FORM 10-K

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   (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, 2003

                                       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.)

3300 N. Central Ave., Suite 900, Phoenix, Arizona               85012
   (Address of principal executive offices)                   (Zip Code)

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

         Former Address: 1313 E. Osborn Rd, Suite 250, Phoenix, AZ 85014

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

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common  stock  as of  the  latest  practicable  date:  As  of  March  29,  2004,
448,610,056 units of Class A Beneficial Interests and 137,246,636 units of Class
B Beneficial Interests were outstanding.

<PAGE>

                              BFA Liquidation Trust
                                    Form 10-K
                                Table of Contents

                                     PART I

Item 1.  Business.                                                             1

Item 2.  Properties.                                                           2

Item 3.  Legal Proceedings.                                                    2

Item 4.  Submission of Matters to a Vote of Security Holders.                  6

                                     PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters 6

Item 6.  Selected Financial Data.                                              6

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

Item 7A. Qualitative and Quantitative Disclosures about Market Risk.          11

Item 8.  Financial Statements and Supplementary Data.                         12

Item 9.  Changes in and  Disagreements  with  Accountants on Accounting
         and Financial Disclosure.                                            27

Item 9A. Controls and Procedures.                                             27

                                    PART III

Item 10. Directors and Executive Officers of the Registrant.                  28

Item 11. Executive Compensation.                                              29

Item 12. Security Ownership of Certain Beneficial Owners and
         Management and Related Stockholder Matters.                          30

Item 13. Certain Relationships and Related Transactions.                      32

Item 14. Principal Accounting Fees and Services.                              32

                                     PART IV

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  there  from.  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.


                                      -1-
<PAGE>

Availability of SEC Reports

The Trust' s website address is www.bfalt.org. The Trust makes available free of
charge  through its internet  website or mail,  its annual  report on Form 10-K,
quarterly  reports on Form 10-Q,  current  reports on Form 8-K and amendments to
these  reports  filed or  furnished  pursuant to Section  13(a) or 15 (d) of the
Securities  Exchange Act of 1934, as amended as soon as  reasonably  practicable
after the Trust  electronically  files such material with or furnishes it to the
SEC.  Materials posted on the Trust' s website are not incorporated by reference
into this annual report on Form 10-K.

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.

         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.

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


                                      -2-
<PAGE>

                  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  matter,  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 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 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


                                      -3-
<PAGE>

the way for  distribution  of these funds on January 23, 2003. The cash portions
of these settlements were distributed during 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. During this discovery process
the Trust and class action were able to reach a settlement  with the defendant's
and Debtors'  insurance  carrier,  National  Union, in the gross amount of $3.75
million. The settlement calls for the Trust to dismiss its cases against Messrs.
Crotts and Grabinski. The settlement consists of gross proceeds of $3.75 million
less legal  fees and  expenses  of  approximately  $550,000  for a net amount of
approximately  $3.2  million.  Both the  Superior  Court  and  Bankruptcy  Court
approved the settlement on October 17, 2003 and October 21, 2003,  respectively.
The National  Union  Settlement  became final and the funds were  distributed on
December 19, 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 sought to recoup its  payments  to SRA in its
claim  against  BFA. The Trust has settled this claim and as of June 30, 2003 no
liability remains outstanding.

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
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  judgment  and  according  to the  terms of the  settlement
received payment.

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'  were
working to accumulate all the construction-related  documents.  During that time
the Trust was able to reach a  settlement  agreement  with  Chaparral  Pines LLC
consisting  of the Trust  receiving  $300,000 in cash and


                                      -4-
<PAGE>

real  estate  valued  at  approximately  $420,000  net  of  selling  costs.  The
settlement  agreement  must now be signed by both  parties  and  approved by the
Superior  Court to become  final.  The Trust has recorded this asset in its fair
value of  expected  cash flows from  settlements  net of  various  discounts  at
December 31, 2003.

William Blair

         In an effort to avoid repaying $4 million dollars in debt to the Trust,
Mr. William 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").  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.  With regard to Mr.
Blair's  second  obligation  (the  "CAMPBELL  NOTE") the Superior  Court entered
judgment on March 19, 2003 against both Mr. Blair and his trust in the amount of
$1,418,329.82 with interest at the rate of 18% from August 13, 2001, until paid.
The  Trust  has  authorized  the  initiation  of a  new  lawsuit  to  recover  a
substantial  number of real property transfers made by Mr. Blair to mostly third
party related entities on the eve of the Superior Court judgments.  These claims
will be pursued under Arizona  state law theories of  fraudulent  transfer.  The
Trust now has  successfully  litigated  and  received  judgments  on the two (2)
Superior  Court actions and defended the Trust's  claims  against the actions of
Mr. Blair in connection  with the Desert  Diamond  bankruptcy.  This  bankruptcy
included  a  proposed  cram down plan and an  adversary  lawsuit  to modify  the
underlying  contract.  The assets of the bankruptcy  estate have been liquidated
and the proceeds from the sale of the assets have been distributed to the Trust.
With regard to the remaining action against Fidelity Title (the "TITLE COMPANY")
the Title  Company  hired by Mr.  Blair to  transfer  title to  portions  of the
Trust's collateral to third parties without lien releases,  the Bankruptcy Court
recently granted the Title Company's Motion for Reconsideration and reversed its
prior  ruling.  The  effect is that the  Bankruptcy  Court has upheld an alleged
contract modification  disallowed by a different judge in an earlier litigation.
If the Bankruptcy  Court's ruling stands as issued,  the Trust would be required
to release its liens on the  remaining  real property  collateral  for a release
price of  $12,500/lot  (a total of $275,000 for the remaining  lots).  The Title
Company  also  has on file a  Motion  for  Award  of Fees  seeking  an  award of
approximately  $138,000 in fees and costs incurred. The Bankruptcy Court awarded
the  Title  Company  an  amount  of  $44,000  for fees and  costs.  The Trust is
appealing  both  rulings  made by the  Bankruptcy  Court  relating  to the Title
Company matters.

W.H.H.C

The Trust holds a note receivable in an outstanding  amount of  approximately $2
million dollars from W.H.H.C.  Through this note the Trust has begun foreclosing
on approximately  70 acres of real property located in Maricopa County,  Arizona
as a partial  payment on the  outstanding  note. A lawsuit has been filed in the
Superior  Court to foreclose  on the mortgage and obtain a judgment  against the
real  property.  Two (2) of the  defendants  have made a claim in the form of an
affirmative defense,  that the Trust has filed a wrongful claim against the real
property. Three (3) of the defendants have now filed answers. The remaining four
(4) defendants  claim no interest in the real property.  The estimated  value of
the 70 acres of real property has been included in the notes receivable  portion
of the accompanying consolidated financial statements.

Glen Crotts

On November  12, 2003 the Trust filed an adversary  proceeding  against Glen and
Nannie Lou Crotts and the Glen E. Crotts  Revocable Trust  ("CROTTS").  Glen and
Nannie Lou Crotts are the parents of past BFA president  William Crotts and Glen
Crotts served as president of BFA prior to William  Crotts.  The complaint  sets
forth four  claims  against  the  Crotts.  The first two claims  seek to recover
monies owed in excess of $750,000  on two  promissory  notes to the Trust now in
default.  The third claim asserts that the Crotts assisted BFA senior management
in  creating   misleading   financial   statements  in  1994  and  1995  through
participation  in real  estate  transactions.  The fourth and final  claim is to
recover $296,000  withdrawn from the investment  accounts held at BFA during the
one-year  period prior to BFA filing for  bankrupcty  protection as a preference
amount.  The Crotts have denied the  assertions in all the claims and


                                      -5-
<PAGE>

have filed  counterclaims  against the Trust for  withholding  distributions  on
$537,219 of their investments in BFA and $18,000 from another  partnership.  The
Crotts and the Trust have agreed to  mediation,  which is  scheduled to start on
May 3,  2004.  No amount  has been  recorded  in the  accompanying  consolidated
financials statements related to these claims and counterclaims.

Disputed Proofs of Claims

A number  of  creditors  filed  proofs  of  claims  in the  Debtors'  bankruptcy
proceedings.  As of December 31, 2003 all of these claims have been resolved and
either paid in full (if any amount was due) or fully reserved for (if disputed).

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, 2003.

                                     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 years ending December 31, 2003 and December 31 ,2002:

<TABLE>
<CAPTION>
                                                                       January 1, 2003 to       January 1, 2002 to
                                                                       December 31, 2003        December 31, 2002
                                                                      ---------------------    ---------------------
<S>                                                                            <C>                      <C>
Class 3A and 3B holders - Trust Asset proceeds                                 $75,750,000              $20,950,000
Class 3A and 3B holders - Trust's share of litigation proceeds (*)              93,470,000               12,250,000
All Other Class holders                                                          6,330,000                4,350,000
                                                                      ---------------------    ---------------------
Total Distributions                                                           $175,550,000              $37,550,000
                                                                      =====================    =====================
</TABLE>

Note (*) - During 2003 the Trust  distributed  approximately  $186.9  million in
litigation  proceeds.  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 for 2003 and 2002.

Item 6. Selected Financial Data.

The  selected  historical  financial  data  presented  below for the year  ended
December 31, 2003,  for the year ended December 31, 2002 and for the period from
January  22,  2001 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.


                                      -6-
<PAGE>

<TABLE>
<CAPTION>
                                                                            January 1,       January 1,     January 22,
                                                                              2003 to         2002 to         2001 to
                                                                           December 31,     December 31,    December 31,
                                                                               2003             2002            2001
                                                                          ---------------- --------------- ---------------
<S>                                                                        <C>             <C>             <C>
Net Assets in liquidation, beginning                                       $ 194,833,341   $ 128,980,963   $ 171,414,559

Interest on notes receivable                                                   3,324,670       6,230,184       7,409,609
Interest on notes payable                                                       (120,579)       (564,192)     (1,057,361)
Changes in fair value of other trust assets and liabilities                   (2,023,541)     92,189,547      (1,705,848)
Changes in fair value of estimated costs to complete liquidation              (1,032,616)        675,351            --
Distributions to holders of Class 3A and 3B beneficial interests            (163,315,462)    (32,678,512)    (47,079,996)
                                                                           -------------   -------------   -------------
Net assets in liquidation, ending                                          $  31,665,813   $ 194,833,341   $ 128,980,963
                                                                           =============   =============   =============
</TABLE>

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

Certain statements under the headings  "Management's  Discussion and Analysis of
Financial Condition and Results of Operation," "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, 2003 COMPARED TO

                        THE YEAR ENDED DECEMBER 31, 2002

The  estimated  fair value of the  Trust's net assets in  liquidation  decreased
approximately $163.2 million for the year ended December 31, 2003 as compared to
an  approximately  $65.9 million  increase for the year ended December 31, 2002.
Factors  which  contributed  to the net  decrease  of the net asset value of the
Trust's net assets for the year ended  December  31, 2003  include (i)  interest
income from notes receivables  which increased net assets by approximately  $3.3
million,  (ii) interest  expense for notes payable which decreased net assets by
approximately  $121,000,  (iii) a decrease  in the value of certain  other trust
assets which decreased net assets by approximately  $2.0 million,  (iv) increase
in estimated costs to liquidate which decreased net assets by approximately $1.0
million and (v) distributions to holders of Class 3A and 3B beneficial interests
which  decreased  net assets by  approximately  $163.3  million.  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 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,  (iv) a decrease in estimated costs to liquidate
which increased net assets by  approximately  $675,000 and (v)  distributions to
holders of Class 3A and 3B beneficial  interests  which  decreased net assets by
approximately $32.7 million.

Interest  income  from notes  receivable  decreased  in 2003 as compared to 2002
because of  principal  payments  received.  Interest  expense  on notes  payable
decreased  from 2003 as compared 2002 because of


                                      -7-
<PAGE>

principal  payments made by the Trust during 2003.  The changes in fair value of
other trust assets in 2003 as compared to 2002 changed because of the changes in
the fair market  value of assets and certain  related  liabilities.  The primary
change  in the fair  value of other  trust  assets  in 2002 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 2003 were the result of a revised budget for the final
years of the Trust.

In 2003, the Trust distributed  approximately $163.3 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  $93.5
million of litigation proceeds during 2003 (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
$31.7 million at December 31, 2003.

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.

                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  $65.9 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
which decreased net assets by approximately  $564,000,  (iii) an appreciation in
the 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 million,  (iii) an appreciation in the
value of certain other trust assets which  increased net asset by  approximately
$1.7 million,  (iv) a decrease in estimated  costs to liquidate  which increased
net assets by approximately  $675,000 and (v)  distributions to holders of Class
3A and 3B beneficial interests which decreased net assets by approximately $47.1
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.


                                      -8-
<PAGE>

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.

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 $129.0 million at December 31,
2001.

Non-cash  trust assets at December 31, 2003 and December 31, 2002 were comprised
of the following:

             NON-CASH ASSETS IN LIQUIDATION AT ESTIMATED FAIR VALUE

<TABLE>
<CAPTION>
                                                                         December 31,          December 31,
                                                                             2003                  2002
                                                                       ----------------     -----------------
<S>                                                                         <C>                  <C>
Receivables, net                                                            $4,190,921           $59,434,985
Other trust assets, net                                                     27,746,115            46,149,276
Fair value of expected cash flows from settlements                             420,750             6,594,000
                                                                       ----------------     -----------------
TOTAL ASSETS                                                               $32,357,786          $112,178,261
                                                                       ================     =================
</TABLE>

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,
2003 and December 31, 2002, 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:

     o   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.


                                      -9-
<PAGE>

     o   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.

     o   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.

     o   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 4.00%  present  value factor at
         December  31, 2003 and a 4.25%  present  value  factor at December  31,
         2002.

            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.

     o   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.

In June 2002,  the FASB issued SFAS No. 146,  "Accounting  for Costs  Associated
with Exit or Disposal  Activities." SFAS No. 146 addresses financial  accounting
and reporting for costs associated with exit or disposal activities and replaces
Emerging  Issues Task Force (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 No. 146 requires
that a liability  for a cost  associated  with an exit or  disposal  activity be
recognized  when the  liability is incurred and should be initially  measured at
fair value.  Under EITF Issue No. 94-3, a liability for such costs is recognized
as of the date of an entity's commitment to an exit plan. The provisions of SFAS
No. 146 are effective for exit or disposal  activities  that we initiated  after
December 31, 2002.  Our adoption of SFAS No. 146 did not have a material  effect
on our  consolidated  statement  of net assets in  liquidation  or  statement of
changes in net assets.

In November  2002,  the FASB issued  Interpretation  (FIN) No. 45,  "Guarantor's
Accounting  and  Disclosure  Requirements  for  Guarantees,  Including  Indirect
Guarantees of Indebtedness of Others." FIN No. 45 requires certain guarantees to
be  recorded  at fair  value  and also  requires  a  guarantor  to make  certain
disclosures regarding  guarantees.  FIN No. 45's initial recognition and initial
measurement  provisions  are  applicable  on a  prospective  basis to guarantees
issued or modified after December 31, 2002. Our adoption of this  Interpretation
did not have a  material  impact on our  consolidated  financial  statements  or
disclosures.

In December  2002,  the FASB issued SFAS No. 148,  "Accounting  for  Stock-Based
Compensation  Transition and  Disclosure."  This statement  amends SFAS No. 123,
""Accounting  for  Stock-Based  Compensation  I An  Amendment  of SFAS No. 123."
Although  SFAS 148 does not require use of the fair value  method of  accounting
for stock-based  employee  compensation,  it does provide alternative methods of
transition. It also amends the disclosure provisions of SFAS 123 and APB Opinion
No. 28, "Interim  Financial  Reporting," to require disclosure in the summary of
significant  accounting policies or the effects of an entity's accounting policy
with respect to  stock-based  employee  compensation  on reported net income and
earnings  per share in annual  and  interim  financial  statements.  SFAS  148's
amendment of the transition and annual disclosure  requirements is effective for
fiscal years  ending  after  December  15,  2002.  The  amendment of  disclosure
requirements  of APB Opinion No. 28 is effective for interim  periods  beginning
after  December 15,  2002.  Our  adoption of this  pronouncement  did not have a
material impact on our consolidated financial statements or disclosures.


                                      -10-
<PAGE>

In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable Interest
Entities,  an  Interpretation  of ARB 51." FIN No. 46  provides  guidance on the
identification of entities of which control is achieved through means other than
voting  rights  (""variable  interest  entities" or "VIEs") and how to determine
when and which  business  enterprise  should  consolidate  the VIE (the "primary
beneficiary").   In  addition,  FIN  No.  46  requires  that  both  the  primary
beneficiary and all other enterprises with a significant  variable interest in a
VIE make additional disclosures. The transitional disclosure requirements of FIN
No. 46 are required in all financial  statements  initially issued after January
31, 2003, if certain conditions are met. Our adoption of this Interpretation did
not  have  a  material  impact  on  our  consolidated  financial  statements  or
disclosures.

In April 2003,  the FASB issued SFAS No. 149,  "Amendment  of  Statement  133 on
Derivative  Instruments  and  Hedging  Activities."  SFAS  No.  149  amends  and
clarifies the accounting guidance on derivative  instruments  (including certain
derivative  instruments embedded in other contracts) and hedging activities that
fall within the scope of SFAS No. 133,  "Accounting  for Derivative  Instruments
and Hedging  Activities." SFAS No. 149 is effective  prospectively for contracts
entered into or modified after June 30, 2003, with certain  exceptions,  and for
hedging  relationships  designated after June 30, 2003. Our adoption of SFAS No.
149 did not have a material impact on our consolidated  financial  statements or
disclosures.

In May 2003,  the FASB issued SFAS No. 150,  "Accounting  for Certain  Financial
Instruments with  Characteristics  of both Liabilities and Equity." SFAS No. 150
changes  the  accounting  and  disclosure  requirements  for  certain  financial
instruments that, under previous  guidance,  could be classified as equity.  The
guidance in SFAS No. 150 is generally  effective for all  financial  instruments
entered into or modified  after May 31, 2003 and is  otherwise  effective at the
beginning  of the first  interim  period  beginning  after  June 15,  2003.  The
adoption  of SFAS No.  150 did not have a  material  impact on our  consolidated
financial statements or disclosures.

The following table sets forth,  as of December 31, 2003, the aggregate  amounts
of our contractual  obligations and  commitments  with definitive  payment terms
that will require cash outlays in the future.

<TABLE>
<CAPTION>
                                                                Payments Due by Period

                Total                    Less than 1 Year      2-3 Years       4-5 Years      After 5 Years
                -----                    ----------------      ---------       ---------      -------------
<S>                                            <C>              <C>              <C>              <C>
Operating Leases                               $41,064          $41,064          $ -              $ -
                                        -------------------------------------------------------------------
Total Contractual Commitments                  $41,064          $41,064          $ -              $ -
                                        ===================================================================
</TABLE>

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

The Trusts principal exposure to risk relates to interest rate risk, credit risk
and market  risk  associated  with the types of assets  being  sold.  An adverse
change in interest rates would not have a material adverse impact on the Trust's
operations or net assets.  Adverse changes in credit or market risk could have a
material adverse affect of the Trust's  operations and net assets. The Trust has
attempted  to minimize  this risk by  discounting  the Trust Assets based on the
asset's  exposure to credit or market  risk and  historical  experiences  of the
asset.

                  [Remainder of Page Intentionally Left Blank]


                                      -11-
<PAGE>

Item 8. Financial Statements and Supplementary Data.

                         Report of Independent Auditors

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

We have  audited  the  accompanying  consolidated  statements  of net  assets in
liquidation of BFA  Liquidation  Trust and its  subsidiaries  as of December 31,
2003 and 2002, and the related consolidated  statements of changes in net assets
in  liquidation  for each of the years ended December 31, 2003 and 2002, and for
the period from  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 consolidated  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, 2003 and December 31,
2002, and the statements of changes in net assets in liquidation for each of the
years  ended  December  31,  2003 and 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 29, 2004


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

<TABLE>
<CAPTION>
                                                                             December 31, 2003           December 31, 2002
                                                                             -----------------           -----------------
<S>                                                                             <C>                        <C>
           ASSETS IN LIQUIDATION AT ESTIMATED FAIR VALUE

Cash and cash equivalents (note 2)                                              $ 4,032,941                $  2,254,806
Receivables, net (note 3)                                                         4,190,921                  59,434,985
Other trust assets, net (note 4)                                                 27,746,115                  46,149,276
Restricted cash and cash equivalents (note 5)                                       630,884                   6,631,801
Fair value of expected cash flows from settlements (note 6)                         723,937                 188,478,673
                                                                                -----------                ------------

      TOTAL ASSETS                                                               37,324,798                 302,949,541
                                                                                -----------                ------------

                    LIABILITIES IN LIQUIDATION

Accounts Payable and accrued liabilities (note 7)                                 1,037,939                   3,071,617
Notes payable (note 8)                                                                 --                     4,126,217
Estimated costs to complete liquidation (note 9)                                  4,271,302                   6,679,030
Settlement liability (note 10)                                                      349,744                  94,239,336
                                                                                -----------                ------------
      TOTAL LIABILITIES                                                           5,658,985                 108,116,200
                                                                                -----------                ------------
Commitments and contingencies (note 13)

      NET ASSETS IN LIQUIDATION                                                 $31,665,813                $194,833,341
                                                                                ===========                ============

CLAIMS AGAINST NET ASSETS IN LIQUIDATION CONSIST OF THE FOLLOWING:

Class "3A" Certificate, 448,610,056 units outstanding, $.06 per
   unit at December 31, 2003 and $.36 per unit at December 31, 2002             $26,949,857                $162,294,947

Class "3B" Certificate, 137,246,636 units outstanding, $.03 per
   unit at December 31, 2003 and $.24 per unit at December 31, 2002               4,715,956                  32,538,394
                                                                                -----------                ------------
      TOTAL NET ASSETS                                                          $31,665,813                $194,833,341
                                                                                ===========                ============
</TABLE>
The  accompanying  notes are an integral  part of these  Consolidated  Financial
Statements.


                                      -13-
<PAGE>

                     BFA LIQUIDATION TRUST AND SUBSIDIARIES
         CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS IN LIQUIDATION

<TABLE>
<CAPTION>
                                                                                                           JANUARY 22,
                                                                  JANUARY 1,           JANUARY 1,             2001
                                                                    2003 -               2002 -           (INCEPTION) -
                                                                 DECEMBER 31,         DECEMBER 31,         DECEMBER 31,
                                                                    2003                 2002                 2001
                                                                -------------        -------------        -------------
<S>                                                            <C>                  <C>                  <C>
Net assets in liquidation, January 1, 2003, January 1,
2002 and January 22, 2001, respectively                         $ 194,833,341        $ 128,980,963        $ 171,414,559

Interest on notes receivable (note 3)                               3,324,670            6,230,184            7,409,609
Interest on notes payable (note 8)                                   (120,579)            (564,192)          (1,057,361)
Changes in fair value of other trust assets and
liabilities (notes 10 & 11)                                        (2,023,541)          92,189,547           (1,705,848)
Changes in fair value of estimated costs to complete
liquidation (note 9)                                               (1,032,616)             675,351                 --
Distributions to holders of Class 3A and 3B beneficial
interests (note 12)                                              (163,315,462)         (32,678,512)         (47,079,996)
                                                                -------------        -------------        -------------
Net assets in liquidation, December 31, 2003, December
31, 2002 and December 31, 2001, respectively                    $  31,665,813        $ 194,833,341        $ 128,980,963
                                                                =============        =============        =============
</TABLE>

The  accompanying  notes are an integral  part of these  Consolidated  Financial
Statements.


                                      -14-
<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  ("BFA")
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  ("BANKRUPTCY  COURT"), 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 Trust's beneficiaries; (ii) prosecute all claims
and causes of action  that the Trust may have  against any person or entity (the
"LITIGATION  CLAIMS")  for the benefit of the Trust's  beneficiaries;  and (iii)
distribute any proceeds of the Litigation  Claims and the Trust Assets  received
by the Trust to the Trust's 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 liquidation  value of the Trust Assets,  consistent with
the primary  purpose of the Trust. To facilitate the orderly  administration  of
the Trust and to  maximize  the value of the Trust  Assets,  the Trust  owns one
subsidiary,  New Asset Subsidiary,  LLC ("NAS"). The assets will be grouped in a
consistent and coherent manner and held, pending sale, by NAS. The Trust and NAS
are charged with the  responsibility of appraising the assets,  listing them for
sale in an orderly manner,  and  distributing  the proceeds from the sale to its
beneficiaries  on a regular basis. The Trust is expected to terminate after five
(5) years on January 22, 2006 unless the  Bankruptcy  Court  determines  that an
extension of the Trust is necessary for the purposes of the Trust.

The Plan provides for the appointment of a liquidating trustee (the "LIQUIDATING
TRUSTEE") and a liquidating trust board  ("LIQUIDATION  TRUST BOARD") to oversee
the  liquidation  of the Trust  Assets and to ensure  that such  liquidation  is
conducted in a cost-effective manner and in a reasonable time. In addition,  the
Liquidating Trustee and Liquidating Trust Board are directing the prosecution of
the Litigation Claims in an attempt to maximize the Trust's recoveries from such
claims.  The  Liquidating  Trustee  and the  Liquidating  Trust Board are making
ongoing efforts to dispose of the Trust Assets, to make timely distributions and
to minimize the duration of the Trust.

The Trust has a  wholly-owned  subsidiary to assist in  liquidating  the assets,
NAS, an Arizona limited liability company. 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".

BASIS OF PRESENTATION

The accompanying  consolidated  financial statements as of December 31, 2003 and
December 31, 2002  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.


                                      -15-
<PAGE>

These audited consolidated  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.

The Trust's  management 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.

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, 2003 and December  31,  2002,  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 as required  under the Plan and other  pledged  assets per prior  written
agreements.

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 assets 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 the Litigation
Claims, which consist of 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 of such  Litigation  Claims.
However, if realized these Litigation Claims could be material to the Trust.

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.


                                      -16-
<PAGE>

CONTINGENT LIABILITIES

Management does not believe that there will be any future material cash outflows
as a result of any claims against the Trust, thus no amount is included in these
accompanying consolidated financial statements (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 4.00% at December 31, 2003 and 4.25%
at  December  31,  2002.  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.  Litigation costs contain
assumptions  based on what management  expects the likely course of actions will
be regarding  litigating and or settling certain  contingencies  (Note 6 and 9).
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 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.

NEW ACCOUNTING PRONOUNCEMENTS

In June 2002,  the FASB issued SFAS No. 146,  "Accounting  for Costs  Associated
with Exit or Disposal  Activities." SFAS No. 146 addresses financial  accounting
and reporting for costs associated with exit or disposal activities and replaces
Emerging  Issues Task Force (EITF) Issue No. 94-3,  "Liability  Recognition  for
Certain  Employee  Termination  Benefits  and  Other  Costs to Exit an  Activity
(including  Certain Costs


                                      -17-
<PAGE>

Incurred in a Restructuring)." SFAS No. 146 requires that a liability for a cost
associated with an exit or disposal activity be recognized when the liability is
incurred  and should be initially  measured at fair value.  Under EITF Issue No.
94-3,  a liability  for such costs is  recognized  as of the date of an entity's
commitment  to an exit plan.  The  provisions  of SFAS No. 146 are effective for
exit or disposal  activities  that we initiated  after  December  31, 2002.  Our
adoption  of SFAS No.  146 did not have a  material  effect on our  consolidated
statement of net assets in liquidation or statement of changes in net assets.

In November  2002,  the FASB issued  Interpretation  (FIN) No. 45,  "Guarantor's
Accounting  and  Disclosure  Requirements  for  Guarantees,  Including  Indirect
Guarantees of Indebtedness of Others." FIN No. 45 requires certain guarantees to
be  recorded  at fair  value  and also  requires  a  guarantor  to make  certain
disclosures regarding  guarantees.  FIN No. 45's initial recognition and initial
measurement  provisions  are  applicable  on a  prospective  basis to guarantees
issued or modified after December 31, 2002. Our adoption of this  Interpretation
did not have a  material  impact on our  consolidated  financial  statements  or
disclosures.

In December  2002,  the FASB issued SFAS No. 148,  "Accounting  for  Stock-Based
Compensation  Transition and  Disclosure."  This statement  amends SFAS No. 123,
"Accounting  for  Stock-Based  Compensation  I An  Amendment  of SFAS No.  123."
Although  SFAS 148 does not require use of the fair value  method of  accounting
for stock-based  employee  compensation,  it does provide alternative methods of
transition. It also amends the disclosure provisions of SFAS 123 and APB Opinion
No. 28, "Interim  Financial  Reporting," to require disclosure in the summary of
significant  accounting policies or the effects of an entity's accounting policy
with respect to  stock-based  employee  compensation  on reported net income and
earnings  per share in annual  and  interim  financial  statements.  SFAS  148's
amendment of the transition and annual disclosure  requirements is effective for
fiscal years  ending  after  December  15,  2002.  The  amendment of  disclosure
requirements  of APB Opinion No. 28 is effective for interim  periods  beginning
after  December 15,  2002.  Our  adoption of this  pronouncement  did not have a
material impact on our consolidated financial statements or disclosures.

In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable Interest
Entities,  an  Interpretation  of ARB 51." FIN No. 46  provides  guidance on the
identification of entities of which control is achieved through means other than
voting rights ("variable interest entities" or "VIEs") and how to determine when
and  which  business   enterprise  should  consolidate  the  VIE  (the  "primary
beneficiary").   In  addition,  FIN  No.  46  requires  that  both  the  primary
beneficiary and all other enterprises with a significant  variable interest in a
VIE make additional disclosures. The transitional disclosure requirements of FIN
No. 46 are required in all financial  statements  initially issued after January
31, 2003, if certain conditions are met. Our adoption of this  Interpretation is
not expected to have a material impact on our consolidated  financial statements
or disclosures.

In April 2003,  the FASB issued SFAS No. 149,  "Amendment  of  Statement  133 on
Derivative  Instruments  and  Hedging  Activities."  SFAS  No.  149  amends  and
clarifies the accounting guidance on derivative  instruments  (including certain
derivative  instruments embedded in other contracts) and hedging activities that
fall within the scope of SFAS No. 133,  "Accounting  for Derivative  Instruments
and Hedging  Activities." SFAS No. 149 is effective  prospectively for contracts
entered into or modified after June 30, 2003, with certain  exceptions,  and for
hedging  relationships  designated after June 30, 2003. Our adoption of SFAS No.
149 did not have a material impact on our consolidated  financial  statements or
disclosures.

In May 2003,  the FASB issued SFAS No. 150,  "Accounting  for Certain  Financial
Instruments with  Characteristics  of both Liabilities and Equity." SFAS No. 150
changes  the  accounting  and  disclosure  requirements  for  certain  financial
instruments that, under previous  guidance,  could be classified as equity.  The
guidance in SFAS No. 150 is generally  effective for all  financial  instruments
entered into or modified  after May 31, 2003 and is  otherwise  effective at the
beginning  of the first  interim  period  beginning  after  June 15,  2003.  The
adoption  of SFAS No.  150 did not have a  material  impact on our  consolidated
financial statements or disclosures.


                                      -18-
<PAGE>

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 $4,032,941 at
December 31, 2003 and $2,254,806 at December 31, 2002.

3. RECEIVABLES, NET

At December 31, 2003, net receivables  consisted  primarily of an  approximately
$820,000 note from  W.H.H.C.,  an  approximately  $1.3 million note from Clearly
Waikoloa,  approximately  $1.4 million from various note receivables  related to
land  contracts,  and  approximately  $680,000 of various other  mortgage  notes
receivable and commercial  receivables most of which are  collateralized by real
estate.  At  December  31,  2002  receivables  consisted  primarily  of  a  note
receivable  from Shea Homes,  Inc.  ("SHEA") of $53.0  million.  At December 31,
2002,  the note  receivable  from Shea was  collateralized  by a master  planned
community,  and the  remaining  other  receivables  relate  to  land  contracts,
mortgage notes receivable and various other commercial receivables.  During July
2003 the Shea note receivable was paid in full.

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

<TABLE>
<CAPTION>
                                                                     December 31, 2003      December 31, 2002
                                                                     -----------------      -----------------
<S>                                                                    <C>                    <C>
Total gross future cash flows from notes receivable                    $ 42,870,365           $ 138,853,065
Collectibility discount                                                 (38,391,751)            (69,241,041)
Present value discount (8-9%)                                              (287,693)            (10,177,039)
                                                                       ------------           -------------
Net receivables                                                        $  4,190,921           $  59,434,985
                                                                       ============           =============
</TABLE>

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

4. OTHER TRUST ASSETS, NET

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.
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:

<TABLE>
<CAPTION>
                                                                     December 31, 2003    December 31, 2002
                                                                     -----------------    -----------------
<S>                                                                     <C>                  <C>
Real estate assets and partnerships, net                                $ 24,932,982         $ 51,151,619
Investments in other operating companies, net                              5,212,277            5,007,029
Other assets, net                                                            295,842              696,956
                                                                        ------------         ------------
Future value of other trust assets                                        30,441,101           56,855,604
Present value discount (various rates)                                    (2,694,986)         (10,706,328)
                                                                        ------------         ------------
Other trust assets value                                                $ 27,746,115         $ 46,149,276
                                                                        ============         ============
</TABLE>

Real  estate  assets  and  partnership  interests  consist of the  following  at
December 31, 2003


                                      -19-
<PAGE>

     o   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.

     o   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.

     o   VARIOUS OTHER REAL ESTATE ASSETS including approximately 8,000 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.

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

     o   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.

     o   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.

     o   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.

     o   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  $630,884  at  December  31, 2003 and
$6,631,801 at December 31, 2002 consisted of reserves for disputed  claims,  and
pledged  assets.  At December  31, 2003  restricted  cash  consists  entirely of
reserves for possible  distributions for disputed obligations arising from proof
of claim  issues not  currently  recorded as  liabilities  on the Trust  balance
sheet. At December 31, 2002 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. A majority of these disputed claims were
subsequently settled and the reserves were distributed to investors during 2003.
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 in a mutual fund
                  investment   held  as  collateral  for  a  non-Trust   related
                  institution's debt entered into before the Debtor's bankruptcy
                  filing.


                                      -20-
<PAGE>

         2)       Approximately $350,000 at December 31, 2002 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, 2003 primarily  consist of the net expected
proceeds from the settlement  with Chaparral  Pines LLC. The Chaparral Pines LLC
settlement  consists of $300,000  cash and real estate  valued at  approximately
$420,000 net of selling costs. The Chaparral Pines settlement agreement must now
be signed by both parties and approved by the  Superior  Court to become  final.
Also during 2003 the Trust settled with National Union Fire Insurance Company of
Pittsburgh,  PA ("NATIONAL UNION") in regards to insurance claims of the Debtors
against former officers and directors. The National Union settlement consists of
gross  proceeds of $3.75  million less legal fees and expenses of  approximately
$550,000 for a net amount of approximately $3.2 million. Both the Superior Court
for the State of Arizona,  Maricopa County (the "SUPERIOR COURT") and Bankruptcy
Court  approved the  settlement  on October 17 and 21, 2003,  respectively.  The
National  Union  Settlement  became  final  and  the  net  proceeds  along  with
approximately $1.7 million in litigation proceeds that was derived from the sale
of assets  received  as part of the  litigation  settlements  with  Jalma W. and
Carole Hunsinger and their affiliates was distributed on December 19, 2003.

Settlement  proceeds at December 31, 2002 primarily consist of net proceeds from
Arthur  Andersen  ("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 Superior Court and Bankruptcy
Court approved the settlement on September 13, 2002.  Interest of  approximately
$1.1  million  was  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.  In
addition  to the AA  settlement,  the Trust and class  action were 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.  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.  On January 23, 2003, the remaining
AA settlement  funds of $174.7  million were  distributed to the Class 3A and 3B
beneficial  interest  holders and class action  members in  accordance  with the
court approved plan of allocation.  On March 24, 2003 the cash proceeds received
from the other  litigation  settlements of $7.1 million 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 remaining  non-cash
assets of $6.6 million received as part of these additional settlements has been
reclassified  to the  appropriate  asset  classification  and are being  sold in
accordance  with the  liquidation  plan.  As of December 31, 2003  approximately
$700,000 of litigation  assets  remains to be sold.  Any funds received from the
sale of litigation  assets has been  separated  from  operating cash and will be
distributed per the court approved plan of allocation.

7. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued  liabilities total $1,037,939 at December 31, 2003,
all of which relates to accrued expenses for the operation of the Trust.


                                      -21-
<PAGE>

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

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

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

8. NOTES PAYABLE

At December 31, 2003 the Trust had no outstanding notes payable.  The final note
payable was paid in full during July 2003.

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
                                                   ===============

9. ESTIMATED COSTS TO COMPLETE LIQUIDATION AND LITIGATION

The  estimated  costs to complete  liquidation  and  litigation of $4,271,302 at
December 31, 2003 and  $6,679,030  at December 31, 2002  represent the estimated
costs of operating  the Trust  through its expected  termination  on January 21,
2006,  discounted using a present value factor of 4.00% at December 31, 2003 and
4.25% at December 31, 2002. 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.  Litigation costs contain  assumptions  based on
what  management  expects  the  likely  course  of  actions  will  be  regarding
litigating and or settling certain  contingencies.  Given that there is inherent
uncertainty  in the  estimation  process,  actual  results  could be  materially
different.


                                      -22-
<PAGE>

10. SETTLEMENT LIABILITY

The settlement  liability at December 31, 2003 represents the class action's 50%
portion of the remaining  settlement  assets from Jalma W. and Carole  Hunsinger
and their affiliates and Harold D. and Stephanie B. Friend and their affiliates.
The  settlement  liability  relates to assets  reported in other trust assets of
approximately  $250,000 and receivables of  approximately  $450,000.  In January
2003 the courts approved an allocation  process for the January 2003 settlements
whereby the Trust and the class action each are allocated 50% of the  settlement
proceeds. All of the class action investors are beneficial holders of the Trust,
however not all beneficial holders of the Trust are class action investors. 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
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.

The settlement  liability at December 31, 2002 represents the class action's 50%
portion  of the  joint  settlement  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. 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. 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  and  the  available  cash  was   distributed  to  class  action
participants through out 2003.

11. CHANGES IN OTHER TRUST ASSETS

During the year ended  December 31, 2003,  the  valuation of certain other trust
assets were adjusted based on current and pending sales offers,  new information
received  by  management  and  actual  operating   results.   These  adjustments
aggregately  total an approximate  $2.0 million  decrease in other trust assets.
Included in actual operating  results are sales of  approximately  $15.5 million
for the sale of the Stillwaters Resort, Chandler Commerce Center, First Mortgage
Building,  Park at Juniper Ridge, property in Casa Grande,  property at Ironwood
and  Southern  and  various  other lots and  parcels  from ASC San  Antonio  and
Westside Property.

During the year ended  December 31, 2002,  the  valuation of certain other trust
assets were adjusted based on current and pending sales offers,  new information
received  by  management  and  actual  operating   results.   These  adjustments
aggregately  total an approximate  $92.2 million  increase in other trust assets
which  primarily  related to the  settlements  with AA (see note 6). Included in
actual operating results are sales of approximately $9.8 million for the sale of
various lots and parcels from Coyote  Lakes,  Rancho  Vistoso,  Show Low Country
Club and Westside Property,  Bloomington Indiana vacant land, Coyote Lakes Joint
Venture property,  Bonds Alarms stock and the sale of the Document  Technologies
assets.

During the period from January 22, 2001  (inception)  to December 31, 2001,  the
valuation  of certain  other  trust  assets were  adjusted  based on current and
pending  sales  offers,  new  information  received  by  management  and  actual
operating  results.  These  adjustments  aggregately  total an approximate  $1.7
million decrease in other trust assets. Included in actual operating results are
sales of approximately $104.8 million for the sale of Foundation  Administrative
stock to Shea Homes, sale of New Century stock, real estate development known as
Kilohana  Waikoloa,  Saddle  Mountain RV Park and various  lots and parcels from
Rancho Vistoso,  Park at Juniper Ridge,  ASC San Antonio and Westside  Property,
and in addition  various  commercial  lots at Sunrise  Business  Park,  Chandler
Commerce Center,  Santa Fe Trail Ranch,  Tres Realty Building and various church
lots.

12. DISTRIBUTIONS

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


                                      -23-
<PAGE>

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  $163.3 million,  including the
Trust's 50% share of litigation  distributions,  for the year ended December 31,
2003.

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
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. As of December 31, 2003 all Class 5 and 6 claims have either been paid
in full or fully reserved for.


                                      -24-
<PAGE>

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. As of December 31, 2003
all of these  claims have been  resolved  and either paid in full (if any amount
was due) or fully reserved for (if disputed).

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.  During this discovery process the Trust
and  class  action  were able to reach a  settlement  with the  defendant's  and
Debtors'  insurance  carrier,  National  Union,  in the  gross  amount  of $3.75
million. The settlement calls for the Trust to dismiss its cases against Messrs.
Crotts and Grabinski. The settlement consists of gross proceeds of $3.75 million
less legal  fees and  expenses  of  approximately  $550,000  for a net amount of
approximately  $3.2  million.  Both the  Superior  Court  and  Bankruptcy  Court
approved the  settlement on October 17, 2003 and October 21, 2003,  respectively
(See note 4). The  National  Union  Settlement  became  final and the funds were
distributed in December 2003.

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'  were working to accumulate all the
construction-related  documents.  During that time the Trust was able to reach a
settlement  agreement with Chaparral Pines LLC consisting of the Trust receiving
$300,000 in cash and real estate valued at approximately $420,000 net of selling
costs. The settlement  agreement must now be signed by both parties and approved
by the Superior Court to become final.  The Trust has recorded this asset in its
fair value of expected cash flows from  settlements net of various  discounts at
December 31, 2003.

In an effort to avoid  repaying  $4 million  dollars  in debt to the Trust,  Mr.
William  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").  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.  With regard to Mr.
Blair's  second  obligation  (the  "CAMPBELL  NOTE") the Superior  Court entered
judgment on March 19, 2003 against both Mr. Blair and his trust in the amount of
$1,418,329.82 with interest at the rate of 18% from August 13, 2001, until paid.
The  Trust  has  authorized  the  initiation  of a  new  lawsuit  to  recover  a
substantial  number of real property transfers made by Mr. Blair to mostly third
party related entities on the eve of the Superior Court judgments.  These claims
will be pursued under Arizona  state law theories of  fraudulent  transfer.  The
Trust now has  successfully  litigated  and  received  judgments  on the two (2)
Superior  Court actions and defended the Trust's  claims  against the actions of
Mr. Blair in connection  with the Desert  Diamond  bankruptcy.  This  bankruptcy
included  a  proposed  cram down plan and an  adversary  lawsuit  to modify  the
underlying  contract.  The assets of the bankruptcy  estate have been liquidated
and the  proceeds  from the sale of the assets  distributed  to the Trust.  With
regard to the remaining  action against Fidelity Title (the "TITLE COMPANY") the
Title  Company  hired by Mr. Blair to transfer  title to portions of the Trust's
collateral to third parties without lien releases, the Bankruptcy Court recently
granted the Title Company's  Motion for  Reconsideration  and reversed its prior
ruling.  The effect is


                                      -25-
<PAGE>

that the Bankruptcy Court has upheld an alleged contract modification disallowed
by a different judge in an earlier litigation.  If the Bankruptcy Court's ruling
stands as  issued,  the Trust  would be  required  to  release  its liens on the
remaining  real property  collateral for a release price of $12,500/lot (a total
of $275,000 for the remaining lots). The Title Company also has on file a Motion
for Award of Fees seeking an award of  approximately  $138,000 in fees and costs
incurred.  The  Bankruptcy  Court awarded the Title Company an amount of $44,000
for fees and costs.  The Trust is appealing  both rulings made by the Bankruptcy
Court relating to the Title Company matters.

The Trust holds a note receivable in an outstanding  amount of  approximately $2
million dollars from W.H.H.C.  Through this note the Trust has begun foreclosing
on approximately  70 acres of real property located in Maricopa County,  Arizona
as a partial  payment on the  outstanding  note. A lawsuit has been filed in the
Superior  Court to foreclose  on the mortgage and obtain a judgment  against the
real  property.  Two (2) of the  defendants  have made a claim in the form of an
affirmative defense,  that the Trust has filed a wrongful claim against the real
property. Three (3) of the defendants have now filed answers. The remaining four
(4) defendants  claim no interest in the real property.  The estimated  value of
the 70 acres of real property has been included in the notes receivable  portion
of the accompanying consolidated financial statements.

On November  12, 2003 the Trust filed an adversary  proceeding  against Glen and
Nannie Lou Crotts and the Glen E. Crotts  Revocable Trust  ("CROTTS").  Glen and
Nannie Lou Crotts are the parents of past BFA president  William Crotts and Glen
Crotts served as president of BFA prior to William  Crotts.  The complaint  sets
forth four  claims  against  the  Crotts.  The first two claims  seek to recover
monies owed in excess of $750,000  on two  promissory  notes to the Trust now in
default.  The third claim asserts that the Crotts assisted BFA senior management
in  creating   misleading   financial   statements  in  1994  and  1995  through
participation  in real  estate  transactions.  The fourth and final  claim is to
recover $296,000  withdrawn from the investment  accounts held at BFA during the
one-year  period prior to BFA filing for  bankrupcty  protection as a preference
amount.  The Crotts have denied the  assertions in all the claims and have filed
counterclaims  against the Trust for  withholding  distributions  on $537,219 of
their  investments in BFA and $18,000 from another  partnership.  The Crotts and
the Trust have agreed to mediation,  which is scheduled to start on May 3, 2004.
No  amount  has  been  recorded  in  the  accompanying  consolidated  financials
statements related to these claims and counterclaims.

Because of the  significant  uncertainty  associated with the valuation of these
contingent  assets,  it is likely that the  amounts  ultimately  realized  could
differ  from  the  amounts  that  are  actually  reflected  in the  accompanying
consolidated financial statements and the differences could be material.

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 for office space
and office  equipment call for  approximate  payments of $3,400 monthly for 2003
and 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.  Rent expense for 2003,  2002 and 2001 was $91,600,  $221,000 and
$219,100,  respectively. The estimated rental payments are included in estimated
costs to complete liquidation and litigation.

15. CASH RECEIPTS AND DISBURSEMENTS

For the year ended  December  31,  2003,  December  31, 2002 and the period from
January 22, 2001 to December 31, 2001, the Trust received net cash proceeds from
sales of assets,  note receivable  collections  and operations of  approximately
$264.4,  $47.8  million  and  $50.7  million  respectively,  consisting  of  the
following:


                                      -26-
<PAGE>

<TABLE>
<CAPTION>
                                                                January 1, 2003      January 1, 2002     January 22, 2001
                                                                 to December 31,     to December 31,      to  December 31,
                                                                      2003                 2002                 2001
                                                              ------------------- -------------------- --------------------
<S>                                                               <C>                   <C>                  <C>
Principal  and  interest  received  from notes receivable         $ 55,729,327          $18,647,857          $ 7,397,856
Cash flows from other trust assets                                 208,623,346           29,151,787           43,351,517
                                                                  ------------          -----------          -----------
Total                                                             $264,352,673          $47,799,644          $50,749,373
                                                                  ============          ===========          ===========
</TABLE>

Conversely,  for the same  respective  periods,  the Trust  paid out to  various
creditors  approximately $262.6, $46.6 million and $60.7 million,  respectively,
as follows:

<TABLE>
<CAPTION>
                                              January 1, 2003 to     January 1, 2002 to   January 22, 2001 to
                                               December 31, 2003     December 31, 2002     December 31, 2001
                                           ----------------------- --------------------- ----------------------
<S>                                             <C>                    <C>                  <C>
Trust operations                                $  (3,337,531)         $ (5,050,748)        $ (7,402,222)
Payable to Class 5 creditors                       (2,308,738)           (5,946,085)          (4,046,931)
Principal and interest payments on
collateralized notes payable                       (4,126,217)           (2,897,091)          (3,537,454)
Distributions to Class 3A & 3B                   (252,802,053)          (32,678,512)         (45,735,268)
                                                -------------          ------------         ------------
Total                                           $(262,574,539)         $(46,572,436)        $(60,721,875)
                                                =============          ============         ============
</TABLE>

Distributions  to Class 3A and 3B  include  the  class  action  50%  portion  of
litigation proceeds and are net of returned distributions and reserves.

16. SUBSEQUENT EVENTS

On March 15, 2004 the  Bankruptcy  Court  approved the sale of Building 4 in the
Bloomington Industrial Center.

17. QUARTERLY FINANCIAL DATA (UNAUDITED):

Summarized  unaudited  quarterly  financial  data for fiscal 2003 and 2002 is as
follows:

                     BFA LIQUIDATION TRUST AND SUBSIDIARIES
         CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION

<TABLE>
<CAPTION>
                                                        MARCH 31,           JUNE 30,         SEPTEMBER 30,         DECEMBER 31,
                                                          2003                2003               2003                 2003
                                                    ----------------   ----------------    ----------------    ------------------
<S>                                                  <C>                 <C>                 <C>                 <C>
Net assets in liquidation, beginning                 $ 194,833,341       $ 100,959,333       $  85,393,358       $  51,090,733

Interest on notes receivable (note 3)                    1,507,478           1,224,995             345,056             247,141
Interest on notes payable (note 8)                         (58,584)            (63,374)            (12,215)             13,594
Changes in fair value of other trust assets
and liabilities (notes 10 & 11)                         (1,754,223)         (4,470,239)          4,528,147            (327,226)
Changes in fair value of estimated costs to
complete liquidation (note 9)                                 --                  --            (1,139,534)            106,918
Distributions to holders of Class 3A and 3B
beneficial interests (note 12)                         (93,568,679)        (12,257,357)        (38,024,079)        (19,465,347)
                                                     -------------       -------------       -------------       -------------
Net assets in liquidation, ending                    $ 100,959,333       $  85,393,358       $  51,090,733       $  31,665,813
                                                     =============       =============       =============       =============
</TABLE>


                                      -27-
<PAGE>

<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
                                                     =============       =============       =============       =============

</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.

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

None

Item 9A. Controls and Procedures.

Based on their  evaluation,  as of the end of the  period  covered  by this Form
10-K, the Trust's  Liquidating Trustee (the Trust's principal executive officer)
and  Assistant  to the  Liquidating  Trustee (the  Trust's  principal  financial
officer) have concluded that they have reasonable assurance of the effectiveness
of the Trust's disclosure  controls and procedures (as defined in Rule 13a-15(e)
under the Securities Exchange Act of 1934).

In connection with this evaluation, the Liquidating Trustee and the Assistant to
the Liquidating  Trustee identified no change in internal control over financial
reporting that occurred  during the Trust's fiscal year ended December 31, 2003,
and that has materially affected,  or is reasonably likely to materially affect,
the Trust's internal control over financial reporting.

                                    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  Trust's  Audit  Committee  is made up of three (3)  members of the
Liquidating Trust Board, Mr. Mark Winkleman, Mr. Steve Culp and Mr. John Prince.
Mr. John Prince  serves as the  financial  expert on the Audit  Committee and is
independent  as defined in the Exchange Act. The Trust has not adopted a code of
ethics due to the small  staff size of the Trust,  the direct  reporting  of the
Trust staff to the Liquidating  Trustee and  Liquidating  Trust Board and highly
regulated and reviewed environment in which the Trust's operates.


                                      -28-
<PAGE>

         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.          49             Liquidating Trustee
Paul D. Carlson                 68             Liquidating Trust Board Member
Stephen L. Culp                 38             Liquidating Trust Board Member
John V. Prince                  49             Liquidating Trust Board Member
Shirley C. Weast                64             Liquidating Trust Board Member
Mark E. Winkleman               45             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


                                      -29-
<PAGE>

Public  Accountant  who is  certified  in  Arkansas  and  Oklahoma.  Mr.  Prince
graduated  with a  Bachelor  of Arts in  Accounting  from the  Ouachita  Baptist
University.

         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:

-------------------------------------------------------------------------
              Net Recoveries            Performance Bonus (expressed as a
                                         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.


                                      -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


                                      -31-
<PAGE>

         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.

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, 2003
approximate  $243,000  and do not include  fees and  expenses  for the  services
provided by Mr. Jessup as Liquidating Trustee.

Item 14. Principal Accounting Fees and Services

Audit Fees

The aggregate fees billed for the last two (2) fiscal years ending  December 31,
2003 and  December  31,  2002  was  $103,770  and  $229,335,  respectively,  for
professional     services     rendered    by    the    principal     accountant,
PricewaterhouseCoopers,  LLP,  for the  audit of the  Trust's  annual  financial
statements and review of financial statements included in the Trust's 10Q.

Audit-Related Fees

The aggregate fees billed for the last two (2) fiscal years was $0 for assurance
and    related    services    rendered    by    the    principal     accountant,
PricewaterhouseCoopers,  LLP, that are reasonably  related to the performance of
the audit or review of the  Trust's  financial  statements  and are not  already
reported under Audit Fees.

Tax Fees

The  aggregate  fees  billed  for the  last  two  (2)  fiscal  years  was $0 for
professional     services     rendered    by    the    principal     accountant,
PricewaterhouseCoopers, LLP, tax compliance, tax advice and tax planning.

All Other Fees

The  aggregate  fees billed for the last two (2) fiscal year was $0 for products
and services provided by the principal accountant, PricewaterhouseCoopers,  LLP,
other than as reported under Audit Fees.

The Audit  Committee  approves  the  engagement  letter  for the  service of the
principal accountant prior to work commencing.  The Audit Committee has approved
100% of the Audit Fees  charged by the  principal  accountant  and all audit and
review work was performed by the principal accountants employees.

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.


                                      -32-
<PAGE>

                  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 31        Certification
                  Exhibit 32        Certification  pursuant to 18 U.S.C. Section
                                    1350

                  *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,
                  2003.

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

                  None.

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

                  None.

                                   SIGNATURES

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

                           BFA LIQUIDATION TRUST


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

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  registrant and
in the capacities and on the dates indicated.

                  By:      /s/ Clifton R. Jessup, Jr.
                           --------------------------
                           Clifton R. Jessup, Jr., Liquidating Trustee
                  Date: March 29, 2004


                  By:      /s/ Mark A. Roberts
                           --------------------------
                           Mark A. Roberts, Assistant to the Liquidating Trustee
                  Date: March 29, 2004


                                      -33-
<PAGE>

                  By:      /s/ Erik R. Anspach
                           --------------------------
                           Erik R. Anspach, Controller
                  Date: March 29, 2004


                  By:      /s/ Paul D. Carlson
                           --------------------------
                           Paul D. Carlson, Liquidating Trust Board
                  Date: March 29, 2004


                  By:      /s/ Stephen L. Culp
                           --------------------------
                           Stephen L. Culp, Liquidating Trust Board
                  Date: March 29, 2004


                  By:      /s/ John V. Prince
                           --------------------------
                           John V. Prince, Liquidating Trust Board
                  Date: March 29, 2004


                  By:      /s/ Shirley C. Weast
                           --------------------------
                           Shirley C. Weast, Liquidating Trust Board
                  Date: March 29, 2004


                  By:      /s/ Mark E. Winkleman
                           --------------------------
                           Mark E. Winkleman, Liquidating Trust Board
                  Date: March 29, 2004


                                      -34-