FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   (Mark one)

|X|      QUARTERLY  REPORT  PURSUANT  TO SECTION  13 OR 15(d) OF THE  SECURITIES
         EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 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  November  12,  2003,
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-Q
                                Table of Contents

PART 1 - FINANCIAL INFORMATION

Item 1.  Financial Statements                                                  1

Item 2.  Management's Discussion and Analysis of Financial Condition
         And Results of Operations                                            11

Item 4   Controls and Procedures                                              13

PART 2 - OTHER INFORMATION

Item 1   Legal Proceedings                                                    14
<PAGE>

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

                     BFA LIQUIDATION TRUST AND SUBSIDIARIES
               CONSOLIDATED STATEMENT OF NET ASSETS IN LIQUIDATION
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                              September 30, 2003      December 31, 2002
                                                                              -----------------------------------------
<S>                                                                             <C>                      <C>
           ASSETS IN LIQUIDATION AT ESTIMATED FAIR VALUE

Cash and cash equivalents                                                       $ 7,591,238              $  2,254,806
Receivables, net (note 2)                                                         6,004,504                59,434,985
Other trust assets, net (notes 3 and 8)                                          41,926,027                46,149,276
Restricted cash and cash equivalents                                              1,772,801                 6,631,801
Fair value of expected cash flows from settlements (note 4)                       4,864,311               188,478,673
                                                                              -----------------------------------------

      TOTAL ASSETS                                                               62,158,881               302,949,541
                                                                              -----------------------------------------

                    LIABILITIES IN LIQUIDATION

Accounts Payable and accrued liabilities                                          1,022,044                 3,071,617
Notes payable (note 5)                                                                 --                   4,126,217
Estimated costs to complete liquidation and litigation (note 6)                   5,061,437                 6,679,030
Settlement liability (note 7)                                                     4,984,667                94,239,336
                                                                              -----------------------------------------

      TOTAL LIABILITIES                                                          11,068,148               108,116,200
                                                                              -----------------------------------------

Commitments and contingencies (note 9)

      NET ASSETS IN LIQUIDATION                                                 $51,090,733              $194,833,341
                                                                               ========================================

CLAIMS AGAINST NET ASSETS IN LIQUIDATION CONSIST OF THE FOLLOWING:
 Class "3A" Certificate,
   448,610,056 units outstanding, $.10 per unit at September 30,
   2003 and $.36 at December 31, 2002                                           $44,835,749              $162,294,947
 Class "3B" Certificate,
   137,246,636 units outstanding, $.05 per unit at September 30,
   2003 and $.24 at December 31, 2002                                             6,254,984                32,538,394
                                                                              -----------------------------------------

      TOTAL NET ASSETS                                                          $51,090,733              $194,833,341
                                                                               ========================================
</TABLE>

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


                                       1
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                   Three months ended
                                                                            ----------------------------------
                                                                             September 30,     September 30,
                                                                                  2003             2002
                                                                            ----------------------------------
<S>                                                                              <C>             <C>
Net assets in liquidation, July 1, 2003 and July 1, 2002, respectively           $85,393,358     $127,895,794

Interest income on notes receivable (note 2)                                         345,056        1,597,445
Interest expense on notes payable (note 5)                                          (12,215)        (113,311)
Changes in fair value of other trust assets and liabilities (note 8)               4,528,147        1,051,265
Changes in fair value of estimated costs to complete liquidation (note 6)        (1,139,534)        (829,951)
Distributions to holders of Class 3A and 3B beneficial interests                (38,024,079)      (9,005,705)
                                                                            ----------------------------------
Net assets in liquidation, September 30, 2003 and September 30, 2002,
respectively                                                                     $51,090,733     $120,595,537
                                                                            ==================================
</TABLE>

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


                                       2
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                    Nine months ended
                                                                            ----------------------------------
                                                                             September 30,     September 30,
                                                                                  2003             2002
                                                                            ----------------------------------
<S>                                                                             <C>              <C>
Net assets in liquidation, January 1, 2003 and January 1, 2002,
respectively                                                                    $194,833,341     $128,980,963

Interest income on notes receivable (note 2)                                       3,077,529        4,920,869
Interest expense on notes payable (note 5)                                         (134,173)        (499,251)
Changes in fair value of other trust assets and liabilities (note 8)             (1,696,315)        3,148,839
Changes in fair value of estimated costs to complete liquidation (note 6)        (1,139,534)      (1,334,910)
Distributions to holders of Class 3A and 3B beneficial interests               (143,850,115)     (14,620,973)
                                                                            ----------------------------------
Net assets in liquidation, September 30, 2003 and September 30, 2002,
respectively                                                                     $51,090,733     $120,595,537
                                                                            ==================================
</TABLE>

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


                                       3
<PAGE>

                     BFA LIQUIDATION TRUST AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION

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 September 30, 2003 and
December 31, 2002 and for the three and nine months ended September 30, 2003 and
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.

These unaudited  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


                                       4
<PAGE>

basis of accounting,  the financial  statements  reflect the estimated  costs of
liquidating  the assets and  distributing  the proceeds to holders of beneficial
interests.

The  accompanying   unaudited  consolidated  financial  statements  reflect  all
adjustments,  consisting only of normal  recurring  adjustments that are, in the
opinion of  management,  necessary  for a fair  statement of the results for the
interim  period  presented.   Such  financial  information  should  be  read  in
conjunction with the consolidated financial statements and related notes thereto
as of December  31, 2002 and for the fiscal  years ended  December  31, 2002 and
December  31,  2001  included  in the  Trust's  Form  10 -K as  filed  with  the
Securities  and Exchange  Commission.  The results for the three and nine months
ended  September 30, 2003 may not be  indicative  of the future  results for the
entire year 2003.

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.

TRUST ASSETS

The assets of the Trust are  carried at  estimated  fair  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 and receivables  transferred to the Trust upon the  consummation of
the Plan.  The estimates of the future cash flows from which the asset values of
the Trust were derived are made under the  direction  of the Trust's  management
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 difference 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,  it is not
practical to estimate their fair value. 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.

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.


                                       5
<PAGE>

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 4.00% present value factor at September 30, 2003 and a 4.25%
factor at December 31, 2002. These costs, which include  personnel,  facilities,
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.

NEW ACCOUNTING PRONOUNCEMENTS

In June 2001, the Financial  Accounting  Standards  Board (FASB) issued SFAS No.
143,"Accounting  for  Asset  Retirement  Obligations."  SFAS No.  143  addresses
financial   accounting  and  reporting  for  obligations   associated  with  the
retirement of tangible  long-lived  assets and the associated  asset  retirement
costs.  SFAS No. 143 is effective  for  financial  statements  issued for fiscal
years  beginning  after June 15, 2002,  and we expect that the adoption will not
have  a  material  impact  on  our  consolidated  statement  of  net  assets  in
liquidation or statement of changes in net assets.

In August 2001, the FASB issued SFAS No. 144,  "Accounting for the Impairment or
Disposal  of  Long-Lived  Assets,"  which  addresses  financial  accounting  and
reporting  for the  impairment or disposal of  long-lived  assets.  SFAS No. 144
retains the fundamental  provisions of existing accounting  principles generally
accepted in the United States with respect to the recognition and measurement of
long-lived  asset  impairment  contained in SFAS No. 121,  ""Accounting  for the
Impairment of Long-Lived  Assets and for  Long-Lived  Assets to be Disposed of."
SFAS No. 144 also  provides  additional  guidance  intended  to address  certain
significant  implementation  issues  associated  with  SFAS No.  121,  including
expanded  guidance  with  respect  to  appropriate  cash  flows  to be  used  in
determining  whether  recognition of a long-lived  asset impairment is required,
and if required, how to measure the amount of the impairment.  SFAS No. 144 also
requires  that any net assets to be disposed of by sale be reported at the lower
of carrying  value or fair value less cost to sell, and expands the reporting of
discontinued  operations to include any component of any entity with  operations
and cash flows that can be clearly  distinguished  from the rest of the  entity.
SFAS No. 144 is  effective  for  financial  statements  issued for fiscal  years
beginning  after  December  15,  2001,  and our  adoption  of it did not  have a
material  effect on our  consolidated  statement of net assets in liquidation or
statement of changes in net assets.

In April 2002, the FASB issued SFAS No. 145, ""Rescission of SFAS Nos. 4, 44 and
64, Amendment of SFAS 13, and Technical Corrections." SFAS No. 145 rescinds SFAS
No. 4, ""Reporting  Gains and Losses from  Extinguishment of Debt," and excludes
extraordinary   item  treatment  for  gains  and  losses   associated  with  the
extinguishment  of debt that do not meet the  criteria  for such  treatment,  as
outlined  in APB  Opinion  No.  30,  ""Reporting  the  Results of  Operations  I
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions." Any gain or loss on
extinguishment of debt that was previously  classified as an extraordinary  item
in the reported financial results that does not meet the criteria in APB Opinion
No. 30 for classification as an extraordinary  item shall be reclassified.  SFAS
No. 145 was effective  beginning  after May 15, 2002, and our adoption of it did
not have a  material  effect  on our  consolidated  statement  of net  assets in
liquidation or statement of changes in net assets.

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.

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 is not  expected  to have a  material  impact  on our
consolidated financial statements or disclosures.

2. RECEIVABLES, NET

At  September  30,  2003,   receivables  consisted  primarily  of  various  note
receivables  related to land  contracts,  mortgage notes  receivable and various
other 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 is  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>
                                                                      September 30, 2003      December 31, 2002
                                                                    --------------------------------------------
<S>                                                                          <C>                   <C>
Total gross future cash flows from notes receivable                          $42,769,209           $138,853,065
Collectibility discount                                                     (36,220,700)           (69,241,041)
Present value discount (8-9%)                                                  (544,005)           (10,177,039)
                                                                    --------------------------------------------
Net receivables                                                               $6,004,504            $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.

3. OTHER TRUST ASSETS, NET

The other trust assets,  net 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>
                                                                     September 30, 2003      December 31, 2002
                                                                  ---------------------------------------------
<S>                                                                         <C>                    <C>
Real estate assets and partnerships, net                                    $39,399,388            $43,601,619
Investments in other operating companies, net                                 5,300,332              5,007,029
Other assets, net                                                               594,157                696,956
                                                                  ---------------------------------------------
Future value of other trust assets                                           45,293,877             49,305,604
Present value discount (various rates)                                      (3,367,850)            (3,156,328)
                                                                  ---------------------------------------------
Other trust assets value                                                    $41,926,027            $46,149,276
                                                                  =============================================
</TABLE>


                                       6
<PAGE>

4. FAIR VALUE OF EXPECTED CASH FLOWS FROM SETTLEMENTS

Settlement  proceeds at September 30, 2003 primarily consist of the net proceeds
from the settlement 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  will become final pending the expiration of the 30-day appeal period
on November 17, 2003.  As of the date of this filing no appeals have been filed.
In addition to the National Union net settlement proceeds there is 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.

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.
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.

5. NOTES PAYABLE

At September 30, 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


                                       7
<PAGE>

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

6. ESTIMATED COSTS TO COMPLETE LIQUIDATION AND LITIGATION

The  estimated  costs to complete  liquidation  and  litigation of $5,061,437 at
September 30, 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 4.00% present value factor at September 30, 2003 and a
4.25%  present  value factor at December 31, 2002.  These costs,  which  include
personnel,  facilities,  Trustee and 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  (Note 9). Given that there is
inherent  uncertainty  in  the  estimation  process,  actual  results  could  be
materially different.

7. SETTLEMENT LIABILITY

The settlement liability at September 30, 2003 represents the class action's 50%
portion of the settlement  proceeds and assets from National Union, 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 fair
value of expected  cashflows  from  settlements of  approximately  $4.9 million,
receivables of  approximately  $200,000 and other trust assets of  approximately
$350,000.  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.  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.

8. CHANGES IN OTHER TRUST ASSETS

During the three months ended September 30, 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  $4.5 million  increase in other
trust assets.  Included in actual  operating  results are sales of approximately
$2.0  million for the sale of property at Ironwood and Southern and parcels from
ASC San Antonio.

During the three months ended September 30, 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


                                       8
<PAGE>

adjustments  aggregately  total an  approximate  $1.0 million  increase in other
trust assets.  Included in actual  operating  results are sales of approximately
$5.7 million for the sale of various  lots and parcels  from Rancho  Vistoso and
Westside Property and the sale of the Document Technologies assets.

During the nine months ended  September 30, 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  $1.7 million  decrease in other
trust assets.  Included in actual  operating  results are sales of approximately
$6.6 million for the sale of the 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 nine months ended  September 30, 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  $3.1 million  increase in other
trust assets.  Included in actual  operating  results are sales of approximately
$9.1 million for the sale of various lots and parcels from Coyote Lakes,  Rancho
Vistoso,  Show  Low  Country  Club  and  Westside  Property  and the sale of the
Document Technologies assets.

9. COMMITMENTS, CONTINGENCIES AND SETTLEMENTS

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 September  30,
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  will  become  final  pending the
expiration  of the 30-day  appeal period on November 17, 2003. As of the date of
this filing no appeals have been filed.

In 2002 a complaint alleging four (4) separate causes of action was filed in the
Superior Court against BFA's former limited liability company member,  Chaparral
Pines,  LLC, in the development of the Chaparral Pines property.  The complaints
center  around the  mismanagement  of the property by the  defendant.  Chaparral
Pines filed a Motion to dismiss the complaint. After briefings and argument, the
Superior  Court has  allowed the Trust to proceed on three of the four counts in
the complaint. Discovery has commenced. Because of the substantial nature of the
Chaparral  Pines  project,  the  defendants'  are working to accumulate  all the
construction-related  documents. Currently, both the Trust and defendants are in
a document  review  process.  No amount has been  recorded  in the  accompanying
consolidated financial statements related to this contingent asset.

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 regards to Mr.
Blair's  second  obligation  (the  "CAMPBELL  NOTE") the Superior  Court entered
judgment on March 19, 2003 against both


                                       9
<PAGE>

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 state
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 state 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 cramdown 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 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.  An  amount  equal  to
approximately  $138,000  has  been  recorded  in the  accompanying  consolidated
financial statements related to this contingent asset.

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.
The  estimated  value of the 70 acres of real  property has been included in the
notes receivable portion of the accompanying  consolidated financial statements.
Additionally,  the  Trust  has  recourse  against  one  of the  partners  of the
partnership.  The Trust Board has  recently  agreed to a proposal to release the
one remaining  individual  partner for receipt of the sum of $50,000 cash.  This
proposal is subject to court  approval.  All remaining  partners have previously
paid the Trust cash  payments  in  exchange  for  release  of their of  personal
recourse liability.  A lawsuit has been filed in the Superior Court to foreclose
on the mortgage and obtain a judgment against the  partnership.  No answers have
been  filed.  No  amount  has been  recorded  in the  accompanying  consolidated
financial  statements  related to future amounts from a judgement or partner not
yet received from this contingent asset.

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.

10. CASH RECEIPTS AND DISBURSEMENTS

For the three months ended  September 30, 2003 and September 30, 2002, the Trust
received net cash proceeds from sales of assets, note receivable collections and
operations of approximately $46.5 and $20.3 million respectively,  consisting of
the following:

<TABLE>
<CAPTION>
                                                                       Three months ended
                                                        --------------------------------------------------
                                                               September 30, 2003       September 30, 2002
                                                        --------------------------------------------------
<S>                                                                   <C>                      <C>
Notes receivable                                                      $45,446,512              $9,988,630
Cash flows from other trust assets                                      1,096,911              10,275,216
                                                        --------------------------------------------------
                                                                      $46,543,423             $20,263,846
                                                        ==================================================
</TABLE>

Conversely,  for the same  respective  periods,  the Trust  paid out to  various
creditors approximately $40.9 and $13.1 million as follows:

<TABLE>
<CAPTION>
                                                                        Three months ended
                                                         --------------------------------------------------
                                                               September 30, 2003      September 30, 2002
                                                         --------------------------------------------------
<S>                                                                    <C>                    <C>
Trust operations                                                       $(419,306)             $(1,553,705)
Payables & class 5 creditors                                                    -                (155,701)
Payments to secured notes payables                                    (2,167,328)              (2,395,998)
Distributions to 3A and 3B                                           (38,360,670)              (9,005,705)
                                                         --------------------------------------------------
                                                                    $(40,947,304)            $(13,111,109)
                                                         ==================================================
</TABLE>


                                       10
<PAGE>

For the nine months ended  September 30, 2003 and September 30, 2002,  the Trust
received net cash proceeds from sales of assets, note receivable collections and
operations of approximately $245.9 and $35.5 million respectively, consisting of
the following:

<TABLE>
<CAPTION>
                                                                        Nine months ended
                                                        --------------------------------------------------
                                                           September 30, 2003       September 30, 2002
                                                        --------------------------------------------------
<S>                                                                   <C>                     <C>
Notes receivable                                                      $55,595,428             $17,830,262
Cash flows from other trust assets                                    190,313,776              17,710,070
                                                        --------------------------------------------------
                                                                     $245,909,204             $35,540,332
                                                        ==================================================
</TABLE>

Conversely,  for the same  respective  periods,  the Trust  paid out to  various
creditors approximately $240.6 and $28.6 million as follows:

<TABLE>
<CAPTION>
                                                                         Nine months ended
                                                         --------------------------------------------------
                                                            September 30, 2003      September 30, 2002
                                                         --------------------------------------------------
<S>                                                                  <C>                      <C>
Trust operations                                                     $(2,585,221)             $(6,469,771)
Payables & class 5 creditors                                          (2,324,633)              (4,701,221)
Payments to secured notes payables                                    (4,126,217)              (2,856,634)
Distributions to 3A and 3B                                          (231,536,706)             (14,620,972)
                                                         --------------------------------------------------
                                                                   $(240,572,777)            $(28,648,598)
                                                         ==================================================
</TABLE>

11. SUBSEQUENT EVENTS

On October 15, 2003 the Trust  distributed  approximately  $12.5  million to the
holders of Class 3A and 3B beneficial interests.

On  October 29 and 31,  2003 the Trust  sold two  pieces of real  estate for the
gross aggregate amount of $5.7 million in cash.


                                       11
<PAGE>

Item 2. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations.

The  historical  financial  data  presented  below for the three and nine months
ended   September  30,  2003  and  September  30,  2002  are  derived  from  our
consolidated financial statements. The selected financial data should be read in
conjunction with the notes below and the consolidated  financial  statements and
related notes included in Item 1.

<TABLE>
<CAPTION>
                                                   Three months ended                       Nine months ended
                                            ---------------------------------       ----------------------------------
                                             September 30,    September 30,           September 30,    September 30,
                                                 2003             2002                    2003              2002
                                            ---------------------------------       ----------------------------------
<S>                                             <C>             <C>                      <C>             <C>
Net assets in liquidation                       $85,393,358     $127,895,794             $194,833,341    $128,980,963

Interest income on notes receivable                 345,056        1,597,445                3,077,529       4,920,869
Interest expense on notes payable                  (12,215)        (113,311)                (134,173)       (499,251)
Changes in fair value of other trust
assets and liabilities                            4,528,147        1,051,265              (1,696,315)       3,148,839
Changes in fair value of estimated costs
to complete liquidation                         (1,139,534)        (829,951)              (1,139,534)     (1,334,910)
Distributions to holders of Class 3A and
3B beneficial interests                        (38,024,079)      (9,005,705)            (143,850,115)    (14,620,973)
                                            ---------------------------------       ----------------------------------
Net assets in liquidation, September 30,
2003 and September 30, 2002, respectively       $51,090,733     $120,595,537              $51,090,733    $120,595,537
                                            =================================       ==================================
</TABLE>

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

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

         THREE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002

The  estimated  fair value of the  Trust's net assets in  liquidation  decreased
approximately  $34.3  million for the three months ended  September  30, 2003 as
compared to  approximately  $7.3  million  decrease  for the three  months ended
September  30,  2002.  Factors  which  contributed  to the  majority  of the net
decrease of the net asset  value of the Trust's net assets for the three  months
ended  September  30, 2003  include (i) interest  income from notes  receivables
which increased net assets by approximately  $345,000, (ii) interest expense for
notes  payable  which  decreased  net  assets by  approximately  $12,000,  (iii)
increase in value of certain  other trust assets which  decreased  net assets by
approximately  $4.5  million,  (iv)  increase  in  value of  estimated  costs to
liquidate  which  increased  net assets by  approximately  $1.1  million and (v)
distributions to holders of Class 3A and 3B beneficial interests which decreased
net assets by  approximately  $38.0  million.  Factors which  contributed to the
majority  of the net  decrease  of the net


                                       12
<PAGE>

asset value of the Trust's net assets for the three months ended  September  30,
2002 include (i)  interest  income from notes  receivable  which  increased  net
assets by  approximately  $1.6 million,  (ii) interest expense for notes payable
which decreased net assets by approximately $113,000, (iii) increase in value of
certain  other trust  assets which  increased  net asset by  approximately  $1.0
million,  (iv)  increase in estimated  costs to liquidate  which  decreased  net
assets by  approximately  $830,000 and (v)  distributions to holders of Class 3A
and 3B beneficial  interests  which decreased net assets by  approximately  $9.0
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 principal  payments made by the
Trust.  The changes in fair value of other  trust  assets in 2003 as compared to
2002 differed  because of changes in the fair market value of assets and certain
related  liabilities due to pending or current sales offers,  receipt of current
information and actual operating results of the assets.

In  the  three  months  ended   September  30,  2003,   the  Trust   distributed
approximately  $38.0 million to holders of Class 3A or 3B beneficial  interests.
This  distribution was made  principally  from collections on Trust Assets.  The
Class 3A and 3B beneficial  interests were valued at approximately $50.9 million
at September 30, 2003 and $129.8 million at December 31, 2002.

         NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002

The  estimated  fair value of the  Trust's net assets in  liquidation  decreased
approximately  $143.7  million for the nine months ended  September  30, 2003 as
compared to  approximately  $8.4  million  decrease  for the nine  months  ended
September  30,  2002.  Factors  which  contributed  to the  majority  of the net
decrease  of the net asset  value of the  Trust's net assets for the nine months
ended  September  30, 2003  include (i) interest  income from notes  receivables
which increased net assets by approximately $3.1 million,  (ii) interest expense
for notes payable which decreased net assets by  approximately  $135,000,  (iii)
decrease in value of certain  other trust assets which  decreased  net assets by
approximately  $1.7  million,  (iv)  increase  in  value of  estimated  costs to
liquidate  which  decreased  net assets by  approximately  $1.1  million and (v)
distributions to holders of Class 3A and 3B beneficial interests which decreased
net assets by  approximately  $144.0 million.  Factors which  contributed to the
majority  of the net  decrease  of the net asset value of the Trust's net assets
for the nine months ended  September  30, 2002 include (i) interest  income from
notes receivable which increased net assets by approximately $4.9 million,  (ii)
interest  expense for notes payable which decreased net assets by  approximately
$499,000,  (iii) increase in value of certain other trust assets which increased
net asset by  approximately  $3.1 million,  (iv) increase in estimated  costs to
liquidate  which  decreased  net assets by  approximately  $1.3  million and (v)
distributions to holders of Class 3A and 3B beneficial interests which decreased
net assets by approximately $14.6 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 principal  payments made by the
Trust.  The changes in fair value of other  trust  assets in 2003 as compared to
2002 differed  because of changes in the fair market value of assets and certain
related  liabilities due to pending or current sales offers,  receipt of current
information and actual operating results of the assets.

In the nine months ended September 30, 2003, the Trust distributed approximately
$144.0  million  to  holders  of  Class  3A or 3B  beneficial  interests.  These
distributions  were  made  principally  from  collections  on Trust  Assets  and
proceeds from litigation.  The Class 3A and 3B beneficial  interests were valued
at  approximately  $50.9  million at  September  30, 2003 and $129.8  million at
December 31, 2002.


                                       13
<PAGE>

Non-cash trust assets at September 30, 2003 and December 31, 2002 were comprised
of the following:

<TABLE>
<CAPTION>
  NON-CASH ASSETS IN LIQUIDATION AT ESTIMATED FAIR VALUE      September 30, 2003         December 31, 2002
                                                            ------------------------    ---------------------
<S>                                                                      <C>                     <C>
Receivables, net                                                         $6,004,504              $59,434,985
Other trust assets, net                                                  41,926,027               46,149,276
Fair value of expected cash flows from settlement                                 -               $6,594,000
                                                            ------------------------    ---------------------
TOTAL                                                                   $47,930,531             $112,178,261
                                                            ========================    =====================
</TABLE>

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.  At September 30, 2003 and
September 30, 2002, the projected  monthly cash flows were discounted at various
rates to reflect the Trust Assets at estimated fair value.

The Trust's  consolidated  financial statements 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 basis for making judgments about the
fair  values  of assets  and  liquidation  liabilities  are not  always  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.

      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 September  30, 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.


                                       14
<PAGE>

            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.

NEW ACCOUNTING PRONOUNCEMENTS

In June 2001, the Financial  Accounting  Standards  Board (FASB) issued SFAS No.
143,"Accounting  for  Asset  Retirement  Obligations."  SFAS No.  143  addresses
financial   accounting  and  reporting  for  obligations   associated  with  the
retirement of tangible  long-lived  assets and the associated  asset  retirement
costs.  SFAS No. 143 is effective  for  financial  statements  issued for fiscal
years  beginning  after June 15, 2002,  and we expect that the adoption will not
have  a  material  impact  on  our  consolidated  statement  of  net  assets  in
liquidation or statement of changes in net assets.

In August 2001, the FASB issued SFAS No. 144,  "Accounting for the Impairment or
Disposal  of  Long-Lived  Assets,"  which  addresses  financial  accounting  and
reporting  for the  impairment or disposal of  long-lived  assets.  SFAS No. 144
retains the fundamental  provisions of existing accounting  principles generally
accepted in the United States with respect to the recognition and measurement of
long-lived  asset  impairment  contained in SFAS No. 121,  ""Accounting  for the
Impairment of Long-Lived  Assets and for  Long-Lived  Assets to be Disposed of."
SFAS No. 144 also  provides  additional  guidance  intended  to address  certain
significant  implementation  issues  associated  with  SFAS No.  121,  including
expanded  guidance  with  respect  to  appropriate  cash  flows  to be  used  in
determining  whether  recognition of a long-lived  asset impairment is required,
and if required, how to measure the amount of the impairment.  SFAS No. 144 also
requires  that any net assets to be disposed of by sale be reported at the lower
of carrying  value or fair value less cost to sell, and expands the reporting of
discontinued  operations to include any component of any entity with  operations
and cash flows that can be clearly  distinguished  from the rest of the  entity.
SFAS No. 144 is  effective  for  financial  statements  issued for fiscal  years
beginning  after  December  15,  2001,  and our  adoption  of it did not  have a
material  effect on our  consolidated  statement of net assets in liquidation or
statement of changes in net assets.

In April 2002, the FASB issued SFAS No. 145, ""Rescission of SFAS Nos. 4, 44 and
64, Amendment of SFAS 13, and Technical Corrections." SFAS No. 145 rescinds SFAS
No. 4, ""Reporting  Gains and Losses from  Extinguishment of Debt," and excludes
extraordinary   item  treatment  for  gains  and  losses   associated  with  the
extinguishment  of debt that do not meet the  criteria  for such  treatment,  as
outlined  in APB  Opinion  No.  30,  ""Reporting  the  Results of  Operations  I
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions." Any gain or loss on
extinguishment of debt that was previously  classified as an extraordinary  item
in the reported financial results that does not meet the criteria in APB Opinion
No. 30 for classification as an extraordinary  item shall be reclassified.  SFAS
No. 145 was effective  beginning  after May 15, 2002, and our adoption of it did
not have a  material  effect  on our  consolidated  statement  of net  assets in
liquidation or statement of changes in net assets.

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.

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 is not  expected  to have a  material  impact  on our
consolidated financial statements or disclosures.

Item 4. Controls and Procedures

Based on their  evaluation,  as of the end of the  period  covered  by this Form
10-Q, 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 quarter ended  September 30,
2003, and that has materially  affected,  or is reasonably  likely to materially
affect, the Trust's internal control over financial reporting.

PART II OTHER INFORMATION

Item 1. Legal Proceedings

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 was 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  will become final pending the expiration of the 30-day appeal period
on November 17, 2003. As of the date of this filing no appeals have been filed.

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.

W.H.H.C.

      The Trust holds a note receivable from W.H.H.C.  in an outstanding  amount
of  approximately  $2  million  dollars.  Through  this note the Trust has begun
foreclosing on approximately 70 acres of real property located in Maricopa


                                       15
<PAGE>

County,  Arizona.  The estimated value of the 70 acres of real property has been
included  in the  notes  receivable  portion  of the  accompanying  consolidated
financial  statements.  Additionally,  the Trust has recourse against one of the
partners of the  partnership.  The Trust Board has recently agreed to a proposal
to  release  the one  remaining  individual  partner  for  receipt of the sum of
$50,000 cash. This proposal is subject to court approval. All remaining partners
have previously paid the Trust cash payments in exchange for release of their of
personal recourse  liability.  A lawsuit has been filed in the Superior Court to
foreclose  on the  mortgage and obtain a judgment  against the  partnership.  No
answers  have  been  filed.  No amount  has been  recorded  in the  accompanying
consolidated  financial  statements related to future amounts from a judgment or
partner not yet received from this contingent asset.

Chaparral Pines

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

William Blair

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

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

      The Trust  separately  filed a lawsuit and obtained a judgment against Mr.
Blair  individually  as a co-maker under the Desert Diamond Note.  That debt has
been reduced to judgment in an amount of $1.4 million dollars,  plus interest at
19% until paid in full.  With  regards 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. Additionally the court awarded the
Trust legal fees in the amount of $54,931.00  and costs of $1,279.20.  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 state 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 state 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 cramdown 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 the Title Company  defendants,
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 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.


                                       16
<PAGE>

Disputed Proofs of Claims

      A number of creditors  filed  proofs of claims in the Debtors'  bankruptcy
proceedings. As of September 30, 2003 all of these claims have been resolved and
either paid in full (if any amount was due) or fully reserved for (if disputed).

                                   SIGNATURES

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

Dated November 13, 2003            BFA LIQUIDATION TRUST


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


                                       17