SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K
(Mark one)

[X]  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002

                                       OR

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

                        Commission File Number: 000-32859

                              BFA LIQUIDATION TRUST
             (Exact name of registrant as specified in its charter)

           ARIZONA                                               86-1018485
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)

           1313 E. OSBORN RD., SUITE 250, PHOENIX, ARIZONA 85014-5699
               (Address of principal executive offices) (Zip Code)

       Registrant's telephone number, including area code: (602) 279-3587

Securities  registered pursuant to Section 12(b) or 12(g) of the Act: Beneficial
Interests established under the Trust Agreement

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

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

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

As of March 25, 2003,  448,213,228  units of Class A  Beneficial  Interests  and
137,176,571 units of Class B Beneficial Interests were outstanding.
<PAGE>
                              BFA Liquidation Trust
                                    Form 10-K
                                Table of Contents

Item 1. Business.                                                              1

Item 2. Properties.                                                            2

Item 3. Legal Proceedings.                                                     2

Item 4. Submission of Matters to a Vote of Security Holders.                   7

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters. 7

Item 6. Selected Financial Data.                                               8

Item 7. Management's Discussion and Analysis of Financial Condition
          and Results of Operations.                                           8

Item 8. Financial Statements and Supplementary Data.                          11

Item 9. Change in and Disagreements with Accountants on Accounting
          and Financial Disclosure.                                           28

Item 10. Directors and Executive Officers of the Registrant.                  29

Item 11. Executive Compensation.                                              30

Item 12. Security Ownership of Certain Beneficial Owners and Management
           and Related Stockholder Matters.                                   31

Item 13. Certain Relationships and Related Transactions.                      32

Item 14. Controls and Procedures.                                             32

Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K.     32
<PAGE>
                                     PART I

ITEM 1. BUSINESS.

The BFA  Liquidation  Trust  (the  "TRUST")  was formed  pursuant  to the "First
Amended Joint Liquidating Plan of Reorganization of the Debtors Under Chapter 11
of the Bankruptcy  Code" proposed by the Baptist  Foundation of Arizona  ("BFA")
and related subsidiaries and affiliates (collectively,  the "DEBTORS"), Official
Collateralized  Investors'  Committee and Official Joint  Committee of Unsecured
Creditors,  relating  to Case No.  99-13275  ECF GBN  (the  "PLAN"),  which  was
confirmed by the Bankruptcy  Court for the District of Arizona (the  "BANKRUPTCY
COURT"), by an order entered on December 22, 2000 (the "CONFIRMATION ORDER") and
effective on January 22, 2001 (the "EFFECTIVE DATE").

The primary purpose of the Trust is to (i) oversee and direct the liquidation of
the assets that were  transferred  to the Trust pursuant to the Plan (the "TRUST
ASSETS") for the benefit of the beneficiaries of the Trust (the "BENEFICIARIES")
in accordance with Treasury Regulation Section 301.7701-4(d), (ii) prosecute all
litigation  claims  for the  benefit  of the  Trust,  and (iii)  distribute  any
proceeds of the litigation  claims and the Trust Assets received by the Trust to
the Beneficiaries. The Trust is not operated with the objective of continuing or
engaging in the conduct of a trade or business,  except to the extent reasonably
necessary to preserve or enhance the value of the Trust Assets,  and  consistent
with the liquidating purpose of the Trust.

Pursuant to the Plan, a liquidating  trustee (the  "LIQUIDATING  TRUSTEE") and a
liquidating trust board (the  "LIQUIDATING  TRUST BOARD") have been appointed to
oversee the liquidation of the Trust Assets.  Currently, the Liquidating Trustee
and the  Liquidating  Trust Board are  overseeing  the  liquidation of the Trust
Assets ensuring that such  liquidation is conducted in a  cost-effective  manner
and in a  reasonable  time,  with due regard  for the risk that undue  haste may
minimize the liquidation proceeds of a particular Trust Asset. In addition,  the
Liquidating  Trustee and the  Liquidating  Trust Board are using best efforts to
make  timely  distributions  and to  minimize  the  duration  of the  Trust.  In
overseeing  the selling of the Trust  Assets,  the  Liquidating  Trustee and the
Liquidating  Trust Board are using best  efforts to  maximize  the amount of the
proceeds  derived  therefrom.  The  liquidation  of  the  Trust  Assets  may  be
accomplished   either  through  the  prosecution,   compromise  and  settlement,
abandonment  or dismissal of any or all claims,  rights or causes of action,  or
otherwise subject to the terms of the Plan.

The Trust is set to  terminate  on the  later  of:  (i) the date of entry by the
Bankruptcy  Court of the final decree which fully and finally closes the Chapter
11 cases  (the  "FINAL  DECREE");  or (ii) the date upon  which all of the Trust
Assets have been  distributed  to the  Beneficiaries  and there are no remaining
assets expected to be received in the Trust Assets, PROVIDED,  HOWEVER, that the
Trust will terminate no later than the fifth (5th)  anniversary of the Effective
Date. On or prior to such termination date, the Bankruptcy Court, upon motion by
a party in  interest,  may  extend  the term of the Trust  upon a finding by the
Bankruptcy Court that the extension is necessary for the liquidating purposes of
the Trust.  Extensions  may be obtained so long as each extension is approved by
the Bankruptcy Court six (6) months prior to the expiration of the original term
and each extended term.

After the  termination  of the  Trust and for the  purpose  of  liquidating  and
winding up the affairs of the Trust,  the  Liquidating  Trustee will continue to
act  in  such  capacity  until  its  duties  have  been  fully  performed.  Upon
distribution of the entire Trust Assets and entry of the Final Decree and unless
ordered  otherwise  by the  Bankruptcy  Court as part of the Final  Decree,  the
Liquidating  Trustee  will  retain  for a period  of two (2)  years  the  books,
records,  Beneficiary  lists,  securities  register,  and certificates and other
documents  and files  which  will  have  been  delivered  to or  created  by the
Liquidating Trustee.  Subject to the final decree, at the Liquidating  Trustee's
discretion, all of such records and documents may, but need not, be destroyed at
any time after two (2) years from the  completion  and winding up of the affairs
of the Trust. Except as otherwise  specifically  provided in the Trust Agreement
dated  January 22,  2001 (the  "TRUST  AGREEMENT"),  upon the  discharge  of all
liabilities  of the Trust,  final  distribution  of the entire  Trust Assets and
entry of the Final Decree,  the Liquidating  Trustee will have no further duties
or obligations relating to the Trust.

                                     Page 1
<PAGE>
ITEM 2. PROPERTIES.

The  Trust  does not have any  material  physical  properties,  except  for such
properties that are held for sale.

ITEM 3. LEGAL PROCEEDINGS.

ARTHUR ANDERSEN

     On January 23, 2003,  the Trust  distributed  approximately  $174.7 million
which  represented  the remaining  proceeds of the $217 million  settlement with
BFA's  former  auditor  Arthur  Andersen,  LLP  ("AA"),  net of  legal  fees  of
approximately $32.9 million and litigation expenses incurred for prosecuting the
litigation of approximately  $4.0 million,  to the  Beneficiaries in conjunction
with a plan of  allocation  approved  by the  Superior  Court  for the  State of
Arizona,  Maricopa County (the "SUPERIOR COURT").  This distribution  marked the
culmination of a year in which the settlement  with AA fell apart in the wake of
AA's indictment by the United States Department of Justice,  only to be restored
after commencing trial of the action.

     On March 1, 2002,  three days before the scheduled  commencement  of trial,
the Trust,  lead plaintiffs in a parallel class action lawsuit,  and the Arizona
Attorney General  ("PLAINTIFFS") entered into a global settlement of claims with
AA for  the  sum of  $217  million  in  cash.  Two  weeks  after  reaching  this
settlement, AA was indicted on obstruction of justice charges in connection with
its role as auditor of Enron. Shortly thereafter, AA advised Plaintiffs that its
insurance  carrier had failed to approve the  settlement,  and AA was  therefore
withdrawing from the agreement.

     Following  AA's  surprise   withdrawal  from  the  settlement,   the  Trust
immediately  returned to the Superior  Court and succeeded in restoring the case
to the trial calendar on an expedited  basis. On April 29, 2002, trial of the AA
action commenced in the Superior Court before a jury, and the Trust called eight
witnesses  to testify  over the next week.  As the trial  proceeded,  settlement
negotiations  resumed  between  Plaintiffs  and AA. On May 6,  2002,  Plaintiffs
entered into a new global  settlement  with AA for $217  million in cash,  which
provided  for  severe  penalties  in the event  that AA failed  to  fulfill  its
obligations under the settlement agreement. AA paid $11 million to Plaintiffs on
the date that the  settlement  was  reached,  and paid the balance  into a joint
escrow account in June 2002.

     The terms of the settlement provided for the bulk of the funds to remain in
escrow  and not be  distributed  to  investors  until a variety  of  events  had
occurred,  including: (i) approval of the settlement by the Bankruptcy Court and
the Superior  Court;  (ii) approval of a plan of  allocation  of the  settlement
proceeds  among  investors by the Superior  Court;  and (iii)  resolution of any
appeals taken from orders entered by the courts approving the settlement or plan
of  allocation.  The  Bankruptcy  Court  and the  Superior  Court  approved  the
settlement  in July and September  2002,  respectively,  over the  objections of
various  parties.  Certain  of  these  parties  appealed  the  approval  of  the
settlement,  which delayed the distribution of the funds for several months.  In
late December 2002,  the last of these appeals was resolved,  allowing the Trust
to distribute the funds to investors on January 23, 2003 pursuant to the plan of
allocation approved by the Superior Court.

JENNINGS STROUSS & SALMON PLC

     On December 27, 2002,  the Trust  distributed  approximately  $18.0 million
which  represented  the net  proceeds of the $21 million  settlement  with BFA's
former counsel Jennings Strouss & Salmon PLC ("JSS"),  net of attorneys fees and
litigation  expenses,  to investors in conjunction with the same  court-approved
plan of allocation governing the AA settlement  proceeds.  The Trust was able to
obtain this settlement  without  commencing formal litigation against JSS, which
not only would have resulted in significant  expense,  but also may have delayed
the trial in the AA action.

     In June 2002,  Plaintiffs  entered into a global settlement of their claims
with  JSS for  $21  million  in  cash.  Similar  to the AA  settlement,  the JSS
settlement was contingent  upon the occurrence of a number of events,  including

                                     Page 2
<PAGE>
court  approval and resolution of all appeals.  While both the Bankruptcy  Court
and Superior  Court  approved the JSS  settlement  in  September  2002,  certain
parties  registered  objections  and filed  appeals  from the  courts'  approval
orders.  These appeals were resolved in November  2002,  allowing the settlement
funds to be distributed to the Beneficiaries on December 27, 2002.

FORMER DIRECTORS, ACCOUNTANTS AND AFFILIATED PARTIES

     The Trust has spent substantial time investigating potential claims against
third parties and  analyzing  insurance  policies  that could provide  insurance
coverage for claims by the Trust against potentially  responsible third parties.
As a result of these  investigations,  which  included  reviewing  thousands  of
documents and interviewing  dozens of individuals  involved in the demise of the
Debtors,  the Trust identified multiple parties against whom it possessed viable
claims  arising from the Debtors'  fraud.  As a result,  the Trust filed various
adversary proceedings against these potentially  responsible parties,  including
the following:

     -    L. Dwain Hoover and  Affiliates:  On February  15, 2000,  BFA filed an
          adversary  proceeding in the Bankruptcy Court against L. Dwain Hoover,
          a  former  BFA  director,  and  the  related  parties  that he owns or
          controls (collectively,  "HOOVER"). The case alleged, INTER ALIA, that
          Hoover had entered into a series of transactions wherein he and/or his
          companies  borrowed money from companies  managed by BFA and then lent
          that money to  another  company,  at higher  rates of  interest.  As a
          result,  Hoover  earned large profits while having little if any risk,
          at the expense of BFA and its managed  companies.  On November 7, 2001
          the Trust  brought a second  adversary  proceeding  against  L.  Dwain
          Hoover and several  other  parties  alleging  that by breaching  their
          fiduciary duties as directors,  officers or professionals hired by BFA
          or its affiliated companies,  the defendants had assisted BFA's senior
          management in disguising the true financial condition of BFA.

     -    Harold Friend and  Affiliates:  In 2000,  BFA filed a lawsuit  against
          Harold Friend and two companies co-owned by Mr. Friend and BFA-related
          companies  seeking a full  accounting  of his  financial  records  and
          business  dealings with BFA and its former senior management team. Mr.
          Friend was reported to be a benefactor of BFA through much of the time
          that the fraud occurred, and engaged in various transactions with BFA.
          The Trust  alleged that,  in reality,  Mr.  Friend and his  affiliated
          entities  facilitated  the fraud  through  these  transactions,  which
          benefited Mr. Friend to the detriment of BFA.

     -    Edgar Alan Kuhn: Mr. Kuhn served as the nominal head of E.V.I.G., Inc.
          ("EVIG"),  a  purportedly  unrelated  entity with which BFA engaged in
          numerous real estate transactions. The Trust alleged that, in reality,
          EVIG was  controlled  by BFA, and was used for the purpose of allowing
          BFA to record  profits from the sale of  non-performing  properties at
          prices  significantly above their true market value. The Trust further
          alleged  that BFA  funded  these  sales  through a series  of  "swirl"
          transactions,  through  which BFA funneled  money to EVIG,  which EVIG
          then used to purchase the  non-performing  assets from BFA at inflated
          prices, thereby perpetuating the fraud.

     -    Jalma Hunsinger and Affiliates:  Mr.  Hunsinger  served as the nominal
          head of A.L.O.,  Inc. ("ALO"),  another  purportedly  unrelated entity
          with which BFA engaged in numerous real estate  transactions.  Similar
          to the  EVIG  situation,  the  Trust  alleged  that  ALO was  actually
          controlled  by BFA,  and was used for the  purpose  of  hiding  losses
          incurred from  non-performing  assets through bogus sale transactions.
          As in the case of EVIG,  BFA funded these bogus sales through a series
          of swirl transactions which perpetuated the fraud.

     -    Arizona Southern Baptist Convention:  BFA was a member organization of
          the Arizona Southern Baptist Convention ("ASBC"), and a representative
          of the ASBC served as an ex officio member of the BFA Board throughout
          the period of the fraud.  The Trust alleged that the ASBC breached its

                                     Page 3
<PAGE>
          fiduciary  duties  to BFA by  failing  to take a more  active  role in
          detecting and halting the fraud.

     -    Nelson Lambson and Henry & Horne: BFA engaged these two (2) accounting
          firms to perform  audits  ensuring that BFA complied with relevant IRS
          regulations  to serve as a non-bank  passive  custodian of  Individual
          Retirement  Accounts.  The Trust  alleged  that these firms  committed
          malpractice  in failing to  discover  that BFA had not  complied  with
          these requirements.

     An agreement to (i) settle both adversary  proceedings  against Hoover, and
(ii) resolve the claims against Harold Friend and affiliates,  Edgar Allen Kuhn,
Jalma Hunsinger and affiliates,  ASBC, and Nelson Lambson and Henry & Horne, was
reached in December 2002 for an aggregate  settlement amount of $16.5 million in
cash and real  property.  In addition,  each of the settling  parties  agreed to
waive all claims  totaling  $37.0 million filed against BFA with the  Bankruptcy
Court.  Also as part of the  settlement,  Mr. Hoover agreed to drop an appeal he
had filed with respect to the Bankruptcy  Court's  approval of the AA settlement
clearing the way for distribution of these funds on January 23, 2003.

CROTTS AND GRABINSKI

     During  late  2001,  the  Trust   commenced  two  (2)  separate   adversary
proceedings in the Bankruptcy Court against William Crotts and Thomas Grabinski,
the Chief Executive Officer and General Counsel, respectively, of BFA during the
period  that the fraud  occurred.  The Trust  alleges  that  Messrs.  Crotts and
Grabinski  were the primary  architects of the fraud,  thereby  breaching  their
fiduciary duties to BFA and its investors.

     The Trust has  successfully  defeated  motions by Crotts and  Grabinski  to
dismiss the action, and since that time has engaged in extensive  discovery with
these  parties.  Trial for this action is  scheduled  to commence in early 2004,
following the conclusion of the parallel class action case scheduled to commence
on May 1, 2003.

COOK CHARITABLE TRUST CLAIM AND RELATED MATTERS

     This claim  arises out of the  Sovereign  Sherwood  Crossing LLC venture in
which  Cook  Charitable   Trust  and  Sovereign  Realty  Advisors  ("SRA")  were
shareholders. In 1999, BFA exercised its power as trustee of the Cook Charitable
Trust  ("CCT") to arrange  for CCT to  contribute  $6.3  million in capital  and
substitute for a BFA  subsidiary as a shareholder  in the entity  purchasing the
Sherwood Crossing apartment  complex.  CCT alleges that, among other things, BFA
breached its fiduciary duties to CCT by investing virtually the entire corpus of
the trust in  Sovereign  Sherwood  Crossing and by  permitting  SRA to receive a
substantial  equity stake in the entity without  contributing  any capital.  CCT
brought an  arbitration  proceeding  against  SRA,  in which the Trust  produced
documents and witnesses. That case was settled in September 2002 with CCT buying
out SRA's interest for $4 million,  exclusive of  approximately  $1.1 million in
prior  distributions  to SRA. CCT now seeks to recoup its payments to SRA in its
claim  against  BFA. The Trust has opposed this claim and the matter is expected
to be ready for trial in the second half of 2003.

PHOEBUS COMMUNICATIONS

     With respect to loans that BFA made to Gail Arnall (William Crotts' sister)
and her company,  Phoebus  Communications,  the Trust brought suit on delinquent
promissory  notes made by Phoebus  Communications  and Ms. Arnall.  Judgment was
obtained  against  Phoebus  Communications,  Ms. Arnall and her ex-husband in an
amount  of  approximately  $175,000  (the  full  amount  of the  debt  plus  all
attorneys'  fees and pre- and  post-judgment  interest).  In 2002 the defendants
filed a motion  to set aside  the  default  judgment  on  grounds  that they had
inadequate  notice.  That  motion was  denied on  January  9, 2003.  Enforcement
proceedings  were initiated in 2002 in Maryland,  where Phoebus is located,  and

                                     Page 4
<PAGE>
the court  denied a motion to dismiss or stay those  proceedings  on January 10,
2003.  In  March,  2003  the  Trust  approved  a  settlement  of  $  140,000  in
satisfaction of the judgement.

CHAPARRAL PINES

     In 2002 a complaint  alleging four (4) separate  causes of action was filed
in the Superior Court against BFA's former  limited  liability  company  member,
Chaparral  Pines,  LLC, in the development of the Chaparral Pines property.  The
complaints  center around the  mismanagement  of the property by the  defendant.
Chaparral  Pines filed a Motion to dismiss the  complaint.  After  briefings and
argument,  the  Superior  Court has allowed the Trust to proceed on three of the
four  counts  in  the  complaint.   Discovery  has  commenced.  Because  of  the
substantial  nature of the Chaparral Pines project,  the defendants' are working
to accumulate all the construction-related  documents. Currently, both the Trust
and defendants are in a document review process.

WILLIAM BLAIR

     In an effort to avoid repaying $4 million dollars in debt to the Trust, Mr.
Blair has  engaged in a number of legal  maneuvers.  In 2001,  the Trust filed a
Notice of  Trustee's  Sale on the  collateral  securing  repayment on one of the
Notes  (the  "DESERT  DIAMOND  NOTE").  Mr.  Blair  then  filed a  petition  for
bankruptcy  relief under Chapter 11 to frustrate the  collection  efforts of the
Trust. Separately,  Fidelity Title, the title company that worked with Mr. Blair
to transfer  title of portions of the Trust's  collateral  to third party buyers
without  lien  releases,  filed its own  lawsuit  in a  different  jurisdiction,
seeking a variety of legal and equitable relief.

     With regard to the petition for bankruptcy relief filed by Mr. Blair in the
name of Desert  Diamond,  in 2002, the Trust  successfully  opposed a "cramdown"
plan of reorganization,  and then separately  succeeded in converting the Desert
Diamond  bankruptcy case to a liquidation under the provisions of Chapter 7. The
Trust  worked with the  Chapter 7 Trustee to sell the  remaining  real  property
collateral to a third party  purchaser.  That sale has recently  closed in 2003,
netting  approximately  $380,000 to the Trust.  The Trust  previously  recovered
approximately  $100,000  from other  collection  efforts,  bringing  the Trust's
recovery to approximately $480,000.

     The Trust  separately  filed a lawsuit and obtained a judgment  against Mr.
Blair  individually  as a co-maker under the Desert Diamond Note.  That debt has
been reduced to judgment in an amount of $1.4 million dollars,  plus interest at
19% until paid in full.  During the last year,  the Trust has  successfully  now
closed  two of the  legal  actions  brought  by Mr.  Blair.  With  regard to the
remaining  action against the title company  defendants,  there appears to be no
known factual  issues to date.  To date,  there have been at least seven motions
and cross  motions  for  summary  judgment  filed.  At the  request of the title
company, one of the actions has been certified to the Arizona Supreme Court. Two
motions and one cross motion for summary judgment are currently pending.

     With regard to Mr. Blair's second  obligation  (the "CAMPBELL  NOTE"),  Mr.
Blair  successfully  convinced the Superior Court judge to certify two questions
to the Bankruptcy  Court for  determination.  Both of those issues have now been
resolved  in favor of the  Trust.  The Trust  previously  obtained  judgment  of
$75,000 against Mr. Blair on the Campbell Note as to the issue of liability. The
only remaining issue left for determination is one for damages.

     The Trust has employed an outside private  investigation  firm to assist in
locating assets for the satisfaction of the judgements against Mr. Blair.

DISPUTED PROOFS OF CLAIMS

     A  number  of  creditors  filed  proofs  of  claims  in the BFA  bankruptcy
proceeding,  which  have been  objected  to by BFA.  All of these  disputes  are
pending in the Bankruptcy Court as of December 31, 2002. The claims in excess of
$1 million are as follows:

                                     Page 5
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     1.   Cook Charitable  Trust.  On March 31, 2000, the Cook Charitable  Trust
          filed a proof of claim  alleging  that BFA abused its  discretion  and
          breached  its  fiduciary  duty when it served as  trustee  of the Cook
          Charitable Trust and, as a result, is seeking $2 million to $5 million
          in damages. The Trust is attempting to settle this claim at this time.
          However,  the Trust is unable to  estimate  at this time the amount of
          future cash flows, if any, to Cook Charitable Trust.

     2.   Hoover Parties. On March 19, 2000, March 29-31, 2000 and May 22, 2000,
          Dwain Hoover and Beva Hoover, together with certain of their relatives
          and  entities  controlled  by them,  including  D. Hoover & Associates
          Investments,  Inc., The Hoover Family  Charitable  Trust,  The Dwain &
          Beva Hoover  Charitable Trust II, SLS Trust, CRM Holdings,  and United
          Development Inc., filed fourteen (14) proof of claims aggregating over
          $16 million and based on a number of  theories.  The most  significant
          claims are (i) a claim in the approximate  amount of $278,000 alleging
          that officers of BFA made an oral promise to  repurchase  certain real
          property;  (ii) a claim in the  approximate  amount  of $14.2  million
          alleging  note   obligations   between  New  Church   Ventures  Credit
          Corporation and D. Hoover & Associates Investments,  Inc; (iii) claims
          in  the   approximate   amount  of  $328,000   based  on  IRA  account
          investments; (iv) a claim by The Hoover Family Charitable Trust in the
          approximate  amount of  $580,000  based on the alleged  conversion  of
          trust property;  and (v) a claim by The Dwain & Beva Hoover Charitable
          Trust II in the  approximate  amount of $680,000  based on the alleged
          conversion of trust property.  All of the claims were waived by Hoover
          as part of the settlement  reached  during 2002 as described  above in
          the "FORMER  DIRECTORS,  ACCOUNTANTS  AND AFFILIATED  PARTIES" part of
          Item 3.

     3.   Arizona Southern Baptist Convention.  On March 31, 2000 the ASBC filed
          a proof of claim  in the  approximate  amount  of $1  million  plus an
          unknown  amount  based on its alleged  beneficial  interest in various
          trusts or endowments for which BFA or one of its affiliates  served as
          trustee.  Further,  the  proof of claim  seeks to have the  Bankruptcy
          Court  transfer BFA's  beneficial  interest in the trusts to ASBC. The
          Trust  has  objected  to  this  claim  on  various   grounds  and  has
          counterclaims  against ASBC.  This claim was waived by ASBC as part of
          the settlement  reached during 2002 as described  above in the "FORMER
          DIRECTORS, ACCOUNTANTS AND AFFILIATED PARTIES" part of Item 3.

     4.   Arizona State  Mission  Board,  Inc. On March 31, 2000,  Arizona State
          Mission Board, Inc. ("ASMB") filed a proof of claim in the approximate
          amount of $1.45  million  plus an unknown  amount based on its alleged
          beneficial  interest in various  trusts or endowments for which BFA or
          one of its affiliates  served as trustee.  ASMB also seeks to have the
          Bankruptcy  Court  transfer BFA's  beneficial  interest in the trusts,
          which is now held by the Trust,  to ASMB.  The Trust has  objected  to
          this claim on various grounds and has counterclaims against ASMB. This
          claim was waived by ASMB as part of the settlement reached during 2002
          as  described  above  in  the  "FORMER   DIRECTORS,   ACCOUNTANTS  AND
          AFFILIATED PARTIES" part of Item 3.

     5.   Arizona Baptist Children's  Services,  Inc. On March 31, 2000, Arizona
          Baptist Children's  Services,  Inc. ("ABCS") filed a proof of claim in
          the approximate amount of $2.3 million plus an unknown amount based on
          its alleged  beneficial  interest in various trust or  endowments  for
          which BFA or one of its affiliates served as trustee.  ABCS also seeks
          to have the Bankruptcy Court transfer BFA's beneficial interest in the
          trusts,  which  is now  held by the  Trust,  to ABCS.  The  Trust  has
          objected  to this  claim  on  various  grounds  and has  counterclaims
          against ABCS. The Trust filed a settlement  agreement between ABCS and
          the Trust with the  Bankruptcy  Court and it was  approved in February
          2003.  Based on the terms of the  settlement  agreement the Trust does
          not  believe  that it is likely  that any future  cash  outflows  will
          result from this claim.

     6.   Harold Friend and Related Parties. On March 31, 2000 Harold Friend and
          several  entities  controlled  by him  including  Export Tyre  Holding
          Company,    Stockbridge    holding   Company,    Stockbridge    Realty

                                     Page 6
<PAGE>
          Investors--Arizona,  Inc.,  Property  Consultants,  Inc. and HMR, Inc.
          filed a proof of  claim in the  approximate  amount  of $18.0  million
          based on a number of theories.  The most significant  claim is one for
          unpaid fees and  commissions,  both earned and projected to be earned,
          in the approximate amount of $14.88 million. The Trust has objected to
          these  claims  on  various  grounds  and has  counterclaims  of action
          against Mr.  Friend for his role at BFA.  This claim was waived by Mr.
          Friend as part of the  settlement  reached  during  2002 as  described
          above in the "FORMER  DIRECTORS,  ACCOUNTANTS AND AFFILIATED  PARTIES"
          part of Item 3.

     7.   Claim of Grand  Canyon  University.  On March 31,  2000,  Grand Canyon
          University   ("GCU")  filed  a  proof  of  claim  seeking  payment  of
          approximately  $3.2 million for various unsecured  investments held by
          BFA,  approximately $3.67 million for the balance due under a note and
          deed of trust executed by Cora Properties,  Inc. (the "CORA NOTE") and
          a  quarterly  $24,425  annuity  payment  for  which  BFA is  primarily
          obligated and GCU is the guarantor. The Trust has objected to the $3.2
          million  claim and the  $24,425  quarterly  annuity  claim on  various
          grounds and is pursuing  discussions with GCU in regards to settlement
          of these  claims.  The claim  related  to the Cora Note has since been
          resolved  and the  liability  has been  recorded.  The Trust  does not
          believe  that it is likely that any future cash  outflows  will result
          from the $3.2 million claim and the $24,425 quarterly annuity claim.

     8.   Various other  miscellaneous  claims were filed by unsecured creditors
          seeking compensation. These claims have all been settled in 2002 and a
          liability, if any, has been recorded for the settled amount.

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

The Trust has no  outstanding  voting  securities  and,  thus,  no matters  were
submitted to a vote of security holders during the year ended December 31, 2002.

                                     PART II

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

Class 3A and 3B  beneficial  interests  are not  listed  or  traded  on a public
exchange.

The  following  is a schedule  of cash  distributions  NET OF  DISPUTED  ACCOUNT
RESERVES made to holders of Class 3A and 3B Trust  beneficial  interest  holders
and other  classes for the period from  January 1, 2002 to December 31, 2002 and
for the period from January 22, 2001 (inception) to December 31 ,2001

<TABLE>
<CAPTION>
                                                January 1, 2002 to   January 22, 2001 to
                                                 December 31, 2002    December 31, 2001
                                                 -----------------    -----------------
<S>                                                 <C>                  <C>
Class 3A and 3B holders - Trust Asset proceeds      $20,950,000          $50,885,000
Class 3A and 3B holders - Trust's share of
  litigation proceeds (*)                            12,250,000                   --
All Other Class holders                               4,350,000            6,916,000
                                                    -----------          -----------

Total Distributions                                 $37,550,000          $57,801,000
                                                    ===========          ===========
</TABLE>

Note (*) - On  December  27,  2002 the  Trust  distributed  approximately  $24.5
million in litigation proceeds.  Per the court approved plan of allocation,  50%
of these  proceeds  were  allocated  to the  Trust  and the  remaining  50 % was
distributed to the class action  members.  The amount  detailed in this schedule
reflects only the Trust's 50% share of these proceeds.

                                     Page 7
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.

The  selected  historical  financial  data  presented  below for the year  ended
December  31, 2002 and for the period  from  January  22,  2001  (inception)  to
December 31, 2001 are derived from our consolidated  financial  statements.  The
selected financial data should be read in conjunction with Item 7. "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION AND RESULTS OF  OPERATIONS"  and
the consolidated financial statements and related notes included in Item 8.

                                                 January 1,        January 22,
                                                   2002 to           2001 to
                                                December 31,       December 31,
                                                    2002               2001
                                                -------------     -------------
Net assets in liquidation, beginning            $ 128,980,963     $ 171,414,559

Interest on notes receivable                        6,230,184         7,409,609
Interest on notes payable                            (564,192)       (1,057,361)
Changes in fair value of other trust assets
  and liabilities                                  92,189,547        (1,705,848)
Changes in fair value of estimated costs
  to complete liquidation                             675,351                --
Distributions to holders of Class 3A
  and 3B beneficial interests                     (32,678,512)*     (47,079,996)
                                                -------------     -------------

Net assets in liquidation, ending               $ 194,833,341     $ 128,980,963
                                                =============     =============

Note (*) - On January 23, 2003, the Trust  distributed  it's 50% share of the AA
proceeds totaling approximately $87.35 million.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS.

Certain statements under the headings  "Management's  Discussion and Analysis of
Financial  Condition and Results of  Operations,"  "Business,"  and elsewhere in
this report constitute  "forward-looking  statements"  within the meaning of the
rules and regulations promulgated by the Securities and Exchange Commission.

This report contains a number of forward-looking  statements,  which reflect the
Trust's  current views with respect to future events and financial  performance.
Such   forward-looking   statements  are  based  on  management's   beliefs  and
assumptions  regarding  information  that is currently  available,  and are made
pursuant to the "safe harbor"  provisions of the federal  securities laws. These
forward-looking  statements are subject to certain risks and uncertainties.  The
Trust's  actual  performance  and results  could  differ  materially  from those
expressed in the forward-looking  statements due to risks and uncertainties that
could materially impact the Trust in an adverse fashion and are only predictions
of future results, and there can be no assurance that the Trust's actual results
will not  materially  differ  from those  anticipated  in these  forward-looking
statements.  In this report,  the words  "anticipates",  "believes",  "expects",
"intends",   "plans",   "may",   "future",   and  similar  expressions  identify
forward-looking statements. Readers are cautioned not to place undue reliance on
the forward-looking statements contained herein, which speak only as of the date
hereof.  The Trust has no  obligation  to  publicly  update or revise any of the
forward-looking  statements to reflect  events or  circumstances  that may arise
after the date hereof.

                FOR THE YEAR ENDED DECEMBER 31, 2002 COMPARED TO
        THE PERIOD FROM JANUARY 22, 2001 (INCEPTION) TO DECEMBER 31, 2001

The  estimated  fair value of the  Trust's net assets in  liquidation  increased
approximately  $65.8 million in the year ended  December 31, 2002 as compared to
approximately  $42.4  million  decrease  for the  period  of  January  22,  2001
(inception) to December 31, 2001.  Factors which contributed to the net increase
of the net asset value of the Trust's net assets for the year ended December 31,
2002 include (i) interest  income from notes  receivables  which  increased  net
assets by  approximately  $6.2 million,  (ii) interest expense for notes payable

                                     Page 8
<PAGE>
which  decreased net assets by  approximately  $564,000,  (iii)  appreciation in
value of certain other trust assets  including  litigation  proceeds and related
settlement  liability which increased net assets by approximately  $92.2 million
and (iv) distributions to holders of Class 3A and 3B beneficial  interests which
decreased net assets by approximately  $32.7 million.  Factors which contributed
to the net  decrease  of the net asset  value of the  Trust's net assets for the
period from January 22, 2001 to December  31, 2001  include (i) interest  income
from notes receivable which increased net assets by approximately  $7.4 million,
(ii)  interest   expense  for  notes  payable  which  decreased  net  assets  by
approximately  $1,000,000,  (iii)  appreciation  in value of certain other trust
assets  which  increased  net  asset  by  approximately  $1.7  million  and (iv)
distributions to holders of Class 3A and 3B beneficial interests which decreased
net assets by approximately $49.1 million.

Interest  income  from notes  receivable  decreased  in 2002 as compared to 2001
because of  principal  payments  received.  Interest  expense  on notes  payable
decreased  from 2002 as compared 2001 because of principal  payments made by the
Trust during 2002. The changes in fair value of other trust assets  increased in
2002 as compared to 2001  because of changes in the fair market  value of assets
and certain related  liabilities.  The primary change in the fair value of other
trust assets was related to the settlement liability account,  which was reduced
in 2002 because of the approval by the courts of an allocation agreement whereby
the Trust recognized only 50% of the litigation  proceeds,  as compared to prior
periods  where  the  settlement  liability  was  recorded  at  100%  due  to the
substantial  uncertainty  as to the  approval  of the  allocation  process.  The
changes in the estimated  costs to complete  liquidation in 2002 were the result
of a revised budget for the final years of the Trust.

In 2002, the Trust distributed  approximately  $32.7 million to holders of Class
3A or 3B beneficial  interests.  This  distribution  was made  principally  from
collections  on  Trust  Assets  and the  distribution  of the  Trust's  share of
litigation  proceeds.  The Trust distributed an additional  approximately $12.25
million of litigation proceeds during 2002 (which represented the class action's
share of such  litigation  proceeds,)  to holders  of Class 3A or 3B  beneficial
interests.  The Class 3A and 3B beneficial interest were valued at approximately
$194.8  million at December 31, 2002.  In January  2003,  the Trust  distributed
approximately  an additional  $87.35  million of the Trust's share of litigation
proceeds  to  holders  of  Class 3A or 3B  beneficial  interests  and the  Trust
distributed  approximately an additional $87.35 million of litigation  proceeds,
representing the class action's share of those proceeds,  to holders of Class 3A
or 3B beneficial interests.

For the period from January 22, 2001 (inception) to December 31, 2001, the Trust
distributed  approximately $47.1 million to holders of Class 3A or 3B beneficial
interests.  This  distribution  was made  principally  from collections on Trust
Assets  in 2001  and  January  22,  2001  cash  balances.  The  Class  3A and 3B
beneficial interests were valued at approximately $128.9 million at December 31,
2001.

Non-cash  trust assets at December 31, 2002 and December 31, 2001 were comprised
of the following:

NON-CASH ASSETS IN LIQUIDATION                     December 31,     December 31,
   AT ESTIMATED FAIR VALUE                             2002             2001
                                                   ------------     ------------

Receivables, net                                   $ 59,434,985     $ 73,877,916
Other trust assets, net                              46,149,276       57,479,167
                                                   ------------     ------------
TOTAL ASSETS                                       $105,584,261     $131,357,083
                                                   ============     ============

The fair  value of the  Trust  Assets  is  reassessed  at  least  quarterly  and
adjustments  to estimated  fair values are reflected in the period in which they
become known. For each asset, estimates of income, expenses and net cash flow on
a quarterly basis through the expected final disposition date are prepared.  The
individual  asset cash flow  estimates are developed  based upon factors,  which
include appraisals by independent  appraisers,  physical inspection of the asset
or the  collateral  underlying  the  related  loans,  local  market  conditions,
contractual payments and discussions with the relevant borrower. At December 31,

                                     Page 9
<PAGE>
2002 and December 31, 2001, the projected  monthly cash flows were discounted at
various  rates,  as  appropriate,  to reflect the Trust Assets at estimated fair
market value.

The  Trust's  consolidated  financial  statements,  which have been  prepared in
accordance with accounting principles generally accepted in the United States of
America and in  accordance  with the  liquidating  basis of  accounting.  During
preparation of these consolidated financial statements, the Trust is required to
make  estimates and  assumptions  that affect the reported  amounts of assets at
estimated fair value,  liquidation  liabilities,  resolution of disputed claims,
estimates  of  liquidating  costs to be  incurred,  resolution  of  current  and
potential  litigation and the fair value of and related disclosure of contingent
assets and liabilities. On an on-going basis the Trust evaluates and updates its
estimates and  assumptions.  The Trust bases its estimates  and  assumptions  on
historical  experience and on various other  assumptions that the Trust believes
are  reasonable  under the  circumstances.  The results for the basis for making
judgments  about the fair values of assets and  liquidation  liabilities are not
readily  apparent  from other  sources.  Actual  results  may differ  from these
estimates under different assumptions or conditions.

     The Trust believes the following  critical  accounting  policies affect the
Trust's more  significant  estimates and assumptions  used in the preparation of
our consolidated  financial  statements,  which have been prepared in accordance
with the liquidation basis of accounting:

     *    Receivables  are  recorded  at  fair  value,   which   represents  our
          discounted   expected  future  cash  flows  calculated  based  on  the
          following factors:  receivable payment history,  financial performance
          of debtor, and underlying collateral of the Trust.

     *    Other  assets  consist  of  real  estate  partnerships,  interests  in
          operating  companies  and other assets and are recorded at fair value,
          which  represents  discounted  expected  future cash  flows,  based on
          estimates  and  assumptions  regarding  timing  of  sales,  timing  of
          payments, projected cash flows and appropriate discount factors.

     *    Payables,  accrued liabilities and notes payable are recorded based on
          expected  cash  outflows  which  require   estimates  and  assumptions
          relating to the timing of the payments and discount factors.

     *    Estimated costs to complete  liquidation and litigation  represent the
          estimated costs of operating the Trust to its expected  termination on
          January 21, 2006,  discounted  using a 4.25%  present  value factor at
          December 31, 2002 and an 8% present value factor at December 31, 2001.

          o    The costs include personnel, facilities,  Liquidating Trustee and
               Liquidating  Trust  Board  compensation,  professional  fees  and
               litigation   costs,   and  are  estimated  based  on  assumptions
               regarding the number of employees,  use of outside professionals,
               and timing of cash flows.

     *    Contingent Assets,  Litigation Settlements and related liabilities are
          recorded at the Trust's  estimated  future cash flows which  require a
          significant   amount   of   estimates   and   assumptions    regarding
          collectibility,  probable  outcomes,  timing of cash flows and various
          other factors.

                                    Page 10
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Liquidating Trustee, Board of Directors
And holders of the beneficial interests of the
BFA Liquidation Trust:

We have audited the consolidated  statements of net assets in liquidation of BFA
Liquidation  Trust and its subsidiaries as of December 31, 2002 and December 31,
2001, and the related statements of changes in net assets in liquidation for the
year ended December 31, 2002 and for the period January 22, 2001  (Inception) to
December 31, 2001.  These  financial  statements are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audits.

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

As described in Note 1, these  financial  statements  have been  prepared on the
liquidation basis of accounting.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the net assets in liquidation of BFA Liquidation  Trust
and its  subsidiaries  at  December  31, 2002 and  December  31,  2001,  and the
statements of changes in net assets in  liquidation  for the year ended December
31, 2002 and for the period January 22, 2001 (Inception) to December 31, 2001 in
conformity with accounting principles generally accepted in the United States of
America applied on the basis described in the preceding paragraph.

As described in Note 1, these  financial  statements  have been  prepared on the
liquidation basis of accounting,  which requires  management to make significant
assumptions and estimates  regarding the fair value of assets, the resolution of
disputed  claims,  the estimate of  liquidating  costs to be  incurred,  and the
resolution  and  valuation of current and potential  litigation.  Because of the
inherent  uncertainty  related to these  estimates and  assumptions,  there will
likely be differences  between these  estimates and the actual results and those
differences may be material.


----------------------------------
PricewaterhouseCoopers, LLP
Phoenix, Arizona

March 17,2003

                                    Page 11
<PAGE>
                     BFA LIQUIDATION TRUST AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF NET ASSETS IN LIQUIDATION AS OF

<TABLE>
<CAPTION>
                                                                     December 31,   December 31,
                                                                         2002           2001
                                                                     ------------   ------------
<S>                                                                  <C>            <C>
                  ASSETS IN LIQUIDATION AT ESTIMATED FAIR VALUE
Cash and cash equivalents (note 2)                                   $  2,254,806   $  1,027,598
Receivables, net (note 3)                                              59,434,985     73,877,916
Other trust assets, net (note 4)                                       46,149,276     57,479,167
Restricted cash and cash equivalents (note 5)                           6,631,801      5,214,453
Fair value of expected cash flows from settlements (note 6)           188,478,673     19,800,000
                                                                     ------------   ------------

      TOTAL ASSETS                                                    302,949,541    157,399,134
                                                                     ------------   ------------

                           LIABILITIES IN LIQUIDATION
Accounts Payable and accrued liabilities (note 7)                       3,071,617      9,017,702
Notes payable (note 8)                                                  4,126,217      6,995,339
Estimated costs to complete liquidation (note 9)                        6,679,030     12,405,130
Settlement liability (note 10)                                         94,239,336             --
                                                                     ------------   ------------

      TOTAL LIABILITIES                                               108,116,200     28,418,171
                                                                     ------------   ------------

Commitments and contingencies (note 13)

      NET ASSETS IN LIQUIDATION                                      $194,833,341   $128,980,963
                                                                     ============   ============

CLAIMS AGAINST NET ASSETS IN LIQUIDATION CONSIST OF THE FOLLOWING:
  Class "3A" Certificate,
    448,213,228 units outstanding, $.36 per unit at
    December 31, 2002 and $.25 at December 31, 2001                  $162,294,947   $111,823,670
  Class "3B" Certificate,
    137,176,571 units outstanding, $.24 per unit at
    December 31, 2002 and $.13 at December 31, 2001                    32,538,394     17,157,293
                                                                     ------------   ------------

      TOTAL NET ASSETS                                               $194,833,341   $128,980,963
                                                                     ============   ============
</TABLE>

THE  ACCOMPANYING  NOTES ARE AN INTEGRAL  PART OF THESE  CONSOLIDATED  FINANCIAL
STATEMENTS.

                                    Page 12
<PAGE>
                     BFA LIQUIDATION TRUST AND SUBSIDIARIES
         CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS IN LIQUIDATION

<TABLE>
<CAPTION>
                                                                    JANUARY 22, 2001
                                               JANUARY 1, 2002 -       (INCEPTION) -
                                               DECEMBER 31, 2002    DECEMBER 31, 2002
                                               -----------------    -----------------
<S>                                              <C>                  <C>
Net assets in liquidation, January 1, 2002
  and January 22, 2001, respectively             $ 128,980,963        $ 171,414,559

Interest on notes receivable (note 3)                6,230,184            7,409,609
Interest on notes payable (note 8)                    (564,192)          (1,057,361)
Changes in fair value of other trust assets
  and liabilities (notes 10 & 11)                   92,189,547           (1,705,848)
Changes in fair value of estimated costs to
  complete liquidation (note 9)                        675,351                   --
Distributions to holders of Class 3A and
  3B beneficial interests (note 12)                (32,678,512)         (47,079,996)
                                                 -------------        -------------
Net assets in liquidation, December 31, 2002
  and December 31, 2001, respectively            $ 194,833,341        $ 128,980,963
                                                 =============        =============
</TABLE>

THE  ACCOMPANYING  NOTES ARE AN INTEGRAL  PART OF THESE  CONSOLIDATED  FINANCIAL
STATEMENTS.

                                    Page 13
<PAGE>
                     BFA LIQUIDATION TRUST AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS

The BFA  Liquidation  Trust  (the  "TRUST")  was formed  pursuant  to the "First
Amended Joint Liquidating Plan of Reorganization of the Debtors Under Chapter 11
of the  Bankruptcy  Code"  proposed  by the  Baptist  Foundation  of Arizona and
related  subsidiaries  and affiliates (the "DEBTORS"),  Official  Collateralized
Investors'  Committee  and Official  Joint  Committee  of  Unsecured  Creditors,
relating to Case No.  99-13275 ECF GBN (the "PLAN"),  which was confirmed by the
Bankruptcy  Court for the District of Arizona,  by an order  entered on December
22, 2000 and became effective on January 22, 2001 ("EFFECTIVE DATE").

The primary purpose of the Trust is to (i) oversee and direct the liquidation of
the assets that were  transferred  to the Trust pursuant to the Plan (the "TRUST
ASSETS") for the benefit of the beneficiaries of the Trust (the "BENEFICIARIES")
in accordance with Treasury Regulation Section 301.7701-4(d), (ii) prosecute all
litigation  claims  for the  benefit  of the  Trust,  and (iii)  distribute  any
proceeds of the  litigation  and the Trust  Assets  received by the Trust to the
Beneficiaries.  The Trust is not operated  with the  objective of  continuing or
engaging in the conduct of a trade or business,  except to the extent reasonably
necessary to preserve or enhance the value of the Trust Assets,  and  consistent
with the liquidating purpose of the Trust.

The Trust is set to  terminate  on the  later  of:  (i) the date of entry by the
Bankruptcy  Court of the final decree which fully and finally closes the Chapter
11 cases  (the  "FINAL  DECREE");  or (ii) the date upon  which all of the Trust
Assets have been  distributed  to the  Beneficiaries  and there are no remaining
assets expected to be received in the Trust Assets, PROVIDED,  HOWEVER, that the
Trust will terminate no later than the fifth (5th)  anniversary of the Effective
Date. On or prior to such termination date, the Bankruptcy Court, upon motion by
a party in  interest,  may  extend  the term of the Trust  upon a finding by the
Bankruptcy Court that the extension is necessary for the liquidating purposes of
the Trust.  Extensions  may be obtained so long as each extension is approved by
the Bankruptcy Court six months prior to the expiration of the original term and
each extended term.

After the  termination  of the  Trust and for the  purpose  of  liquidating  and
winding up the affairs of the Trust,  the  Liquidating  Trustee will continue to
act as such until its duties have been fully performed. Upon distribution of the
entire Trust Assets and entry of the Final Decree and unless  ordered  otherwise
by the Bankruptcy  Court as part of the Final Decree,  the  Liquidating  Trustee
will retain for a period of two (2) years the books, records, Beneficiary lists,
securities  register,  and certificates and other documents and files which will
have been  delivered to or created by the  Liquidating  Trustee.  Subject to the
Final Decree, at the Liquidating Trustee's  discretion,  all of such records and
documents  may,  but need not, be destroyed at any time after two (2) years from
the completion  and winding up of the affairs of the Trust.  Except as otherwise
specifically  provided  in  the  Trust  Agreement,  upon  the  discharge  of all
liabilities  of the Trust,  final  distribution  of the entire  Trust Assets and
entry of the Final Decree,  the Liquidating  Trustee will have no further duties
or obligations relating to the Trust.

The Trust has a wholly-owned subsidiary to assist in liquidating the assets, New
Asset Subsidiary,  LLC, an Arizona limited  liability  company ("NAS").  NAS was
formed on the Effective  Date, and the Trust is the sole member of that company.
The Trust is able to direct NAS to take any actions that the Liquidating Trustee
believes  will  maximize  the  value  of the  assets  held  by  NAS.  The  Trust
transferred  substantially  all of its  assets to NAS,  which  NAS is  currently
marketing  for sale.  NAS is not  permitted to sell any assets or take any other
action  unless so  directed  by the Trust.  Collectively,  the Trust and NAS are
referred to as the "Trust".

                                    Page 14
<PAGE>
BASIS OF PRESENTATION

These  financial  statements  include  the  accounts  of the Trust and NAS.  All
intercompany  transactions  and accounts are  eliminated in  consolidation.  The
Trust's  investments  in certain  wholly-owned  entities  are  included in these
financial  statements at their  estimated  fair value since the Trust expects to
liquidate the investments by selling the entire  individual  businesses as going
concerns.

These financial  statements have been prepared based on the liquidation basis of
accounting,  accordingly  assets and liabilities have been recorded at estimated
fair  values.  In  accordance  with the  liquidation  basis of  accounting,  the
financial  statements  reflect the estimated costs of liquidating the assets and
distributing the proceeds to holders of beneficial interests.

CASH EQUIVALENTS AND RESTRICTED CASH AND CASH EQUIVALENTS

The Trust considers all highly liquid  investments  with original  maturities of
three months or less to be cash  equivalents.  The Trust  maintains  balances in
various  operating  and money  market  accounts in excess of  federally  insured
limits.  At December  31, 2002 and December  31,  2001,  substantially  all cash
balances were in excess of federally  insured  limits.  In  accordance  with the
terms of the  Liquidating  Trust  Agreement,  all cash  balances are invested in
"Eligible  Institutions" and into "Eligible Investments" as defined by the Trust
agreement.  Restricted cash and cash equivalents represent reserves for disputed
claims and other pledged assets.

TRUST ASSETS

The assets of the Trust are carried at estimated  fair market values  determined
by discounting, at appropriate risk adjusted discount rates, the Trust's current
best  estimate  of cash  flows  expected  to be  realized  from the  collection,
liquidation  and  disposition  of assets held by the Trust.  Such assets consist
principally of notes  receivable,  income producing real estate and interests in
real estate, interests in partnerships and operating companies and miscellaneous
other assets,  receivables and proceeds from litigation and/or settlements.  The
estimates  of the  future  cash  flows and  discount  rates from which the asset
values of the Trust were  derived are updated  quarterly  and are made under the
direction of the  management of the Trust based upon  information  available and
believed to be reliable. These estimates reflect significant judgments regarding
assumptions,  discount  rates,  timing of cash flows,  market risk and allowable
disputed claims.  Because of the inherent uncertainty regarding the valuation of
these assets there will likely be  differences  between  actual  results and the
estimated  fair values  reflected  in the  accompanying  consolidated  financial
statements and the differences may be material.

In  addition  to the  assets  described  above,  the Trust  also  holds  certain
contingent asset claims ("LITIGATION CLAIMS"), such as claims against the former
Directors and Officers of BFA and judgments  and  deficiencies  related to loans
made  to  former   borrowers  of  the  Debtors.   Because  of  the   significant
uncertainties  associated  with  estimating the  probability  and timing of cash
flows  related to these  claims,  there can be no assurance  that the Trust will
realize any value from of such contingent asset claims.

The fair value of Trust Assets is reassessed at least  quarterly and adjustments
to estimated fair values are reflected in the period in which they become known.
For each asset,  estimates of income,  expenses and net cash flow on a quarterly
basis through the expected final  disposition date are prepared.  The individual
asset cash flow  estimates  are  developed  based  upon  factors  which  include
appraisals by independent  appraisers,  physical  inspection of the asset or the
collateral  underlying the related loans, local market  conditions,  contractual
payments and discussions with the relevant borrower.

CONTINGENT LIABILITIES

In  addition  to  the  contractual  liabilities  recorded  on  the  accompanying
consolidated  financial  statements,  the  Trust  also  has  certain  contingent
liability  claims,  such as claims against the Trust for  mismanagement of trust
assets and breach of fiduciary duty. Management does not believe that there will
be any future material cash outflows as a result of these claims, thus no amount
is included in these accompanying consolidated financial statements.  Because of

                                    Page 15
<PAGE>
the significant  uncertainty  associated with the valuation of these  contingent
liabilities, it is possible that these contingencies could be settled at amounts
that  differ  from  the  amounts  that  are  reflected  in  these   accompanying
consolidated  financial  statements and the differences  could be material (Note
13).

OTHER LIQUIDATION LIABILITIES

Accounts  payable and  accrued  liabilities  are  reflected  at their  estimated
settlement  amounts  which in the  opinion of the Trust  approximate  their fair
value.

Notes payable are reported in the accompanying consolidated financial statements
at their stated amounts.  In the opinion of the Trust these amounts  approximate
their estimated fair value since the respective  interest rates  approximate the
market rates of interest for similar instruments.

ESTIMATED COSTS TO COMPLETE LIQUIDATION AND LITIGATION

The estimated costs to complete  liquidation  represent the estimated cash costs
of operating  the Trust  through its expected  termination  on January 21, 2006,
discounted  using a present value factor of 4.25% at December 31, 2002 and 8% at
December 31, 2001. These costs, which include personnel, facilities, Liquidating
Trustee and Liquidating Trust Board compensation,  professional fees, litigation
costs and other  related  costs,  are  estimated  based on  various  assumptions
regarding the number of employees,  the use of outside professionals  (including
attorneys  and  accountants)  and other  costs.  Given  that  there is  inherent
uncertainty  in the  estimation  process,  actual  results  could be  materially
different.

INCOME TAXES

For federal  income tax  purposes,  the  distribution/transfer  of the  Debtor's
assets to the Trust on the Effective Date is treated as a distribution  of these
assets  directly to the  Beneficiaries.  Each  Beneficiary is deemed as owning a
proportionate  share of the Trust  Assets  and has a tax  basis in such  assets,
other  than  the  Litigation  Claims  and the  Avoidance  Actions  equal to such
holder's  share of the fair market value of such assets at the  Effective  Date.
For tax  purposes,  any item of income or loss is  allocated  among the holders.
Therefore,  no  provision  has been made for  income  taxes in the  accompanying
consolidated financial statements.

USE OF ESTIMATES

Management of the Trust has made certain  estimates and assumptions  relating to
the reporting of assets and liabilities and the disclosure of contingent  assets
and liabilities to prepare these consolidated financial statements in conformity
with accounting  principles  generally accepted in the United States of America.
Under the  liquidation  basis of accounting,  assets and  liabilities  have been
recorded  at  their  estimated  fair  values.   Given  that  there  is  inherent
uncertainty in the valuation  process,  the amounts actually realized or settled
could  be  materially   different  from  those  reflected  in  the  accompanying
consolidated financial statements.

RECLASSIFICATION

Certain  amounts in the 2001  financial  statements  have been  reclassified  to
conform to the 2002 presentation.  These reclassifications have no impact on the
previously reported net assets in liquidation.

RECENT ACCOUNTING PRONOUNCEMENTS

In August 2001, the FASB issued SFAS 143, which establishes accounting standards
for recognition and measurement of a liability for the costs of asset retirement
obligations.  Under SFAS 143, the future costs of retiring a tangible long-lived
asset will be recorded as a liability at their present value when the retirement
obligation  arises and will be  amortized to expense over the life of the asset.
The adoption of SFAS 143 is not expected to materially  affect the  consolidated
financial statements.

In October 2001, the FASB issued SFAS 144, which addresses financial  accounting
and  reporting  for  the  impairment  or  disposal  of  long-lived   assets  and
discontinued  operations.  SFAS 144  supersedes  SFAS 121 and the accounting and
reporting provisions of Accounting  Principles Board Opinion No. 30 (APB 30) for
the disposal of a segment of a business.  SFAS 144 retains the basic  principles
of SFAS 121 for long-lived assets to be disposed of by sale or held and used and
modifies the accounting and disclosure  rules for discontinued  operations.  The

                                    Page 16
<PAGE>
adoption  of SFAS 144 is not  expected  to  materially  affect the  consolidated
financial statements.

In July 2002,  the FASB  issued SFAS 146,  which  addresses  significant  issues
regarding  the  recognition,  measurement,  and  reporting  of  costs  that  are
associated with exit and disposal activities, including restructuring activities
that are  currently  accounted  for pursuant to the  guidance  that the Emerging
Issues  Task  Force  ("EITF")  has set forth in EITF Issue No.  94-3,  Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (Including Certain Costs Incurred in a Restructuring). SFAS 146 revises
the  accounting  for certain lease  termination  costs and employee  termination
benefits,  which are  generally  recognized  in  connection  with  restructuring
activities.  The adoption of SFAS 146 is not expected to  materially  affect the
consolidated financial statements.

In  November  2002,  the FASB issued FIN 45,  which  expands  previously  issued
accounting guidance and disclosure  requirements for certain guarantees.  FIN 45
requires  companies to recognize an initial  liability  for the fair value of an
obligation assumed by issuing a guarantee. The provision for initial recognition
and  measurement  of the  liability  will be applied on a  prospective  basis to
guarantees issued or modified after December 31, 2002. The adoption of FIN 45 is
not expected to materially affect the consolidated financial statements.

2. CASH AND CASH EQUIVALENTS

The Trust maintains  balances in various  operating and money market accounts in
excess of federally insured limits. Cash and cash equivalents were $2,254,806 at
December 31, 2002 and $1,027,598 at December 31, 2001.

3. RECEIVABLES, NET

Net  receivables as of December 31, 2002 primarily  consist of an  approximately
$53 million note receivable from Shea Homes, Inc.  ("SHEA")  collateralized by a
7,000 acre master  planned  community,  and other  receivables  relating to land
contracts,  notes receivable and various other commercial receivables.  The Shea
note receivable is current as it relates to principal and interest.  In addition
the Shea note receivable acts as collateral for a note payable (note 8).

Net  receivables as of December 31, 2001 primarily  consist of an  approximately
$68 million note receivable from Shea Homes, Inc. collateralized by a 7,000 acre
master planned  community,  and other  receivables  relating to land  contracts,
notes receivable and various other commercial receivables

The following is a summary of gross cash flows and related valuation:

<TABLE>
<CAPTION>
                                                        December 31,     December 31,
                                                            2002             2001
                                                        ------------     ------------
<S>                                                     <C>              <C>
Total gross future cash flows from notes receivable     $138,853,065     $167,220,475
Collectibility discount                                  (69,241,041)     (77,161,296)
Present value discount (8-9%)                            (10,177,039)     (16,181,263)
                                                        ------------     ------------
Net receivables                                         $ 59,434,985     $ 73,877,916
                                                        ============     ============
</TABLE>

Some of the  debtors  other  than  Shea  are in  default  on  their  contractual
obligations  to the  Trust.  At this time the Trust  does not  expect to receive
future cash flows  related to  receivables  in default and,  thus,  no amount is
included in the above stated net receivable amount;  provided however, the Trust
is aggressively  pursuing  collection of these debts by various means including,
but not limited to, foreclosure and litigation.Recoveries from these actions, if
any, could be material.

4. OTHER TRUST ASSETS

The other trust assets are carried at estimated fair values which are the result
of  discounting,  at appropriate  discount rates,  the currently  estimated cash
flows projected to be realized from the collection, liquidation and disposition.

                                    Page 17
<PAGE>
These valuations include appraisals by independent appraisers of the liquidation
value of some assets.  These values do not  represent  the full future cash flow
values  expected  from  the  sale  or  operations  of  these  assets  due to the
discounting of respective cash flows. Such assets consist  principally of income
producing  real estate and interests in real estate,  interests in  partnerships
and operating companies, and miscellaneous other assets transferred to the Trust
upon the consummation of the Plan.

Other trust assets consist of the following:

                                                  December 31,     December 31,
                                                      2002             2001
                                                  ------------     ------------
Real estate assets and partnerships, net          $ 51,151,619     $ 58,368,035
Investments in other operating companies, net        5,007,029       11,494,171
Other assets, net                                      696,956          379,322
                                                  ------------     ------------
Future value of other trust assets                  56,855,604       70,241,528
Present value discount (various rates)             (10,706,328)     (12,762,361)
                                                  ------------     ------------
Other trust assets value                          $ 46,149,276     $ 57,479,167
                                                  ============     ============

Real  estate  assets  and  partnership  interests  consist of the  following  at
December 31, 2002:

     *    NEWLAND TFC LLC, a series of four distinct residential  communities in
          California in which the Trust has invested along with Newland and with
          CalPERS in the Cal Land Partnership.  In each of the communities,  the
          Cal Land Partnership is selling lots to builders.

     *    STILLWATERS, a 2,200-acre resort community, situated on Lake Martin in
          Dadeville,  Alabama. It offers 36 holes of golf, a golf clubhouse with
          a restaurant for casual dining, a marina, hiking trails and a lakeside
          conference  center  with a  restaurant  for an upscale  casual  dining
          experience.  StillWaters  offers golf course lots with upscale  homes,
          executive cottages,  cabins,  condominiums and undeveloped  commercial
          and residential real estate.

     *    BLOOMINGTON  BUILDINGS,  two  industrial  grade  buildings  located in
          Bloomington,  Indiana,  which are part of the  Bloomington  Industrial
          Center.  Building 3 offers  450,000  sq.  ft.,  and  Building 4 offers
          630,000  sq. ft.  for a total of  approximately  1,080,000  sq. ft. of
          industrial lease space.

     *    VARIOUS OTHER REAL ESTATE ASSETS including  approximately 13,000 acres
          of raw land,  commercial  buildings  and  commercial  land and  ground
          leases.

Investments in other non-public  operating  companies  consist of ownership in a
venture capital company.

Other assets  consist  principally of prepaid  expenses and property,  plant and
equipment.

5. RESTRICTED CASH AND CASH EQUIVALENTS

Restricted  cash and cash  equivalents  of  $6,631,801  at December 31, 2002 and
$5,214,453 at December 31, 2002 consisting of reserves for disputed claims,  and
pledged assets. Reserves for disputed claims totaling approximately $4.5 million
consist of cash  reserves for possible  distributions  for disputed  obligations
arising from proof of claim issues not currently  recorded as liabilities on the
Trust balance  sheet (Note 12).  Pledged  assets  totaling  approximately  $2.15
million are cash  equivalents  held as collateral for non-Trust debt obligations
as follows:

     1)   Approximately  $800,000 at  December  31,  2002 and  approximately  $1
          million at  December  31,  2001 in a mutual  fund  investment  held as
          collateral  for a non-Trust  related  institution's  debt entered into
          before the Debtor's bankruptcy filing.

                                    Page 18
<PAGE>
     2)   Approximately $350,000 at December 31, 2002 and approximately $232,000
          at  December  31,  2001 in  certificates  of the  deposit  pledged  as
          collateral  for  letters  of credit on behalf of one of the  operating
          companies wholly owned by the Trust.

     3)   Approximately  $1,000,000  at  December  31, 2002 in escrow to be held
          until  the  satisfaction  of all  conditions  met on  the  sale  of an
          operating company in 2002.

6. FAIR VALUE OF EXPECTED CASH FLOWS FROM SETTLEMENTS

Settlement  proceeds at December 31, 2002 primarily consist of net proceeds from
Arthur  Andersen,  LLP ("AA").  The AA settlement  consists of gross proceeds of
$217  million  less legal fees of  approximately  $32.9  million and  litigation
expenses  incurred for prosecuting the litigation of approximately  $4.0 million
for a net  amount of  approximately  $180.1  million.  Both the State  Court and
Bankruptcy  Court  approved the  settlement on September  13, 2002.  Interest of
approximately  $1.1  million  has been earned on the cash  balances  held by the
Trust for the AA  settlement  at  December  31, 2002 and is  reflected  in these
financial  statements.  On December 27, 2002, the Trust distributed $6.5 million
of the AA settlement to the Class 3A and 3B beneficial  interest  holders of the
Trust and class action  members in  accordance  with the court  approved plan of
allocation. At December 31, 2002, approximately $174.7 million representing both
the Trust and class action share of the AA  settlement  proceeds  remained to be
distributed.  On January  23,  2003,  the  remaining  AA  settlement  funds were
distributed to the Class 3A and 3B beneficial  interest holders and class action
members in  accordance  with the court  approved plan of  allocation.  The court
approved  plan of  allocation  states  that the  Trust is  allocated  50% of the
proceeds  and that the  class  action  is  allocated  the  remaining  50% of the
proceeds.

In addition to the AA  settlement,  the Trust and Class Action was able to reach
settlements with Henry & Horne, P.L.C.,  Nelson Lambson & Co., P.L.C., E. A. and
Rebecca Kuhn,  Jalma W. and Carole Hunsinger and their  affiliates,  The Arizona
Southern Baptist Convention and affiliated entities,  Harold D. and Stephanie B.
Friend their affiliated  entities and L. Dwain Hoover, Beva J. Hoover, D. Hoover
& Associates and the D. Hoover & Associates Investments,  Inc. Retirement Trust.
These settlements  aggregately total  approximately $15.3 million less discounts
and  consist of cash and other real  property.  Litigation  expenses  related to
these  settlements  total  approximately  $1.6  million  for  a  net  amount  of
approximately  $13.7 million.  These settlements also include releases of claims
against the Trust of approximately $37.0 million.

All  settlement  funds are being  held in  interest  bearing  accounts.  For all
settlements  the courts have  approved an allocation  process  whereby the Trust
recognizes  50% of the net  proceeds  and the  Class  Action  is  allocated  the
remaining 50% of the net proceeds (see note 10).

Settlement  proceeds at December 31, 2001 consist of net proceeds from Jennings,
Strouss and Salmon ("JSS"). The JSS settlement consists of gross proceeds of $21
million  less  legal  fees of  approximately  $1.2  million  for a net amount of
approximately  $19.8  million at December 31, 2001.  In November 2002 the courts
approved legal fees of approximately  $3.0 million  resulting in a net amount of
approximately  $18.0  million to be  distributed.  On December  27, 2002 the net
proceeds of $18.0 million from this settlement were  distributed to Class 3A and
3B beneficial  interest  holders and class action members in accordance with the
court approved plan of allocation.

7. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued  liabilities of $3,071,617 consist of the following
at December 31, 2002:

     *    Accrued  expenses  consist of  approximately  $1.2 million of expenses
          accrued for trade vendors, outside professionals, including litigation
          attorneys and experts.

     *    Obligations to Class 5 and 6 creditors of  approximately  $1.9 million
          representing undisputed general unsecured claims.

                                    Page 19
<PAGE>
Accounts payable and accrued  liabilities of $9,017,702 consist of the following
at December 31, 2001:

     *    Accrued  expenses  consist of  approximately  $2.7 million of expenses
          accrued for trade vendors, outside professionals, including litigation
          attorneys and experts.

     *    Obligations to Class 5 and 6 creditors of  approximately  $6.3 million
          representing undisputed general unsecured claims.

8. NOTES PAYABLE

The  following  is a summary of notes  payable to third  parties at December 31,
2002:

Notes payable of approximately $3.3 million, including interest of approximately
$98,000,  to a creditor  collateralized by the Shea Homes note receivable,  with
payment terms of annual principal and interest  payments,  with an interest rate
of 6.75%. Due on June 26, 2005.

Notes payable of  approximately  $815,000,  including  interest of approximately
$28,000, to various creditors  collateralized by real estate, with payment terms
including  monthly  interest  only  payments and monthly  principal and interest
payments,  with  interest  rates  ranging from 7% to 12%.  Due at various  dates
ranging from June 1, 2002 to October 31, 2008.

Notes payable of  approximately  $20,000,  including  interest of  approximately
$200, to various  creditors  collateralized  by various notes  receivable,  with
monthly  principal and interest payments and interest rates ranging from 7.5% to
8.75%. Due at various dates ranging from March 1, 2007 to July 25, 2007.

At December 31, 2002,  aggregate  debt  maturities  including  interest  were as
follows:

                                        2003     $ 1,425,715
                                        2004       1,223,206
                                        2005       1,297,153
                                        2006           6,577
                                        2007          15,424
                                  Thereafter         644,241
                                                 -----------
                                                   4,612,316
     Less present value discount (6.75%-12%)        (486,099)
                                                 -----------

                               Notes payable     $ 4,126,217
                                                 ===========

The  following  is a summary of notes  payable to third  parties at December 31,
2001:

Notes payable of approximately $5.7 million, including interest of approximately
$200,000, to various creditors collateralized by the Shea Homes note receivable,
with payment terms including semi-annual interest only payment,  annual interest
only payments and annual  principal and interest  payments,  with interest rates
ranging from 6.75% to 9%. Due at various dates ranging from June 26, 2005 to May
12, 2008.

Notes payable of approximately $1.2 million, including interest of approximately
$76,000, to various creditors  collateralized by real estate, with payment terms
including  monthly  interest  only  payments and monthly  principal and interest
payments,  with  interest  rates  ranging from 7% to 12%.  Due at various  dates
ranging from June 1, 2002 to October 31, 2008.

Notes payable of  approximately  $22,000,  including  interest of  approximately
$1,000,  to various creditors  collateralized by various notes receivable,  with
monthly  principal and interest payments and interest rates ranging from 7.5% to
8.75%. Due at various dates ranging from March 1, 2007 to July 25, 2007.

                                    Page 20
<PAGE>
At December 31, 2001,  aggregate  debt  maturities  including  interest  were as
follows:

                                        2002     $ 1,049,386
                                        2003         493,228
                                        2004         493,228
                                        2005       3,837,589
                                        2006       1,264,386
                                  Thereafter       2,249,602
                                                 -----------
                                                   9,387,419
         Less present value discount (7-12%)      (2,392,080)
                                                 -----------
                               Notes payable     $ 6,995,339
                                                 ===========

9. ESTIMATED COSTS TO COMPLETE LIQUIDATION AND LITIGATION

The  estimated  costs to complete  liquidation  and  litigation of $6,679,030 at
December 31, 2002 and  $12,405,130  at December 31, 2001 represent the estimated
costs of operating  the Trust  through its expected  termination  on January 21,
2006,  discounted using a present value factor of 4.25% at December 31, 2002 and
8% at December  31, 2001.  These costs,  which  include  personnel,  facilities,
Liquidating Trustee and Liquidating Trust Board compensation,  professional fees
and litigation costs, are estimated based on various  assumptions  regarding the
number of employees,  the use of outside professionals  (including attorneys and
accountants) and other matters.  Given that there is inherent uncertainty in the
estimation process, actual results could be materially different.

10. SETTLEMENT LIABILITY

The Trust  engaged in  litigation  with AA regarding  AA's audits of some of the
Debtor  entities  prior to  bankruptcy,  and was the lead plaintiff in a lawsuit
against AA, which consisted of three actions. The actions consisted of a lawsuit
filed by BFA  alleging  claims of  negligence,  breach of contract and breach of
fiduciary duty,  which was transferred to the Trust on January 22, 2001, a Class
Action Lawsuit filed by a group of investors,  and the State of Arizona.  All of
the class action investors are beneficial holders of the Trust,  however not all
beneficial  holders  of the Trust are class  action  investors.  After the trial
against AA began in May 2002,  a joint  settlement  was reached with AA for $217
million. The AA settlement of $217 million,  less of legal fees of approximately
$32.9 million and litigation expenses incurred for prosecuting the litigation of
approximately  $4 million,  has been  recognized and recorded as an asset of the
Trust in these  consolidated  financial  statements (see note 6). Both the State
Court and Bankruptcy Court approved the settlement on September 13, 2002.

In  addition,  the Trust and the class  action  have  reached  settlements  with
various other responsible  parties in the amount of approximately  $13.7 million
net (see note 6). These  settlements also include releases of claims against the
Trust of  approximately  $37.0 million.  These  settlements were approved by the
courts in January,  2003.  These amounts have been included in the  accompanying
consolidated financial statements, net of legal fees and other discount factors.

The courts also approved an allocation  process for all settlements  whereby the
Trust is allocated 50% of the net proceeds and the class action is allocated the
remaining 50% of the net proceeds.

From all Litigation Claims, the Trust will distribute its allocated share of the
proceeds to the  beneficial  holders on a pro rata basis in accordance  with the
Plan. The class action  proceeds will be distributed to its investors based on a
formula as agreed by its members.  The Trust has recorded a settlement liability

                                    Page 21
<PAGE>
for the settlement proceeds, net of legal fees, equal to the amount allocated to
the class action.  The liability will remain until the proceeds are  distributed
to the class action investors by the Trust.

11. CHANGES IN OTHER TRUST ASSETS

During the period from January 1, 2002 to December 31, 2002,  the Trust sold the
following assets:

     *    The assets of Document  Technologies were sold for approximately  $5.0
          million.

     *    Westside  property and land contracts  consist of actual  ownership of
          and/or land contracts secured by land west of Phoenix, Arizona. During
          2002 a portion of the lots  owned were sold for cash of  approximately
          $3.1 million.

     *    Bloomington,  Indiana vacant land sold for approximately  $1.2 million
          in 2002.

     *    Coyote Lakes Joint Venture, in which BFALT is a majority partner, sold
          its last  piece of  commercial  real  estate  for  approximately  $1.1
          million in 2002.

     *    Sale of Bonds Alarm, Inc. for approximately $0.9 million.

     *    Rancho Vistoso, a master-planned  residential community in Oro Valley,
          Arizona,  sold its remaining  lots in 2002 resulting in gross proceeds
          of approximately $0.2 million.

     *    The Trust sold various other assets for a total of approximately  $0.2
          million.

During the period from January 22, 2001 to December 31, 2001, the Trust sold the
following assets:

     *    On  January  22,   2001  the  Trust  sold  the  stock  of   Foundation
          Administrative  Services  ("FAS") to Shea  Homes.  FAS is the owner of
          7,000  acres of  property in  Maricopa  County  located  south of Lake
          Pleasant and commonly referred to as the Pleasant Point property.  The
          stock of FAS was sold for $85 million,  including  $17 million in cash
          and a note in the amount of $68 million. The terms of the note include
          a 4 year maturity with an interest rate equal to prime + 2% annual, in
          no  event  less  than  9.0%,  with  quarterly  interest  payments  and
          principal payments as specified in the note.

     *    As of January 22, 2001,  the Trust owned 881,269 shares of New Century
          stock,  which was sold at various  times  during  2001 on the New York
          Stock  Exchange  resulting  in gross  proceeds of  approximately  $9.0
          million.

     *    Kilohana Waikoloa, a residential subdivision located on the Big Island
          of Hawaii, was sold in July 2001 for approximately  $3.8 million.  The
          Trust  took  back a note  for  $1.25  million  on the  sale  with  the
          remainder  being paid in cash.  The terms of the note include a 4 year
          maturity with an interest rate of prime + 1%, with quarterly  interest
          payments.  Cash proceeds of  approximately  $1.9 million from the sale
          were used to payoff secured debtors.

     *    Sunrise  Business  Park lot was sold in April  2001 for  approximately
          $1.9 million in cash. Cash proceeds of approximately $135,000 from the
          sale were used to payoff secured debtors.

     *    Saddle Mountain RV Park, a 350 acre RV and  manufactured  home park in
          Tonopah,  Arizona including a 125,000 square foot dormitory,  was sold
          in August of 2001 for  approximately  $1.2 million cash. Cash proceeds
          of  approximately  $88,000  from the sale were used to payoff  secured
          debtors.

                                    Page 22
<PAGE>
     *    Rancho Vistoso, a master-planned  residential community in Oro Valley,
          Arizona,  has been selling  lots  throughout  2001  resulting in gross
          proceeds of approximately $1.4 million.

     *    Westside  property and land contracts  consist of actual  ownership of
          and/or land contracts secured by land west of Phoenix, Arizona. During
          2001 a portion of the lots  owned were sold for cash of  approximately
          $1.1 million.  Also during 2001 the majority of notes receivables were
          sold for cash of approximately $2.3 million.

     *    The  Trust  sold  various  parcels,  buildings  and  lots  of  several
          developments  during 2001. Lots were sold at Chandler Commerce Center,
          Park at Juniper  Ridge,  ASC San  Antonio,  Show Low Country  Club and
          Walnut Ridge.  In addition  various  individual  parcels and buildings
          were sold,  including church sites,  Santa Fe Trail Ranch, Tres Realty
          Building,  Westdale  Shopping  Center  and  other  assets.  The  Trust
          received  gross  proceeds  from  these  sales  of  approximately  $4.0
          million.

12. DISTRIBUTIONS

Under  the  terms of the  Plan,  the  Trust  makes  quarterly  distributions  to
Beneficiaries after providing for certain reserves and expenses.

DISTRIBUTIONS TO TRUST BENEFICIARIES. Each holder of Class 3A or Class 3B claims
("INVESTORS")  received  an  uncertificated,  beneficial  interest in the Trust,
which entitles the Investor to receive cash  distributions  from the Trust based
upon the orderly  liquidation of all of the Trust assets and the recoveries,  if
any,  from  litigation  against  potentially   responsible  third  parties.  All
Investors  will share,  on a pro rata basis,  the first  $80,000,000 in proceeds
from the liquidation of the Trust assets after payment to other creditors with a
greater payment priority.  All proceeds from the liquidation of the Trust assets
in excess of $80,000,000 up to and including  $160,000,000,  will be distributed
on a pro rata basis  between 3B  investors  and 3A  investors;  however,  the 3A
investors will receive a  collateralized  investor  premium of $13,200,000.  All
proceeds from the liquidation of the Trust assets in excess of $160,000,000 will
be  distributed  on a pro rata basis  between  3A  investors  and 3B  investors.
Recoveries,  if any, from the litigation against potentially responsible parties
will be distributed to all Investors on a pro rata basis. The Class 3A and Class
3B net asset value on the balance sheet has been  calculated  based on the above
distribution  requirements.   Cash  distributions  to  Class  3A  and  Class  3B
beneficial  interests  amounted to  approximately  $32.7 million,  including the
Trust's 50% share of  distributions  relating  to JSS and part of AA  settlement
proceeds, for the period ended December 31, 2002 (note 6).

Cash  distributions  are reported net of any  distributions  that were voided or
returned to the Trust.

SOURCES OF  DISTRIBUTIONS.  Distributions to the creditors and  Beneficiaries of
the  Trust  will  come  from  the  sale  of  the  Trust  Assets.  However,  some
distributions may come from "AVOIDANCE  ACTIONS." Avoidance Actions are lawsuits
filed by the Trust against specific  creditors who received money that the Court
determines is part of the Trust's  estate.  The Court will order these creditors
to  return  that  money  to  the  Trust  for   distribution  to  all  creditors.
Essentially, the goal is to ensure that all creditors receive fair and equitable
treatment  and that  specific  creditors  were not treated more  favorably  than
others prior to or during the Trust's  Chapter 11 cases.  The Trust is unable to
estimate the proceeds from avoidance  actions,  if any, that will be received in
respect of the Avoidance  Actions  because the  Avoidance  Actions have not been
prosecuted by the Trust or resolved by the Court.

In  addition  to the  Avoidance  Actions,  Investors  may or  already  have also
received  proceeds from the significant  "LITIGATION  CLAIMS" that the Trust has
against  certain third parties  potentially  responsible for the failure of BFA,
including  potential claims against BFA's former accounting and law firms. Under
the Plan,  BFA and it `s affiliates  were  dissolved  and no longer  exist.  The
Litigation Claims of the BFA against potentially  responsible third parties have
been assigned to, and are being  prosecuted by, the Trust.  Under the Plan, each
Investor received an uncertificated  beneficial interest in the Trust, entitling
Investors  to  share in any  recoveries  resulting  from  such  litigation.  The
recoveries from any litigation (net of any expenses  incurred in prosecuting the

                                    Page 23
<PAGE>
Litigation Claims) will be disbursed directly to Investors, and the funds cannot
be  co-mingled  with other funds from the orderly  liquidation  of assets by the
Trust. In addition,  those Investors that hold IRAs or who are  beneficiaries of
trusts will receive an  additional  uncertificated,  beneficial  interest in the
Trust,  entitling them to receive litigation  recoveries relating to breaches of
fiduciary obligations  associated with these accounts and trusts. The litigation
by the Trust is under the  control of the  Liquidating  Trustee  and  subject to
supervision by the Liquidating Trust Board.

DISTRIBUTION TO OTHER CREDITORS. Class 6 is the "Convenience Class" and consists
of the general  unsecured  Creditor's  claims that are in an amount of $5,000 or
less, or any claim greater than $5,000 that is voluntarily reduced by the holder
of such claim to $5,000. Class 5 contains all other general unsecured creditors.
Most of these general unsecured  creditors  conducted business with subsidiaries
of BFA.

Under  the  Plan,  the  general  unsecured  creditors  in  Class 5  received  an
uncertificated,  beneficial  interest in the Trust,  entitling them to their pro
rata share of 10% of the net proceeds from such  liquidation  and 10% of the net
proceeds from the Avoidance Actions until they are paid their respective allowed
amount.  If the Class 5 claims are not paid in full in accordance  with the Plan
by the end of the two-year  period  commencing  January 22, 2001, the holders of
the Class 5 claims will be entitled to 100% of the liquidation proceeds from the
sale of the Trust Assets until such holders are paid in full in accordance  with
the Plan.

13. COMMITMENTS AND CONTINGENCIES

CONTINGENT LIABILITIES

The Trust is involved in various legal proceedings.  A number of creditors filed
proofs of claims in the Debtors' bankruptcy  proceedings in the aggregate amount
of approximately $45.5 million that were initially objected to by the Debtors on
various  grounds  including,  but not limited to,  counter  claims the Trust has
against these  creditors.  On the Effective Date, the Trust assumed the Debtors'
rights to pursue the objections  against such claims.  All of these disputes are
pending in the  Bankruptcy  Court at  December  31,  2002.  Approximately  $37.0
million of these claims were waived in the settlements  reached with the various
parties in January 2003 (note 6). In the opinion of the management of the Trust,
the  allowance  of any of the  following  disputed  claims  may have a  material
adverse impact on the financial condition of the Trust, resulting in higher than
recorded  liabilities  and  decreased  net assets in  liquidation.  These claims
consisted of the following:

     (a)  Claim of Cook Charitable Trust. On March 31, 2000, the Cook Charitable
          Trust filed a proof of claim  alleging that BFA abused its  discretion
          and breached its fiduciary  duty when it served as trustee of the Cook
          Charitable  Trust and as a result is claiming damages of $2 million to
          $5 million. The Trust is attempting to settle this claim at this time.
          However,  the Trust is unable to  estimate  the amount of future  cash
          flows, if any, to Cook Charitable Trust.

     (b)  Claims of Hoover Parties. On March 19, 2000, March 29-31, 2000 and May
          22, 2000, Dwain Hoover and Beva Hoover, together with certain of their
          relatives  and  entities  controlled  by them,  including  D. Hoover &
          Associates Investments,  Inc., The Hoover Family Charitable Trust, The
          Dwain & Beva Hoover Charitable Trust II, SLS Trust, CRM Holdings,  and
          United   Development   Inc.,  filed  fourteen  (14)  proof  of  claims
          aggregating  over $16 million based on a number of theories.  The most
          significant  claims  are  (i) a claim  in the  approximate  amount  of
          $278,000  alleging  that  officers  of BFA  made  an oral  promise  to
          repurchase  certain  real  property;  (ii) a claim in the  approximate
          amount of $14.2 million alleging note  obligations  between New Church
          Ventures Credit  Corporation  and D. Hoover & Associates  Investments,
          Inc; (iii) claims in the  approximate  amount of $328,000 based on IRA
          account  investments;  (iv) a claim by The  Hoover  Family  Charitable
          Trust in the  approximate  amount  of  $580,000  based on the  alleged
          conversion  of trust  property;  and (v) a claim  by The  Dwain & Beva
          Hoover Charitable Trust II in the approximate amount of $680,000 based
          on the alleged conversion of trust property. The Trust has objected to
          these claims on various grounds and has  counterclaims  against Hoover
          for  his  role  at  Baptist  Foundation  of  Arizona.  As  part of the

                                    Page 24
<PAGE>
          settlements  discussed  in note 9,  Hoover  waived all of his proof of
          claims.  Therefore  management  does not believe  that any future cash
          outflows  will result from these  claims,  therefore no liability  has
          been accrued.

     (c)  Claim of Arizona  Southern Baptist  Convention.  On March 31, 2000 the
          Arizona Southern Baptist Convention ("ASBC") filed a proof of claim in
          the  approximate  amount of $1 million plus an unknown amount based on
          its alleged  beneficial  interest in various  trusts or endowments for
          which BFA or one of its  affiliates  served as trustee.  Further,  the
          proof of  claim  seeks to have the  court  transfer  BFA's  beneficial
          interest in the trusts to ASBC.  The Trust has  objected to this claim
          on various grounds and has counterclaims  against ASBC. As part of the
          settlements  discussed  in note 9,  ASBC  waived  its  proof of claim.
          Therefore  management  does not believe that any future cash  outflows
          will  result  from  these  claims,  therefore  no  liability  has been
          accrued.

     (d)  Claim of Arizona State Mission Board, Inc. On March 31, 2000,  Arizona
          State  Mission  Board,  Inc.  ("ASMB")  filed a proof  of claim in the
          approximate  amount of $1.45  million plus an unknown  amount based on
          its alleged  beneficial  interest in various  trusts or endowments for
          which BFA or one of its affiliates served as trustee.  ASMB also seeks
          to have the court  transfer BFA's  beneficial  interest in the trusts,
          which is now held by the Trust,  to ASMB.  The Trust has  objected  to
          this claim on various grounds and has counter claims of action against
          ASMB. As part of the settlements  discussed in note 9, ASMB waived its
          proof of claim.  Therefore management does not believe that any future
          cash outflows  will result from these  claims,  therefore no liability
          has been accrued.

     (e)  Claim of Arizona Baptist Children's Services,  Inc. On March 31, 2000,
          Arizona Baptist  Children's  Services,  Inc. ("ABCS") filed a proof of
          claim in the approximate amount of $2.3 million plus an unknown amount
          based  on  its  alleged  beneficial   interest  in  various  trust  or
          endowments for which BFA or one of its  affiliates  served as trustee.
          ABCS also seeks to have the court transfer BFA's  beneficial  interest
          in the trusts,  which is now held by the Trust, to ABCS. The Trust has
          objected to this claim on various  grounds  and has counter  claims of
          action  against ABCS. The Trust filed a settlement  agreement  between
          ABCS and the Trust with the  Bankruptcy  Court and it was  approved in
          February  2003.  Based on the terms of the  settlement  agreement  the
          Trust does not believe that it is likely that any future cash outflows
          will result from this claim.

     (f)  Claim of Harold Friend and Related  Parties  ("FRIEND").  On March 31,
          2000 Harold  Friend and several  entities  controlled by him including
          Export Tyre Holding Company,  Stockbridge holding Company, Stockbridge
          Realty Investors--Arizona,  Inc., Property Consultants,  Inc. and HMR,
          Inc. filed a proof of claim in the approximate amount of $16.5 million
          plus  unliquidated  amounts  based on a number of  theories.  The most
          significant claim is one for unpaid fees and commissions;  both earned
          and  projected  to be  earned,  in the  approximate  amount  of $14.88
          million. The Trust has objected to these claims on various grounds and
          has counter  claims of action  against  Friend for his role at Baptist
          Foundation of Arizona. As part of the settlements discussed in note 9,
          Friend  waived  his  proof of  claim.  Therefore  management  does not
          believe that any future cash  outflows  will result from these claims,
          therefore no liability has been accrued.

     (g)  Claim of Grand  Canyon  University.  On March 31,  2000,  Grand Canyon
          University   ("GCU")  filed  a  proof  of  claim  seeking  payment  of
          approximately  $3.2 million for various unsecured  investments held by
          BFA,  approximately $3.67 million for the balance due under a note and
          deed of trust executed by Cora Properties,  Inc. (the "CORA NOTE") and
          a  quarterly  $24,425  annuity  payment  for  which  BFA is  primarily
          obligated and GCU is the guarantor. The Trust has objected to the $3.2
          million  claim and the  $24,425  quarterly  annuity  claim on  various
          grounds and is pursuing  discussions with GCU in regards to settlement
          of these  claims.  The claim  related  to the Cora Note has since been
          resolved  and the  liability  of  approximately  $3.4 million has been
          included in notes payable in the accompanying  consolidated  financial

                                    Page 25
<PAGE>
          statements at December 31, 2001.  Management  does not believe that it
          is likely  that any future  cash  outflows  will  result from the $3.2
          million claim and the $24,425  quarterly  annuity claim,  therefore no
          liability has been accrued.

CONTINGENT ASSETS

During late 2001, the Trust commenced two (2) separate adversary  proceedings in
the  Bankruptcy  Court against  William Crotts and Thomas  Grabinski,  the Chief
Executive  Officer and General Counsel,  respectively,  of BFA during the period
that the fraud  occurred.  The Trust  alleges that Messrs.  Crotts and Grabinski
were the primary  architects of the fraud,  thereby  breaching  their  fiduciary
duties to BFA and its investors.

The Trust has  successfully  defeated motions by Crotts and Grabinski to dismiss
the action,  and since that time has engaged in extensive  discovery  with these
parties. Trial for this action is scheduled to commence in early 2004, following
the conclusion of the parallel class action case scheduled to commence on May 1,
2003.

With respect to loans that BFA made to Gail Arnall (William  Crotts' sister) and
her  company,  Phoebus  Communications,  the Trust  brought  suit on  delinquent
promissory  notes made by Phoebus  Communications  and Ms. Arnall.  Judgment was
obtained  against  Phoebus  Communications,  Ms. Arnall and her ex-husband in an
amount  of  approximately  $175,000  (the  full  amount  of the  debt  plus  all
attorneys'  fees and pre- and  post-judgment  interest).  In 2002 the defendants
filed a motion  to set aside  the  default  judgment  on  grounds  that they had
inadequate  notice.  That  motion was  denied on  January  9, 2003.  Enforcement
proceedings  were initiated in 2002 in Maryland,  where Phoebus is located,  and
the court  denied a motion to dismiss or stay those  proceedings  on January 10,
2003. In March, 2003 the Trust approved a settlement of $140,000 in satisfaction
of the judgement.

In 2002 a complaint alleging four (4) separate causes of action was filed in the
Superior Court against BFA's former limited liability company member,  Chaparral
Pines,  LLC, in the development of the Chaparral Pines property.  The complaints
center  around the  mismanagement  of the property by the  defendant.  Chaparral
Pines filed a Motion to dismiss the complaint. After briefings and argument, the
Superior  Court has  allowed the Trust to proceed on three of the four counts in
the complaint. Discovery has commenced. Because of the substantial nature of the
Chaparral  Pines  project,  the  defendants'  are working to accumulate  all the
construction-related  documents. Currently, both the Trust and defendants are in
a document review process

14. LEASES

The Trust entered into certain lease obligations to carry out the purpose of the
Trust  as  discussed  in Note 1.  These  operating  lease  obligations  call for
approximate  payment of $3,600  monthly for 2003 and $3,000  monthly  payment in
2004.  It may be  necessary  for the Trust to renew or  commit  to future  lease
obligations to continue to carry out the activities of the Trust until the Trust
is terminated.  The estimated rental payments are included in estimated costs to
complete liquidation and litigation.

15. CASH RECEIPTS AND DISBURSEMENTS

The Trust  received net cash  proceeds  from sales of assets,  notes  receivable
collections and operations consisting of the following:

<TABLE>
<CAPTION>
                                                       January 1, 2002 to   January 22, 2001 to
                                                        December 31, 2002    December 31, 2001
                                                        -----------------    -----------------
<S>                                                        <C>                 <C>
Principal and interest received from notes receivable      $ 18,600,000        $  7,400,000
Cash flows from other trust assets                           29,100,000          43,300,000
                                                           ------------        ------------
Total                                                      $ 47,700,000        $ 50,700,000
                                                           ============        ============
</TABLE>

                                    Page 26
<PAGE>
Conversely, the Trust paid out cash to various creditors, as follows:

<TABLE>
<CAPTION>
                                                       January 1, 2002 to   January 22, 2001 to
                                                        December 31, 2002    December 31, 2001
                                                        -----------------    -----------------
<S>                                                        <C>                 <C>
Trust operations                                           $  3,500,000        $  4,400,000
Litigation costs                                              1,500,000           3,000,000
Payable to Class 5 creditors                                  5,900,000           4,000,000
Principal and interest payments on collateralized
  notes payable                                               2,900,000           3,500,000
Distributions to Class 3A & 3B                               32,700,000          45,700,000
                                                           ------------        ------------
Total                                                      $ 46,500,000        $ 60,600,000
                                                           ============        ============
</TABLE>

16. SUBSEQUENT EVENTS

On January 2, 2003, Shea made their scheduled  quarterly  interest payment (note
3).

On January 27, 2003, the Trust  distributed  the remaining  $174.7 million in AA
settlement proceeds to the holders of the Class 3A and 3B beneficial interest in
the Trust and class action members (note 6 and 10).

On March 14, 2003, the Trust distributed  approximately  $7.1 million of the net
$13.7 million  settlement with various other parties to the holders of the Class
3A and 3B beneficial interest in the Trust and class action members (note 6).

17. QUARTERLY FINANCIAL DATA (UNAUDITED):

Summarized unaudited quarterly financial data for fiscal 2002 and for the period
from Inception 2001 is as follows:

                                    Page 27
<PAGE>
                     BFA LIQUIDATION TRUST AND SUBSIDIARIES
         CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION

<TABLE>
<CAPTION>
                                                MARCH 31,       JUNE 30,      SEPTEMBER 30,   DECEMBER 31,
                                                  2002            2002            2002            2002
                                              ------------    ------------    ------------    ------------
<S>                                           <C>             <C>             <C>             <C>
Net assets in liquidation, beginning          $128,980,963    $129,808,985    $127,895,794    $120,595,537

Interest on notes receivable (note 3)            1,673,203       1,650,221       1,597,445       1,309,315
Interest on notes payable (note 8)                (205,962)       (179,978)       (113,311)        (64,941)
Changes in fair value of other trust assets
  and liabilities (notes 10 & 11)                 (639,219)      2,736,793       1,051,265      89,040,708
Changes in fair value of estimated costs to
  complete liquidation (note 9)                         --        (504,959)       (829,951)      2,010,261
Distributions to holders of Class 3A and 3B
  beneficial interests (note 12)                        --      (5,615,268)     (9,005,705)    (18,057,539)
                                              ------------    ------------    ------------    ------------

Net assets in liquidation, ending             $129,808,985    $127,895,794    $120,595,537    $194,833,341
                                              ============    ============    ============    ============

                                                MARCH 31,       JUNE 30,      SEPTEMBER 30,   DECEMBER 31,
                                                  2001            2001            2001            2001
                                              ------------    ------------    ------------    ------------
Net assets in liquidation, beginning
(Inception)                                   $171,414,559    $149,975,305    $137,888,441    $129,955,114

Interest on notes receivable (note 3)            1,668,036       1,956,553       1,948,723       1,836,297
Interest on notes payable (note 8)                (227,338)       (329,158)       (277,873)       (222,992)
Changes in fair value of other trust assets
  and liabilities (notes 10 & 11)               (2,801,975)     (2,439,236)        521,043       3,014,320
Changes in fair value of estimated costs to
  complete liquidation (note 9)                         --              --              --              --
Distributions to holders of Class 3A and 3B
  beneficial interests (note 12)               (20,077,977)    (11,275,023)    (10,125,220)     (5,601,776)
                                              ------------    ------------    ------------    ------------

Net assets in liquidation, ending             $149,975,305    $137,888,441    $129,955,114    $128,980,963
                                              ============    ============    ============    ============
</TABLE>

Certain   accounts  for  the  quarter   ended   September  30,  2002  have  been
reclassified.  The  approximate  reclassifications  are as  follows:  a  $30,000
increase in the Interest on notes payable,  a $95,000  decrease in the Change in
fair value of other trust assets and liabilities,  and a $65,000 increase in the
Changes  in  fair  value  of  estimated  cost  to  complete  liquidation.  These
reclassifications  have no  impact  on the  previously  reported  net  assets in
liquidation.

Certain accounts for the quarter ended September 30, 2001 have been reclassified
to conform to the 2002  presentation.  The approximate  reclassification  are as
follows:  a $198,000  decrease in the Interest on notes  receivable,  a $156,000
decrease in the Interest on notes payable,  a $429,000 increase in the Change in
fair value of other trust assets and liabilities,  and a $75,000 decrease in the
Changes  in  fair  value  of  estimated  cost  to  complete  liquidation.  These
reclassifications  have no  impact  on the  previously  reported  net  assets in
liquidation.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE.

None

                                    Page 28
<PAGE>
                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

     The  decision-making  authority  for the Trust  resides in the  Liquidating
Trustee and the  Liquidating  Trust Board pursuant to the Trust  Agreement.  The
Liquidating  Trustee  is  primarily   responsible  for  the  Trust's  day-to-day
operations,  and the Liquidating Trust Board supervises the Liquidating  Trustee
and  has the  ability  to  approve  or  disapprove  certain  of the  Liquidating
Trustee's  material  decisions.  The Liquidating  Trustee and the members of the
Liquidating  Trust Board were  appointed  in  accordance  with the  Confirmation
Order, and each of them will serve in their related capacity until such person's
death,  resignation  or  removal  in  accordance  with the  terms  of the  Trust
Agreement.

     The  following  table  sets forth  information  regarding  the  Liquidating
Trustee  and the  Liquidating  Trust  Board.  A summary  of the  background  and
experience of each of these individuals is set forth after the table.

             NAME                      AGE                  POSITION
             ----                      ---                  --------
     Clifton R. Jessup, Jr.             48        Liquidating Trustee
     Paul D. Carlson                    67        Liquidating Trust Board Member
     Stephen L. Culp                    37        Liquidating Trust Board Member
     John V. Prince                     48        Liquidating Trust Board Member
     Shirley C. Weast                   63        Liquidating Trust Board Member
     Mark E. Winkleman                  44        Liquidating Trust Board Member

     CLIFTON R. JESSUP, JR. was approved as the Liquidating  Trustee pursuant to
the Confirmation Order. Mr. Jessup is a partner and the head of the Bankruptcy &
Insolvency  Group at the Dallas  office of Patton Boggs LLP,  which he joined in
1997.  Prior to joining  Patton Boggs LLP, Mr.  Jessup was the Chairman of Dixon
and Jessup, Ltd., LLP and the Managing Partner of the Dallas office of that firm
from 1990 until 1997.  Mr.  Jessup  received  his  Bachelor of Arts from Oakwood
College in 1976 and his Juris Doctor from  University of Michigan  School of Law
in  1978.  Mr.  Jessup's  experience  includes  the  representation  of  secured
creditors, unsecured creditors, committees, equity holders, debtors and trustees
in federal  bankruptcy cases in over 37 states.  Mr. Jessup was appointed as the
Examiner in the Megafoods  Stores  bankruptcy case in Phoenix,  Arizona in 1996.
When the Plan of Liquidation  was confirmed in 1998, Mr. Jessup was appointed as
the Estate  Representative of the Megafoods  Liquidation Estate, a position that
he held until the case was closed in 2001.

     PAUL D.  CARLSON  served as the  Chairman  of the  Official  Collateralized
Investors' Committee.  From 1980 until his retirement in 1993, Mr. Carlson was a
Senior  Development  Engineer  with  Hughes  Aircraft  Company,   where  he  was
responsible for the procurement of components and their functional  integrity in
a major missile system.

     STEPHEN L. CULP served as the  Co-Chairman of the Official Joint  Committee
of Unsecured Creditors. Mr. Culp has been employed since 1999 as the Director of
Property  Development and Legal Counsel at Saddleback Valley Community Church in
Lake Forest,  California, one of the largest churches in the United States. From
1992 to 1999, Mr. Culp worked at the Orange County law firm of Callahan,  McCune
& Willis, specializing in litigation.

     JOHN V. PRINCE is in private management  consulting and currently serves as
a member of the Board of Directors of Arizona  MultiBank,  an Arizona  community
development  corporation.  Prior to entering private management consulting,  Mr.
Prince  was Senior  Vice  President  and Chief  Financial  Officer  of  Employee
Solutions,  Inc., which filed a voluntary petition for relief under Chapter 7 of
the Bankruptcy Code on February 26, 2001.  Prior to 1997 Mr. Prince held several
positions  with First  Interstate  Bancorp,  Inc. Most notably,  he was the Vice
President and Manager of Bank SEC and Regulatory Reporting from 1994 until 1996.
From 1990 until 1994, Mr. Prince was a Vice President at First  Interstate  Bank
of Texas,  where he was  involved  with the purchase of failed banks and savings
and loans in cooperation with the Resolution Trust Corporation.  From 1986 until
1990, Mr. Prince was Vice President and Controller for First  Interstate Bank of
Oklahoma where he was involved in the purchase and  liquidation of the assets of
failed banks in cooperation with the Federal Deposit Insurance Corporation.  Mr.
Prince is a  Certified  Public  Accountant  who is  certified  in  Arkansas  and
Oklahoma.  Mr. Prince  graduated with a Bachelor of Arts in Accounting  from the
Ouachita Baptist University.

                                    Page 29
<PAGE>
     SHIRLEY  C.  WEAST  served  as a  member  of  the  Official  Collateralized
Investors'  Committee  and retired in 1990 after having  operated the Shirley C.
Weast  Agency  for 30 years in the State of New York.  Ms.  Weast is a  licensed
insurance and real estate broker in the State of New York.

     MARK E. WINKLEMAN has been recently  appointed the State Land  Commissioner
for the State of Arizona.  As well he is the founder of MGS Realty Partners LLC,
which  acquires and sells  commercial  properties.  Prior to founding MGS Realty
Partners LLC in 2000, Mr.  Winkleman was in charge of  acquisitions  for Pacific
Realty  Advisors,  where he directed the  acquisition  and  disposition  of many
commercial properties from 1997 until 1999. From 1991 to 1997, Mr. Winkleman was
the  Senior  Vice  President  of  Grossman  Company  Properties,  a real  estate
investment  company in Phoenix,  Arizona,  where he was actively involved in the
acquisition,  development,  financing  and  disposition  of projects such as the
Arizona Biltmore Hotel,  Biltmore Fashion Park,  National Bank Tower,  Christown
Mall, the Arizona Mills and several other significant real estate projects.  Mr.
Winkleman  was not an Investor or a creditor in the  Debtors'  Chapter 11 cases,
and he had no prior connection with the Debtors or the Non-Debtor Affiliates.

ITEM 11. EXECUTIVE COMPENSATION.

COMPENSATION OF THE LIQUIDATING TRUSTEE

     On December 19, 2000 the  Bankruptcy  Court approved the Trust's entry into
the  compensation  agreement by and among the transferors and Clifton R. Jessup,
Jr. (the "TRUSTEE  COMPENSATION  AGREEMENT").  The following  description of the
Trustee  Compensation  Agreement is only a summary and is qualified by reference
to the Trustee Compensation Agreement, a copy of which was filed as Exhibit 10.1
to the Trust's Form 10 filed May 1, 2002.

     The  compensation  of the  Liquidating  Trustee is  comprised  of three (3)
components: hourly compensation,  expense reimbursement and a performance bonus.
The  Liquidating  Trustee's  hourly  compensation  is an hourly rate of $295.00,
which is subject to periodic upward  adjustment by the Liquidating  Trust Board.
The Liquidating  Trustee will not be compensated for his travel time to and from
Phoenix,  Arizona  unless he is actually  working on matters  pertaining  to the
Trust during that travel time.

     All reasonable out of pocket expenses  incurred by the Liquidating  Trustee
for airfare between Dallas, Texas and Phoenix,  Arizona (the "TRAVEL EXPENSES"),
are  reimbursable  as an  expense  of the Trust.  All  reasonable  out of pocket
expenses  incurred by the  Liquidating  Trustee and relating to the  Liquidating
Trustee's  performance of his duties hereunder and under the Trust Agreement and
which are not Travel Expenses, are also reimbursable as an expense of the Trust.

     The performance bonus to be paid to the Liquidating Trustee is based on the
net recoveries paid to certain creditors and is as follows:

                                           PERFORMANCE BONUS (EXPRESSED AS A
             NET RECOVERIES                  PERCENTAGE OF NET RECOVERIES)
             --------------                  -----------------------------
     $0 - $125,000,000                                    None
     $125,000,000.01 - $250,000,000                       .25%
     $250,000,000.01 - $500,000,000                       .50%
     $500,000,000.01 and above                            .75%

"NET  RECOVERIES"  means the aggregate of all  distributions by the Trust to the
Holders of claims in Class 3A, Class 3B and Class 5 from the  liquidation of the
Trust Assets and the prosecution and/or settlement of the Litigation Claims. The
aggregate amount of all hourly  compensation paid to the Liquidating  Trustee by
the Trust and the Travel Expenses  reimbursed by the Trust will be deducted from
the performance bonus payable to the Liquidating Trustee.

                                    Page 30
<PAGE>
COMPENSATION OF THE LIQUIDATING TRUST BOARD

     On  December  19,  2000  the  Bankruptcy  Court  approved  the  form of the
compensation  agreement  to be entered  into by the Trust and the members of the
Liquidating  Trust Board (the "BOARD  COMPENSATION  AGREEMENT").  The  following
description  of the  Board  Compensation  Agreement  is  only a  summary  and is
qualified by reference to the Board Compensation  Agreement and Amendment to the
Board  Compensation  Agreement,  the form of which is filed as Exhibit  10.2 and
10.3 to the Trust's Form 10 filed May 1, 2001.

     Each  member  of the  Liquidating  Trust  Board  receives  $1,000  for each
calendar  month  during  which  the  board  member  serves  as a  member  of the
Liquidating  Trust Board and $2,000 for each  meeting of the  Liquidating  Trust
Board,  which the  board  member  attends  (either  in  person  or by  telephone
conference). In addition, the Independent Board Member, Mark Winkleman, receives
$1,250 for each  calendar  month  during  which he serves as the Chairman of the
Audit Committee and the Valuation Committee.

     On December 28, 2001 the Bankruptcy  Court entered its Order permitting the
Trust to pay fees to each member of the  Liquidating  Trust Board for the period
from November 1, 2000 to January 22, 2001 in recognition of services provided by
the Board prior to January 22, 2001. In addition to the  compensation  described
above,  each Liquidating Trust Board member is also entitled to reimbursement of
all reasonable out-of-pocket expenses, including travel expenses.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
         RELATED STOCKHOLDER MATTERS.

     a)   Since the Trust has no  outstanding  "voting  securities"  within  the
          meaning  of the  Exchange  Act and  the  regulations  thereunder,  the
          disclosure requirements of this annual report pertaining to 5% holders
          of  voting   securities  are  not  applicable.   Notwithstanding   the
          foregoing,  no person or group is the beneficial owner of more than 5%
          of interests in the Trust.

     b)   The following table sets forth certain information with respect to the
          beneficial ownership of interests in the Trust, as of the date of this
          annual  report , by the  Liquidating  Trustee  and the  members of the
          Liquidating  Trust Board.  There is only one class of interests in the
          Trust.

               NAME OF BENEFICIAL OWNER                 PERCENT OF CLASS
               ------------------------                 ----------------
               Clifton R. Jessup, Jr.                        0.00%
               Stephen L. Culp                               0.00%
               Mark E. Winkleman                             0.00%
               John V. Prince                                0.01%
               Paul D. Carlson                               0.05%
               Shirley C. Weast                              0.13%

     c)   Because  the Trust does not have any  "voting  securities"  within the
          meaning of the Exchange Act and the regulations thereunder, changes in
          ownership of voting  securities will not result in a change of control
          of the  Trust.  Pursuant  to the  terms of the  Trust  Agreement,  the
          Liquidating   Trustee  and  the  Liquidating  Trust  Board  have  sole
          management  and executive  authority over the Trust.  The  Liquidating
          Trustee and the initial  members of the  Liquidating  Trust Board were
          initially  selected  by  the  Restructuring  Committee,  the  Official
          Collateralized  Investors'  Committee and the Official Joint Committee
          of  Unsecured  Creditors,  and  the  Bankruptcy  Court  approved  such
          selections in connection with the Confirmation  Order. The Liquidating
          Trustee and the members of the Liquidating  Trust Board will serve for
          the  duration  of the  Trust.  However,  in the event of any  member's
          earlier death,  resignation  or removal,  such member will be replaced
          pursuant to the terms of the Trust Agreement.

     The Trust has no knowledge of any arrangements  that may result in a change
of control of the Trust.

                                    Page 31
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Pursuant to the authority under the Plan, the Trust retained  Patton Boggs,  the
law firm that employs Clifton R. Jessup, Jr., the Liquidating Trustee, to handle
various  litigation,  investigation and transactional  matters.  Fees charged by
Patton Boggs for the  services  performed  for the year ended  December 31, 2002
approximate  $1.1  million and do not include fees and expenses for the services
provided by Mr. Jessup as Liquidating Trustee.

ITEM 14. CONTROLS AND PROCEDURES.

Within the ninety (90) days prior to the date of this report,  the Trust carried
out an  evaluation,  under the  supervision  and with the  participation  of the
Trust's  management,  including the Liquidating  Trustee (the Trust's  principal
executive  officer) and the  Assistant to the  Liquidating  Trustee (the Trust's
principal financial  officer),  of the effectiveness of the design and operation
of the Trust's  disclosure  controls and procedures,  as defined in Exchange Act
Rule 15d-14(c).  Based upon that evaluation, the Trust's Liquidating Trustee and
the Assistant to the Liquidating  Trustee concluded that the Trust's  disclosure
controls and procedures are effective in enabling the Trust to record,  process,
summarize and report information required to be included in the Trust's periodic
SEC filings  within the  required  time period.  There have been no  significant
changes  in the  Trust's  internal  controls  or in  other  factors  that  could
significantly  affect the  internal  controls  subsequent  to the date the Trust
carried out its evaluation.

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

     (a)  1. Financial Statements

          The consolidated financial statements of the Trust are incorporated by
          reference to Item 8. "Financial  Statements and Supplementary Data" of
          this report.

          2. Financial Statement Schedules

          Financial   statement   schedules   have  been  omitted   because  the
          information  is either not required,  not  applicable,  or is included
          with Item 8.  "Financial  Statements and  Supplementary  Data" of this
          report.

          3. Exhibits

          The following exhibits are filed with this Form 10K:

          Exhibit 2.1*   First Amended Joint  Liquidating Plan of Reorganization
                         of the Debtors Under Chapter 11 of the Bankruptcy Code
          Exhibit 2.2*   Order Confirming  First Amended Joint  Liquidating Plan
                         of Reorganization
          Exhibit 3.1*   Liquidating  Trust  Agreement,  dated as of January 22,
                         2001
          Exhibit 10.1*  Trustee Compensation Agreement, dated as of January 22,
                         2001
          Exhibit 10.2*  Form of Board Compensation Agreement
          Exhibit 10.3*  Form of Amendment to Board Compensation Agreement
          Exhibit 21.1*  Articles of Organization of New Asset Subsidiary,  LLC,
                         dated as of January 22, 2001
          Exhibit 21.2*  Operating Agreement of New Asset Subsidiary, LLC, dated
                         as of January 22, 2001
          Exhibit 99.1   Certification

          *Previously filed with Form 10 on May 1, 2002.

     (b)  Reports on Form 8-K.

          No report on Form 8-K was filed by the registrant  with the Commission
          during the quarterly period ended December 31, 2002.

     (c)  Exhibits required by Item 601 of Regulation S-K

          None.

     (d)  Financial statement schedules as required by Regulation S-X

          None.

                                    Page 32
<PAGE>
                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.


Dated March 25, 2003                    BFA LIQUIDATION TRUST


                                        By: /s/ Clifton R. Jessup, Jr.
                                            ------------------------------------
                                            Name:  Clifton R. Jessup, Jr.
                                            Title: Liquidating Trustee


Dated March 25, 2003                    BFA LIQUIDATION TRUST


                                        By: /s/ Mark A. Roberts
                                            ------------------------------------
                                            Name:  Mark A. Roberts
                                            Title: Assistant to the Liquidating
                                                   Trustee

                                    Page 33
<PAGE>
                                  CERTIFICATION

I, Clifton R. Jessup, Jr., certify that:

1. I have reviewed this annual report on Form 10-K of the BFA Liquidation Trust;

2.  Based on my  knowledge,  this  annual  report  does not  contain  any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made,  not  misleading  with  respect to the period  covered by this annual
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included  in this annual  report,  fairly  present in all  material
respects the financial  condition,  results of operations  and cash flows of the
issuer as of, and for, the periods presented in this annual report;

4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     (i)  designed  such  disclosure  controls  and  procedures  to ensure  that
material  information  relating to the  registrant,  including its  consolidated
subsidiaries,   is  made  known  to  them  by  others  within  those   entities,
particularly during the period in which this annual report is being prepared;

     (ii) evaluated the  effectiveness of the registrant's  disclosure  controls
and  procedures  as of a date  within 90 days prior to the  filing  date of this
annual report ("EVALUATION DATE"); and

     (iii)   presented  in  this  annual  report  our   conclusions   about  the
effectiveness of the disclosure  controls and procedures based on our evaluation
as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
the  registrant's  board of  directors  (or persons  fulfilling  the  equivalent
function):

     (i) all  significant  deficiencies  in the design or  operation of internal
controls  which  could  adversely  affect  the  registrant's  ability to record,
process,  summarize  and  report  financial  data  and have  identified  for the
registrant's auditors any material weaknesses in internal controls; and

     (ii) any fraud, whether or not material,  that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The  registrant's  other  certifying  officers  and I have  indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: March 25, 2003                    By: /s/ Clifton R. Jessup, Jr.
                                            ------------------------------------
                                            Name:  Clifton R. Jessup, Jr.
                                            Title: Liquidating Trustee

                                    Page 34
<PAGE>
                            CERTIFICATION (CONTINUED)

I, Mark A. Roberts, certify that:

1. I have reviewed this annual report on Form 10-K of the BFA Liquidation Trust;

2.  Based on my  knowledge,  this  annual  report  does not  contain  any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made,  not  misleading  with  respect to the period  covered by this annual
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included  in this annual  report,  fairly  present in all  material
respects the financial  condition,  results of operations  and cash flows of the
issuer as of, and for, the periods presented in this annual report;

4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     (i)  designed  such  disclosure  controls  and  procedures  to ensure  that
material  information  relating to the  registrant,  including its  consolidated
subsidiaries,   is  made  known  to  them  by  others  within  those   entities,
particularly during the period in which this annual report is being prepared;

     (ii) evaluated the  effectiveness of the registrant's  disclosure  controls
and  procedures  as of a date  within 90 days prior to the  filing  date of this
annual report ("EVALUATION DATE"); and

     (iii)   presented  in  this  annual  report  our   conclusions   about  the
effectiveness of the disclosure  controls and procedures based on our evaluation
as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
the  registrant's  board of  directors  (or persons  fulfilling  the  equivalent
function):

     (i) all  significant  deficiencies  in the design or  operation of internal
controls  which  could  adversely  affect  the  registrant's  ability to record,
process,  summarize  and  report  financial  data  and have  identified  for the
registrant's auditors any material weaknesses in internal controls; and

     (ii) any fraud, whether or not material,  that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The  registrant's  other  certifying  officers  and I have  indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: March 25, 2003                    By: /s/ Mark A. Roberts
                                            ------------------------------------
                                            Name:  Mark A. Roberts
                                            Title: Assistant to the Liquidating
                                                   Trustee

                                    Page 35