real estate mortgage loans and real estate related investments. However, as soon as reasonably practicable after the consummation of the Conversion Transactions, we expect the board of directors to consider opportunities to make distributions to stockholders, subject to legally available funds and liquidity requirements. We also believe the consummation of the Conversion Transactions will more favorably position IMH Financial Corporation to take advantage of new and developing commercial real estate mortgage loan acquisition and origination opportunities in the current economic environment. We believe our current structure limits our ability to do so by making it more difficult for us to raise capital and, thus, limiting the number of attractive opportunities we may pursue. We also believe that the Conversion Transactions, together with the financing from an initial public offering, will better position us financially and operationally to pursue our strategies of maximizing liquidity from our commercial mortgage loan portfolio as well as generating income through future investments in, and the active management of, a diversified investment portfolio of performing, distressed and non-performing commercial mortgage loans and other attractively priced real estate related investments that we believe are attractively priced. By doing so, we believe we can better reposition our portfolio assets to create the ability to pay regular dividends and increase our stockholder value. If we consummate the Conversion Transactions, but not an initial public offering, we may not be able to acquire or originate commercial mortgage loans or invest in other real estate related investment opportunities as contemplated without selling some or all of our existing portfolio assets, which may result in a loss in the event of a sale at this time or at some future time.
Q: How does the Manager expect IMH Financial Corporation to benefit from management and other fees?
A: Historically, the Manager and Holdings have operated independently of the Fund and revenue from both entities have specifically not benefitted the members of the Fund. In addition to the management fee that the Manager receives from the Fund, the Manager is also entitled to receive 100% of all origination fees and points associated with the origination of new mortgage loans and the modification or extension of existing mortgage loans, as well as 25% of all penalty fees and gains pertaining to the portfolio assets. The Fund paid the Manager $430,000, $968,000 and $1.1 million, respectively, in management fees for each of the three years ended December 31, 2006, 2007, and 2008, and $481,000 in management fees for the nine months ended September 30, 2009. The Manager also recorded gains totaling $0, $101,000 and $401,000 for its 25% share of gains during the years ended

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December 31, 2006, 2007 and 2008, respectively, and no gains for the nine months ended September 30, 2009. In addition, the Manager received origination and other fees and points in each of these periods. The Conversion Transactions are designed so that the fees the Fund currently pays to the Manager will instead be retained solely by IMH Financial Corporation following the consummation of the Conversion Transactions. Additionally, consummation of the Conversion Transactions also provides that 100% of the fees associated with loan origination, acquisition and modification, previously paid solely to the Manager, will instead inure to the sole benefit of IMH Financial Corporation following the consummation of the Conversion Transactions. Furthermore, Holdings, through subsidiaries, collects management fees from, and has rights to participate in profits generated by, the Strategic Wealth Income fund, or SWI Fund. Similarly, the Conversion Transactions ensure that all revenue otherwise payable to Holdings will inure to the sole benefit of IMH Financial Corporation.
Q: How do you intend to manage the Fund between the date of this consent solicitation/prospectus and the vote on the consummation of the Conversion Transactions?
A: We intend to continue to manage the Fund in a manner designed to preserve the Fund’s liquidity and to position the Fund to consummate the Conversion Transactions. In the event that we sell any of our portfolio assets during this period, we contemplate retaining the net proceeds from those dispositions to address the Fund’s liquidity needs and to position the Fund to implement the investment strategies contemplated by this consent solicitation/prospectus pending the vote of the members on the Conversion Transactions. We do not anticipate making distributions or offering redemptions to the members of the Fund during this period.
Q: Will the Manager continue to manage the business following the consummation of the Conversion Transactions?
A: Pursuant to the Conversion Transactions, the Manager will become internalized and the same persons who currently manage our business for the Manager will manage our business following the consummation of the Conversion Transactions in their new capacities as executive officers and employees of IMH Financial Corporation. In connection with the consummation of the Conversion Transactions, the Manager will become a wholly-owned subsidiary of IMH Financial Corporation and the Manager’s directors, Shane Albers and William Meris, will become directors of IMH Financial Corporation, the Manager’s executive officers will become the executive officers of IMH Financial Corporation, and the operating agreement between the Fund and the Manager will be terminated. We also plan to appoint as soon as practicable five additional directors, who we expect will be considered independent under NYSE and SEC rules.
Q: How will competition with the SWI Fund be addressed following the consummation of the Conversion Transactions and an initial public offering?
A: Following the consummation of the Conversion Transactions, Holdings will become a wholly-owned subsidiary of IMH Financial Corporation, and Holdings will continue to own SWI Management, LLC, or SWIM, the manager of the SWI Fund. The SWI Fund is a real estate investment fund with target classes of investment that are substantially similar to ours. At December 31, 2009, the SWI Fund had $10.5 million under management. Upon consummation of the Conversion Transactions, any benefit SWIM receives from managing the SWI Fund, including receipt of management fees, will inure to the sole benefit of IMH Financial Corporation. SWIM will have obligations to the SWI Fund and its members pursuant to the operating agreement between SWIM and the SWI Fund. In order to mitigate conflicts of interest between IMH Financial Corporation and the SWI Fund, upon the

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consummation of an initial public offering of IMH Financial Corporation common stock, SWIM will cease raising capital on behalf of the SWI Fund. Thereafter, SWIM will invest capital on behalf of the SWI Fund in the ordinary course. The independent members of the board of directors of IMH Financial Corporation (or a subcommittee) will decide, in its sole discretion, whether prospective asset acquisitions or origination opportunities that are suitable for both IMH Financial Corporation and the SWI Fund will be acquired or originated by IMH Financial Corporation or the SWI Fund. These decisions are expected to be based on various factors established by the independent members of the board of directors of IMH Financial Corporation (or a subcommittee) from time to time and may include factors such as the following:
whether the investments fall within our investment objectives, policies and strategies and/or those of the SWI Fund;
whether we have, and/or the SWI Fund has sufficient cash and purchasing power;
whether the terms of any necessary financing are appropriate for us and/or the SWI Fund;
whether the investment satisfies our portfolio needs and/or those of the SWI Fund;
whether the investment’s liquidity meets our cash flow requirements and/or those of the SWI Fund;
whether a similar type of investment (i.e., a geographic location, size of loan, quality of borrower, quality of guarantor, loan to value criteria, risk profile or type of collateral, among other factors) has recently been allocated to us and/or the SWI Fund;
whether the investment meets regulatory or legal requirements applicable to us or the SWI Fund; and
what impact the investment has on our portfolio diversification, and/or that of the SWI Fund.
Q: How much common stock does IMH Financial Corporation contemplate issuing in exchange for all of the outstanding shares in the Manager and all the outstanding membership interests in Holdings, and by what process was that number determined?
A: IMH Financial Corporation contemplates paying an aggregate of 995,750 shares of Class B-3 common stock to the stockholders of the Manager in exchange for purchasing all of their shares in the Manager and to the members of Holdings in exchange for all of their membership interests in Holdings. The aggregate purchase price being paid by IMH Financial Corporation for the Manager and Holdings is based upon the Manager’s assessment of reasonable compensation based on assets under management, management fees and termination fees paid in other internalization transactions, and will be subject to the receipt by the Manager, on behalf of the members of the Fund, of a fairness opinion from Sutter Securities Incorporated, or Sutter Securities, that the acquisitions of Manager and Holdings are fair, from a financial point of view, to IMH Financial Corporation and to the stockholders of IMH Financial Corporation (other than the owners of the Manager and Holdings). A copy of the fairness opinion is attached as Annex F to this consent solicitation/prospectus. The fairness opinion is subject to various assumptions, qualifications and limitations, and does not constitute a recommendation to members of the Fund in the Conversion Transactions as to how they should vote on the Conversion Transactions.

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Q: When will the Conversion Transactions be consummated and what are the conditions to consummating the Conversion Transactions?
A: We expect the Conversion Transactions will be consummated in the first quarter of 2010. Prior to consummation of the Conversion Transactions, we must satisfy or waive all of the closing conditions set forth in the merger agreement, including, without limitation, the following:
approval of the Conversion Transactions and the 2010 Stock Incentive Plan, and adoption of the merger agreement by the requisite vote of the members of the Fund;
confirmation that no stop order has been issued, and no proceedings seeking a stop order have been initiated, by the SEC with respect to IMH Financial Corporation’s registration statement on Form S-4 registering the shares of Class B, Class C and Class D common stock to be issued in the Conversion Transactions, of which this consent solicitation/prospectus is a part;
receipt of all governmental and third party consents to the Conversion Transactions, except for consents which, if not obtained, would not reasonably be expected to have a material adverse effect on the business, financial condition or results of operations of IMH Financial Corporation and its subsidiaries taken as a whole;
execution by each of Mr. Albers and Mr. Meris of lock-up agreements substantially in the form attached as Annex G to this consent solicitation/prospectus; and
Mr. Albers shall have been either released from guarantees provided to the Manager’s landlord and the Manager’s lender for the benefit of the Fund and the Manager, or in the absence of such releases, shall have received an indemnity from IMH Financial Corporation for any losses thereunder.

The Manager reserves the right, in its sole discretion, to cancel or defer the Conversion Transactions even if the members of the Fund vote to approve the Conversion Transactions and the other conditions to the consummation of the Conversion Transactions are satisfied or waived.

Q: What are the material U.S. federal income tax considerations related to the Conversion Transactions?
A: The Conversion Transactions are intended to qualify, and the Fund expects them to qualify, for nonrecognition treatment under Section 351(a) of the Code. Except as described below under the heading entitled “Material U.S. Federal Income Tax Considerations,” the Conversion Transactions generally should be tax-free to the Holders, except to the extent that a Holder’s share of the Fund’s liabilities (adjusted to take account of the Conversion Transactions as described more fully below) exceeds the Holder’s tax basis in its interest in its membership units. Please see the section of this consent solicitation/prospectus entitled “Material U.S. Federal Income Tax Considerations” for a more detailed discussion of the tax considerations to you as a result of the Conversion Transactions. You should consult with your own tax adviser for a full understanding of the tax considerations to you of the Conversion Transactions in light of your particular situation.
Q: Why is the Fund making an election that will result in a member having a lower tax basis in the shares of IMF Financial Corporation received in the Conversion Transactions?
A: The Fund intends to make an election that will result in a member of the Fund having a lower tax basis in the IMH Financial Corporation common stock that the member receives in connection with the Conversion Transactions than the tax basis the member would have had if the election had not

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been made. The election will allow IMH Financial Corporation to retain substantial additional tax basis in the assets received in the Conversion Transactions. However, the reduced stock basis for the member will result in increased gain (or reduced loss) upon a later disposition of IMH Financial Corporation common stock by the member. The additional tax basis in the assets of IMH Financial Corporation is expected to reduce the amount of taxable income or gain generated by IMH Financial Corporation with respect to such assets and could also result in tax losses to offset other income or gain generated by IMH Financial Corporation following the consummation of the Conversion Transactions. It is possible that IMH Financial Corporation will not be able to use the expected losses to offset other income or gains.
Q: What would be the terms of an initial public offering and when do you expect that it would occur?
A: The exact timing and size of an initial public offering of IMH Financial Corporation will depend on the regulatory process and market conditions at the time of an initial public offering. If we consider the market to be unfavorable at the time of an initial public offering, we may reduce the size of an initial public offering, delay an initial public offering or cancel it altogether or supplement an initial public offering with other financings, which may include debt. The board of directors of IMH Financial Corporation will not be required to determine whether to pursue an initial public offering by any particular date. Accordingly, the actual size of an initial public offering or the actual amount of net proceeds to be raised from any initial public offering, or whether it will be commenced or completed is uncertain.
Q: How would you use the net proceeds of an initial public offering of the common stock of IMH Financial Corporation?
A: We expect that we would use the net proceeds of an initial public offering for the acquisition of existing commercial mortgage loans and the investment in real estate related assets, and the origination of new short to medium term commercial mortgage loans. Additionally, a portion of the proceeds would be used to satisfy professional, advisory and consulting fees related to an initial public offering, accumulated real estate taxes and general working capital purposes. We may need a significant amount of time to fully invest the available net proceeds of any initial public offering in our intended investments and to implement fully our strategy to increase the total amount of our investments to our desired level. In addition, as described above, after the consummation of an initial public offering, IMH Financial Corporation may, in its sole discretion, pay up to 30% of the net proceeds of the initial public offering (up to an aggregate of $50 million) to redeem shares of IMH Financial Corporation Class C common stock.
Q: What if the board of directors of IMH Financial Corporation determines not to effect an initial public offering?
A: If the board of directors of IMH Financial Corporation determines that it will not pursue an initial public offering, it may, beginning 90 days after that determination, convert up to 20% of the outstanding shares of Class C common stock into shares of freely tradeable common stock, with the remaining shares of Class C common stock automatically converting into shares of Class B common stock on the following basis: 25% would convert into Class B-1 common stock, 25% would convert into Class B-2 common stock and 50% would convert into Class B-3 common stock. The restrictions on transfer of the Class B Shares will continue for six, nine or 12 months following the 90th day after the board of directors makes the determination not to pursue an initial public offering. Additionally, the Special Dividend will not be payable if we do not consummate an initial public offering.

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Q: What is the current net asset value of my membership units in the Fund?
A: As of December 31, 2009, the Fund had a net asset value of $     million, 73,038 outstanding membership units, and a net per membership unit asset value of approximately $    .
Q: When will I start receiving dividends or other distributions?
A: Assuming the consummation of the Conversion Transactions and an initial public offering, IMH Financial Corporation currently intends to pay regular dividends to its stockholders subject to various considerations. We currently anticipate that our initial aggregate annual distributions per share will depend on a number of factors, including our financial performance, and must be approved by, and remain subject to the sole discretion of, our board of directors. Additionally, on the twelve-month anniversary of the consummation of the Conversion Transactions, we intend to pay, subject to the availability of legally distributable funds at that time, the Special Dividend on any shares of Class B common stock that remain outstanding on that date. See the section entitled “Dividend and Distribution Policy.”
Q: Who may return a consent and what vote is required to approve the Conversion Transactions and adoption of the 2010 IMH Financial Corporation Employee Stock Incentive Plan?
A: Holders of record of membership units in the Fund at the close of business on         , 2010, may vote in this consent solicitation. The approval of the Conversion Transactions and the adoption of the 2010 Stock Incentive Plan by the holders of membership units in the Fund requires the affirmative vote of the holders of a majority of the issued and outstanding membership units in the Fund entitled to cast votes on the Conversion Transactions and the adoption of the 2010 Stock Incentive Plan. As of         , 2010, the record date for the vote, there were 73,038 membership units in the Fund outstanding and entitled to vote. Each membership unit in the Fund entitles the holder to one vote on the proposals described in this consent solicitation/prospectus.
Q: How does the Manager of the Fund recommend I vote on the proposals?
A: The Manager believes that the Conversion Transactions and the adoption of the 2010 Stock Incentive Plan are advisable and in the best interests of the Fund and its members and recommends that you vote “FOR” the approval of the Conversion Transactions and the adoption of the 2010 Stock Incentive Plan. In considering the Manager’s recommendation, please note that in connection with the Conversion Transactions, among other things, the stockholders of the Manager and the members of Holdings will receive shares of Class B-3 common stock in IMH Financial Corporation in exchange for their shares of the Manager and their membership interests in Holdings, and the executive officers of the Manager will enter into employment agreements with IMH Financial Corporation for which they will receive compensation for their services to IMH Financial Corporation. Therefore, the interests of the principals of the Manager differ from yours in important ways as discussed under the section entitled “Interests of Certain Persons in the Conversion Transactions.”
Q: How will my consent be counted?
A: If you complete, sign, date and return your consent, your consent will be voted in accordance with your instructions.
Q: If my membership units in the Fund are held in “street name” by my broker, will my broker vote my membership units in the Fund for me?
A: If your membership units in the Fund are held in the name of a broker, bank or other nominee, then you are not the holder of record and you must provide voting instructions to your street name holders

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by telephone or via the Internet by following the instructions provided by the nominee. We urge you to contact your nominee to confirm the best way to have your voting instruction properly reflected. Alternately, you may obtain a proxy, executed in your favor, from the record holder.
Q: What do I need to do now?
A: You should carefully read and consider the information contained in this consent solicitation/prospectus including its Annexes. It contains important information about what the Manager considered in evaluating the Conversion Transactions, including adoption of the merger agreement, and the adoption of the 2010 Stock Incentive Plan and the pursuit of a new business plan.

If you are a holder of record, you should then complete, sign and date your consent and return it in the enclosed envelope as soon as possible and in any event no later than       , 2010, the date which is 30 days after the mailing date of this consent solicitation/prospectus so that your membership units in the Fund will be represented. You may also vote your membership units in the Fund by visiting www.dfking.com/imh. IMH Secured Loan Fund, LLC reserves the right to extend, one or more times, the final date for receipt of written consents beyond           , 2010, in the event that consents approving the Conversion Transactions and the 2010 Stock Incentive Plan have not been obtained by that date from holders of a sufficient number of membership units in the Fund to approve the Conversion Transactions and the 2010 Stock Incentive Plan. Any such extensions may be made without notice to members of the Fund. Once all conditions to the Conversion Transactions have been satisfied or waived, the consent solicitation will conclude.

If you hold your membership units in the Fund in “street name,” you should provide voting instructions to your street name holders by telephone or via the Internet by following the instructions provided by your broker, bank or other nominee.

Q: Can I change my vote after I have mailed my signed consent?
A: Yes. A member of IMH Secured Loan Fund, LLC may generally revoke a returned consent and change its vote until the earlier to occur of (i) the final date for receipt of written consents (including any extensions thereof) and (ii) receipt of a sufficient number of consents to approve the Conversion Transaction and the 2010 Stock Incentive Plan. If you wish to change or revoke a previously given consent before that time, you may do so by delivering a written notice of revocation to IMH Secured Loan Fund, LLC or by delivering a new written consent with a later date. See the section entitled “Voting and Consents” beginning on page 76.
Q: Whom should I call with questions?
A: If you have any questions about the consent solicitation or the Conversion Transactions, or you would like additional copies of the consent solicitation/prospectus, or you need assistance with voting your membership units in the Fund, please call D.F. King, our consent solicitor, at 1-800-966-8932.

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SUMMARY

This summary highlights selected information contained in this consent solicitation/prospectus and may not contain all of the information that is important to you. You should carefully read this entire consent solicitation/prospectus, including the section entitled “Risk Factors” and our financial statements and related notes, and the other documents to which this consent solicitation/prospectus refers in order to understand in greater detail the Conversion Transactions proposal. In particular, you should read the Annexes attached to this consent solicitation/prospectus, including the merger agreement, which is attached hereto as Annex A. You also should read the form of articles of incorporation of IMH Financial Corporation, which are attached hereto as Annex B, because this document governs many of your rights as a holder of common stock in IMH Financial Corporation following the consummation of the Conversion Transactions. References to “our investments” are to the commercial real estate mortgage loans that we originate or acquire; or to other real estate investments which we may own from time to time, all of which we intend to sell for a gain in the ordinary course of business.

The information contained in this consent solicitation/prospectus, unless otherwise indicated, assumes the Conversion Transactions and all the transactions related thereto will occur. Unless we specify otherwise, when used in this consent solicitation/prospectus, (i) the term “Fund” refers to IMH Secured Loan Fund, LLC prior to the consummation of the Conversion Transactions, and (ii) the terms “we,” “our” and “us” refer to the Fund and its subsidiaries with respect to the period prior to the consummation of the Conversion Transactions, and IMH Financial Corporation and its subsidiaries with respect to the period after the consummation of the Conversion Transactions.

General

Investors Mortgage Holdings Inc., the Manager of the Fund, has approved a plan to internalize the management of the Fund, currently a Delaware limited liability company, by merging the Fund into a Delaware corporation through the following steps which we refer to as the Conversion Transactions:

the merger of the Fund with and into IMH Financial Corporation, the Fund’s wholly-owned subsidiary, with IMH Financial Corporation as the surviving entity, pursuant to which each membership unit you hold in the Fund will be exchanged, at your election, for 246.4471 shares of Class B common stock or Class C common stock of IMH Financial Corporation, or some combination thereof; and
the acquisition, by IMH Financial Corporation, of all of the outstanding shares of the Manager and all of the outstanding membership interests in Holdings, in exchange for an aggregate of 995,750 shares of Class B-3 common stock in IMH Financial Corporation, a portion of which will be issued to holders of outstanding stock appreciation rights of the Manager in exchange for cancellation of those rights, as a result of which the Manager and Holdings will become wholly-owned subsidiaries of IMH Financial Corporation;

In connection with the Conversion Transactions, IMH Financial Corporation anticipates that it will appoint a seven person board of directors, including the two existing directors of the Manager, and as soon as practicable after the consummation of the Conversion Transactions and in connection with an initial public offering, five new directors who we expect to be considered independent under the rules of the New York Stock Exchange, or NYSE, and the Securities and Exchange Commission, or SEC. The executive officers of the Manager immediately prior to the consummation of the Conversion Transactions will become the executive officers of IMH Financial Corporation immediately after the consummation of the Conversion Transactions. Following consummation of the Conversion Transactions, we intend to implement the 2010 Stock Incentive Plan.

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Upon the consummation of the Conversion Transactions, we expect there will be no established public trading market for IMH Financial Corporation common stock. Subject to then prevailing market conditions and regulatory review, we plan to conduct an initial public offering of common stock and we contemplate that the shares of common stock of IMH Financial Corporation will become publicly traded on the New York Stock Exchange, or NYSE. We do not plan to list the shares of the Class B or Class C common stock on any securities exchange or include the shares of Class B or Class C common stock in any automated quotation system, and no trading market for the shares of these classes of common stock is expected to develop. Consummation of an initial public offering or listing on the NYSE is not a condition to the consummation of the Conversion Transactions.

The Manager reserves the right to cancel or defer the Conversion Transactions even if the members of the Fund vote to approve the Conversion Transactions and the other conditions to the consummation of the Conversion Transactions are satisfied or waived.

We estimate that one-time transaction costs incurred or to be incurred in connection with the Conversion Transactions will be approximately $        .

Our Company

We are a commercial real estate lender based in the southwest United States with over 12 years of experience in many facets of the real estate investment process, including origination, underwriting, documentation, servicing, construction, enforcement, development, marketing and disposition. We focus on a niche segment of the real estate market that we believe is underserved by community, regional and national banks: high yield, short-term, senior secured commercial real estate mortgage loans. The intense level of underwriting analysis required in this segment of the market necessitates personnel and expertise that many small community banks lack, yet the requisite localized market knowledge of the underwriting process and the size of the loans we seek often precludes the regional and national banks from efficiently entering this market.

IMH Secured Loan Fund, LLC

The Fund was organized in Delaware in May 2003 to originate, acquire and manage commercial real estate mortgage loan investments, consisting primarily of short-term commercial mortgage loans collateralized by first mortgages on real property, and to perform all functions reasonably related thereto, including developing, managing and either holding for investment and resale or disposing of real property acquired through foreclosure or other means. On October 1, 2008, as a result of the unprecedented disruptions in the general real estate and related markets and the rapid decline in the global and U.S. economies in recent periods, the Manager, among other things, ceased originating and funding new commercial real estate mortgage loans for the Fund’s portfolio. We now believe that attractive opportunities are emerging from the repricing of commercial mortgage loans resulting from the current economic downturn and corresponding credit crisis. We plan to pursue these emerging opportunities upon the consummation of the Conversion Transactions. The Fund also has existing wholly-owned subsidiaries that hold real estate acquired through foreclosure.

IMH Financial Corporation

IMH Financial Corporation is a newly-formed Delaware corporation formed to effect the conversion of the Fund into a corporation. Upon the consummation of the Conversion Transactions, we will be an internally managed real estate finance company formed through the combination of the Fund, the Manager and Holdings.

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Investors Mortgage Holdings Inc.

The Manager was incorporated in the State of Arizona in June 1997 as a licensed mortgage broker, and in 2009 became licensed as a mortgage banker by the State of Arizona. Prior to the consummation of the Conversion Transactions, we paid management fees to the Manager to serve as the Fund’s external manager and the Manager was also entitled to receive 100% of all origination fees and points associated with the origination of new mortgage loans and the modification or extension of existing mortgage loans, as well as 25% of all penalty fees and gains pertaining to the portfolio assets. The Manager is responsible for managing every aspect of the Fund’s operations, including identifying and funding new commercial mortgage loans, evaluating and acquiring commercial mortgage loans held by third parties, and periodically analyzing the composition of the Fund’s portfolio. The current directors of the Manager are Shane Albers and William Meris. The Manager has a wholly-owned subsidiary, Investors Mortgage Holdings California, Inc., which is licensed as a real estate broker by the California Department of Real Estate. The Manager does not manage any other private or public funds similar to the Fund, however, the principals of the Manager manage the SWI Fund through a wholly-owned subsidiary of Holdings, as described below. After the consummation of the Conversion Transactions, IMH Financial Corporation will assume the duties previously performed by the Manager, and the Fund will no longer pay management fees to the Manager.

IMH Holdings, LLC

IMH Holdings, LLC, or Holdings, is an Arizona limited liability company organized in 2008. Holdings is a holding company for two wholly-owned subsidiaries, IMH Management Services, LLC, an Arizona limited liability company, and SWI Management, LLC, an Arizona limited liability company. IMH Management Services, LLC provides the Fund and affiliates of the Manager with human resources and administrative services, including the supply of employees, and SWI Management, LLC, or SWIM, is engaged in a variety of real estate and real estate-related activities, including, among others, acting as the manager for the Strategic Wealth & Income Fund, LLC, or the SWI Fund. The SWI Fund is a Delaware limited liability company with investment strategies and objectives substantially similar to ours, who seeks to generate attractive risk-adjusted returns by making privately negotiated, high yielding, real estate-based investments. At December 31, 2009, the SWI Fund had $10.5 million under management. In order to mitigate potential conflicts of interest between us and the SWI Fund, upon the consummation of an initial public offering of IMH Financial Corporation common stock, SWIM will cease raising capital on behalf of the SWI Fund. Thereafter, the SWI Fund expects to continue to purchase and originate, in the ordinary course, commercial mortgage loans, individually or in pools, at a discount to par, and originate commercial mortgage loans collateralized by real property in the United States. The independent members of the board of directors of IMH Financial Corporation (or a subcommittee) will decide, in its sole discretion, whether prospective asset acquisitions or origination opportunities that are suitable for both IMH Financial Corporation and the SWI Fund will be acquired or originated by IMH Financial Corporation or the SWI Fund. These decisions are expected to be based upon various factors established by the independent members of the board of directors of IMH Financial Corporation from time to time and may include factors such as the following:

whether the investments fall within our investment objectives, policies and strategies and/or those of the SWI Fund;
whether we have, and/or the SWI Fund has sufficient cash and purchasing power;
whether the terms of any necessary financing are appropriate for us and/or the SWI Fund;
whether the investment satisfies our portfolio needs and/or those of the SWI Fund;

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whether the investment’s liquidity meets our cash flow requirements and/or those of the SWI Fund;
whether a similar type of investment (i.e., a geographic location, size of loan, quality of borrower, quality of guarantor, loan to value criteria, risk profile or type of collateral, among other factors) has recently been allocated to us and/or the SWI Fund;
whether the investment meets regulatory or legal requirements applicable to us or the SWI Fund; and
what impact the investment has on our portfolio diversification, and/or that of the SWI Fund.

SWIM, which will become a wholly-owned indirect subsidiary of IMH Financial Corporation following the consummation of the Conversion Transactions, holds less than 1% of the equity in the SWI Fund. However, SWIM is entitled to (i) an organization fee of 0.5% of all equity and debt capital raised by the SWI Fund, (ii) a monthly asset management fee equal to 1.75% of the cost basis of the aggregate assets of the SWI Fund, determined on a month-end basis, divided by twelve, less half of the origination fees received by SWIM (or, beginning in 2013, if greater, the average monthly asset management fee paid over the preceding 12 months), (iii) origination fees, (iv) acquisition fees equal to up to 2.0% of the acquisition price of certain eligible investments, less origination fees, (v) 20% of the SWI Fund’s earnings after the SWI Fund members earn an 8% return on equity and until the SWI Fund members earn a 20% return on equity, and (vi) 30% of the SWI Fund’s earnings after the SWI Fund members earn a 30% return on equity. Following the consummation of the Conversion Transactions, the SWI Fund will remain independent of us but the benefits of managing the SWI Fund will inure to us.

Structure of the Conversion Transactions

In order to help you better understand the Conversion Transactions and how they will affect the Fund, the Manager and IMH Holdings, LLC, the charts below illustrate, in summary form (i) the organizational structure of the Fund, Investors Mortgage Holdings Inc., and IMH Holdings, LLC, immediately before the consummation of the Conversion Transactions and; (ii) the organizational structure of IMH Financial Corporation and its subsidiaries, immediately after the consummation of the Conversion Transactions and certain other related transactions.

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Note: Dotted lines in the charts below denote a management agreement. Solid lines denote equity ownership.

Structure BEFORE the consummation of the Conversion Transactions

[GRAPHIC MISSING]

* The Manager acts as the manager of the Fund, but holds no equity interest in the Fund. IMH Management Services, LLC provides the Fund and affiliates of the Manager with human resources and administrative services, including employee services.
** SWIM acts as the manager of the SWI Fund, but holds less than a 1% equity interest in the SWI Fund.

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Structure AFTER the consummation of the Conversion Transactions

[GRAPHIC MISSING]

* SWIM acts as the manager of the SWI Fund, but holds less than a 1% equity interest in the SWI Fund.

Board of Directors of IMH Financial Corporation; Manager of IMH Financial Corporation

We expect that the two existing directors of Investors Mortgage Holdings Inc., the Manager of the Fund, in addition to five newly-appointed directors who we expect will be considered independent under NYSE and SEC rules, will comprise the board of directors of IMH Financial Corporation after the consummation of the Conversion Transactions. For further information, see the section entitled “Our Directors.”

Recommendation of the Manager

The Manager has approved the Conversion Transactions, the merger agreement and the adoption of the 2010 Stock Incentive Plan, and determined that the Conversion Transactions, the merger agreement and the adoption of the 2010 Stock Incentive Plan are advisable and in the best interests of the Fund and its members, and recommends that you vote “FOR” the approval of the Conversion Transactions and the adoption of the 2010 Stock Incentive Plan. In the Conversion Transactions, the principals of the Manager and Holdings will be receiving shares of Class B-3 common stock in IMH Financial Corporation in

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exchange for their shares of the Manager and their membership interests in Holdings, and entering into new compensation agreements with IMH Financial Corporation. Accordingly, their interests may differ from yours as discussed under the section entitled “Interests of Certain Persons in the Conversion Transactions.”

Interests of Certain Persons in the Conversion Transactions (See page 93)

In considering the recommendation of the Manager to vote for the approval of the Conversion Transactions and the adoption of the 2010 Stock Incentive Plan, you should be aware that some of the Manager’s directors and executive officers have interests in the Conversion Transactions and the adoption of the 2010 Stock Incentive Plan that are different from, and in addition to, the interests of other holders of membership units in the Fund.

Ownership by Affiliates and Officers of the Manager.  The Manager does not own any of the outstanding membership units in the Fund. However, Shane Albers, the chief executive officer of the Manager and a member of Holdings, owns 75% of the outstanding common stock of the Manager, and William Meris, the president of the Manager and a member of Holdings, owns 25% of the outstanding common stock of the Manager. Currently, Mr. Albers and Mr. Meris hold 67.5% and 22.5% of the outstanding membership interests of Holdings, respectively. Steven Darak, the chief financial officer of the Manager, owns 5% of the membership interests of Holdings, and two other senior employees of a subsidiary of Holdings each own 2.5% of the membership interests of Holdings.

As of the date of this consent solicitation/prospectus, Mr. Albers, Mr. Meris and Mr. Darak, and the executive officers of the Manager as a group, beneficially own, individually and in the aggregate, less than 1% of the outstanding membership units in the Fund. Immediately following the consummation of the Conversion Transactions, however, Mr. Albers, Mr. Meris and Mr. Darak, and the executive officers as a group, are expected to receive 447,191, 444,427, 50,285 and 941,903 shares of Class B-3 common stock, respectively (which amounts also include shares received in exchange for membership units in the Fund owned by Messrs. Albers and Meris, respectively), and to beneficially own approximately 2.4%, 2.3%, 0.3%, and 5.0%, respectively, of the common stock of IMH Financial Corporation on a fully diluted basis without giving effect to an initial public offering or any other public offering of shares of common stock of IMH Financial Corporation. Based on the aggregate approximate book value of the Fund of $321 million as of September 30, 2009, the aggregate book value of the shares of Class B-3 common stock to be issued to Mr. Albers, Mr. Meris, Mr. Darak and the executive officers as a whole as a result of the Conversion Transactions is expected to be approximately $7.98 million, $7.93 million, $897,000 and $16.8 million, respectively. Mr. Albers and Mr. Meris have agreed that the shares of IMH Financial Corporation Class B-3 common stock they will receive in the Conversion Transactions will be subject to transfer restrictions under lock-up agreements that lapse over a three year period as follows: one third of their shares from the one year anniversary of the consummation of the Conversion Transactions, one third from the two year anniversary of the consummation of the Conversion Transactions and one third from the three year anniversary of the Conversion Transactions. The lock up agreements will terminate if the restrictions are eliminated on the Class B common stock as a result of a change of control or the trading price of the common stock exceeding 125% of the initial public offering price for a period of 20 trading days. Additionally, in connection with the Conversion Transactions, each of Messrs. Albers, Meris and Darak will enter into employment agreements with IMH Financial Corporation. The Manager, on behalf of the members of the Fund, has engaged Sutter Securities Incorporated, or Sutter Securities, to provide an opinion as to whether, as of the date thereof and based upon and subject to certain procedures, assumptions, qualifications and limitations the acquisitions of Manager and Holdings are fair, from a financial point of view, to IMH Financial Corporation and to the stockholders of IMH Financial Corporation (other than the owners of the Manager and

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Holdings). The fairness opinion, attached as Annex F to this consent solicitation/prospectus, does not constitute a recommendation to members of the Fund as to how they should vote on the Conversion Transactions. For purposes of computing the percentage of shares of IMH Financial Corporation to be beneficially owned by any person or persons on a fully diluted basis immediately following the consummation of the Conversion Transactions, we have based that calculation on the membership units in the Fund outstanding as of December 29, 2009.

2010 Stock Incentive Plan.  IMH Financial Corporation will enter into employment agreements with its executive officers. It is also anticipated that IMH Financial Corporation will adopt the 2010 Stock Incentive Plan, which will benefit its employees, including the executive officers and directors. Approximately two-thirds of the awards under the 2010 Stock Incentive Plan are expected to be issued to the executive officers of IMH Financial Corporation; however, the amount, structure and vesting requirements applicable to any awards to be granted under the 2010 Stock Incentive Plan will be determined by our Compensation Committee (or the board of directors of IMH Financial Corporation) following the consummation of the Conversion Transactions.

Indemnification.  IMH Financial Corporation will enter into indemnification agreements with its directors and officers.

Merger Agreement.  The merger agreement provides limited representations and warranties made by each of the Manager, Holdings and their respective stockholders and members, and does not provide indemnification rights in favor of the Fund or the members of the Fund in the event of any inaccuracy in, or breach of, those representations and warranties.

Operating Agreement.  In connection with the Conversion Transactions, the operating agreement between the Fund and Investors Mortgage Holdings Inc. will be terminated and IMH Financial Corporation will be governed by a board of directors, as provided by IMH Financial Corporation’s amended and restated certificate of incorporation, attached to this consent solicitation/prospectus as Annex B. The directors and executive officers of the Manager will become the directors and executive officers of IMH Financial Corporation.

Landlord and Lender Releases.  For the benefit of the Fund and the Manager, Mr. Albers guaranteed promissory notes (i) in favor of the landlord for the Fund’s headquarters, which was security for the tenant’s rental obligations to the landlord, and (ii) in favor of a lender as security for loans the lender made to the Manager. As of December 31, 2009, the outstanding balance under the promissory note to the landlord was $392,969, and the outstanding balance under the promissory note to the lender was $1.6 million. In connection with the Conversion Transactions, Mr. Albers will either be released from the guarantees provided to the Manager’s landlord and lender for the benefit of the Fund, or receive an indemnity from IMH Financial Corporation for any losses thereunder.

Termination of Selling Agreement.  In connection with the Conversion Transactions, IMH Financial Corporation expects to issue in private transactions five year warrants which will become exercisable over the three year period following the consummation of an initial public offering for up to an aggregate of 200,000 shares of common stock in exchange for termination of selling agreements with broker-dealers who assisted the Manager in raising equity capital for the Fund and in lieu of paying the broker-dealers a portion of the late fees, penalties or net proceeds received by the Manager pursuant to the Fund’s operating agreement from the sale of foreclosed or related assets of the Fund.

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As a result of the conflicts of interests described above, certain of the directors and officers of the Manager may be more likely to recommend approval of the Conversion Transactions by the Manager than the members of the Fund generally.

Special Dividend (See page 250)

We intend to pay holders of Class B common stock of IMH Financial Corporation a one-time dividend equal to $0.95 per share of Class B common stock outstanding on the twelve-month anniversary of the consummation of an initial public offering, subject to the availability of legally distributable funds at that time. The Special Dividend will not be payable if we do not consummate an initial public offering.

Proposed Initial Public Offering of Our Common Stock Following the Consummation of the Conversion Transactions

After consummation of the Conversion Transactions, IMH Financial Corporation contemplates undertaking an initial public offering of common stock. We expect that we would use the net proceeds from an initial public offering to pursue our investment strategies and for working capital purposes. We may also choose to use some of the net proceeds from an initial public offering to redeem some or all of the shares of Class C common stock outstanding immediately following the consummation of an initial public offering.

Distribution Policy Following the Consummation of the Conversion Transactions and Proposed Initial Public Offering (See page 103)

During the quarter ended June 30, 2009, the Fund suspended distributions to its members. If the Conversion Transactions are consummated as contemplated and IMH Financial Corporation raises additional capital in an initial public offering, IMH Financial Corporation currently intends to provide dividends to its stockholders subject to various considerations and qualifications, including, without limitation, liquidity requirements, IMH Financial Corporation’s distribution yield relative to its peers, and other relevant factors identified and considered by the board of directors of IMH Financial Corporation from time to time. In particular, our ability to pay dividends in the future will be subject to using the net proceeds from an initial public offering or other financing to resume the pursuit of new investments, and the disposition of existing and future investments on sufficiently attractive terms to generate liquidity for IMH Financial Corporation. With minimal existing debt and a significant equity base following the initial public offering, we anticipate that our earnings will be sufficient to cover all operating expenses and any excess earnings will be available for distributions to our stockholders. Further, existing portfolio assets may be subject to liquidation following an initial public offering, the net proceeds of which will be available for subsequent reinvestment in income-producing assets, thereby adding to our earnings base. As existing portfolio assets of the Fund are being transferred at the current carrying value that approximates the current fair value thereof in connection with the Conversion Transactions, we do not expect the liquidation of such assets will generate any material book gains or losses in relation to current carrying values. We intend to make annual distributions per share generally comparable to historical amounts paid by the Fund prior to the suspension of such distributions during the quarter ended June 30, 2009, although all future distributions will depend on a number of factors, including our financial performance, and must be approved by, and remain subject to the sole discretion of, our board of directors.

NYSE Listing

If we pursue an initial public offering as contemplated, we expect that IMH Financial Corporation shares of common stock will be listed and traded on the NYSE upon consummation of the offering. We may or may not decide to pursue NYSE listing if we do not consummate an initial public offering. We do not plan to list the Class B, Class C or Class D common stock on any securities exchange or include the shares of

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Class B, Class C or Class D common stock in any automated quotation system, and no trading market for Class B or Class C common stock is expected to develop. The membership units in the Fund are not currently publicly traded.

Redemption of Class C Common Stock in Connection with an Initial Public Offering

After the consummation of an initial public offering, IMH Financial Corporation may, in its sole discretion, use up to 30% of the net proceeds of the initial public offering (up to an aggregate of $50 million) to effect a pro rata redemption of Class C common stock (based upon the number of shares of Class C common stock held by each stockholder) at the initial public offering price, less selling commissions and discounts paid or allowed to the underwriters in an initial public offering; all shares of Class C common stock that are not so redeemed will automatically be converted into shares of Class B common stock as follows: 25% of the outstanding shares of Class C common stock will convert into shares of Class B-1 common stock; 25% will convert into shares of Class B-2 common stock; and 50% will convert into shares of Class B-3 common stock.

Exchange of Class C Common Stock for Common Stock if the Board of Directors Determines Not to Pursue an Initial Public Offering

If the board of directors of IMH Financial Corporation determines that it will not pursue an initial public offering, it may, beginning 90 days after that determination, redeem up to 20% of the outstanding shares of Class C common stock for shares of common stock, with the remaining shares of Class C common stock automatically converting into shares of Class B common stock.

Material U.S. Federal Income Tax Consequences of the Conversion Transactions and of Holding IMH Financial Corporation Common Stock (See page 269)

Please see the section entitled “Material U.S. Federal Income Tax Considerations.” You should consult your own tax adviser for a full understanding of the tax considerations to you of the Conversion Transactions and of holding IMH Financial Corporation common stock in light of your particular situation.

Section 362(e) Tax Election (See page 269)

Under Section 362(e) of the Internal Revenue Code of 1986, as amended, or the Code, if the aggregate fair market value of the assets transferred to IMH Financial Corporation as a result of the Conversion Transactions is less than their aggregate tax basis at the time of the transfer, IMH Financial Corporation would generally be required to reduce its basis in those assets to their fair market value. In order to avoid this result, the Fund intends to make an election under Section 362(e) to reduce the tax basis of the shares of common stock in IMH Financial Corporation deemed to be received by the Fund in the transaction (instead of reducing the corresponding portion of the basis of the assets of IMH Financial Corporation). This election will result in a member of the Fund having a lower tax basis in the IMH Financial Corporation common stock that the member receives in connection with the Conversion Transactions than the tax basis the member would have had if the election had not been made. The election will allow IMH Financial Corporation to retain substantial additional tax basis in the assets received in the Conversion Transactions. However, the reduced stock basis will result in increased gain (or reduced loss) upon a later disposition of IMH Financial Corporation common stock by the member. The additional tax basis in the assets of IMH Financial Corporation is expected to reduce the amount of taxable income or gain generated by IMH Financial Corporation with respect to such assets and could also result in tax losses to offset other income or gain generated by IMH Financial Corporation following the consummation of the Conversion Transactions. It is possible that IMH Financial Corporation will not be able to use the expected losses to offset other income or gains.

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Members Entitled to Vote

The Manager has fixed the close of business on         , 2010, as the record date for the determination of the members of the Fund entitled to receive notice of, and to vote in, the consent solicitation. As of           , 2010, there were 73,038 membership units in the Fund outstanding and entitled to vote and 4,735 holders of membership units in the Fund of record. At the close of business on the record date, the directors and executive officers of the Manager as a group owned and were entitled to vote less than 1% of the outstanding voting power of the Fund. All of the directors and executive officers of the Manager that are entitled to vote have indicated that they currently intend to vote their membership units in the Fund in favor of approving the Conversion Transactions.

Members of the Fund may vote to approve the Conversion Transactions and 2010 Stock Incentive Plan on or before           , 2010, the final date for receipt of written consents. The Fund reserves the right to extend, one or more times, the final date for receipt of written consents beyond           , 2010, in the event that consents approving the Conversion Transactions and the 2010 Stock Incentive Plan have not been obtained by that date from holders of a sufficient number of membership units in the Fund to approve the Conversion Transactions. Any such extensions may be made without notice to members of the Fund. Once all conditions to the Conversion Transactions have been satisfied or waived, the consent solicitation will conclude.

Votes Required to Approve the Conversion Transactions and the Adoption of the 2010 Stock Incentive Plan; No Dissenters’ Rights

The affirmative vote of a majority of the outstanding membership units in the Fund entitled to cast votes on the Conversion Transactions is required to approve the Conversion Transactions and to approve adoption of the 2010 Stock Incentive Plan. The directors and executive officers of the Manager and their affiliates collectively hold less than 1% of the membership units in the Fund entitled to cast votes on the Conversion Transactions and the 2010 Stock Incentive Plan. Under Delaware law and the Restated Limited Liability Company Operating Agreement of the Fund, or the operating agreement, you will not be entitled to dissenters’ rights of appraisal as a result of the Conversion Transactions.

Regulatory Approvals

We are not aware of any federal, state or local regulatory requirements that must be complied with or approvals that must be obtained prior to consummation of the Conversion Transactions pursuant to the merger agreement, other than compliance with applicable federal and state securities laws, the filing of the certificate of incorporation as required under the Delaware General Corporation Law, or DGCL, and various state governmental authorizations, including those pertaining to a change of ownership of the Manager with regards to the Manager’s mortgage banking license in the State of Arizona and Investors Mortgage Holdings California, Inc.’s mortgage broker’s license in the State of California.

The Manager’s mortgage banking license in the State of Arizona is not transferrable and control of a license may not be acquired, through a merger agreement or otherwise, without the prior written consent of the Department of Financial Institutions of the State of Arizona. We intend to file the required application and seek approval from the Department of Financial Institutions to effect a change of ownership of the Manager with regards to the Manager’s mortgage banking license to IMH Financial Corporation or one of its wholly-owned subsidiaries. We expect to receive that approval prior to the consummation of the Conversion Transactions.

Investors Mortgage Holdings California, Inc.’s real estate broker’s license in the State of California is not transferrable without the prior approval of the Department of the Real Estate of the State of California.

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Prior to the consummation of the Conversion Transactions, we intend to file the required application to notify the Department of Real Estate of the contemplated change of control of the Manager pursuant to the Conversion Transactions.

Comparison of Rights of Holders of Membership Units in the Fund and Stockholders of IMH Financial Corporation (See page 255)

The rights of IMH Financial Corporation’s stockholders under the Delaware General Corporation Law will be different from the rights of holders of membership units in the Fund under the Delaware Limited Liability Company Act. There will be additional differences in the rights of IMH Financial Corporation’s stockholders and holders of membership units in the Fund under the provisions of the organizational documents of each company. For example, IMH Financial Corporation’s stockholders will enjoy broader voting rights than are provided to the members in the Fund under the Fund’s operating agreement. Additionally, while there is only one class of membership units in the Fund, the IMH Financial Corporation certificate of incorporation authorizes the IMH Financial Corporation board of directors to classify and reclassify any of the unissued shares of capital stock into a class or series, or classes or series, of preferred stock or other type of stock, and there will initially be the following classes of authorized stock: common stock; Class B-1; Class B-2; Class B-3; Class C; and Class D common stock.

Comparison of Rights of the Holders of Common Stock, Class B Common Stock and Class C Common Stock of IMH Financial Corporation (See page 246)

IMH Financial Corporation common stock, which we anticipate would be the security we would issue in an initial public offering, is expected to be freely transferable, subject to any restrictions on transfer imposed by applicable securities laws, and, in general, would not be convertible pursuant to their terms into any other security of IMH Financial Corporation. However, the shares of Class B and Class C common stock to be issued to the members of the Fund, stockholders of the Manager and the members of Holdings as consideration in the Conversion Transactions are subject to various redemption, conversion and transfer restrictions, and the shares of Class B common stock are entitled to payment of a Special Dividend under certain circumstances. The rights, preferences and privileges of the shares of Class B and Class C common stock are otherwise substantially identical to the shares of common stock.

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SELECTED HISTORICAL FINANCIAL DATA

IMH Secured Loan Fund, LLC Selected Historical Financial Information

The tables that follow set forth certain financial data of the Fund. The summary financial data are derived from our audited and unaudited consolidated financial statements and other financial records.

         
  As of and for the Year Ended December 31,
     2004   2005   2006   2007   2008
     (in thousands, except percentages, per unit and unit data)
Summary balance sheet items
                                            
Cash and cash equivalents   $ 3,569     $ 12,089     $ 12,159     $ 73,604     $ 23,815  
Mortgage loan principal outstanding   $ 28,045     $ 92,945     $ 258,615     $ 510,797     $ 613,854  
Allowance for credit losses   $     $     $     $ (1,900 )    $ (300,310 ) 
Mortgage loans, net   $ 28,045     $ 92,945     $ 258,615     $ 508,897     $ 313,544  
Real estate owned   $     $     $     $     $ 62,781  
Total assets   $ 31,761     $ 105,981     $ 273,374     $ 590,559     $ 414,804  
Total liabilities   $ 1,186     $ 8,145     $ 13,193     $ 13,726     $ 6,753  
Retained earnings (accumulated deficit)   $ 84     $ 852     $ 1,426     $ 49     $ (322,332 ) 
Members’ capital, net of redemptions   $ 30,490     $ 96,983     $ 258,754     $ 576,784     $ 730,383  
Total owners' equity   $ 30,574     $ 97,835     $ 260,181     $ 576,833     $ 408,051  
Summary income statement
                                            
Mortgage loan interest   $ 1,607     $ 7,846     $ 20,547     $ 47,929     $ 65,497  
Total revenue   $ 1,614     $ 7,961     $ 21,145     $ 49,763     $ 67,420  
Operating expenses   $ 51     $ 166     $ 430     $ 968     $ 2,454  
Provision for credit losses                       1,900       296,000  
Impairment charge for assets acquired through foreclosure                             27,175  
Total expenses   $ 51     $ 542     $ 1,043     $ 4,088     $ 325,707  
Net earnings (loss)   $ 1,563     $ 7,419     $ 20,102     $ 45,675     $ (258,287 ) 
Member Related items
                                            
Number of member accounts     185       491       1,376       3,472       4,735  
Average Member account balance   $ 165     $ 199     $ 189     $ 166     $ 86  
Member investments (excluding reinvestments)   $ 23,979     $ 68,661     $ 176,101     $ 349,523     $ 250,871  
Member distributions reinvested   $ 883     $ 4,303     $ 12,307     $ 26,165     $ 23,191  
Distributions to members (including distributions reinvested)   $ 1,479     $ 6,651     $ 19,379     $ 46,920     $ 64,051  
% of total distributions reinvested     56.52 %      58.00 %      63.51 %      55.77 %      36.21 % 
Redemptions   $ 402     $ 6,471     $ 26,786     $ 57,790     $ 120,506  
Redemptions as % of new investment
(including reinvestments)
    1.62 %      8.87 %      14.22 %      15.38 %      43.97 % 
Book value per member unit   $ 10,027.59     $ 10,088.21     $ 10,055.29     $ 10,000.93     $ 5,586.93  
Net distributions to Members per weighted average membership units   $ 1,004.96     $ 1,086.04     $ 1,146.38     $ 1,102.72     $ 951.27  
Earnings (loss) from continuing operations per weighted average member unit   $ 1,061.84     $ 1,211.50     $ 1,189.12     $ 1,073.47     $ (3,835.96 ) 
Loan Related items
                                            
Note balances originated   $ 26,560     $ 139,354     $ 266,101     $ 428,777     $ 329,952  
Number of notes originated     76       48       37       38       23  
Average note balance originated   $ 349     $ 2,903     $ 7,192     $ 11,284     $ 14,346  
Number of loans outstanding     54       41       44       61       62  
Average loan carrying value   $ 519     $ 2,267     $ 5,878     $ 8,343     $ 5,057  
% of portfolio principal – fixed interest rate     100.0 %      84.4 %      69.0 %      30.3 %      31.3 % 
Weighted average interest rate – fixed     11.64 %      12.56 %      12.26 %      12.26 %      11.71 % 
% of portfolio principal – variable interest rate           15.6 %      31.0 %      69.6 %      68.7 % 
Weighted average interest rate – variable           11.64 %      12.49 %      12.52 %      12.39 % 

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  As of and for the Year Ended December 31,
     2004   2005   2006   2007   2008
     (in thousands, except percentages, per unit and unit data)
Principal balance % by state:
                                            
Arizona     93.1 %      81.5 %      57.9 %      44.8 %      47.9 % 
California     6.9 %      18.5 %      37.4 %      33.7 %      28.9 % 
Texas     %      %      4.4 %      6.3 %      9.1 % 
Idaho     %      %      %      9.6 %      8.1 % 
Other     %      %      0.3 %      5.6 %      6.0 % 
Total     100.0 %      100.0 %      100.0 %      100.0 %      100.0 % 
Credit Quality
                                         
Extension fees included in mortgage loan
principal
  $ 321     $ 376     $ 2,061     $ 6,106     $ 10,796  
Interest payments over 30 days delinquent   $     $     $     $ 2,741     $ 1,134  
Loans past scheduled maturity                 3       15       24  
Carrying value of loans past scheduled maturity   $     $     $ 13,901     $ 133,532     $ 210,198  
Number of loans in non accrual status                       10       11  
Carrying value of loans in non accrual status   $     $     $     $ 73,346     $ 95,624  
Allowance for credit losses   $     $     $     $ (1,900 )    $ (300,310 ) 
Allowance for credit losses as % of loan carrying value     0.0 %      0.0 %      0.0 %      0.4 %      48.9 % 

         
  As of and for the Year Ended December 31, 2008   As of and for the Nine Months Ended
September 30,
  As of and for the Three Months Ended
September 30,
     2008   2009   2008   2009
     (in thousands, except percentages, per unit and unit data)
          (Unaudited)   (Unaudited)
Summary balance sheet items
                                            
Cash and cash equivalents   $ 23,815     $ 57,766     $ 2,463     $ 57,766     $ 2,463  
Mortgage loan principal outstanding   $ 613,854     $ 596,755     $ 553,356     $ 596,755     $ 553,356  
Allowance for credit losses   $ (300,310 )    $ (45,440 )    $ (337,000 )    $ (45,440 )    $ (337,000 ) 
Mortgage loans, net   $ 313,544     $ 551,315     $ 216,356     $ 551,315     $ 216,356  
Real estate owned   $ 62,781     $ 88,178     $ 90,213     $ 88,178     $ 90,213  
Total assets   $ 414,804     $ 709,120     $ 334,577     $ 709,120     $ 334,577  
Total liabilities   $ 6,753     $ 20,720     $ 13,406     $ 20,720     $ 13,406  
Retained earnings (accumulated deficit)   $ (322,332 )    $ (41,984 )    $ (409,212 )    $ (41,984 )    $ (409,212 ) 
Total members’ equity   $ 730,383     $ 730,384     $ 730,383     $ 730,384     $ 730,383  
Total owners' equity   $ 408,051     $ 688,400     $ 321,171     $ 688,400     $ 321,171  
Summary income statement
                                            
Mortgage loan interest   $ 65,497     $ 49,420     $ 20,256     $ 17,069     $ 2,697  
Total revenue   $ 67,420     $ 51,208     $ 20,750     $ 17,536     $ 3,155  
Operating expenses   $ 2,454     $ 1,526     $ 5,707     $ 855     $ 2,431  
Provisions for credit losses     296,000       41,130       82,000       41,130       82,000  
Impairment charge for assets acquired through foreclosure     27,175       1,300       8,000       1,300       8,000  
Total expenses   $ 325,707     $ 44,034     $ 95,924     $ 43,285     $ 92,546  
Net earnings (loss)   $ (258,287 )    $ 7,174     $ (75,174 )    $ (25,749 )    $ (89,391 ) 
Member Related items
                                            
Number of member accounts     4,735       4,732       4,735       4,732       4,735  

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  As of and for the Year Ended December 31, 2008   As of and for the Nine Months Ended
September 30,
  As of and for the Three Months Ended
September 30,
     2008   2009   2008   2009
     (in thousands, except percentages, per unit and unit data)
          (Unaudited)   (Unaudited)
Average member account balance   $ 86     $ 145     $ 68     $ 145     $ 68  
Member investments (excluding reinvestments)   $ 250,871     $ 250,941     $     $ 84,070     $  
Member distributions reinvested   $ 23,191     $ 23,192     $     $ 6,127     $  
Net distributions to members   $ 64,051     $ 49,163     $ 11,706     $ 16,627     $  
% of total distributions reinvested     36.21 %      47.17 %      N/A       36.85 %      N/A  
Redemptions   $ 120,506     $ 120,533     $     $ 36,640     $  
Redemptions as % of new investment
(including reinvestments)
    43.97 %      43.97 %      N/A       40.6 %      N/A  
Loan related items
                                            
Note balances originated   $ 329,952     $ 327,662     $ 392     $ 92,394     $  
Number of notes originated     23       22       1       11        
Average note balance originated   $ 14,346     $ 14,894     $ 392     $ 8,399     $  
Number of loans outstanding     62       63       58       63       58  
Average loan carrying value   $ 5,057     $ 8,751     $ 3,730     $ 8,751     $ 3,730  
% of portfolio principal – fixed interest rate     31.3 %      30.5 %      50.1 %      30.5 %      50.1 % 
Weighted average interest rate – fixed     11.71 %      11.03 %      10.26 %      11.03 %      10.26 % 
% of portfolio principal – variable interest rate     68.7 %      69.5 %      49.9 %      69.5 %      49.9 % 
Weighted average interest rate – variable     12.39 %      12.37 %      12.87 %      12.37 %      12.87 % 
Principal balance % by state:
                                            
Arizona     47.9 %      48.4 %      53.0 %      48.4 %      53.0 % 
California     28.9 %      27.7 %      31.1 %      27.7 %      31.1 % 
Texas     9.1 %      9.8 %      3.1 %      9.8 %      3.1 % 
Idaho     8.1 %      7.6 %      4.9 %      7.6 %      4.9 % 
Other     6.0 %      6.5 %      7.9 %      6.5 %      7.9 % 
Total     100.0 %      100.0 %      100.0 %      100.0 %      100.0 % 
Credit Quality
                                         
Extension fees included in mortgage loan
principal
  $ 10,796     $ 10,176     $ 17,763     $ 5,973     $ 15,037  
Interest payments over 30 days delinquent   $ 1,134     $ 41     $ 7,687     $ 41     $ 7,687  
Loans past scheduled maturity     24       15       36       15       36  
Principal balance of loans past scheduled maturity   $ 210,198     $ 94,529     $ 370,255     $ 94,529     $ 370,255  
Number of loans in non accrual status     11       7       43       7       43  
Principal balance of loans in non accrual status   $ 95,624     $ 64,631     $ 450,568     $ 64,631     $ 450,568  
Allowance for credit losses   $ (300,310 )    $ (45,440 )    $ (337,000 )    $ (45,440 )    $ (337,000 ) 
Allowance for credit losses as % of loan principal outstanding     48.9 %      8.2 %      60.9 %      8.2 %      60.9 % 

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The following table presents additional information regarding the Fund’s mortgage loan assets.

       
  As of December 31,   As of
September 30,
2009
  2006   2007   2008
Average Balance Sheets
    (in thousands)  
Cash and cash equivalents   $ 12,124     $ 53,459     $ 79,573     $ 4,605  
Mortgage loan principal outstanding     175,780       425,917       561,281       588,152  
Allowance for credit losses           (475 )      (87,388 )      (300,940 ) 
Mortgage loans, net     175,780       425,442       473,893       287,212  
Real estate owned, net                 56,319       76,483  
Other assets     1,773       5,363       11,483       20,392  
Total assets   $ 189,677     $ 484,264     $ 621,268     $ 388,692  
Total liabilities     10,669       17,828       23,049       8,302  
Total owners’ equity     179,008       466,436       598,219       380,390  
Total liabilities and owners’ equity   $ 189,677     $ 484,264     $ 621,268     $ 388,692  

Notes:

Averages for the fiscal year ended December 31, 2006 were computed using annual average data.

Averages for the fiscal years ended December 31, 2007 and 2008 and the nine months ended September 30, 2009 were computed using quarterly average data.

Prospectively, we expect to report monthly average data.

       
  As of and for the
Year Ended December 31,
  As of and for the
Nine Months Ended
September 30,
2009
  2006   2007   2008
Analysis of Mortgage Loan Interest by Loan Classification
    (in thousands)  
Pre-entitled Land:
                                
Held for Investment   $ 230     $ 62     $ 830     $ 142  
Processing Entitlements     11,208       20,537       24,897       3,850  
Entitled Land:
                                
Held for Investment     2,002       10,299       13,988       5,194  
Infrastructure under Construction     2,176       4,687       6,918       1,268  
Improved and Held for vertical Construction     1,776       1,574       5,742       849  
Construction and Existing Structures:
                                
New Structure – Construction in process     2,217       8,060       5,055       458  
Existing Structure Held for Investment     938       2,640       3,043       1,805  
Existing Structure – Improvements           70       5,024       6,690  
Mortgage Loan Interest and Fees   $ 20,547     $ 47,929     $ 65,497     $ 20,256  
Average Mortgage Loan Balances by Loan Classification
                                   
Pre-entitled Land:
                                   
Held for Investment   $ 23,416     $ 466     $ 7,173     $ 9,397  
Processing Entitlements     70,813       194,974       200,327       187,027  
Entitled Land:
                                   
Held for Investment     24,498       120,291       112,434       100,882  
Infrastructure under Construction     14,483       62,469       57,542       64,741  
Improved and Held for vertical Construction     12,363       15,614       53,898       47,050  

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  As of and for the
Year Ended December 31,
  As of and for the
Nine Months Ended
September 30,
2009
Construction and Existing Structures:
  (in thousands)
New Structure – Construction in process     24,424       69,081       43,641       42,914  
Existing Structure Held for Investment     5,784       35,306       37,310       33,151  
Existing Structure – Improvements                 96,267       61,246  
Totals   $ 175,781     $ 498,201     $ 608,592     $ 546,408  
Average Interest Rate by Loan Classification
                                   
Pre-entitled Land:
                                   
Held for Investment     12.0 %      11.5 %      13.8 %      11.8 % 
Processing Entitlements     12.3 %      12.5 %      12.5 %      12.4 % 
Entitled Land:
                                   
Held for Investment     11.9 %      12.2 %      12.4 %      12.4 % 
Infrastructure under Construction     12.3 %      12.8 %      11.9 %      10.2 % 
Improved and Held for vertical Construction     11.1 %      12.0 %      11.7 %      11.6 % 
Construction and Existing Structures:
                                   
New Structure – Construction in process     12.4 %      12.4 %      12.2 %      11.2 % 
Existing Structure Held for Investment     12.4 %      12.1 %      12.1 %      10.8 % 
Existing Structure – Improvements     N/A       12.5 %      11.6 %      10.6 % 
Totals     12.3 %      12.4 %      12.2 %      11.6 % 
Return on Equity and net assets
                       
Return on assets     10.8 %      9.4 %      -41.6 %      -19.3 % 
Return on equity     11.2 %      9.8 %      -43.2 %      -19.8 % 
Distribution payout ratio     96.4 %      102.7 %      -24.8 %      -14.9 % 
Equity to assets ratio     96.4 %      96.3 %      96.3 %      97.9 % 

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TABLE OF CONTENTS

           
  As of and for the Year Ended December 31,   As of and for
the Nine
Months Ended
September 30
  2004   2005   2006   2007   2008   2009
Principal Balances Outstanding by Loan Classifications
    (in thousands)  
Pre-entitled Land:
                                   
Held for Investment     NA     $     $     $     $ 7,178     $ 13,834  
Processing Entitlements     NA     $ 43,237     $ 145,219     $ 203,166     $ 200,902     $ 193,087  
Entitled Land:
                                   
Held for Investment     NA     $ 7,102     $ 41,893     $ 135,060     $ 114,307     $ 113,117  
Infrastructure under Construction     NA     $ 11,344     $ 17,621     $ 60,037     $ 57,908     $ 69,834  
Improved and Held for vertical Construction     NA     $ 8,409     $ 29,388     $ 14,800     $ 54,486     $ 46,857  
Construction and Existing Structures:
                                   
New Structure – Construction in process     NA     $ 19,461     $ 16,316     $ 70,864     $ 43,814     $ 37,110  
Existing Structure Held for Investment     NA     $ 3,392     $ 8,177     $ 26,870     $ 37,482     $ 23,632  
Existing Structure- Improvements     NA     $     $     $     $ 97,777     $ 55,885  
Allocation of Allowance for Credit Losses by Loan Classifications
                                   
Pre-entitled Land:
                                   
Held for Investment   $     $     $     $     $ (3,242 )    $ (9,776 ) 
Processing Entitlements                       (1,900 )      (122,266 )      (141,675 ) 
Entitled Land:
                                   
Held for Investment   $     $     $     $     $ (79,279 )    $ (83,790 ) 
Infrastructure under Construction                             (24,863 )      (45,756 ) 
Improved and Held for Vertical Construction                             (38,522 )      (20,659 ) 
Construction & Existing Structures:
                                   
New Structure – Construction in-process   $     $     $     $     $ (28,547 )    $ (28,030 ) 
Existing Structure Held for Investment                             (2,954 )      (5,003 ) 
Existing Structure – Improvements                             (637 )      (2,311 ) 
Allowance for Loan Loss   $     $     $     $ (1,900 )    $ (300,310)     $ (337,000 ) 
Rollforward of Allowance for Credit Losses by Loan Classifications
                                   
Balance at the beginning of period   $     $     $     $     $ (1,900 )    $ (300,310 ) 
Additions to Allowance for Credit Losses:
                                   
Pre-entitled Land:
                                   
Held for Investment                             (3,242 )      (6,534 ) 
Processing Entitlements                       (1,900 )      (120,366 )      (26,125 ) 
Entitled Land:
                                   
Held for Investment                             (79,279 )      (12,091 ) 
Infrastructure under Construction                             (24,863 )      (20,893 ) 
Improved and Held for Vertical Construction                             (38,522 )      8,838  
Construction & Existing Structures:
                                   
New Structure – Construction in-process                             (26,137 )      (1,142 ) 
Existing Structure Held for Investment                             (2,954 )      (2,049)  

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TABLE OF CONTENTS

           
  As of and for the Year Ended December 31,   As of and for
the Nine
Months Ended
September 30
Existing Structure – Improvements           (637)   (22,004)
Total charge-offs                       (1,900 )      (296,000 )      (82,000 ) 
Charge-Offs:
                                   
Pre-entitled Land:
                                   
Held for Investment                                    
Processing Entitlements                                   6,716  
Entitled Land:
                                   
Held for Investment                                   7,580  
Infrastructure under Construction                                    
Improved and Held for Vertical Construction                                   9,025  
Construction & Existing Structures:
                                   
New Structure – Construction in-process                                   1,659  
Existing Structure Held for Investment                                    
Existing Structure – Improvements                                   20,330  
Total charge-offs                                   45,310  
Recoveries – None
                                   
Total recoveries                                    
Net charge-offs                                   45,310  
Other changes to allowance for credit losses                             (2,410 )       
Balance at end of period   $     $     $     $ (1,900 )    $ (300,310)     $ (337,000 ) 
Ratio of net charge-offs during the period to average loans outstanding during the period     0.0 %      0.0 %      0.0 %      0.0 %      0.0 %      -8.2 % 
Scheduled Maturities within One Year and Thereafter
                                   
Scheduled Maturities – One year or less     NA     $ 87,894     $ 258,615     $ 510,796     $ 543,017     $ 448,610  
Scheduled Maturities – One to five years     NA       5,051                   70,837       104,746  
Totals     NA     $ 92,945     $ 258,615     $ 510,796     $