<PAGE>
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-K/A


                               (Amendment No. 2)


(Mark One)
[X]     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                  For the fiscal year ended September 30, 2005

                                       OR

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

             For the transition period from _________ to __________

                         Commission file number: 0-4408

                             RESOURCE AMERICA, INC.
             (Exact name of registrant as specified in its charter)

DELAWARE                                                              72-0654145
----------------------------------------                     -------------------
(State or other  jurisdiction                                   (I.R.S. Employer
of incorporation or organization)                            Identification No.)

1845 WALNUT STREET, SUITE 1000
PHILADELPHIA, PA                                                           19103
----------------------------------------                     -------------------
(Address of principal executive offices)                              (Zip Code)

Registrant's telephone number, including area code: 215-546-5005

Securities registered pursuant to Section 12(b) of the Act:

     Title of each class               Name of each exchange on which registered
     -------------------               -----------------------------------------
            NONE                                        NONE

           Securities registered pursuant to Section 12(g) of the Act:
                     Common stock, par value $.01 per share
                     --------------------------------------
                                 Title of class

Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes [ ] No [ X ]

Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(a) of the Act. Yes [ ] No [ X ]

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

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

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

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

The aggregate market value of the voting common equity held by non-affiliates of
the registrant, based on the closing price of such stock on the last business
day of the registrant's most recently completed second fiscal quarter (March 31,
2005) was approximately $512,845,000.

The number of outstanding shares of the registrant's common stock on December 1,
2005 was 18,060,825 shares.

                       DOCUMENTS INCORPORATED BY REFERENCE
                                     [None]
<PAGE>


                       EXPLANATORY NOTE - AMENDMENT NO. 2

Resource America, Inc. is filing Amendment No. 2 ("Amendment No. 2") to its
Annual Report on Form 10-K for the fiscal year ended September 30, 2005,
originally filed with the Securities and Exchange Commission on December 14,
2005, as amended on March 27, 2006 (the "Original Filing"), for the purpose of
amending the Auditors Reports included in the audited financial statements filed
as financial schedules as part of Item 15 which inadvertently were not signed.

Except as described above, this Form 10-K/A does not amend, update or change the
financials statements or any other items or disclosures made in the Original
Filing.


<PAGE>

                     RESOURCE AMERICA, INC. AND SUBSIDIARIES
                             INDEX TO ANNUAL REPORT
                                 ON FORM 10-K/A
<TABLE>
<CAPTION>
                                                                                                                   Page
                                                                                                                 ---------
<S>                  <C>                                                                                        <C>
PART I
        Item 1:       Business................................................................................       3 - 8
        Item 1A:      Risk Factors............................................................................      9 - 13
        Item 1B:      Unresolved Staff Comments...............................................................          13
        Item 2:       Properties..............................................................................          13
        Item 3:       Legal Proceedings.......................................................................          14
        Item 4:       Submission of Matters to a Vote of Security Holders.....................................          14

PART II
        Item 5:       Market for Registrant's Common Equity, Related Stockholder Matters and
                        Issuer Purchases of Equity Securities.................................................     14 - 15
        Item 6:       Selected Financial Data.................................................................          16
        Item 7:       Management's Discussion and Analysis of Financial Condition and
                         Results of Operations................................................................     17 - 40
        Item 7A:      Quantitative and Qualitative Disclosures About Market Risk..............................          41
        Item 8:       Financial Statements and Supplementary Data.............................................     42 - 85
        Item 9:       Changes in and Disagreements with Accountants on Accounting and
                        Financial Disclosure..................................................................          86
        Item 9A:      Controls and Procedures.................................................................     86 - 87
        Item 9B:      Other Information.......................................................................          88

PART III
        Item 10:      Directors and Executive Officers of the Registrant......................................     89 - 91
        Item 11:      Executive Compensation..................................................................     92 - 95
        Item 12:      Security Ownership of Certain Beneficial Owners and Management and
                        Related Stockholder Matters...........................................................     96 - 97
        Item 13:      Certain Relationships and Related Transactions..........................................     98 - 99
        Item 14:      Principal Accounting Fees and Services..................................................         100

PART IV
        Item 15:      Exhibits, Financial Statement Schedules.................................................   101 - 102

SIGNATURES....................................................................................................         103
</TABLE>

<PAGE>
                                     PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

        (a) The following documents are filed as part of this Annual Report on
            Form 10-K:

          1. FINANCIAL STATEMENTS

             Report of Independent Registered Public Accounting Firm
             Consolidated Balance Sheets at September 30, 2005 and 2004
             Consolidated Statements of Operations for the years ended
               September 30, 2005, 2004 and 2003
             Consolidated Statements of Comprehensive Income (Loss) for the
               years ended September 30, 2005, 2004 and 2003
             Consolidated Statements of Changes in Stockholders' Equity for
               the years ended September 30, 2005, 2004 and 2003
             Consolidated Statements of Cash Flows for the years ended
               September 30, 2005, 2004 and 2003
             Notes to Consolidated Financial Statements - September 30, 2005

          2. FINANCIAL STATEMENT SCHEDULES

             Schedule III - Investments in Real Estate
             Schedule IV - Investments in Mortgage Loans on Real Estate
             Schedule - Significant Subsidiary Financials
                a)  Consolidated Financial Statements for Trapeza Funding, LLC
                    for the years ended December 31, 2005 and 2004 (unaudited)
                b)  Consolidated Financial Statements for Trapeza Funding, LLC
                    for the years ended December 31, 2004 and 2003 (unaudited)
                c)  Consolidated Financial Statements for Trapeza Funding II,
                    LLC for the years ended December 31, 2005 and 2004
                    (unaudited)
                d)  Consolidated Financial Statements for Trapeza Funding II,
                    LLC for the years ended December 31, 2004 and 2003
                    (unaudited)
                e)  Consolidated Financial Statements for Trapeza Funding III,
                    LLC for the years ended December 31, 2005 and 2004
                    (unaudited)
                f)  Consolidated Financial Statements for Trapeza Funding III,
                    LLC for the years ended December 31, 2004 and 2003
                    (unaudited)
                g)  Trapeza Capital Management, LLC Audited Financial Statements
                    for the years ended December 31, 2005 and 2004
                h)  Trapeza Management Group, LLC Audited Financial Statements
                    for the years ended December 31, 2005 and 2004
                i)  Trapeza Capital Management, LLC Financial Statements for
                    the year ended December 31, 2003 (unaudited)



<PAGE>


                                                                     Schedule a)




TRAPEZA FUNDING, LLC

CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Years ended December 31, 2005 and 2004



<PAGE>

                              Trapeza Funding, LLC

                        Consolidated Financial Statements

                     Years ended December 31, 2005 and 2004

                                    Unaudited





                                    CONTENTS





Consolidated Statements of Financial Condition...............................3
Consolidated Schedules of Investments........................................4
Consolidated Statements of Operations........................................6
Consolidated Statements of Changes in Members' Interests.....................7
Consolidated Statements of Cash Flows........................................8
Notes to Consolidated Financial Statements...................................9




                                                                               2
<PAGE>
                              Trapeza Funding, LLC

                 Consolidated Statements of Financial Condition
                                    Unaudited
<TABLE>
<CAPTION>
                                                                                 DECEMBER 31
                                                                         2005                  2004
                                                                     ---------------      ---------------
<S>                                                                  <C>                  <C>
ASSETS
Investments in trust preferred securities, at fair value
  (amortized cost $319,163,818 and $320,338,643)                     $   323,519,767      $   325,175,799
Cash and cash equivalents                                                  4,086,160            3,519,814
Deferred debt issuance costs (net of accumulated amortization of
  $2,218,100 and $1,498,584)                                               5,925,789            6,645,305
Interest receivable on trust preferred securities                          4,029,310            3,199,650
Net interest receivable from swap counterparty                                10,454                    -
Investment in Trapeza Note I, LLC                                          8,893,125            7,551,747
Prepaid expenses                                                               4,910                3,691
Other                                                                          1,248               11,386
                                                                     ---------------      ---------------
Total Assets                                                         $   346,470,763      $   346,107,392
                                                                     ===============      ===============

LIABILITIES AND MEMBERS' INTERESTS
Liabilities
   Class A-1 Notes                                                   $   160,129,324      $   161,464,034
   Class A-2 Notes                                                        19,830,257           19,995,546
   Class B-1 Notes                                                        54,600,000           54,600,000
   Class B-2 Notes                                                         2,000,000            2,000,000
   Class B-3 Notes                                                        16,000,000           16,000,000
   Class C-1 Notes                                                        29,600,000           29,600,000
   Class C-2 Notes                                                        10,000,000           10,000,000
   Class D Notes                                                          16,408,511           16,500,000
   Interest payable                                                        1,493,826            1,057,666
   Unrealized depreciation on swap agreements                                 43,540              250,153
   Professional fees                                                          95,346               89,196
   Collateral management fees                                                 80,995               81,370
   Net interest payable to swap counterparty                                       -                9,696
   Trustee fees                                                               11,546               11,592
   Accrued expenses                                                           41,250               41,250
                                                                     ---------------      ---------------
Total Liabilities                                                        310,334,595          311,700,503
                                                                     ---------------      ---------------

Minority interest                                                         35,472,597           34,057,776

Members' Interests                                                           663,571              349,113
                                                                     ---------------      ---------------

Total Liabilities and Members' Interests                             $   346,470,763      $   346,107,392
                                                                     ===============      ===============
</TABLE>


See accompanying notes to consolidated financial statements.

                                                                               3
<PAGE>
                              Trapeza Funding, LLC

                      Consolidated Schedules of Investments

                                    Unaudited
<TABLE>
<CAPTION>
                                                                                     DECEMBER 31, 2005         DECEMBER 31, 2004
                                                                                  -----------------------    ----------------------
                                                                                  PRINCIPAL                  PRINCIPAL
                                                                                    AMOUNT                    AMOUNT
                                                                                    (000)      FAIR VALUE      (000)     FAIR VALUE
                                                                                  ---------    ----------    ---------   ----------
<S>                                                                              <C>          <C>            <C>        <C>
INVESTMENTS IN TRUST PREFERRED SECURITIES - (100%) *
BANKS (82.24% AND 81.89%)*
1st Source Capital Trust III, 6.95%, due 11/14/2032 (a)                            $ 10,000  $  9,935,056     $ 10,000 $  9,934,261
Access National Capital Trust I, 3 month libor + 4.125%, due 9/30/2032 (a)            4,000     3,981,653        4,000    3,981,089
Ambank Capital Trust I, 3 month libor + 3.625%, due 7/30/2032 (a)                     8,000     7,941,800        8,000    7,940,849
Bank of Kentucky Capital Trust I, 3 month libor + 3.35%, due 11/14/2032 (a)          11,000    11,001,226       11,000   11,001,249
Banponce Trust I, 8.327%, due 2/1/2027                                                1,200     1,284,000        1,200    1,359,300
Colonial Capital II, 8.92%, due 1/15/2027                                             5,000     5,382,855        5,000    5,540,630
Community Bancshares Capital Trust III, 6 month libor + 3.625%, due 7/30/2032 (a)     5,000     4,856,866        5,000    4,854,533
Community Capital Trust I, 9.75%, due 1/31/2027                                       1,850     1,979,500        1,850    2,073,215
FBOP Capital Trust XII, 6 month libor + 3.625%, 7/30/2032 (a)                        11,000    11,000,000       11,000   11,000,000
FCB/SC Capital Trust I, 8.25%, due 3/15/2028 (a)                                      2,000     2,028,133        2,000    2,213,298
First Indiana Capital Trust I, 6.92%, due 10/30/2032 (a)                              2,000     1,998,350        2,000    1,998,330
First Group Capital Statutory Trust III, 3 month libor + 3.35%, due 11/15/2032 (a)   10,000    10,086,842       10,000   10,085,433
First Gothenburg Capital Trust I, 3 month libor + 3.35%, due 11/15/2032 (a)           4,000     3,943,027        4,000    3,942,006
Franklin Bank Capital Trust I, 3 month libor + 3.35%, due 11/14/2032 (a)             11,000    10,905,145       11,000   10,903,445
GB&T Bancshares Statutory Trust I, 3 month libor + 3.40%, due 10/30/2032 (a)         11,000    10,875,704       11,000   10,873,618
Hanmi Capital Trust II, 3 month libor + 2.90%, due 3/15/2034 (a)                      6,479     6,479,000        6,479    6,479,000
Iberiabank Statutory Trust I, 3 month libor + 3.25%, due 11/15/2032 (a)              10,000     9,887,502       10,000    9,885,448
Industry Bancshares Capital Trust I, 6 month libor + 3.625%, due 7/30/2032 (a)        5,000     4,952,288        5,000    4,951,510
Local Financial Capital Trust II, 6 month libor + 3.625%, due 7/30/2032 (a)          10,000     9,858,773       10,000    9,856,471
Main Street Banks Statutory Trust I, 3 month libor + 3.25%, due 11/15/2032 (a)        5,000     4,943,690        5,000    4,942,683
MB Financial Capital Trust I, 8.60%, due 9/30/2032 (a)                                5,000     5,000,000        5,000    5,000,000
MBNA Capital B, 3 month libor + 0.80%, due 2/1/2027                                   8,000     7,840,000        8,000    7,576,000
Merchants and Manufacturers Statutory Trust I, 3 month libor +3.35%, due
  11/12/2032 (a)                                                                      8,000     7,924,046        8,000    7,922,681
Onbank Capital Trust I, 9.25%, due 2/1/2027                                           2,000     2,140,000        2,000    2,156,348
Pacific Mercantile Capital Trust I, 3 month libor + 3.75%, due 7/15/2032 (a)          5,000     4,977,136        5,000    4,976,409
PMB Capital Trust I, 6 month libor + 3.625%, due 8/22/2032 (a)                        5,000     4,952,300        5,000    4,951,519
Progress Capital Trust III, 3 month libor + 3.35%, due 11/15/2032 (a)                 6,000     5,951,483        6,000    5,950,643
Provident Capital Trust I, 8.60%, due 12/1/2026                                       7,500     8,025,000        7,500    7,892,565
Provident Trust I, 8.29%, due 4/15/2028                                               5,500     5,830,000        5,500    5,707,658
Reliance Capital Trust I, 8.17%, due 5/1/2028 (a)                                     1,000     1,002,875        1,000    1,043,914
Riverside Bancshares Statutory Trust I, 3 month libor + 3.45%, due 10/1/2032 (a)     10,000     9,886,970       10,000    9,885,084
Riverside Gulf Coast Capital Trust I, 3 month libor + 3.25%, due 7/29/2032 (a)        5,000     4,977,045        5,000    4,976,350
Sky Financial Capital Trust I, 9.34%, due 5/1/2030 (a)                                3,500     3,678,539        3,500    3,811,161
South Financial Capital Trust II, 6 month libor + 3.625%, due 7/30/2032 (a)          11,000    10,895,033       11,000   10,893,323
Southcoast Capital Trust II, 3 month libor + 3.75%, due 5/3/2032 (a)                  4,000     3,981,890        4,000    3,981,251
Sterling Bancshares Statutory Trust One, 3 month libor + 3.45%, due
  8/30/2032 (a)                                                                      10,000     9,887,008       10,000    9,885,110
Texas Capital Bancshares Statutory Trust I, 3 month libor + 3.35%,
  due 11/19/2032 (a)                                                                 10,000     9,887,501       10,000    9,885,448
UCBH Capital Trust II, 3 month libor + 3.45%, due 11/7/2032 (a)                      11,000    11,000,000       11,000   11,000,000
Umpqua Statutory Trust II, 3 month libor + 3.35%, due 10/17/2032 (a)                 11,000    10,863,250       11,000   10,860,947
Union State Capital Trust I, 9.58%, due 2/1/2027 (a)                                  1,000     1,075,618        1,000    1,135,699
VCBI Capital Trust II, 6 month libor + 3.40%, due 11/15/2032 (a)                      3,000     2,971,500        3,000    2,970,994
                                                                                              -----------               -----------
Total Banks (amortized cost $261,712,655 and $261,557,502)                                    266,068,604               266,279,472
                                                                                              -----------               -----------
</TABLE>

                                                                               4
<PAGE>
                              Trapeza Funding, LLC

                Consolidated Schedules of Investments (continued)

                                    Unaudited
<TABLE>
<CAPTION>
                                                                                     DECEMBER 31, 2005         DECEMBER 31, 2004
                                                                                  -----------------------    ----------------------
                                                                                  PRINCIPAL                  PRINCIPAL
                                                                                    AMOUNT                    AMOUNT
                                                                                    (000)      FAIR VALUE      (000)     FAIR VALUE
                                                                                  ---------    ----------    ---------   ----------
<S>                                                                              <C>          <C>            <C>        <C>
INVESTMENTS IN TRUST PREFERRED SECURITIES - (100%) * (CONTINUED)
THRIFTS (17.76% AND 18.11%)
BBC Capital Trust VI, 3 month libor + 3.35%, due 9/27/2032 (a)                     $ 10,000  $  9,919,498      $10,000 $  9,918,143
BankUnited Statutory Trust IV, 3 month libor + 3.40%, due 11/15/2032 (a)             11,000    10,876,086       11,000   10,873,881
Beal Financial Trust I, 6 month libor + 3.625%, due 7/30/2032 (a)                    11,000    10,895,033       11,000   10,893,323
First Keystone Capital Trust I, 9.70%, due 8/15/2027 (a)                              1,500     1,626,680        1,500    1,657,500
HFC Capital Trust IV, 6 month libor + 3.35%, due 11/15/2032 (a)                       8,450     8,270,995        8,450    8,267,902
ITLA Capital Statutory Trust III, 6 month libor + 3.40%, due 10/30/2032 (a)          11,000    10,904,877       11,000   10,903,262
Matrix Bancorp Capital Trust V, 6 month libor + 3.625%, due 7/25/2032 (a)             5,000     4,957,994        5,000    4,957,316
WSFS Capital Trust I, 3 month libor + 2.50%, due 12/01/2028                               -             -        1,500    1,425,000
                                                                                             ------------              ------------
Total Thrifts (amortized cost $57,451,163 and $58,781,141 )                                    57,451,163                58,896,327
                                                                                             ------------              ------------
Total Investments in Trust Preferred Securities (amortized cost
  $319,163,818 and $320,338,643)                                                             $323,519,767              $325,175,799
                                                                                             ============              ============


                                                                                               FAIR VALUE                FAIR VALUE
                                                                                               ----------                ----------
INTEREST RATE SWAP AGREEMENTS
Credit Suisse First Boston                                                                   $    (43,540)             $   (250,153)
                                                                                             ------------              ------------
Total Interest Rate Swap Agreements                                                          $    (43,540)             $   (250,153)
                                                                                             ============              ============
</TABLE>

*Amounts in parenthesis indicate percentage of investments in trust-preferred
securities.
(a) Private placement, illiquid securities, where amortized cost approximates
fair value.

See accompanying notes to consolidated financial statements.


                                                                               5
<PAGE>
                              Trapeza Funding, LLC

                      Consolidated Statements of Operations

                                    Unaudited
<TABLE>
<CAPTION>
                                                                             YEAR ENDED DECEMBER 31,
                                                                            2005                    2004
                                                                        ------------            ------------
<S>                                                                     <C>                     <C>
INVESTMENT INCOME
Interest                                                                $ 23,590,716            $ 18,139,801
Equity in earnings of Trapeza Note I, LLC                                  2,875,914               2,502,231
                                                                        ------------            ------------
TOTAL INVESTMENT INCOME                                                   26,466,630              20,642,032
                                                                        ------------            ------------
EXPENSES
Interest                                                                  14,139,658               9,834,015
Collateral management fees                                                   813,323                 818,250
Amortization of deferred debt issuance costs                                 719,516                 721,298
Professional fees                                                            104,933                 126,777
Trustee fees                                                                 124,448                 126,115
Administration fee                                                            64,085                  67,452
Taxes                                                                          6,120                    (769)
Other                                                                        193,895                 251,848
                                                                        ------------            ------------
Total expenses                                                            16,165,978              11,944,986
                                                                        ------------            ------------
NET INVESTMENT INCOME                                                     10,300,652               8,697,046
                                                                        ------------            ------------

Net realized gain (loss) and unrealized appreciation (depreciation) on
  investment transactions:
   Net realized loss on investment transactions                                    -              (4,420,343)
   Net unrealized appreciation (depreciation) on investments in
    trust preferred securities                                              (481,207)              6,535,336
   Net unrealized appreciation on interest rate swap agreements              206,613                 147,177
                                                                        ------------            ------------
Net realized gain (loss) and unrealized appreciation
  (depreciation) on investment transactions                                 (274,594)              2,262,170
                                                                        ------------            ------------

Net income before minority interest                                       10,026,058              10,959,216
Minority interest                                                          8,137,839               8,926,324
                                                                        ------------            ------------
NET INCOME                                                              $  1,888,219            $  2,032,892
                                                                        ============            ============
</TABLE>


See accompanying notes to consolidated financial statements.

                                                                               6
<PAGE>
                              Trapeza Funding, LLC

            Consolidated Statements of Changes in Members' Interests

                     Years ended December 31, 2005 and 2004

                                    Unaudited




Balance at January 1, 2004                                        $    (273,697)
   Net income                                                         2,032,892
   Distributions to members                                          (1,410,082)
                                                                  -------------
Balance at December 31, 2004                                            349,113
   Net income                                                         1,888,219
   Distributions to members                                          (1,573,761)
                                                                  -------------
Balance at December 31, 2005                                      $     663,571
                                                                  =============


See accompanying notes to consolidated financial statements.

                                                                               7
<PAGE>
                              Trapeza Funding, LLC

                      Consolidated Statements of Cash Flows

                                    Unaudited
<TABLE>
<CAPTION>
                                                                              YEAR ENDED DECEMBER 31,
                                                                              2005                  2004
                                                                          ------------           -----------
<S>                                                                       <C>                    <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                                                $  1,888,219           $ 2,032,892
Adjustments to reconcile net income to net cash and cash equivalents
  provided by operating activities:
   Amortization of deferred debt issuance costs                                719,516               721,298
   Accretion of discount of investments in trust preferred securities         (325,175)             (160,197)
   Minority interest                                                         8,137,839             8,926,324
   Net realized loss on investment transactions                                274,594             4,420,343
   Net unrealized (appreciation) depreciation on investments                         -            (6,682,513)
   Net change in operating assets and liabilities:
     Investment in trust preferred securities                                1,500,000                     -
     Interest receivable on trust preferred securities                        (829,660)             (401,123)
     Investment in Trapeza Note I, LLC                                      (1,341,378)           (1,059,741)
     Prepaid expenses                                                           (1,219)               46,427
     Other                                                                      10,138                96,221
     Warehouse facility payable                                                      -                     -
     Interest payable                                                          436,160               330,940
     Professional fees                                                           6,150               (13,168)
     Collateral management fees                                                   (375)               (3,422)
     Net interest payable to swap counterparty                                 (20,150)              (16,026)
     Trustee fees                                                                  (46)                  872
     Accrued expenses                                                                -               (36,250)
     Minority interest                                                      (6,723,018)           (6,054,153)
                                                                          ------------           -----------
Net cash and cash equivalents provided by operating activities               3,731,595             2,148,724
                                                                          ------------           -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on notes                                                 (1,591,488)                    -
Distributions to partners                                                   (1,573,761)           (1,410,082)
                                                                          ------------           -----------
Net cash and cash equivalents used in financing activities                  (3,165,249)           (1,410,082)
                                                                          ------------           -----------

Net increase in cash and cash equivalents                                      566,346               738,642
Cash and cash equivalents, beginning of year                                 3,519,814             2,781,172
                                                                          ------------           -----------
Cash and cash equivalents, end of year                                    $  4,086,160           $ 3,519,814
                                                                          ============           ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid                                                             $ 13,723,648           $ 9,509,517
                                                                          ============           ===========
</TABLE>

See accompanying notes to consolidated financial statements.

                                                                               8

<PAGE>
                              Trapeza Funding, LLC

              Notes to Unaudited Consolidated Financial Statements

                                December 31, 2005




1. ORGANIZATION AND PURPOSE

Trapeza Funding, LLC ("Funding"), was organized on March 25, 2002 as a Delaware
limited liability company. Funding commenced operations on June 1, 2002. Funding
was organized for the purpose of being the General Partner of Trapeza Partners
L.P. (the "Partnership"). Per the partnership agreement, the limited partners
have no right to remove the Funding at any time. Funding has complete and
exclusive control of the management of the business affairs of the Partnership.

The Partnership was organized on May 21, 2002 as a Delaware limited partnership.
The Partnership commenced operations on July 1, 2002. The Partnership was
organized for the purpose of investing in membership interests and other
securities to be issued by Trapeza CDO I, LLC ("Issuer I"), an affiliated
collateralized debt obligation, which was formed by Funding. In addition, the
Partnership also invested in Trapeza CDO II, LLC ("Issuer II"), an affiliated
collateralized debt obligation, which closed on March 11, 2003. On May 15, 2003,
Trapeza Note I, LLC ("Note I") was formed to issue Class BB fixed rate notes and
purchase 100% of the members' interests of Issuer II. In addition, the
Partnership's investment in Issuer II was transferred to Note I at this time.
The Partnership has an 11-year term, which Funding may extend on a year-to-year
basis.

All material intercompany transactions have been eliminated. Minority interest
reflects the 99.99% of partners' interest of the limited partners of the
Partnership. The consolidated entity is referred to as the "Company."

Funding and the Collateral Manager are owned equally by Financial Stocks, Inc.
("FSI") and Resource Financial Fund Management, Inc., a wholly owned subsidiary
of Resource America, Inc. ("REXI") (collectively, the "Owners"). FSI is a
Registered Investment Adviser under the Investment Advisers Act of 1940. REXI, a
publicly traded company, is a specialized asset management company that uses
industry specific expertise to generate and administer investment opportunities
for their own account and for outside investors in the financial fund
management, real estate and equipment leasing sectors. The Owners and certain
officers and directors of the Owners hold partnership interests of approximately
17% of the Partnership. Funding has complete and exclusive control of the
management of the business affairs of the Partnership.

Issuer I and II's objective is to purchase, acquire, own, hold, sell, endorse,
transfer, assign, pledge, finance, refinance, exchange, restructure, workout,
advance and collect funds pursuant to and otherwise deal with and exercise
rights of ownership with respect to the collateral of Issuer I and Issuer II,
including other securities or equity interests

                                                                               9

<PAGE>
                              Trapeza Funding, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


1. ORGANIZATION AND PURPOSE (CONTINUED)

owned from time to time by Issuer I and Issuer II, all in accordance with the
terms of the indentures.

Trapeza Capital Management, LLC (the "Collateral Manager"), a Delaware limited
liability company, is responsible for supervising and directing the investment
of the collateral of Issuer I and Issuer II. Issuer I and Issuer II are charged
a collateral management fee by the Collateral Manager, who is affiliated with
Funding through common ownership.

The business and affairs of Funding are managed by a Board of Managers. The
Board of Managers has full, complete and exclusive authority, power and
discretion to manage and control the business affairs and properties of Funding,
to make all decisions regarding those matters and to perform any activities
customary or incident to the management of Funding's business.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of the significant accounting policies followed by
the Company in the preparation of its financial statements.

BASIS OF ACCOUNTING

The Company's accounting policies are in conformity with accounting principles
generally accepted in the United States. The Company maintains its financial
records in United States dollars. For financial reporting purposes, the Company
follows the accrual basis of accounting.

CASH AND CASH EQUIVALENTS

The Company considers all demand deposits with banks and other highly liquid
investments with original maturities of three months or less to be cash
equivalents.

INVESTMENT TRANSACTIONS

The Company records transactions on their trade dates. Realized gains and losses
on investments are determined on the specific identification basis for financial
accounting purposes. Interest is accrued as earned or incurred and includes the
amortization/accretion of premiums and discounts on debt securities.

                                                                              10
<PAGE>
                              Trapeza Funding, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

INVESTMENT VALUATION

Investments are carried at fair value. Securities for which market quotations
are not readily available are valued by procedures adopted by Funding. In
valuing investments in which market quotations are not readily available,
Funding utilizes data from a variety of different sources, taking into account
the characteristics of a security, any changes in the credit quality of the
securities in the portfolio, the overall movement of interest rates and other
factors which, in Funding's good faith and judgment, are relevant to the value
of a security. For exchange-traded securities, management will obtain current
market data and quotes from independent brokers.

The Company has invested a significant portion of the portfolio in private
placement, illiquid issues having no ready market. At December 31, 2005, these
securities aggregate $291,038,412 and have been valued in good faith by Funding
as described in the preceding paragraph. Because of the inherent uncertainty of
valuation, the fair values estimated by Funding may not necessarily represent
the amounts that could be realized from sales or other dispositions of
investments and the differences may be material.

CREDIT RISKS AND GENERAL LIQUIDITY CONSIDERATIONS

Investments in trust preferred securities are subject to credit, interest rate
and liquidity risks. Adverse changes in the financial condition of an issuer of
trust preferred securities or in general economic conditions or both may impair
the ability of the issuer to make payments of principal and interest. Adverse
changes in the financial condition of an issuer may affect the liquidity of the
market for an issuer's securities and may reduce the market price of such
securities. In addition, changes in general economic and regulatory conditions
may affect the liquidity of the market for trust preferred securities in general
and may reduce the values of some or all of the securities.

ALLOCATION OF PROFITS AND LOSSES

The Company allocates profits to the members in proportion to their respective
capital account balances until the cumulative profits for this current period
and all prior fiscal years are equal to the cumulative losses allocated;
thereafter, among the members in

                                                                              11
<PAGE>
                              Trapeza Funding, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

ALLOCATION OF PROFITS AND LOSSES (CONTINUED)

proportion to their respective units. Losses shall be allocated to the members
in proportion to their respective capital account balances.

Funding's investment in the Partnership is accounted for based on its pro-rata
share of its investment in the Partnership. Profits and losses from
non-portfolio income are allocated to all members in proportion to their
allocable shares. Twenty percent (20%) of the cumulative net profits from
portfolio investments are allocated to Funding.

Non-portfolio income of the Partnership, consisting primarily of income earned
on short-term investments, is allocated to all limited partners of the
Partnership in proportion to their respective capital account balances prior to
the allocation of any other item.

Portfolio income of the Partnership, consisting primarily of interest income and
profits and losses from the sale of such investments, is allocated to all
partners of the Partnership in proportion to their respective contributed
capital of the Partnership in relation to total contributed capital, but 20% of
the cumulative net profits otherwise allocable to all partners of the
Partnership will be allocated to Funding, defined as the incentive allocation.
For the years ended December 31, 2005 and 2004, Funding received an incentive
allocation of $1,616,558 and $1,735,478, respectively.

TAXATION

The Company is treated as a partnership for Federal income tax purposes and,
therefore, no provision for federal income tax is recorded.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities as of
the date of the financial statements and the reported amounts of income and
expenses during the reporting period. Actual results could differ from those
estimates.

                                                                              12
<PAGE>
                              Trapeza Funding, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


3. CONTRIBUTIONS, WITHDRAWALS AND DISTRIBUTIONS

As of December 31, 2005, the Company has 300 membership units issued and
outstanding. No member shall be required to make any additional contributions
beyond their initial contribution. If the Board of Managers unanimously
determines that the Company requires additional funds, any member may, but is
not obligated to, advance such funds.

No member shall have the right to withdraw any of its capital contribution,
except upon dissolution and liquidation of the Company. For the years ended
December 31, 2005 and 2004, the Company made distributions of $1,573,761 and
$1,410,082, respectively, to the members.


In accordance with the partnership agreement, each partner has contributed a
specified amount of capital which is set forth in the partnership agreement. No
limited partner is required to contribute any capital in excess of its
commitment. As of August 13, 2003, all commitments of the Partnership were fully
funded.

A limited partner will not have the right to redeem its interest in the
Partnership. Funding, in its sole discretion, may redeem all or part of the
partnership interest of any limited partner, for an amount equal to the capital
account of the partnership interest being redeemed, if the limited partner
consents to such redemption and all redemptions in any year do not exceed five
percent of the aggregate allocable percentage of all limited partners.

Funding will cause the Partnership to distribute the lesser of (i) ninety
percent (90%) of cash available from profits and (ii) all cash then available to
the partnership less any reserves for partnership expenses or liabilities. All
other distributions will be at the discretion of Funding. Funding will determine
at its sole discretion the source of funds for all distributions. For the years
ended December 31, 2005 and 2004, the Partnership made distributions of
$6,435,312 and $5,793,210, respectively, to the partners.

4. ISSUER I

DEFERRED DEBT ISSUANCE COSTS

Deferred debt issuance costs of $8,143,889 are being amortized over the expected
life of the related debt using the effective interest method. The expected life
of the debt is period ending with the distribution date occurring in November
2012, as defined in the indenture. Amortization of deferred debt issuance costs
commenced on November 19, 2002.

                                                                              13
<PAGE>
                              Trapeza Funding, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)

4. ISSUER I (CONTINUED)

COLLATERAL MANAGEMENT AND TRUSTEE FEES

Pursuant to a collateral management agreement, the Collateral Manager is
entitled to a semiannual fee, payable in arrears on the distribution dates,
equal to 0.10% per annum of the semi-annual asset amount ("Base Collateral
Management Fee"), of the net outstanding portfolio collateral, as defined in the
indenture. After certain expenses have been paid, the Collateral Manager is
entitled to an additional semiannual fee equal to 0.15% per annum, calculated in
the same manner as the Base Collateral Management Fee. For the years ended
December 31, 2005 and 2004, total collateral management fees were $813,323 and
$818,250, respectively, and are reflected on the consolidated statements of
operations.

Pursuant to a trustee agreement, the trustee is entitled to a semiannual fee, on
each distribution date, equal to 0.026% per annum of the sum of the aggregate
principal amount of the investments plus cash and cash equivalents at the
beginning of the period relating to such distribution dates, an annual fee of
$13,000, and reimbursement of out of pocket expenses. For the years ended
December 31, 2005 and 2004, total trustee fees were $102,656 and $104,453,
respectively, and are included in total trustee fees reflected on the
consolidated statements of operations.

On November 19, 2002, Issuer I issued notes (the "Notes") at their respective
principal values, which are secured by Issuer I's investments and are
non-recourse to the Company.


                                                                              14
<PAGE>
                              Trapeza Funding, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


4. ISSUER I (CONTINUED)

NOTES PAYABLE

At December 31, 2005 and 2004, Notes outstanding consisted of the following:
<TABLE>
<CAPTION>
                          2005              2004
                       PRINCIPAL          PRINCIPAL            INTEREST RATE             STATED MATURITY
                     ---------------   ----------------    -----------------------    ----------------------
<S>                  <C>               <C>                 <C>                        <C>
Class A-1 Notes       $160,129,324      $161,464,034       For the period to but      November 30, 2032
                                                           the distribution date
                                                             in November 2012,
                                                           Libor + 0.78%; at all
                                                             times thereafter,
                                                               Libor + 1.28%

Class A-2 Notes       $ 19,830,257      $ 19,995,546       For the period to but      November 30, 2032
                                                               excluding the
                                                            distribution date in
                                                               November 2012,
                                                            4.974%; at all times
                                                             thereafter, 5.474%

Class B-1 Notes       $ 54,600,000      $ 54,600,000         See Class B-1 note       November 30, 2032

Class B-2 Notes       $  2,000,000      $  2,000,000            Libor + 1.20%         November 30, 2032

Class B-3 Notes       $ 16,000,000      $ 16,000,000               5.932%             November 30, 2032

Class C-1 Notes       $ 29,600,000      $ 29,600,000           Libor + 1.80%          November 30, 2032

Class C-2 Notes       $ 10,000,000      $ 10,000,000               6.482%             November 30, 2032

Class D Notes         $ 16,408,511      $ 16,500,000           Libor + 2.65%          November 30, 2032
</TABLE>

                                                                              15
<PAGE>
                              Trapeza Funding, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


4. ISSUER I (CONTINUED)

NOTES PAYABLE (CONTINUED)

Pursuant to the terms of the Class B agency agreement, the holders of the Class
B Notes will be entitled to receive interest, certain third parties will be
entitled to receive compensation, at an aggregate, floating rate per annum not
to exceed Libor plus 1.05% in the aggregate after taking into consideration the
effect of a basis swap to be entered into in connection with the Class B Notes.

Holders of the Notes are to receive semiannual interest payments on May 30 and
November 30, commencing in May 2003 (the "Initial Payment Date"). The order of
payment will be first to Class A (includes Class A-1 and Class A-2), second,
Class B, third, Class C and fourth to Class D, with each Class of Notes being
senior to each of the other classes of Notes. No payments of interest on any
class of Notes will be made until all accrued and unpaid interest on the Notes
of each class that is senior to a class and that remain outstanding has been
paid in full. No payment of principal of any class of Notes will be made until
the principal of, and all accrued and unpaid interest, the Notes of each class
that is senior to such class and that remain outstanding have been paid in full.

In the event that the coverage tests, as defined in the indenture, are not
satisfied as of any distribution date, each class of Notes may be redeemed in
the manner specified in the indenture.

Principal payments will be made in the following manner. First, payment of
principal of the Class A Notes (includes Class A-1 and Class A-2) until the
Class A Notes has been paid in full. Next, payment of principal on the Class B
Notes until the Class B Notes has been paid in full. Next, payment of principal
of the Class C Notes until the Class C Notes has been paid in full. Next,
payment of principal of the Class D Notes. Finally, the remainder to the members
as a dividend on the members' interests or as a return of capital of the
members' interests as provided in Issuer I's Agreement (the "Agreement").

If on any distribution date, the amount available in the payment account from
amounts received in the related due period are insufficient to make the full
amount of the disbursements required by the priority of payments to different
persons, the trustee will make the disbursements ratably in accordance with the
indenture.

If the Notes and the members' interests have not been released prior to November
30, 2032, it is expected that the Company or the Collateral Manager, acting on
behalf of Issuer I, will sell all of the investments and all eligible
investments and sell or liquidate all other collateral, and all net proceeds
from such sales and liquidations and all available cash after the payment (in
the order of priorities set forth above) of all (i) fees, (ii)

                                                                              16
<PAGE>
                              Trapeza Funding, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


4. ISSUER I (CONTINUED)

NOTES PAYABLE (CONTINUED)

expenses and (iii) interest (including any defaulted interest and interest on
defaulted interest, any Class C deferred interest and interest on any Class C
deferred interest and any Class D deferred interest and interest on any Class D
deferred interest) and principal of the Notes, will be distributed to the
members in accordance with the Agreement.

ACCELERATION OF MATURITY AND REDEMPTION

The indenture provides for an acceleration of maturity or redemption of all of
the senior Notes and accrued and unpaid interest upon the occurrence of a
default event. Default events include a) failure of Issuer I to pay interest for
a period of three business days on any Class A or B senior Notes, b) failure of
Issuer I to pay principal of any senior Note when such payment becomes due and
payable at its stated maturity or redemption date, c) failure of Issuer I, on
any distribution date to disburse amounts available to the interest collection
account or principal collection account in accordance with the order of the
priority of payments set forth in the indenture, which continues for three
business days, d) Issuer I or pool of collateral becomes an investment company
required to be registered under the Investment Company Act, e) default in
performance, or a breach, of any other covenant or other agreement of Issuer I
under the indenture or any representation of warranty of Issuer I made in the
indenture or in any certificate or other writing proves to be incorrect in any
material respect when made, and in both clauses, the continuation of such
default or breach for a period of thirty days after Issuer I or the Collateral
Manager has actual knowledge that such default or breach has occurred or after
written notice to Issuer I and the Collateral Manager by the trustee, or to
Issuer I, the Collateral Manager and the trustee by the holders of at least 25%
in aggregate outstanding principal amount of the notes of the controlling class
or hedge counterparty, f) one or more final judgments being rendered against
Issuer I that exceed, in the aggregate, $5,000,000, and which remain unstayed,
undischarged and unsatisfied for thirty days after such judgment(s) becomes
nonappealable, unless adequate funds have been reserved or set aside for the
payment thereof, and g) failure, on any measurement date, to cause the Class A/B
overcollateralization ratio to be equal to or greater than 100%. Each of these
conditions is further described in the indenture.

5. INTEREST RATE SWAP AGREEMENTS

The Company maintains a policy of valuing its derivative instruments at fair
values, with the resulting unrealized gain or loss included in the consolidated
statements of operations.

                                                                              17
<PAGE>
                              Trapeza Funding, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


5. INTEREST RATE SWAP AGREEMENTS (CONTINUED)

A swap is an agreement that obligates two parties to exchange a series of cash
flows at specified intervals based upon or calculated by reference to changes in
specified prices or rates for a specified amount of an underlying asset or
otherwise determined notional amount.

Risks may arise as a result of the failure of the counterparty to the swap
agreement. The loss incurred by the failure of a counterparty is generally
limited to the net payment to be received by the Company and/or the termination
value at the end of the agreement. Therefore, the Company considers the
creditworthiness of each counterparty to a swap agreement in evaluating
potential credit risk. Additionally, risks may arise from unanticipated
movements in interest rates.

The Company records a net receivable or payable for the net income or expense
expected to be received or paid in the interest period. Net amounts received or
paid on swap agreements are recorded as interest income or interest expense on
the consolidated statements of operations. The amount recorded as interest
income on basis swap agreements for the years ended December 31, 2005 and 2004
totaled $378,528 and $302,181, respectively.

The Company entered into interest rate swap agreements with Credit Suisse First
Boston ("CSFB") for the purpose of hedging interest rate and cash flow risk
between the fixed-rate investments and floating-rate investments.

At December 31, 2005 and 2004, the Company had three interest rate swap
agreements outstanding with CSFB, which pay on a semi-annual basis, as follows:
<TABLE>
<CAPTION>

                                    FLOATING RATE                 RATE PAID                 DECEMBER 31
   NOTIONAL        MATURITY          RECEIVED BY                   BY THE                2005          2004
    AMOUNT           DATE            THE COMPANY                   COMPANY            FAIR VALUE    FAIR VALUE
---------------    ----------    --------------------        --------------------    -------------- ------------
<S>                <C>          <C>                              <C>                <C>           <C>
  $  2,000,000     11/30/07     6 month Libor +  3.41%              6.92%              $ 47,912      $   2,217

  $ 10,000,000     11/30/07     6 month Libor +  3.37%              6.95%               226,130         (9,047)

  $ 54,600,000     11/30/12     1 month Libor + 1.015%     6 month Libor + 1.05%       (317,582)      (243,323)
                                                                                       --------      ---------
                                                                                       $(43,540)     $(250,153)
                                                                                       ========      =========
</TABLE>

                                                                              18
<PAGE>
                              Trapeza Funding, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)

6. RELATED PARTY TRANSACTIONS

The Partnership pays Funding an administration fee (payable semi-annually in
advance) equal to one and one-half percent (1.5%) per annum of the aggregate
capital accounts of the limited partners, which will be used to cover management
fees and other ordinary and recurring administrative and related operating
expenses. For the years ended December 31, 2005 and 2004, administration fees
totaled $357,564 and $380,231, respectively.

In exchange for interests sold on behalf of the Partnership, Funding pays
external broker-dealers an administration fee, equal to the percentage of equity
raised by the broker-dealer multiplied by one-third of the total administration
fee being charged by Funding to the Partnership. For the years ended December
31, 2005 and 2004, total administration fee expense equaled $64,085 and $67,452,
respectively.


                                                                              19
<PAGE>

                                                                     Schedule b)




    TRAPEZA FUNDING, LLC

    CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

    Years ended December 31, 2004 and 2003







1
<PAGE>


                              Trapeza Funding, LLC

                        Consolidated Financial Statements

                     Years ended December 31, 2004 and 2003

                                    Unaudited






                                    CONTENTS


Consolidated Statements of Financial Condition................................3
Consolidated Schedule of Investments..........................................4
Consolidated Statements of Operations.........................................6
Consolidated Statements of Changes in Members' Interests......................7
Consolidated Statements of Cash Flows.........................................8
Notes to Consolidated Financial Statements....................................9




2
<PAGE>
                              Trapeza Funding, LLC

                 Consolidated Statements of Financial Condition

                                    Unaudited
<TABLE>
<CAPTION>
                                                                                 DECEMBER 31
                                                                           2004                 2003
                                                                       -------------        -------------
<S>                                                                   <C>                  <C>
ASSETS
Investments in trust preferred securities, at fair value
  (amortized cost $320,338,643 and $324,598,789)                       $ 325,175,799        $ 322,900,609
Cash and cash equivalents                                                  3,519,814            2,781,172
Deferred debt issuance costs (net of accumulated amortization of
  $1,498,584 and $777,286)                                                 6,645,305            7,366,603
Interest receivable on trust preferred securities                          3,199,650            2,798,527
Investment in Trapeza Note I, LLC                                          7,551,747            6,492,006
Prepaid expenses                                                               3,691               50,118
Other                                                                         11,386              107,607
                                                                       -------------        -------------
Total Assets                                                           $ 346,107,392        $ 342,496,642
                                                                       =============        =============

LIABILITIES AND MEMBERS' INTERESTS
Liabilities
   Class A-1 Notes                                                     $ 161,464,034        $ 161,464,034
   Class A-2 Notes                                                        19,995,546           19,995,546
   Class B-1 Notes                                                        54,600,000           54,600,000
   Class B-2 Notes                                                         2,000,000            2,000,000
   Class B-3 Notes                                                        16,000,000           16,000,000
   Class C-1 Notes                                                        29,600,000           29,600,000
   Class C-2 Notes                                                        10,000,000           10,000,000
   Class D Notes                                                          16,500,000           16,500,000
   Interest payable                                                        1,057,666              726,726
   Unrealized depreciation on swap agreements                                250,153              397,330
   Professional fees                                                          89,196              102,364
   Collateral management fees                                                 81,370               84,792
   Net interest payable to swap counterparty                                   9,696               25,722
   Trustee fees                                                               11,592               10,720
   Accrued expenses                                                           41,250               77,500
                                                                       -------------        -------------
Total Liabilities                                                        311,700,503          311,584,734
                                                                       -------------        -------------

Minority interest                                                         34,057,776           31,185,605

Members' Interests (Deficit)                                                 349,113             (273,697)
                                                                       -------------        -------------

Total Liabilities and Members' Interests                               $ 346,107,392        $ 342,496,642
                                                                       =============        =============
</TABLE>


See accompanying notes to consolidated financial statements.

3
<PAGE>
                              Trapeza Funding, LLC.

                      Consolidated Schedule of Investments

                                    Unaudited
<TABLE>
<CAPTION>
                                                                                 PRINCIPAL                  PRINCIPAL
                                                                                   AMOUNT     2004 FAIR      AMOUNT     2003 FAIR
                                                                                   (000)        VALUE         (000)       VALUE
                                                                                ----------    ---------     ---------   ---------
<S>                                                                              <C>          <C>           <C>         <C>
INVESTMENTS IN TRUST PREFERRED SECURITIES - (100%) *
BANKS (81.89% AND 81.80%)*
1st Source Capital Trust III, 6.95%, due 11/14/2032 (a)                           $ 10,000   $ 9,934,261     $ 10,000  $ 9,933,519
Access National Capital Trust I, 3 month libor + 4.125%, due 7/29/2032 (a)           4,000     3,981,089        4,000    3,980,557
Ambank Capital Trust I, 3 month libor + 3.625%, due 7/30/2032 (a)                    8,000     7,940,849        8,000    7,939,948
Bank of Kentucky Capital Trust I, 3 month libor + 3.35%, due 11/14/2032 (a)         11,000    11,001,249       11,000   11,001,271
Banponce Trust I, 8.327%, due 2/1/2027                                               1,200     1,359,300        1,200    1,257,000
CIB Marine Statutory Trust V, 3 month libor + 3.40%, due 9/27/2032                       -             -       11,000    6,600,000
Colonial Capital II, 8.92%, due 1/15/2027                                            5,000     5,540,630        5,000    5,225,001
Community Bancshares Capital Trust III, 6 month libor + 3.625%, due 7/30/2032 (a)    5,000     4,854,533        5,000    4,852,324
Community Capital Trust I, 9.75%, due 1/31/2027                                      1,850     2,073,215        1,850    1,942,500
FBOP Capital Trust XII, 6 month libor + 3.625%, 7/30/2032 (a)                       11,000    11,000,000       11,000   11,000,000
FBC/SC Capital Trust I, 8.25%, due 3/15/2028                                         2,000     2,213,298        2,000    1,999,999
First Indiana Capital Trust I, 6.92%, due 10/30/2032 (a)                             2,000     1,998,330        2,000    1,998,312
First Group Capital Statutory Trust III, 3 month libor + 3.35%, due 11/15/2032 (a)  10,000    10,085,433       10,000   10,084,090
First Gothenburg Capital Trust I, 3 month libor + 3.35%, due 11/15/2032 (a)          4,000     3,942,006        4,000    3,941,032
Franklin Bank Capital Trust I, 3 month libor + 3.35%, due 11/14/2032 (a)            11,000    10,903,445       11,000   10,901,824
GB&T Bancshares Statutory Trust I, 3 month libor + 3.40%, due 10/30/2032 (a)        11,000    10,873,618       11,000   10,871,637
Hanmi Capital Trust II, 3 month libor + 2.90%, due 3/15/2034 (a)                     6,479     6,479,000           --            -
Iberiabank Statutory Trust I, 3 month libor + 3.25%, due 11/15/2032 (a)             10,000     9,885,448       10,000    9,883,488
Industry Bancshares Capital Trust I, 6 month libor + 3.625%, due 7/30/2032 (a)       5,000     4,951,510        5,000    4,950,774
Local Financial Capital Trust II, 6 month libor + 3.625%, due 7/30/2032 (a)         10,000     9,856,471       10,000    9,854,292
Main Street Banks Statutory Trust I, 3 month libor + 3.25%, due 11/15/2032 (a)       5,000     4,942,683        5,000    4,941,723
MB Financial Capital Trust I, 8.60%, due 9/30/2032 (a)                               5,000     5,000,000        5,000    5,000,000
MBNA Capital B, 3 month libor + 0.80%, due 2/1/2027                                  8,000     7,576,000        8,000    6,960,000
Merchants and Manufacturers Statutory Trust I, 3 month libor +3.35%,
  due 11/12/2032 (a)                                                                 8,000     7,922,681        8,000    7,921,379
Onbank Capital Trust I, 9.25%, due 2/1/2027                                          2,000     2,156,348        2,000    2,139,999
Pacific Mercantile Capital Trust I, 3 month libor + 3.75%, due 7/15/2032 (a)         5,000     4,976,409        5,000    4,975,779
PMB Capital Trust I, 6 month libor + 3.625%, due 8/22/2032 (a)                       5,000     4,951,519        5,000    4,950,722
Progress Capital Trust III, 3 month libor + 3.35%, due 11/15/2032 (a)                6,000     5,950,643        6,000    5,949,844
Provident Capital Trust I, 8.60%, due 12/1/2026                                      7,500     7,892,565        7,500    7,425,000
Provident Trust I, 8.29%, due 4/15/2028                                              5,500     5,707,658        5,500    5,555,001
Reliance Capital Trust I, 8.17%, due 5/1/2028                                        1,000     1,043,914        1,000    1,045,000
Riverside Bancshares Statutory Trust I, 3 month libor + 3.45%, due 10/1/2032 (a)    10,000     9,885,084       10,000    9,883,295
Riverside Gulf Coast Capital Trust I, 3 month libor + 3.25%, due 7/29/2032 (a)       5,000     4,976,350        5,000    4,975,691
Sky Financial Capital Trust I, 9.34%, due 5/1/2030                                   3,500     3,811,161        3,500    3,675,001
South Financial Capital Trust II, 6 month libor + 3.625%, due 7/30/2032 (a)         11,000    10,893,323       11,000   10,891,703
Southcoast Capital Trust II, 3 month libor + 3.35%, due 5/3/2032 (a)                 4,000     3,981,251        4,000    3,980,642
Sterling Bancshares Statutory Trust One, 3 month libor + 3.45%, due 8/30/2032 (a)   10,000     9,885,110       10,000    9,883,308
Texas Capital Bancshares Statutory Trust I, 3 month libor + 3.35%,
  due 11/19/2032 (a)                                                                10,000     9,885,448       10,000    9,883,488
UCBH Capital Trust II, 3 month libor + 3.45%, due 11/7/2032 (a)                     11,000    11,000,000       11,000   11,000,000
Umpqua Statutory Trust II, 3 month libor + 3.35%, due 10/17/2032 (a)                11,000    10,860,947       11,000   10,858,759
Union State Capital Trust I, 9.58%, due 2/1/2027                                     1,000     1,135,699        1,000    1,057,501
VCBI Capital Trust II, 6 month libor + 3.30%, due 11/15/2032 (a)                     3,000     2,970,994        3,000    2,970,510
                                                                                             -----------               -----------
Total Banks (amortized cost $261,557,502 and $265,830,038)                                   266,279,472               264,141,913
                                                                                             -----------               -----------
</TABLE>

4
<PAGE>
                              Trapeza Funding, LLC

                Consolidated Schedule of Investments (continued)

                                    Unaudited
<TABLE>
<CAPTION>
                                                                                 PRINCIPAL                  PRINCIPAL
                                                                                   AMOUNT     2004 FAIR      AMOUNT     2003 FAIR
                                                                                   (000)        VALUE         (000)       VALUE
                                                                                ----------    ---------     ---------   ---------
<S>                                                                              <C>          <C>           <C>         <C>
INVESTMENTS IN TRUST PREFERRED SECURITIES - (100%) * (CONTINUED)
THRIFTS (18.11% AND 18.20%)
BBC Capital Trust VI, 3 month libor + 3.35%, due 9/27/2032 (a)                      10,000     9,918,143       10,000    9,916,857
BankUnited Statutory Trust IV, 3 month libor + 3.40%, due 11/15/2032 (a)            11,000    10,873,881       11,000   10,871,777
Beal Financial Trust I, 6 month libor + 3.625%, due 7/30/2032 (a)                   11,000    10,893,323       11,000   10,891,703
First Keystone Capital Trust I, 9.70%, due 8/15/2027                                 1,500     1,657,500        1,500    1,590,000
HFC Capital Trust IV, 6 month libor + 3.35%, due 11/15/2032 (a)                      8,450     8,267,902        8,450    8,264,959
ITLA Capital Statutory Trust III, 6 month libor + 3.40%, due 10/30/2032 (a)         11,000    10,903,262       11,000   10,901,726
Matrix Bancorp Capital Trust V, 6 month libor + 3.625%, due 7/25/2032 (a)            5,000     4,957,316        5,000    4,956,674
WSFS Capital Trust I, 3 month libor + 2.50%, due 12/01/2028                          1,500     1,425,000        1,500    1,365,000
                                                                                            ------------              ------------
Total Thrifts (amortized cost $58,781,141 and $58,768,751)                                    58,896,327                58,758,696
                                                                                            ------------              ------------
Total Investments in Trust Preferred Securities (amortized cost $320,338,643 and
  $324,598,789)                                                                             $325,175,799              $322,900,609
                                                                                            ============              ============


                                                                                             FAIR VALUE                FAIR VALUE
                                                                                             ----------                ----------
INTEREST RATE SWAP AGREEMENTS
Credit Suisse First Boston                                                                  $   (250,153)             $   (397,330)
                                                                                            ------------              ------------
Total Interest Rate Swap Agreements                                                         $   (250,153)             $   (397,330)
                                                                                            ============              ============
</TABLE>

*Amounts in parenthesis indicate percentage of investments in trust-preferred
securities.
(a) Private placement, illiquid securities, where amortized cost approximates
fair value.


See accompanying notes to consolidated financial statements.

5
<PAGE>
                              Trapeza Funding, LLC

                      Consolidated Statements of Operations

                                    Unaudited
<TABLE>
<CAPTION>
                                                                             YEAR ENDED DECEMBER 31,
                                                                            2004                    2003
                                                                        ------------            ------------
<S>                                                                    <C>                      <C>
INVESTMENT INCOME
Interest                                                                $ 18,139,801            $ 18,530,122
Equity in earnings of Trapeza CDO II, LLC                                          -                  49,006
Equity in earnings of Trapeza Note I, LLC                                  2,502,231                 740,500
                                                                        ------------            ------------
TOTAL INVESTMENT INCOME                                                   20,642,032              19,319,628
                                                                        ------------            ------------

EXPENSES
Interest                                                                   9,834,015               9,536,526
Collateral management fees                                                   818,250                 829,243
Amortization of deferred debt issuance costs                                 721,298                 697,624
Professional fees                                                            126,777                 117,612
Trustee fees                                                                 126,115                 107,374
Administration fee                                                            67,452                  73,382
Taxes                                                                           (769)                 17,447
Other                                                                        251,848                 296,187
                                                                        ------------            ------------
Total expenses                                                            11,944,986              11,675,395
                                                                        ------------            ------------
NET INVESTMENT INCOME                                                      8,697,046               7,644,233
                                                                        ------------            ------------

Net realized gain (loss) and unrealized appreciation (depreciation) on
  investment transactions:
   Net realized loss on investment transactions                           (4,420,343)                      -
   Net unrealized appreciation (depreciation) on investments in
    trust preferred securities                                             6,535,336              (2,007,168)
   Net unrealized appreciation on interest rate swap agreements              147,177                 120,710
                                                                        ------------            ------------
Net realized gain (loss) and unrealized appreciation
  (depreciation) on investment transactions                                2,262,170              (1,886,458)
                                                                        ------------            ------------

Net income before minority interest                                       10,959,216               5,757,775
Minority interest                                                          8,926,324               4,658,767
                                                                        ------------            ------------
NET INCOME                                                              $  2,032,892            $  1,099,008
                                                                        ============            ============
</TABLE>

See accompanying notes to consolidated financial statements.

6
<PAGE>
                              Trapeza Funding, LLC

            Consolidated Statements of Changes in Members' Interests

                     Years ended December 31, 2004 and 2003

                                    Unaudited



Balance at January 1, 2003                                $    722,749
   Net income                                                1,099,008
   Distribution to members                                  (2,095,454)
                                                          ------------
Balance at December 31, 2003                              $   (273,697)
   Net income                                                2,032,892
   Distribution to members                                  (1,410,082)
                                                          ------------
Balance at December 31, 2004                              $    349,113
                                                          ============


See accompanying notes to consolidated financial statements.

7
<PAGE>
                              Trapeza Funding, LLC

                      Consolidated Statements of Cash Flows

                                    Unaudited
<TABLE>
<CAPTION>
                                                                              YEAR ENDED DECEMBER 31,
                                                                              2004                 2003
                                                                           -----------         -------------
<S>                                                                        <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                                                 $ 2,032,892         $   1,099,008
Adjustments to reconcile net income to net cash and cash equivalents
  provided by (used in) operating activities:
   Amortization of deferred debt issuance costs                                721,298               697,624
   Accretion of discount of investments in trust preferred securities         (160,197)             (154,288)
   Minority interest                                                         2,872,171            (1,882,027)
   Net realized loss on investment transactions                              4,420,343                     -
   Net unrealized (appreciation) depreciation on investments                (6,682,513)            1,886,458
   Net change in operating assets and liabilities:
     Investment in trust preferred securities                                        -           113,124,124
     Interest receivable on trust preferred securities                        (401,123)            2,581,794
     Investment in Trapeza Note I, LLC                                      (1,059,741)           (6,492,006)
     Prepaid expenses                                                           46,427                52,240
     Other                                                                      96,221                19,212
     Warehouse facility payable                                                      -          (113,397,528)
     Interest payable                                                          330,940              (536,160)
     Professional fees                                                         (13,168)              (82,739)
     Collateral management fees                                                 (3,422)               (4,975)
     Net interest payable to swap counterparty                                 (16,026)              (33,556)
     Trustee fees                                                                  872                   (52)
     Accrued expenses                                                          (36,250)              (17,284)
                                                                           -----------         -------------
Net cash and cash equivalents provided by (used in) operating
  activities                                                                 2,148,724            (3,140,155)
                                                                           -----------         -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on notes                                                          -               (40,420)
Distributions to partners                                                   (1,410,082)           (2,095,454)
                                                                           -----------         -------------
Net cash and cash equivalents used in financing activities                  (1,410,082)           (2,135,874)
                                                                           -----------         -------------

Net increase (decrease) in cash and cash equivalents                           738,642            (5,276,029)
Cash, beginning of year                                                      2,781,172             8,057,201
                                                                           -----------         -------------
Cash, end of year                                                          $ 3,519,814         $   2,781,172
                                                                           ===========         =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid                                                              $ 9,509,517         $  10,106,241
                                                                           ===========         =============
</TABLE>


See accompanying notes to consolidated financial statements.

8
<PAGE>
                              Trapeza Funding, LLC

              Notes to Consolidated Unaudited Financial Statements

                                December 31, 2004

1. ORGANIZATION AND PURPOSE

Trapeza Funding, LLC ("Funding"), was organized on March 25, 2002 as a Delaware
limited liability company. Funding commenced operations on June 1, 2002. Funding
was organized for the purpose of being the General Partner of Trapeza Partners
L.P. (the "Partnership"). Per the partnership agreement, the limited partners
have no right to remove the Funding at any time. Funding has complete and
exclusive control of the management of the business affairs of the Partnership.

The Partnership was organized on May 21, 2002 as a Delaware limited partnership.
The Partnership commenced operations on July 1, 2002. The Partnership was
organized for the purpose of investing in membership interests and other
securities to be issued by Trapeza CDO I, LLC ("Issuer I"), an affiliated
collateralized debt obligation, which was formed by Funding. In addition, the
Partnership also invested in Trapeza CDO II, LLC ("Issuer II"), an affiliated
collateralized debt obligation, which closed on March 11, 2003. On May 15, 2003,
Trapeza Note I, LLC ("Note I") was formed to issue Class BB fixed rate notes and
purchase 100% of the members' interests of Issuer II. In addition, the
Partnership's investment in Issuer II was transferred to Note I at this time.
The Partnership has an 11-year term, which Funding may extend on a year-to-year
basis.

All material intercompany transactions have been eliminated. Minority interest
reflects the 99.99% of partners' interest of the limited partners of the
Partnership. The consolidated entity is referred to as the "Company."

Funding and the Collateral Manager are owned equally by Financial Stocks, Inc.
("FSI") and Resource Financial Fund Management, Inc., a wholly owned subsidiary
of Resource America, Inc. ("REXI") (collectively, the "Owners"). FSI is a
Registered Investment Adviser under the Investment Advisers Act of 1940. REXI is
a publicly traded company operating in energy, real estate and financial
services sectors. The Owners and certain officers and directors of the Owners
hold partnership interests of approximately 17% of the Partnership. Funding has
complete and exclusive control of the management of the business affairs of the
Partnership.

Issuer I and II's objective is to purchase, acquire, own, hold, sell, endorse,
transfer, assign, pledge, finance, refinance, exchange, restructure, workout,
advance and collect funds pursuant to and otherwise deal with and exercise
rights of ownership with respect to the collateral of Issuer I and Issuer II,
including other securities or equity interests owned from time to time by Issuer
I and Issuer II, all in accordance with the terms of the indentures.


9
<PAGE>
                              Trapeza Funding, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


1. ORGANIZATION AND PURPOSE (CONTINUED)

Trapeza Capital Management, LLC (the "Collateral Manager"), a Delaware limited
liability company, is responsible for supervising and directing the investment
of the collateral of Issuer I and Issuer II. Issuer I and Issuer II are charged
a collateral management fee by the Collateral Manager, who is affiliated with
Funding through common ownership.

The business and affairs of Funding are managed by a Board of Managers. The
Board of Managers has full, complete and exclusive authority, power and
discretion to manage and control the business affairs and properties of Funding,
to make all decisions regarding those matters and to perform any activities
customary or incident to the management of Funding's business.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of the significant accounting policies followed by
the Company in the preparation of its financial statements.

BASIS OF ACCOUNTING

The Company's accounting policies are in conformity with accounting principles
generally accepted in the United States. The Company maintains its financial
records in United States dollars. For financial reporting purposes, the Company
follows the accrual basis of accounting.

CASH AND CASH EQUIVALENTS

The Company considers all demand deposits with banks and other highly liquid
investments with original maturities of three months or less to be cash
equivalents.

INVESTMENT TRANSACTIONS

The Company records transactions on their trade dates. Realized gains and losses
on investments are determined on the specific identification basis for financial
accounting purposes. Interest is accrued as earned or incurred and includes the
amortization/accretion of premiums and discounts on debt securities.

10
<PAGE>
                              Trapeza Funding, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

INVESTMENT VALUATION

Investments are carried at market or fair value. Securities for which market
quotations are not readily available are valued by procedures adopted by
Funding. In valuing investments in which market quotations are not readily
available, Funding utilizes data from a variety of different sources, taking
into account the characteristics of a security, any changes in the credit
quality of the securities in the portfolio, the overall movement of interest
rates and other factors which, in Funding's good faith and judgment, are
relevant to the value of a security. For exchange-traded securities, management
will obtain current market data and quotes from independent brokers.

The Company has invested a significant portion of the portfolio in private
placement, illiquid issues having no ready market. At December 31, 2004, these
securities aggregate $281,583,511 and have been valued in good faith by Funding
as described in the preceding paragraph. Because of the inherent uncertainty of
valuation, the fair values estimated by Funding may not necessarily represent
the amounts that could be realized from sales or other dispositions of
investments and the differences may be material.

CREDIT RISKS AND GENERAL LIQUIDITY CONSIDERATIONS

Investments in trust preferred securities are subject to credit, interest rate
and liquidity risks. Adverse changes in the financial condition of an issuer of
trust preferred securities or in general economic conditions or both may impair
the ability of the issuer to make payments of principal and interest. Adverse
changes in the financial condition of an issuer may affect the liquidity of the
market for an issuer's securities and may reduce the market price of such
securities. In addition, changes in general economic and regulatory conditions
may affect the liquidity of the market for trust preferred securities in general
and may reduce the values of some or all of the securities.

OFFERING COSTS

During 2003, the Partnership incurred offering costs related to the closing of
Issuer II of $60,173. All costs were charged directly to the partners' capital
and member's accounts, respectively.

ALLOCATION OF PROFITS AND LOSSES

The Company allocates profits to the members in proportion to their respective
capital account balances until the cumulative profits for this current period
and all prior fiscal years are equal to the cumulative losses allocated;
thereafter, among the members in

11
<PAGE>
                              Trapeza Funding, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

ALLOCATION OF PROFITS AND LOSSES (CONTINUED)

proportion to their respective units. Losses shall be allocated to the members
in proportion to their respective capital account balances.

Funding's investment in the Partnership is accounted for based on its pro-rata
share of its investment in the Partnership. Profits and losses from
non-portfolio income are allocated to all members in proportion to their
allocable shares. Twenty percent (20%) of the cumulative net profits from
portfolio investments are allocated to Funding.

Non-portfolio income of the Partnership, consisting primarily of income earned
on short-term investments, is allocated to all limited partners of the
Partnership in proportion to their respective capital account balances prior to
the allocation of any other item.

Portfolio income of the Partnership, consisting primarily of interest income and
profits and losses from the sale of such investments, is allocated to all
partners of the Partnership in proportion to their respective contributed
capital of the Partnership in relation to total contributed capital, but 20% of
the cumulative net profits otherwise allocable to all partners of the
Partnership will be allocated to Funding, defined as the incentive allocation.
For the years ended December 31, 2004 and 2003, Funding received an incentive
allocation of $1,735,478 and $889,939, respectively.

TAXATION

The Company is treated as a partnership for Federal income tax purposes and,
therefore, no provision for federal income tax is recorded.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities as of
the date of the financial statements and the reported amounts of income and
expenses during the reporting period. Actual results could differ from those
estimates.

12
<PAGE>
                              Trapeza Funding, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


3. CONTRIBUTIONS, WITHDRAWALS AND DISTRIBUTIONS

As of December 31, 2003, the Company has 300 membership units issued and
outstanding. No member shall be required to make any additional contributions
beyond their initial contribution. If the Board of Managers unanimously
determines that the Company requires additional funds, any member may, but is
not obligated to, advance such funds. For the years ended December 31, 2004 and
2003, the Company received no contributions from the members.

No member shall have the right to withdraw any of its capital contribution,
except upon dissolution and liquidation of the Company. For the years ended
December 31, 2004 and 2003, the Company made distributions of $1,410,082 and
$2,095,454, respectively, to the members.

In accordance with the partnership agreement, each partner has contributed a
specified amount of capital which is set forth in the partnership agreement. No
limited partner is required to contribute any capital in excess of its
commitment. As of August 13, 2003, all commitments of the Partnership were fully
funded.

A limited partner will not have the right to redeem its interest in the
Partnership. Funding, in its sole discretion, may redeem all or part of the
partnership interest of any limited partner, for an amount equal to the capital
account of the partnership interest being redeemed, if the limited partner
consents to such redemption and all redemptions in any year do not exceed five
percent of the aggregate allocable percentage of all limited partners.

Funding will cause the Partnership to distribute the lesser of (i) ninety
percent (90%) of cash available from profits and (ii) all cash then available to
the partnership less any reserves for partnership expenses or liabilities. All
other distributions will be at the discretion of Funding. Funding will determine
at its sole discretion the source of funds for all distributions. For the years
ended December 31, 2004 and 2003, the Partnership made distributions of
$5,793,210 and $6,098,125, respectively, to the partners.

4. ISSUER I

DEFERRED DEBT ISSUANCE COSTS

Deferred debt issuance costs of $8,143,889 are being amortized over the expected
life of the related debt using the effective interest method. The expected life
of the debt is period ending with the distribution date occurring in November
2012, as defined in the indenture. Amortization of deferred debt issuance costs
commenced on November 19, 2002.

13
<PAGE>
                              Trapeza Funding, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


4. ISSUER I (CONTINUED)

COLLATERAL MANAGEMENT AND TRUSTEE FEES

Pursuant to a collateral management agreement, the Collateral Manager is
entitled to a semiannual fee, payable in arrears on the distribution dates,
equal to 0.10% per annum of the semi-annual asset amount ("Base Collateral
Management Fee"), of the net outstanding portfolio collateral, as defined in the
indenture. After certain expenses have been paid, the Collateral Manager is
entitled to an additional semiannual fee equal to 0.15% per annum, calculated in
the same manner as the Base Collateral Management Fee. For the years ended
December 31, 2004 and 2003, total collateral management fees were $818,250 and
$829,243, respectively, and are reflected on the consolidated statements of
operations.

Pursuant to a trustee agreement, the trustee is entitled to a semiannual fee, on
each distribution date, equal to 0.026% per annum of the sum of the aggregate
principal amount of the investments plus cash and cash equivalents at the
beginning of the period relating to such distribution dates, an annual fee of
$13,000, and reimbursement of out of pocket expenses. For the years ended
December 31, 2004 and 2003, total trustee fees were $104,453 and $104,912,
respectively, and are included in total trustee fees reflected on the
consolidated statements of operations.




14
<PAGE>
                              Trapeza Funding, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


4. ISSUER I (CONTINUED)

NOTES PAYABLE

On November 19, 2002, Issuer I issued notes (the "Notes") at their respective
principal values, which are secured by Issuer I's investments and are
non-recourse to the Company.

At December 31, 2004 and 2003, Notes outstanding consisted of the following:
<TABLE>
<CAPTION>
                          2004              2003
                       PRINCIPAL          PRINCIPAL            INTEREST RATE             STATED MATURITY
                     ---------------    --------------     -----------------------    ----------------------
<S>                  <C>                <C>               <C>                         <C>
Class A-1 Notes       $161,464,034      $161,464,034       For the period to but      November 30, 2032
                                                           the distribution date
                                                              in November 2012,
                                                           Libor + 0.78%; at all
                                                             times thereafter,
                                                                Libor + 1.28%

Class A-2 Notes       $ 19,995,546      $ 19,995,546       For the period to but      November 30, 2032
                                                               excluding the
                                                           distribution date in
                                                              November 2012,
                                                           4.974%; at all times
                                                            thereafter, 5.474%

Class B-1 Notes       $ 54,600,000      $ 54,600,000         See Class B-1 note       November 30, 2032

Class B-2 Notes       $  2,000,000      $  2,000,000           Libor + 1.20%          November 30, 2032

Class B-3 Notes       $ 16,000,000      $ 16,000,000                5.932%            November 30, 2032

Class C-1 Notes       $ 29,600,000      $ 29,600,000            Libor + 1.80%         November 30, 2032

Class C-2 Notes       $ 10,000,000      $ 10,000,000                6.482%            November 30, 2032

Class D Notes         $ 16,500,000      $ 16,500,000            Libor + 2.65%         November 30, 2032
</TABLE>

15
<PAGE>
                              Trapeza Funding, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


4. ISSUER I (CONTINUED)

NOTES PAYABLE (CONTINUED)

Pursuant to the terms of the Class B agency agreement, the holders of the Class
B Notes will be entitled to receive interest, certain third parties will be
entitled to receive compensation, at an aggregate, floating rate per annum not
to exceed Libor plus 1.05% in the aggregate after taking into consideration the
effect of a basis swap to be entered into in connection with the Class B Notes.

Holders of the Notes are to receive semiannual interest payments on May 30 and
November 30, commencing in May 2003 (the "Initial Payment Date"). The order of
payment will be first to Class A (includes Class A-1 and Class A-2), second,
Class B, third, Class C and fourth to Class D, with each Class of Notes being
senior to each of the other classes of Notes. No payments of interest on any
class of Notes will be made until all accrued and unpaid interest on the Notes
of each class that is senior to a class and that remain outstanding has been
paid in full. No payment of principal of any class of Notes will be made until
the principal of, and all accrued and unpaid interest, the Notes of each class
that is senior to such class and that remain outstanding have been paid in full.

In the event that the coverage tests, as defined in the indenture, are not
satisfied as of any distribution date, each class of Notes may be redeemed in
the manner specified in the indenture.

Principal payments will be made in the following manner. First, payment of
principal of the Class A Notes (includes Class A-1 and Class A-2) until the
Class A Notes has been paid in full. Next, payment of principal on the Class B
Notes until the Class B Notes has been paid in full. Next, payment of principal
of the Class C Notes until the Class C Notes has been paid in full. Next,
payment of principal of the Class D Notes. Finally, the remainder to the members
as a dividend on the members' interests or as a return of capital of the
members' interests as provided in Issuer I's Agreement (the "Agreement").

If on any distribution date, the amount available in the payment account from
amounts received in the related due period are insufficient to make the full
amount of the disbursements required by the priority of payments to different
persons, the trustee will make the disbursements ratably in accordance with the
indenture.

If the Notes and the members' interests have not been released prior to November
30, 2032, it is expected that the Company or the Collateral Manager, acting on
behalf of Issuer I, will sell all of the investments and all eligible
investments and sell or liquidate all other collateral, and all net proceeds
from such sales and liquidations and all available cash after the payment (in
the order of priorities set forth above) of all (i) fees, (ii)

16
<PAGE>
                              Trapeza Funding, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


4. ISSUER I (CONTINUED)

NOTES PAYABLE (CONTINUED)

expenses and (iii) interest (including any defaulted interest and interest on
defaulted interest, any Class C deferred interest and interest on any Class C
deferred interest and any Class D deferred interest and interest on any Class D
deferred interest) and principal of the Notes, will be distributed to the
members in accordance with the Agreement.

ACCELERATION OF MATURITY AND REDEMPTION

The indenture provides for an acceleration of maturity or redemption of all of
the senior Notes and accrued and unpaid interest upon the occurrence of a
default event. Default events include a) failure of Issuer I to pay interest for
a period of three business days on any Class A or B senior Notes, b) failure of
Issuer I to pay principal of any senior Note when such payment becomes due and
payable at its stated maturity or redemption date, c) failure of Issuer I, on
any distribution date to disburse amounts available to the interest collection
account or principal collection account in accordance with the order of the
priority of payments set forth in the indenture, which continues for three
business days, d) Issuer I or pool of collateral becomes an investment company
required to be registered under the Investment Company Act, e) default in
performance, or a breach, of any other covenant or other agreement of Issuer I
under the indenture or any representation of warranty of Issuer I made in the
indenture or in any certificate or other writing proves to be incorrect in any
material respect when made, and in both clauses, the continuation of such
default or breach for a period of thirty days after Issuer I or the Collateral
Manager has actual knowledge that such default or breach has occurred or after
written notice to Issuer I and the Collateral Manager by the trustee, or to
Issuer I, the Collateral Manager and the trustee by the holders of at least 25%
in aggregate outstanding principal amount of the notes of the controlling class
or hedge counterparty, f) one or more final judgments being rendered against
Issuer I that exceed, in the aggregate, $5,000,000, and which remain unstayed,
undischarged and unsatisfied for thirty days after such judgment(s) becomes
nonappealable, unless adequate funds have been reserved or set aside for the
payment thereof, and g) failure, on any measurement date, to cause the Class A/B
overcollateralization ratio to be equal to or greater than 100%. Each of these
conditions is further described in the indenture.

5.   INTEREST RATE SWAP AGREEMENTS

The Company maintains a policy of valuing its securities positions and
derivative instruments at market or fair values, with the resulting unrealized
gain or loss included in the consolidated statements of operations.

17
<PAGE>
                              Trapeza Funding, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


5. INTEREST RATE SWAP AGREEMENTS (CONTINUED)

A swap is an agreement that obligates two parties to exchange a series of cash
flows at specified intervals based upon or calculated by reference to changes in
specified prices or rates for a specified amount of an underlying asset or
otherwise determined notional amount.

Risks may arise as a result of the failure of the counterparty to the swap
agreement. The loss incurred by the failure of a counterparty is generally
limited to the net payment to be received by the Company and/or the termination
value at the end of the agreement. Therefore, the Company considers the
creditworthiness of each counterparty to a swap agreement in evaluating
potential credit risk. Additionally, risks may arise from unanticipated
movements in interest rates.

The Company records a net receivable or payable for the net income or expense
expected to be received or paid in the interest period. Net amounts received or
paid on swap agreements are recorded as interest income or interest expense on
the consolidated statements of operations. The amount recorded as interest
income on basis swap agreements for the years ended December 31, 2004 and 2003
totaled $302,181 and $342,105, respectively.

The Company entered into interest rate swap agreements with Credit Suisse First
Boston ("CSFB") for the purpose of hedging interest rate and cash flow risk
between the fixed-rate investments and floating-rate investments.

At December 31, 2004 and 2003, the Company had three interest rate swap
agreements outstanding with CSFB, which pay on a semi-annual basis, as follows:
<TABLE>
<CAPTION>
                                    FLOATING RATE            RATE PAID                  DECEMBER 31
   NOTIONAL        MATURITY          RECEIVED BY               BY THE                2004          2003
    AMOUNT           DATE            THE COMPANY               COMPANY            FAIR VALUE    FAIR VALUE
---------------    ----------    --------------------    --------------------    -------------- ------------
<S>               <C>           <C>                      <C>                     <C>           <C>
     2,000,000     11/30/07     6 month Libor +  3.41%         6.92%               $  2,217      $(24,140)

    10,000,000     11/30/07     6 month Libor +  3.37%         6.95%                 (9,047)     (147,597)

    54,600,000     11/30/12     1 month Libor + 1.015%   6 month Libor + 1.05%     (243,323)     (225,593)
                                                                                  ---------     ---------
                                                                                  $(250,153)    $(397,330)
                                                                                  =========     =========
</TABLE>
18
<PAGE>
                              Trapeza Funding, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


6. RELATED PARTY TRANSACTIONS

The Partnership pays Funding an administration fee (payable semi-annually in
advance) equal to one and one-half percent (1.5%) per annum of the aggregate
capital accounts of the limited partners, which will be used to cover management
fees and other ordinary and recurring administrative and related operating
expenses. For the years ended December 31, 2004 and 2003, administration fees
totaled $380,231 and $413,657, respectively.

In exchange for interests sold on behalf of the Partnership, Funding pays
external broker-dealers an administration fee, equal to the percentage of equity
raised by the broker-dealer multiplied by one-third of the total administration
fee being charged by Funding to the Partnership. For the years ended December
31, 2004 and 2003, total administration fee expense equaled $67,452 and $73,382,
respectively.


19

<PAGE>
                                                                     Schedule c)





    TRAPEZA FUNDING II, LLC

    CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

    Years ended December 31, 2005 and 2004






<PAGE>
                             Trapeza Funding II, LLC

                   Consolidated Unudited Financial Statements

                     Years ended December 31, 2005 and 2004

                                    Unaudited





                                    CONTENTS


Consolidated Statements of Financial Condition...............................1
Consolidated Schedules of Investments........................................2
Consolidated Statements of Operations........................................5
Consolidated Statements of Changes in Members' Interests.....................6
Consolidated Statements of Cash Flows........................................7
Notes to Consolidated Financial Statements...................................8



<PAGE>
                             Trapeza Funding II, LLC
                 Consolidated Statements of Financial Condition
                                    Unaudited
<TABLE>
<CAPTION>
                                                                                DECEMBER 31
                                                                        2005               2004
                                                                   --------------      --------------
<S>                                                               <C>                 <C>
ASSETS
Investments in trust preferred securities, at fair value
  (amortized cost $689,352,865 and $690,569,714)                   $  694,986,541      $  696,246,408
Cash and cash equivalents                                              19,627,097          15,255,017
Deferred debt issuance costs (net of accumulated amortization
  of $4,119,838 and $2,562,385)                                        13,874,853          15,432,306
Interest receivable on trust preferred securities                       4,189,666           3,555,918
Net interest receivable from swap counterparty                            436,729                   -
Prepaid expenses                                                           25,960              26,796
Unrealized appreciation on swap agreements                              5,865,799             972,087
                                                                   --------------      --------------
Total Assets                                                       $  739,006,645      $  731,488,532
                                                                   ==============      ==============

LIABILITIES AND MEMBERS' INTERESTS
Liabilities
   Class A1A Notes                                                 $  238,996,446      $  240,496,445
   Class A1B Notes                                                    171,500,000         171,500,000
   Class B Notes                                                       52,000,000          52,000,000
   Class C-1 Notes                                                     74,750,000          74,750,000
   Class C-2 Notes                                                     86,050,000          86,050,000
   Class D Notes                                                       31,709,797          32,165,288
   Class E Notes                                                        4,285,713           5,142,856
   Class BB Notes                                                       6,428,571           7,857,143
   Interest payable                                                    11,232,196           7,505,789
   Professional fees                                                      158,859             174,134
   Collateral management fees                                             590,570             591,507
   Net interest payable to swap counterparty                                    -             759,841
   Trustee fees                                                            68,142              68,420
   Accrued expenses                                                       111,667             111,667
                                                                   --------------      --------------
Total Liabilities                                                     677,881,961         679,173,090
                                                                   --------------      --------------

Minority interest                                                      58,161,400          50,882,576

Members' Interests                                                      2,963,284           1,432,866
                                                                   --------------      --------------
Total Liabilities and Members' Interests                           $  739,006,645      $  731,488,532
                                                                   ==============      ==============
</TABLE>

See accompanying notes to consolidated financial statements.

                                                                               1
<PAGE>
                             Trapeza Funding II, LLC

                      Consolidated Schedules of Investments

                                    Unaudited
<TABLE>
<CAPTION>
                                                                    DECEMBER 31, 2005           DECEMBER 31, 2004
                                                                ---------------------------  -------------------------
                                                                 PRINCIPAL                   PRINCIPAL
                                                                  AMOUNT                      AMOUNT
                                                                  (000)        FAIR VALUE      (000)      FAIR VALUE
                                                                ------------ --------------  ---------  --------------
<S>                                                             <C>          <C>             <C>        <C>
INVESTMENTS IN TRUST PREFERRED SECURITIES - (100%) *
BANKS (80.30% AND 80.14%)*
B.P.C. Corp Statutory Trust I, 3 month libor + 3.250%, due
  6/18/2033 (a)                                                  $  3,000    $ 3,000,000    $ 3,000     $ 3,000,000
Bank of Kentucky Capital Trust I, 3 month libor +3.350%, due
  11/14/2032 (a)                                                    6,000      6,000,674      6,000       6,000,685
Benjamin Franklin Capital Trust I, 6.940%, due 11/01/2032 (a)       9,000      8,930,681      9,000       8,929,802
BNC Bancorp Capital Trust I, 3 month libor + 3.250%, due
  4/15/2033 (a)                                                     5,000      4,952,173      5,000       4,951,356
Catawba Valley Capital Trust I, 3 month libor + 3.35%, due
  12/30/2032 (a)                                                    5,000      4,946,927      5,000       4,946,116
Catawba Valley Capital Trust II, 6.850%, due 12/30/2032 (a)         5,000      4,946,318      5,000       4,945,609
Cathay Capital Trust I, 3 month libor + 3.150%, due 6/30/2033 (a)   6,550      6,550,000      6,550       6,550,000
Century Bancshares Capital Trust I, 6.850%, due 1/15/2033 (a)       3,000      3,003,389      3,000       3,003,431
Colonial Capital II, 8.920%, due 1/15/2027                         10,500     11,303,996     10,500      11,635,323
Community Bankshares Capital Trust IV, 6 month libor + 3.300%,
  due 4/15/2033 (a)                                                 5,000      5,013,447      5,000       5,013,654
Corus Statutory Trust II, 3 month libor + 3.100%, due
  6/30/2033 (a)                                                     9,000      8,932,198      9,000       8,931,197
CPB Capital Trust I, 3 month libor + 3.250%, due 4/7/2033 (a)       5,000      5,000,000      5,000       5,000,000
F.N.B Statutory Trust I, 3 month libor + 3.250%, due
  3/31/2033 (a)                                                     9,000      9,000,000      9,000       9,000,000
FBOP Capital Trust XII, 6 month libor + 3.625%, due 7/30/2032 (a)   1,000      1,000,000      1,000       1,000,000
FBOP Capital Trust XV, 6 month libor + 3.625%, due 12/15/2032 (a)  14,000     14,000,000     14,000      14,000,000
FBR Capital Trust I, 3 month libor + 3.250%, due 3/30/2033 (a)     19,000     18,854,879     19,000      18,852,747
First Banks Statutory Trust I, 8.100%, due 3/20/2033 (a)           21,000     21,000,000     21,000      21,000,000
First Financial Statutory Trust II, 3 month libor + 3.100%, due
  9/30/2033 (a)                                                     9,000      9,000,000      9,000       9,000,000
First Group Capital Statutory Trust III, 3 month libor + 3.35%,
  due 11/15/2032 (a)                                                5,000      5,039,490      5,000       5,040,103
First Group Capital Statutory Trust V, 3 month libor + 3.250%,
  due 4/15/2033 (a)                                                15,000     15,095,357     15,000      15,096,875
First Indiana Capital Trust I, 6.920%, due 10/30/2032 (a)          10,000      9,991,732     10,000       9,991,629
First Mariner Capital Trust II, 3 month libor + 3.350%, due
  12/10/2032 (a)                                                    4,000      3,962,738      4,000       3,962,183
First Mutual Capital Trust II, 6.870%, due 1/15/2033 (a)            4,000      3,954,982      4,000       3,954,426
First National Bank Group Inc, 6.580%, due 4/7/2013 (a)             8,500      8,314,391      8,500       8,312,023
First South Bancorp Statutory Trust I, 3 month libor + 3.250%,
  due 6/9/2033 (a)                                                  9,000      9,000,000      9,000       9,000,000
First Southern Bancorp Statutory Trust I, 3 month libor +
  3.250%, due 2/19/2033 (a)                                        11,000     11,000,000     11,000      11,000,000
FNB Statutory Trust I, 3 month libor + 3.250%, due 3/31/2033 (a)   13,330     13,330,000     13,330      13,330,000
FNB/MT Statutory II, 3 month libor + 3.250%, due 5/30/2033 (a)      5,000      4,996,634      5,000       4,996,585
Franklin Bancorp Capital Trust I, 3 month libor + 3.250%, due
  2/25/2033 (a)                                                     7,000      6,932,138      7,000       6,931,106
GB&T Bancshares Statutory Trust I, 3 month libor + 3.400%, due
  10/30/2032 (a)                                                    4,000      4,000,000      4,000       4,000,000
Guaranty (TX) Capital Trust II, 7.940%, due 10/30/2032 (a)          3,000      3,000,487      3,000       3,000,492
Hanmi Capital Trust II, 3 month libor + 2.90%, due 3/15/2034 (a)    5,301      5,301,000      5,301       5,301,000
Hudson United Capital Trust I, 6.85%, due 3/31/2033 (a)            20,000     19,930,843     20,000      19,930,002
IBC Capital Financial II, 8.250%, due 12/31/2026 (a)                  300        300,000        300         300,000
Iberiabank Statutory Trust II, 3 month libor + 3.150%, due
  6/17/2033 (a)                                                     9,000      9,041,262      9,000       9,041,869
ITLA Capital Statutory Trust III, 6 month libor + 3.400%, due
  10/30/2032 (a)                                                    9,000      8,921,743      9,000       8,920,534
ITLA Capital Statutory Trust IV, 6 month libor + 3.400%, due
  12/10/2032 (a)                                                    4,330      4,292,636      4,330       4,292,102
Lakeland Bancorp Capital Trust II, 5.710%, due 6/30/2033 (a)        9,000      8,960,218      9,000       8,959,637
Macatawa Statutory Trust I, 3 month libor + 3.050%, due
  7/15/2033 (a)                                                     9,000      9,000,000      9,000       9,000,000
Main Street Banks Statutory Trust II, 3 month libor + 3.250%,
  due 6/30/2033 (a)                                                 9,000      9,000,000      9,000       9,000,000
MainSource Statutory Trust II, 3 month libor + 3.250%, due
  4/1/2033 (a)                                                     14,000     14,000,000     14,000      14,000,000
MainSource Statutory Trust III, 3 month libor + 3.150%, due
  6/15/2033 (a)                                                     7,000      6,987,995      7,000       6,987,817
Mariner Capital Trust II, 3 month libor + 3.350%, due
  12/10/2032 (a)                                                    2,000      1,981,056      2,000       1,980,774
MBNA Capital B, 3 month libor + 0.800%, due 2/1/2027                7,000      6,860,000      7,000       6,629,000
</TABLE>

                                                                               2

<PAGE>
                             Trapeza Funding II, LLC

                Consolidated Schedules of Investments (continued)

                                    Unaudited
<TABLE>
<CAPTION>
                                                                    DECEMBER 31, 2005           DECEMBER 31, 2004
                                                                ---------------------------  -------------------------
                                                                 PRINCIPAL                   PRINCIPAL
                                                                  AMOUNT                      AMOUNT
                                                                  (000)        FAIR VALUE      (000)      FAIR VALUE
                                                                ------------ --------------  ---------  --------------
<S>                                                             <C>          <C>             <C>        <C>
INVESTMENTS IN TRUST PREFERRED SECURITIES - (100%) *
BANKS (80.30% AND 80.14%)*- CONTINUED
Merchants & Manufacturers Statutory Trust I, 3 month libor +
  3.350%, due 11/12/2032 (a)                                    $   2,000    $ 2,000,000      $  2,000    $ 2,000,000
Merchants and Manufacturers Statutory Trust II, 8.250%, due
 5/30/2033 (a)                                                      9,000      9,000,000         9,000      9,000,000
Mystic Financial Capital Trust II, 3 month libor + 3.250%, due
  2/15/2033 (a)                                                     7,000      6,924,525         7,000      6,923,354
Nara Capital Trust III, 3 month libor + 3.150%, due 6/15/2033 (a)   5,000      4,972,617         5,000      4,972,210
New Mexico Banquest Capital Trust I, 3 month libor + 3.350%,
  due 12/19/2032 (a)                                                9,000      9,065,528         9,000      9,066,494
North American Capital Trust I, 3 month libor + 3.35%, due
  11/15/2032 (a)                                                    5,000      5,118,470         5,000      5,120,308
Northrim Capital Trust I, 3 month libor + 3.150%, due
  5/15/2033 (a)                                                     8,000      7,917,428         8,000      7,916,149
Old Second Capital I, 7.800%, due 6/30/2033 (a)                     1,500      1,500,000         1,500      1,500,000
Orion Bancorp Inc Statutory Trust I, 3 month libor + 3.250%,
  due 5/5/2033 (a)                                                  9,000      9,000,000         9,000      9,000,000
Pacific Crest Capital Trust I, 6.335%, due 3/20/2033 (a)           13,330     13,483,006        13,330     13,485,058
Pacific Crest Capital Trust II, 6.580%, due 4/30/2033 (a)           6,000      6,022,813         6,000      6,023,102
Provident Capital Trust I, 8.600%, due 12/1/2026                    9,395     10,052,650         9,395      9,886,754
Provident Trust I, 8.290%, due 4/15/2028                            6,500      6,890,000         6,500      6,745,414
Red River Statutory Trust II, 3 month libor + 3.250%, due
  5/28/2033 (a)                                                     3,000      3,000,000         3,000      3,000,000
Seacoast Capital Trust II, 6.650%, due 4/7/2033 (a)                 5,000      5,000,000         5,000      5,000,000
South Financial Capital Trust II, 6 month libor + 3.25%, due
  7/30/2032 (a)                                                     6,500      6,437,868         6,500      6,436,875
Southcoast Capital Trust II, 3 month libor + 3.350%, due
  12/16/2032 (a)                                                    7,000      6,934,710         7,000      6,933,747
State National Capital Trust I, 3 month libor + 3.050%, due
  9/30/2033 (a)                                                     6,000      6,014,597         6,000      6,014,811
Stearns Financial Capital Trust, 3 month libor + 3.150%, due
  3/30/2033 (a)                                                    10,000      9,984,714        10,000      9,984,485
Sterling Bank Houston Texas, 7.375%, due 4/15/2013 (a)             12,330     12,326,402        12,330     12,435,494
Sterling Bancshares Statutory Trust I, 3 month libor + 3.450%,
  due 8/30/2032 (a)                                                10,000     10,000,000        10,000     10,000,000
UCBH Capital Trust II, 3 month libor + 3.450%, due 11/7/2032 (a)    9,000      9,000,000         9,000      9,000,000
Umpqua Statutory Trust II Units, 3 month libor + 3.350%, due
  10/17/2032 (a)                                                    9,000      8,887,855         9,000      8,886,065
United Bancorporation of Wyoming Capital Trust I, 3 month libor
  + 3.100%, due 9/30/2033 (a)                                       6,000      6,011,528         6,000      6,011,696
VCBI Capital Trust II, 6 month libor + 3.300%, due 12/19/2032 (a)   1,670      1,659,921         1,670      1,659,776
Virginia Capital Trust II, 6 month libor + 3.300%, due
  12/19/2032 (a)                                                   13,330     13,249,962        13,330     13,248,814
Wesbanco Capital Trust II, 5.800%, due 6/30/2033 (a)                9,000      8,985,611         9,000      8,985,404
Woodforest Statutory Trust IV, 3 month libor + 3.250%, due
  3/3/2033 (a)                                                     10,000     10,000,000        10,000     10,000,000
                                                                             -----------                  -----------
Total Banks (amortized cost $553,474,532 and $553,379,484)                   558,069,589                  557,954,087
                                                                             -----------                  -----------
</TABLE>

                                                                               3
<PAGE>
                             Trapeza Funding II, LLC

                Consolidated Schedules of Investments (continued)

                                    Unaudited
<TABLE>
<CAPTION>
                                                                       DECEMBER 31, 2005           DECEMBER 31, 2004
                                                                   ---------------------------  -------------------------
                                                                    PRINCIPAL                   PRINCIPAL
                                                                     AMOUNT                      AMOUNT
                                                                     (000)        FAIR VALUE      (000)      FAIR VALUE
                                                                   ------------ --------------  ---------  --------------
<S>                                                                <C>          <C>             <C>        <C>
INVESTMENTS   IN  TRUST   PREFERRED   SECURITIES  -  (100%)  *
  (CONTINUED)
THRIFTS (19.70% AND 19.86%)
BankUnited Statutory Trust IV, 3 month libor + 3.400%, due
  11/14/2032 (a)                                                   $   6,000  $    6,000,000    $   6,000  $    6,000,000
BBC Capital Trust VI, 3 month libor + 3.350%, due 12/10/2032 (a)      15,000      14,864,128       15,000      14,862,123
BBC Capital Trust XII, 6.650%, due 4/7/2033 (a)                        3,670       3,670,000        3,670       3,670,000
Beal Financial Trust I, 6 month libor + 3.625%, due 7/30/2032 (a)      9,000       8,913,949        9,000       8,912,596
Beal Financial Trust II, 3 month libor + 3.350%, due
  3/27/2033 (a)                                                       13,000      12,891,554       13,000      12,889,932
Capital One Capital I, 3 month libor + 1.550%, due 2/1/2027            4,000       4,020,000        4,000       3,980,000
Coastal Financial Capital Trust I, 3 month libor + 3.050%,
  due 7/3/2033 (a)                                                     9,000       9,078,891        9,000       9,080,066
Flagstar Statutory Trust IV, 6.750%, due 3/19/2033 (a)                22,330      22,236,250       22,330      22,235,082
Franklin Bank Capital Trust I, 3 month libor + 3.35%, due
  11/15/2032 (a)                                                       9,000       8,921,915        9,000       8,920,702
HFC Capital Trust IV, 6 month libor +3.350%, due 11/15/2032 (a)        6,550       6,410,385        6,550       6,408,292
IndyMac Capital Trust, 6.050%, due 7/11/2033 (a)                       9,000       8,973,513        9,000       8,973,149
Progress Capital Trust III, 3 month libor + 3.350%, due
  11/15/2032 (a)                                                       4,000       3,967,474        4,000       3,966,970
Sterling Capital Trust IV, 3 month libor + 3.150%, due
  5/15/2033 (a)                                                        9,000       8,968,893        9,000       8,968,409
Waypoint Capital Trust II, 3 month libor + 3.300%, due
  1/7/2033 (a)                                                         3,000       3,000,000        3,000       3,000,000
Waypoint Statutory Trust III, 3 month libor + 3.250%, due
  3/13/2033 (a)                                                       15,000      15,000,000       15,000      15,000,000
WSFS Capital Trust I, 3 month libor +2.500%, due 12/1/2028                 -               -        1,500       1,425,000
                                                                                ------------                 ------------
Total Thrifts (amortized cost $135,878,333 and $137,190,230)                     136,916,952                  138,292,321
                                                                                ------------                 ------------
Total Investments in Trust Preferred Securities (amortized
  cost $689,352,865 and $690,569,714)                                           $694,986,541                 $696,246,408
                                                                                ============                 ============


                                                                                 FAIR VALUE                   FAIR VALUE
                                                                                 ----------                   ----------
INTEREST RATE SWAP AGREEMENTS
Credit Suisse First Boston                                                        $5,865,799                  $   972,087
                                                                                  ----------                  -----------
Total Interest Rate Swap Agreements                                               $5,865,799                  $   972,087
                                                                                  ==========                  ===========
</TABLE>

* Amounts in parenthesis indicate percentage of investments in trust preferred
securities.
(a) Private placement, illiquid securities, where amortized cost approximates
fair value.


See accompanying notes to consolidated financial statements.


                                                                               4
<PAGE>
                             Trapeza Funding II, LLC

                      Consolidated Statements of Operations

                                    Unaudited
<TABLE>
<CAPTION>
                                                                           YEAR ENDED DECEMBER 31,
                                                                          2005                 2004
                                                                       ------------         ------------
<S>                                                                    <C>                  <C>
INVESTMENT INCOME
Interest                                                               $ 47,980,287         $ 38,700,292

EXPENSES
Interest                                                                 30,382,232           23,374,628
Collateral management fees                                                1,740,103            1,741,272
Amortization                                                              1,557,453            1,559,366
Trustee fees                                                                269,990              249,125
Professional fees                                                           169,841              196,742
Administration fees                                                         102,584              104,762
Other                                                                       359,125              293,664
                                                                       ------------         ------------
Total expenses                                                           34,581,328           27,519,559
                                                                       ------------         ------------
NET INVESTMENT INCOME                                                    13,398,959           11,180,733
                                                                       ------------         ------------

Net realized gain and unrealized appreciation (depreciation)
  on investment transactions:
  Net realized loss on investment transactions                                    -           (3,616,391)
  Net unrealized appreciation (depreciation) on
    investments in trust preferred securities                               (43,018)           6,153,459
  Net unrealized appreciation on interest rate
    swap agreements                                                       4,893,712            1,388,550
                                                                       ------------         ------------
Net realized gain and unrealized appreciation (depreciation) on
  investment transactions                                                 4,850,694            3,925,618
                                                                       ------------         ------------

Net income before minority interest                                      18,249,653           15,106,351
Minority interest                                                        14,809,563           12,226,236
                                                                       ------------         ------------
NET INCOME                                                             $  3,440,090         $  2,880,115
                                                                       ============         ============
</TABLE>


See accompanying notes to consolidated financial statements.

                                                                               5
<PAGE>
                             Trapeza Funding II, LLC

            Consolidated Statements of Changes in Members' Interests

                     Years ended December 31, 2005 and 2004

                                    Unaudited

Balance at January 1, 2004                                 $     537,185
   Net income                                                  2,880,115
   Distributions to members                                   (1,984,434)
                                                           -------------
Balance at December 31, 2004                                   1,432,866
   Net income                                                  3,440,090
   Distributions to members                                   (1,909,672)
                                                           -------------
Balance at December 31, 2005                               $   2,963,284
                                                           =============


See accompanying notes to consolidated financial statements.


                                                                               6
<PAGE>
                             Trapeza Funding II, LLC

                      Consolidated Statements of Cash Flows

                                    Unaudited
<TABLE>
<CAPTION>
                                                                            YEAR ENDED DECEMBER 31,
                                                                          2005                  2004
                                                                      ------------          ------------
<S>                                                                   <C>                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                                            $  3,440,090          $  2,880,115
Adjustments to reconcile net income to net cash and cash
  equivalents provided by operating activities:
   Amortization of deferred debt issuance costs                          1,557,453             1,543,494
   Accretion of discount on investments in trust preferred
    securities                                                            (283,151)             (146,810)
   Minority interest                                                    14,809,563            12,226,236
   Net realized loss on investment transactions                                  -             3,616,391
   Net unrealized appreciation on investment transactions               (4,850,694)           (7,542,009)
   Net change in operating assets and liabilities:
     Investment in trust preferred securities                            1,500,000                     -
     Interest receivable on trust preferred securities                    (633,748)             (328,266)
     Prepaid expenses                                                          836               (16,789)
     Interest payable                                                    3,726,407             1,271,404
     Professional fees                                                     (15,275)               22,406
     Collateral management fees                                               (937)              (48,198)
     Net interest payable to swap counterparty                          (1,196,570)             (665,169)
     Trustee fees                                                             (278)               (5,051)
     Accrued expenses                                                            -               (30,989)
     Minority interest                                                  (7,530,739)           (8,024,465)
                                                                      ------------          ------------
Net cash and cash equivalents provided by operating activities          10,522,957             4,752,300
                                                                      ------------          ------------

CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on notes                                             (4,241,205)           (3,073,096)
Distributions to members                                                (1,909,672)           (1,984,434)
                                                                      ------------          ------------
Net cash and cash equivalents used in financing activities              (6,150,877)           (5,057,530)
                                                                      ------------          ------------

Net increase (decrease) in cash and cash equivalents                     4,372,080              (305,230)
Cash and cash equivalents, beginning of year                            15,255,017            15,560,247
                                                                      ------------          ------------
Cash and cash equivalents, end of year                                $ 19,627,097          $ 15,255,017
                                                                      ============          ============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid                                                         $ 27,944,173          $ 22,976,508
                                                                      ============          ============
</TABLE>

See accompanying notes to consolidated financial statements.

                                                                               7
<PAGE>
                             Trapeza Funding II, LLC

              Notes to Consolidated Unaudited Financial Statements

                                December 31, 2005


1. ORGANIZATION AND PURPOSE

Trapeza Funding II, LLC ("Funding"), was organized on August 26, 2002 as a
Delaware limited liability company. Funding commenced operations on November 1,
2002. Funding was organized for the purpose of being the general partner (the
"General Partner"), of Trapeza Partners II L.P. (the "Partnership"). Per the
partnership agreement, the limited partners have no right to remove Funding at
any time. Funding has complete and exclusive control of the management of the
business affairs of the Partnership.

The Partnership was organized on September 27, 2002 as a Delaware limited
partnership. The Partnership commenced operations on November 19, 2002. The
Partnership was organized for the purpose of investing in membership interests
and other securities to be issued by Trapeza CDO II, LLC ("Issuer II"), an
affiliated collateralized debt obligation, which was formed by Funding. On May
15, 2003, Trapeza Note I, LLC ("Note I") was formed to issue Class BB fixed rate
notes, purchase 100% of the membership interests of Issuer II and return a
portion of equity to the Partnership for the purpose of investing in membership
interests and other securities to be issued by Trapeza CDO III, LLC ("Issuer
III"), an affiliated collateralized debt obligation. Issuer III closed on June
25, 2003. The Partnership has an 11-year term, which the General Partner may
extend on a year-to-year basis.

All material intercompany transactions have been eliminated. Minority interest
reflects the 99.99% of partners' interest of the limited partners of the
Partnership. The consolidated entity is referred to as the "Company."

Funding and the Collateral Manager are owned equally by Financial Stocks, Inc.
("FSI") and Resource Financial Fund Management, Inc., a wholly owned subsidiary
of Resource America, Inc. ("REXI") (collectively, the "Owners"). FSI is a
Registered Investment Adviser under the Investment Advisers Act of 1940. REXI, a
publicly traded company, is a specialized asset management company that uses
industry specific expertise to generate and administer investment opportunities
for their own account and for outside investors in the financial fund
management, real estate and equipment leasing sectors. The Owners and certain
officers and directors of the Owners hold partnership interests of approximately
18% of the Partnership. Funding has complete and exclusive control of the
management of the business affairs of the Partnership.


                                                                               8
<PAGE>
                             Trapeza Funding II, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


1. ORGANIZATION AND PURPOSE (CONTINUED)

Issuer II and Issuer III's objective is to purchase, acquire, own, hold, sell,
endorse, transfer, assign, pledge, finance, refinance, exchange, restructure,
workout, advance and collect funds pursuant to and otherwise deal with and
exercise rights of ownership with respect to the collateral of Issuer II and
Issuer III, including other securities or equity interests owned from time to
time by Issuer II and Issuer III, all in accordance with the terms of the
indentures.

Trapeza Capital Management, LLC (the "Collateral Manager"), a Delaware limited
liability company, is responsible for supervising and directing the investment
the collateral of Issuer II and Issuer III. Issuer II and III are charged a
collateral management fee by the Collateral Manager, who is affiliated with
Funding through common ownership.

The business and affairs of Funding are managed by a Board of Managers. The
Board of Managers has full, complete and exclusive authority, power and
discretion to manage and control the business affairs and properties of Funding,
to make all decisions regarding those matters and to perform any activities
customary or incident to the management of Funding's business.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of the significant accounting policies followed by
the Company in the preparation of its financial statements.

BASIS OF ACCOUNTING

The Company's accounting policies are in conformity with accounting principles
generally accepted in the United States. The Company maintains its financial
records in United States dollars. For financial reporting purposes, the Company
follows the accrual basis of accounting.

CASH AND CASH EQUIVALENTS

The Company considers all demand deposits with banks and other highly liquid
investments with original maturities of three months or less to be cash
equivalents.

                                                                               9
<PAGE>
                             Trapeza Funding II, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

INVESTMENT TRANSACTIONS

The Company records transactions on their trade dates. Realized gains and losses
on investments are determined on the specific identification basis for financial
accounting purposes. Interest is accrued as earned or incurred and includes the
amortization/accretion of premiums and discounts on debt securities.

INVESTMENT VALUATION

Investments are carried at fair value. Securities for which market quotations
are not readily available are valued by procedures adopted by Funding. In
valuing investments in which market quotations are not readily available,
Funding utilizes data from a variety of different sources, taking into account
the characteristics of a security, any changes in the credit quality of the
securities in the portfolio, the overall movement of interest rates and other
factors which, in Funding's good faith and judgment, are relevant to the value
of a security. For exchange-traded securities, management will obtain current
market data and quotes from independent brokers.

The Company has invested a significant portion of the portfolio in private
placement, illiquid issues having no ready market. At December 31, 2005, these
securities aggregate $655,859,895 and have been valued in good faith by Funding
as described in the preceding paragraph. Because of the inherent uncertainty of
valuation, the fair values estimated by Funding may not necessarily represent
the amounts that could be realized from sales or other dispositions of
investments and the differences may be material.

CREDIT RISKS AND GENERAL LIQUIDITY CONSIDERATIONS

Investments in trust preferred securities are subject to credit, interest rate
and liquidity risks. Adverse changes in the financial condition of an issuer of
trust preferred securities or in general economic conditions or both may impair
the ability of the issuer to make payments of principal and interest. Debt
obligations are also subject to liquidity risk and the risk of market price
fluctuations. Adverse changes in the financial condition of an issuer may affect
the liquidity of the market for an issuer's securities and may reduce the market
price of such securities. In addition, changes in general economic and
regulatory conditions may affect the liquidity of the market for trust preferred
securities in general and may reduce the values of some or all of the
securities.

                                                                              10
<PAGE>
                             Trapeza Funding II, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

ALLOCATION OF PROFITS AND LOSSES

The Company allocates profits to the members in proportion to their respective
capital account balances until the cumulative profits for this current period
and all prior fiscal years are equal to the cumulative losses allocated;
thereafter, among the members in proportion to their respective units. Losses
shall be allocated to the members in proportion to their respective capital
account balances.

Funding's investment in the Partnership is accounted for based on its pro-rata
share of its investment in the Partnership. Profits and losses from
non-portfolio income are allocated to all members in proportion to their
allocable shares. Twenty percent (20%) of the cumulative net profits from
portfolio investments are allocated to Funding.

Non-portfolio income of the Partnership, consisting primarily of income earned
on short-term investments, is allocated to all limited partners in proportion to
their respective capital account balances prior to the allocation of any other
item.

Portfolio income of the Partnership, consisting primarily of interest income and
profits and losses from the sale of such investments, are allocated to all
partners of the Partnership in proportion to their respective contributed
capital of the Partnership in relation to total contributed capital, but 20% of
the cumulative net profits otherwise allocable to all partners will be allocated
to Funding, defined as the incentive allocation. For the years ended December
31, 2005 and 2004, Funding received an incentive allocation of $2,982,801 and
$2,430,901, respectively.

TAXATION

The Company is treated as a partnership for Federal income tax purposes and,
therefore, no provision for federal income tax is recorded.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities as of
the date of the financial statements and the reported amounts of income and
expenses during the reporting period. Actual results could differ from those
estimates.

                                                                              11
<PAGE>
                             Trapeza Funding II, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


3. CONTRIBUTIONS, WITHDRAWALS AND DISTRIBUTIONS

As of December 31, 2005, the Company has 100 membership units issued and
outstanding. No member shall be required to make any additional contributions
beyond their initial contribution. If the Board of Managers unanimously
determines that the Company requires additional funds, any member may, but is
not obligated to, advance such funds.

No member shall have the right to withdraw any of its capital contribution,
except upon dissolution and liquidation of the Company. For the years ended
December 31, 2005 and 2004, the Company made distributions of $1,909,672 and
$1,984,434, respectively, to the members.

In accordance with the partnership agreement, each partner has contributed a
specified amount of capital which is set forth in the partnership agreement. No
limited partner is required to contribute any capital in excess of its
commitment. As of December 24, 2002, all commitments of the Partnership were
fully funded.

A limited partner will not have the right to redeem its interest in the
Partnership. Funding, in its sole discretion, may redeem all or part of the
partnership interest of any limited partner, for an amount equal to the capital
account of the partnership interest being redeemed, if the limited partner
consents to such redemption and all redemptions in any year do not exceed five
percent of the aggregate allocable percentage of all limited partners.


                                                                              12
<PAGE>
                             Trapeza Funding II, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


3. CONTRIBUTIONS, WITHDRAWALS AND DISTRIBUTIONS (CONTINUED)

Funding will cause the Partnership to distribute the lesser of (i) ninety
percent (90%) of cash available from profits and (ii) all cash then available to
the partnership less any reserves for partnership expenses or liabilities. All
other distributions will be at the discretion of Funding. Funding will determine
at its sole discretion the source of funds for all distributions. For the years
ended December 31, 2005 and 2004, the Partnership made distributions of
$7,423,843 and $8,138,564, respectively, to the partners.

4. ISSUER II

DEFERRED DEBT ISSUANCE COSTS

Deferred debt issuance costs of $9,831,231 are being amortized over the expected
life of the related debt using the effective interest method. The expected life
of the debt is the period ending with the distribution date occurring in April
2013, as defined in the indenture ("Indenture II"). Amortization of deferred
debt issuance costs commenced on March 11, 2003.

COLLATERAL MANAGEMENT AND TRUSTEE FEES

Pursuant to a collateral management agreement, the Collateral Manager is
entitled to a semiannual fee, payable in arrears on the distribution dates,
equal to 0.10% per annum of the semi-annual asset amount ("Base Collateral
Management Fee"), of the net outstanding portfolio collateral, as defined in the
indenture. After certain expenses have been paid, the Collateral Manager is
entitled to an additional semiannual fee equal to 0.15% per annum, calculated in
the same manner as the Base Collateral Management Fee. For the years ended
December 31, 2005 and 2004, total collateral management fees were $990,103 and
$993,352, respectively, and are included in total collateral management fees
reflected on the consolidated statements of operations.

Pursuant to a trustee agreement, the trustee is entitled to a semiannual fee, on
each distribution date, equal to 0.023625% per annum of the sum of the aggregate
principal amount of the investments plus cash and cash equivalents at the
beginning of the period relating to such distribution dates, an annual fee of
$15,000, and reimbursement of out of pocket expenses. For the years ended
December 31, 2005 and 2004, total trustee fees were $114,178 and $114,226,
respectively, and are included in total trustee fees reflected on the
consolidated statements of operations.

                                                                              13
<PAGE>
                             Trapeza Funding II, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


4. ISSUER II (CONTINUED)

NOTES PAYABLE

On March 11, 2003, Issuer II issued notes (the "Notes") at their respective
principal values, which are secured by Issuer II's investments and are
non-recourse to the Company.

At December 31, 2005 and 2004, Notes outstanding consisted of the following:
<TABLE>
<CAPTION>
                         2005                  2004                                            STATED
                      PRINCIPAL              PRINCIPAL            INTEREST RATE               MATURITY
                   -----------------     ------------------    ---------------------      ------------------
<S>               <C>                   <C>                    <C>                         <C>
Class A1A Notes     $   130,499,115       $    131,999,114     Libor + 0.65% until         October 5, 2033
                                                                 the distribution
                                                                date in April 2013
                                                                and Libor + 1.30%
                                                                    thereafter

Class A1B Notes     $   100,000,000       $    100,000,000        Libor + 0.88%            October 5, 2033

Class B Notes       $    27,000,000       $     27,000,000        Libor + 0.70%            October 5, 2033

Class C-1           $    43,500,000       $     43,500,000        Libor + 1.90%            October 5, 2033
Floating Notes

Class C-2 Fixed     $    54,800,000       $     54,800,000       5.20% until the           October 5, 2033
Notes                                                           distribution date
                                                                in April 2008 and
                                                                  Libor + 1.90%
                                                                    thereafter

Class D Notes       $    18,450,000       $     18,450,000        Libor + 2.65%            October 5, 2033
</TABLE>

Holders of the Notes are to receive semiannual interest payments on October 5
and April 5, commencing in October 2003 (the "Initial Payment Date"). The order
of payment will be first to Class A1A, second, Class A1B, third, Class B, fourth
to Class C, and fifth Class D of notes being senior to each of the other classes
of notes. No payments of interest on any class of notes will be made until all
accrued and unpaid interest on the notes of each class that is senior to a class
and that remain outstanding has been paid in full. No payment of principal of
any class of notes will be made until the principal of, and all accrued and
unpaid interest, on the notes of each class that is senior to such class and
that remain outstanding have been paid in full.



                                                                              14
<PAGE>
                             Trapeza Funding II, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


4. ISSUER II (CONTINUED)

NOTES PAYABLE (CONTINUED)

In the event that the coverage tests, as defined in Indenture II, are not
satisfied as of any distribution date, each class of notes may be redeemed in
the manner specified in Indenture II.

Principal payments will be made in the following manner. First, payment of
principal of the Class A1A notes until the Class A1A notes have been paid in
full. Next, payment of principal on the Class A1B notes until the Class A1B
notes have been paid in full. Next, payment of principal of the Class B notes
until the Class B notes have been paid in full. Next, payment of principal of
the Class C notes until Class C notes have been paid in full. Next, payment of
principal of the Class D notes. Finally, the remainder to the members as a
dividend on the members' interests or as a return of capital of the members'
interests as provided in Issuer II's Agreement ("Agreement II").

If on any distribution date, the amount available in the payment account from
amounts received in the related due period are insufficient to make the full
amount of the disbursements required by the priority of payments to different
persons, the trustee will make the disbursements ratably in accordance with
Indenture II.

If the notes and the member's interests have not been released prior to October
5, 2033, it is expected that Issuer II or Collateral Manager, acting on behalf
of Issuer II, will sell all of the investments and sell or liquidate all other
collateral, and all net proceeds from such sales and liquidations and all
available cash after the payment (in the order of priorities set forth above) of
all (i) fees, (ii) expenses and (iii) interest (including any defaulted interest
and interest on defaulted interest, any Class C deferred interest and interest
on any Class C deferred interest and any Class D deferred interest and interest
on any Class D deferred interest) and principal of the notes, will be
distributed to the members in accordance with Agreement II.


                                                                              15
<PAGE>
                             Trapeza Funding II, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


4. ISSUER II (CONTINUED)

ACCELERATION OF MATURITY AND REDEMPTION

Indenture II provides for an acceleration of maturity or redemption of all of
the senior notes and accrued and unpaid interest upon the occurrence of a
default event. Default events include a) failure of Issuer II to pay interest
for a period of three business days on any Class A or B senior Notes, b) failure
of Issuer II to pay principal of any senior Note when such payment becomes due
and payable at its stated maturity or redemption date, c) failure of Issuer II,
on any distribution date to disburse amounts available to the interest
collection account or principal collection account in accordance with the order
of the priority of payments set forth in Indenture II, which continues for three
business days, d) Issuer II or pool of collateral becomes an investment company
required to be registered under the Investment Company Act, e) default in
performance, or a breach, of any other covenant or other agreement of Issuer II
under the Indenture II or any representation of warranty of Issuer II made in
Indenture II or in any certificate or other writing proves to be incorrect in
any material respect when made, and in both clauses, the continuation of such
default or breach for a period of thirty days after Issuer II or the Collateral
Manager has actual knowledge that such default or breach has occurred or after
written notice to Issuer II and the Collateral Manager by the trustee, or to
Issuer II, the Collateral Manager and the Trustee by the holders of at least 25%
in aggregate outstanding principal amount of the Notes of the controlling class
or hedge counterparty, f) one or more final judgments being rendered against
Issuer II that exceed, in the aggregate, $5,000,000, and which remain unstayed,
undischarged and unsatisfied for thirty days after such judgment(s) becomes
nonappealable, unless adequate funds have been reserved or set aside for the
payment thereof, and g) failure, on any measurement date, to cause the Class A/B
overcollateralization ratio to be equal to or greater than 100%. Each of these
conditions is further described in Indenture II.

5. NOTE I

DEFERRED DEBT ISSUANCE COSTS

Deferred debt issuance costs of $300,000 are being amortized over the expected
life of the related debt using the effective interest method. The expected life
of the debt is April 2010, as defined in the fiscal and collateral agency
agreement ("Note Agreement"), assuming all scheduled principal payments are made
when due. Amortization of deferred debt issuance costs commenced on May 15,
2003.

                                                                              16
<PAGE>
                             Trapeza Funding II, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


5. NOTE I (CONTINUED)

NOTES PAYABLE

On May 15, 2003, Note I issued Notes at their respective principal value, which
are secured by Note I's investments and are non-recourse to the Company.

At December 31, 2005 and 2004, the Notes outstanding consisted of the following:
<TABLE>
<CAPTION>
                                                                      INTEREST
                           2005 PRINCIPAL       2004 PRINCIPAL          RATE             STATED MATURITY
                          ----------------    ------------------     ------------    -----------------------
<S>                         <C>                <C>                     <C>                       <C>
Class BB Notes              $6,428,571         $    7,857,143          11.00%            October 5, 2033
</TABLE>

Holders of the Notes are to receive semiannual interest payments on October 5
and April 5, commencing in October 2003 (the "Initial Payment Date"). On each
payment date, in addition to scheduled interest, Note I shall prepay the
scheduled principal to the holders of the notes, if and only to the extent Note
I receives payments on membership interests and funds available on deposit in
the note collection account to pay scheduled principal. If Note I fails to pay
any of the scheduled principal due to insufficient funds received by Note I in
respect to the membership interests, such unpaid scheduled principal shall not
be considered "due and payable" for any purposes hereunder and will be deferred
until such date as Note I receives sufficient payments.

In the event that the coverage tests, as defined in the Note Agreement, are not
satisfied as of any distribution date, the notes may be redeemed in the manner
specified in the Note Agreement.

If the notes and the members' interests have not been released prior to October
5, 2033, it is expected that Note I or Collateral Manager, acting on behalf of
the Note I, will sell all of the investments and all eligible investments and
sell or liquidate all other collateral, and all net proceeds from such sales and
liquidations and all available cash after the payment (in the order of
priorities set forth above) of all (i) fees, (ii) expenses and (iii) interest
and principal of the notes, will be distributed to the members in accordance
with the Note Agreement.

The Note Agreement provides for an option by holders of more than 50% of the
notes outstanding an acceleration of maturity or redemption of all of the notes
and accrued and unpaid interest upon the occurrence of a default event. Default
events include a) Note I fails to perform its obligations under the Note
Agreement, and such failure could


                                                                              17
<PAGE>
                             Trapeza Funding II, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


5. NOTE I (CONTINUED)

NOTES PAYABLE (CONTINUED)

reasonably be expected to have a material adverse effect on the interest of the
holders and has not been cured within thirty days after the date of an officer
obtaining actual knowledge of such default, or, b) a court or governmental
authority of competent jurisdiction enters an order appointing, without consent
of Note I, a custodian, receiver, trustee or each officer with similar powers
with respect to Note I or with respect to any substantial part of Note I's
property, or constituting an order for relief or reorganization or any petition
in bankruptcy or for liquidation or to take advantage of any bankruptcy or
insolvency law of any jurisdiction, or ordering the dissolution, winding-up or
liquidation of Note I, or any such petition shall be filed against the issuer
and such petition shall not be dismissed within sixty days.

6. ISSUER III

DEFERRED DEBT ISSUANCE COSTS

Deferred debt issuance costs of $7,863,460 are being amortized over the expected
life of the related debt using the effective interest method. The expected life
of the debt is the period ending with the distribution date occurring in July
2013, as defined in the indenture ("Indenture III"). Amortization of deferred
debt issuance costs commenced on June 25, 2003.

COLLATERAL MANAGEMENT AND TRUSTEE FEES

Pursuant to a collateral management agreement, the Collateral Manager is
entitled to a semiannual fee, payable in arrears on the distribution dates,
equal to 0.10% per annum of the semi-annual asset amount ("Base Collateral
Management Fee"), of the net outstanding portfolio collateral, as defined in
Indenture III. After certain expenses have been paid, the Collateral Manager is
entitled to an additional semiannual fee equal to 0.15% per annum, calculated in
the same manner as the Base Collateral Management Fee. For the years ended
December 31, 2005 and 2004, total collateral management fees were $750,000 and
$747,920, respectively, and are included in total collateral management fees
reflected on the consolidated statements of operations.


                                                                              18
<PAGE>
                             Trapeza Funding II, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


6. ISSUER III (CONTINUED)

COLLATERAL MANAGEMENT AND TRUSTEE FEES (CONTINUED)

Pursuant to a trustee agreement, the trustee is entitled to a semiannual fee, on
each distribution date, equal to 0.0225% per annum of the sum of the aggregate
principal amount of the investments plus cash and cash equivalents at the
beginning of the period relating to such distribution dates, as defined in
Indenture III. For the years ended December 31, 2005 and 2004, total trustee
fees were $84,342 and $83,874, respectively, and are included in total trustee
fees reflected on the consolidated statements of operations.

NOTES PAYABLE

On June 25, 2003, Issuer III issued Notes at their respective principal values,
which are secured by Issuer III's investments and are non-recourse to the
Company.

At December 31, 2005 and 2004, the Notes outstanding consisted of the following:
<TABLE>
<CAPTION>
                                                                  INTEREST
                      2005 PRINCIPAL       2004 PRINCIPAL           RATE          STATED MATURITY
                     -----------------    -----------------      ------------   ---------------------
<S>                 <C>                  <C>                     <C>             <C>
Class A1A Notes      $   108,497,331      $   108,497,331          Libor +        January 20, 2034
                                                                    0.63%

Class A1B Notes      $    71,500,000      $    71,500,000          Libor +        January 20, 2034
                                                                    0.85%

Class B Notes        $    25,000,000      $    25,000,000         See Class       January 20, 2034
                                                                    B note

Class C-1 Notes      $    31,250,000      $    31,250,000          Libor +        January 20, 2034
                                                                    1.75%

Class C-2 Notes      $    31,250,000      $    31,250,000          Libor +        January 20, 2034
                                                                    1.75%

Class D Notes        $    13,259,797      $    13,715,288          Libor +        January 20, 2034
                                                                    2.65%

Class E Notes        $     5,714,284      $     6,857,142          10.00%         January 20, 2034
</TABLE>

                                                                              19
<PAGE>
                             Trapeza Funding II, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


6. ISSUER III (CONTINUED)

NOTES PAYABLE (CONTINUED)

Pursuant to the terms of the Class B agency agreement, the holders of the Class
B Notes will be entitled to receive interest, certain third parties will be
entitled to receive compensation, at an aggregate, floating rate per annum not
to exceed Libor plus 1.05% in the aggregate after taking into consideration the
effect of a basis swap to be entered into in connection with the Class B Notes.

Holders of the Notes are to receive semiannual interest payments on January 20
and July 20, commencing in January 2004 (the "Initial Payment Date"). The order
of payment will be first to Class A1A, second, Class A1B, third, Class B,
fourth, Class C (includes Class C-1 and Class C-2), fifth to Class D and sixth
to Class E with each Class of Notes being senior to each of the other classes of
notes. No payments of interest on any class of Notes will be made until all
accrued and unpaid interest on the Notes of each class that is senior to a class
and that remain outstanding has been paid in full. No payment of principal of
any class of Notes will be made until the principal of, and all accrued and
unpaid interest, on the Notes of each class that is senior to such class and
that remain outstanding have been paid in full.

In the event that the coverage tests, as defined in Indenture III, are not
satisfied as of any distribution date, each class of Notes may be redeemed in
the manner specified in Indenture III.

Principal payments will be made in the following manner. First, payment of
principal of the Class A1A Notes until the Class A1A Notes have been paid in
full. Next, payment of principal on the Class A1B Notes until the Class A1B
Notes have been paid in full. Next, payment of principal on the Class B Notes
until the Class B Notes have been paid in full. Next, payment of principal of
the Class C Notes until the Class C Notes have been paid in full. Next, payment
of principal of the Class D Notes. Next, payment of principal of the Class E
Notes. Finally, the remainder to the members as a dividend on the members'
interests or as a return of capital of the members' interests as provided in the
Trapeza CDO III, LLC Agreement ("Agreement III").

If on any distribution date, the amount available in the payment account from
amounts received in the related due period are insufficient to make the full
amount of the disbursements required by the priority of payments to different
persons, the trustee will make the disbursements ratably in accordance with
Indenture III.

                                                                              20
<PAGE>
                             Trapeza Funding II, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


6. ISSUER III (CONTINUED)

NOTES PAYABLE (CONTINUED)

If the Notes and the members' interests have not been released prior to January
20, 2034, it is expected that Issuer III or Collateral Manager, acting on behalf
of Issuer III, will sell all of the investments and all eligible investments and
sell or liquidate all other collateral, and all net proceeds from such sales and
liquidations and all available cash after the payment (in the order of
priorities set forth above) of all (i) fees, (ii) expenses and (iii) interest
(including any defaulted interest and interest on defaulted interest, any Class
C deferred interest and interest on any Class C deferred interest and any Class
D deferred interest and interest on any Class D deferred interest and any Class
E deferred interest and interest on any Class E deferred interest) and principal
of the Notes, will be distributed to the members in accordance with the
Agreement III.

ACCELERATION OF MATURITY AND REDEMPTION

Indenture III provides for an acceleration of maturity or redemption of all of
the senior Notes and accrued and unpaid interest upon the occurrence of a
default event. Default events include a) failure of Issuer III to pay interest
for a period of three business days on any Class A or B senior Notes, b) failure
of Issuer III to pay principal of any senior Note when such payment becomes due
and payable at its stated maturity or redemption date, c) failure of Issuer III,
on any distribution date to disburse amounts available to the interest
collection account or principal collection account in accordance with the order
of the priority of payments set forth in Indenture III, which continues for
three business days, d) Issuer III or pool of collateral becomes an investment
company required to be registered under the Investment Company Act, e) default
in performance, or a breach, of any other covenant or other agreement of Issuer
III under Indenture III or any representation of warranty of Issuer III made in
Indenture III or in any certificate or other writing proves to be incorrect in
any material respect when made, and in both clauses, the continuation of such
default or breach for a period of thirty days after Issuer III or the General
Partner has actual knowledge that such default or breach has occurred or after
written notice to Issuer III and the General Partner by the trustee, or to
Issuer III, the General Partner and the Trustee by the holders of at least 25%
in aggregate outstanding principal amount of the Notes of the controlling class
or hedge counterparty, f) one or more final judgments being rendered against
Issuer III that exceed, in the aggregate, $5,000,000, and which remain unstayed,
undischarged and unsatisfied for thirty days after such judgment(s) becomes
nonappealable, unless adequate funds have been reserved or set aside for the
payment thereof, and g) failure, on any measurement date, to cause the Class A/B
overcollateralization ratio to be equal to or greater than 100%. Each of these
conditions is further described in Indenture III.

                                                                              21
<PAGE>
                             Trapeza Funding II, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


7. INTEREST RATE SWAP AGREEMENTS

The Company maintains a policy of valuing its derivative instruments at fair
values, with the resulting unrealized gain or loss included in the consolidated
statements of operations.

A swap is an agreement that obligates two parties to exchange a series of cash
flows at specified intervals based upon or calculated by reference to changes in
specified prices or rates for a specified amount of an underlying asset or
otherwise determined notional amount.

Risks may arise as a result of the failure of the counterparty to the swap
agreement. The loss incurred by the failure of a counterparty is generally
limited to the net payment to be received by the Company and/or the termination
value at the end of the agreement. Therefore, the Company considers the
creditworthiness of each counterparty to a swap agreement in evaluating
potential credit risk. Additionally, risks may arise from unanticipated
movements in interest rates.

The Company records a net receivable or payable for the net income or expense
expected to be received or paid in the interest period. Net amounts received or
paid on swap agreements are recorded as interest income or interest expense on
the consolidated statements of operations. The amount recorded as interest
income on basis swap agreements for the years ended December 31, 2005 and 2004
totaled $197,269 and $153,097, respectively.

The Company entered into interest rate swap agreements with Credit Suisse First
Boston ("CSFB") for the purpose of hedging interest rate and cash flow risk
between the fixed-rate investments and floating-rate investments.


                                                                              22
<PAGE>
                             Trapeza Funding II, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


7. INTEREST RATE SWAP AGREEMENTS (CONTINUED)

At December 31, 2005 and 2004, the Company had nine interest rate swap
agreements outstanding with CSFB, which pay as follows:
<TABLE>
<CAPTION>
                                   FLOATING RATE          RATE/AMOUNT                 DECEMBER 31
    NOTIONAL         MATURITY       RECEIVED BY           PAID BY THE            2005              2004
     AMOUNT            DATE         THE COMPANY             COMPANY           FAIR VALUE        FAIR VALUE
 ----------------    ---------    -----------------    ------------------    --------------    -------------
<S>                   <C>         <C>                  <C>                   <C>                <C>
  $  3,330,000        4/5/10      6 month Libor              7.375%          $   125,378        $   11,970
                                    + 3.4425%
  $  8,670,000        4/5/08      6 month Libor              6.65%               279,301            50,098
                                     + 3.30%
  $ 13,330,000        4/5/08      6 month Libor              6.75%               413,468            54,714
                                     + 3.35%
  $ 13,330,000        4/5/08      6 month Libor              6.335%              545,880           239,893
                                     + 3.35%
  $ 13,330,000        4/5/08      6 month Libor              8.10%               452,246           106,241
                                     + 4.69%
  $ 47,330,000        4/5/08      6 month Libor              6.952%            1,205,244          (173,298)
                                     + 3.32%
  $ 69,500,000       7/20/08      6 month Libor              6.35%             3,025,285         1,025,085
                                     + 3.25%
  $ 25,000,000       7/20/13      6 month Libor         6 month Libor +         (555,025)         (355,381)
                                    + 1.0875%                1.05%
  $  9,000,000       7/20/08      6 month Libor              6.05%               442,046           199,715
                                     + 3.145%
                                                                             -----------        ----------
                                                                             $ 5,933,823        $1,159,037
                                                                             ===========        ==========
</TABLE>

At December 31, 2005 and 2004, the Company had one interest rate cap agreement
outstanding with CSFB, which pays on a semi-annual basis as follows:
<TABLE>
<CAPTION>
                                   FLOATING RATE          RATE/AMOUNT                 DECEMBER 31
    NOTIONAL         MATURITY       RECEIVED BY           PAID BY THE            2004              2003
     AMOUNT            DATE         THE COMPANY             COMPANY           FAIR VALUE        FAIR VALUE
 ----------------    ---------    -----------------    ------------------    --------------    -------------
<S>                  <C>          <C>                   <C>                  <C>               <C>
  $ 82,000,000        4/5/07           N/A                  $ 69,000         $   (68,024)      $  (186,950)
</TABLE>


                                                                              23
<PAGE>
                             Trapeza Funding II, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


8. RELATED PARTY TRANSACTIONS

The Partnership pays Funding an administration fee (payable semi-annually in
advance) equal to one and one-half percent (1.5%) per annum of the aggregate
capital accounts of the limited partners, which will be used to cover management
fees and other ordinary and recurring administrative and related operating
expenses. For the years ended December 31, 2005 and 2004, administration fees
totaled $603,039 and $615,848, respectively.

In exchange for interests sold on behalf of the Partnership, Funding pays
external broker-dealers an administration fee, equal to the percentage of equity
raised by the broker-dealer multiplied by one-third of the total administration
fee being charged by Funding to the Partnership. For the years ended December
31, 2005 and 2004, total administration fee expense equaled $102,584 and
$104,762, respectively.



                                                                              24
<PAGE>

                                                                     Schedule d)










    TRAPEZA FUNDING II, LLC

    CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

    Years ended December 31, 2004 and 2003






<PAGE>


                             Trapeza Funding II, LLC

                        Consolidated Financial Statements
                     Years ended December 31, 2004 and 2003
                                    Unaudited




                                    CONTENTS





Consolidated Statements of Financial Condition................................1
Consolidated Schedule of Investments..........................................2
Consolidated Statements of Operations.........................................5
Consolidated Statements of Changes in Members' Interests......................6
Consolidated Statements of Cash Flows.........................................7
Notes to Consolidated Financial Statements....................................8



<PAGE>
                             Trapeza Funding II, LLC

                 Consolidated Statements of Financial Condition

                                    Unaudited
<TABLE>
<CAPTION>
                                                                            DECEMBER 31
                                                                      2004               2003
                                                                  -------------      -------------
<S>                                                              <C>                <C>
ASSETS
Investments in trust preferred securities, at fair value
  (amortized cost $690,569,714 and $694,039,293)                  $ 696,246,408      $ 693,562,530
Cash and cash equivalents                                            15,255,017         15,560,247
Deferred debt issuance costs (net of accumulated amortization
  of $2,562,385 and $1,018,891)                                      15,432,306         16,975,800
Interest receivable on trust preferred securities                     3,555,918          3,227,652
Prepaid expenses                                                         26,796             10,007
Unrealized appreciation on swap agreements                              972,087                  -
                                                                  -------------      -------------
Total Assets                                                      $ 731,488,532      $ 729,336,236
                                                                  =============      =============

LIABILITIES AND MEMBERS' INTERESTS
Liabilities
   Class A1A notes                                                $ 240,496,445      $ 240,499,496
   Class A1B notes                                                  171,500,000        171,499,618
   Class B notes                                                     52,000,000         52,000,000
   Class C-1 notes                                                   74,750,000         74,750,000
   Class C-2 notes                                                   86,050,000         86,050,000
   Class D notes                                                     32,165,288         32,950,000
   Class E notes                                                      5,142,856          6,000,000
   Class BB notes                                                     7,857,143          9,285,714
   Interest payable                                                   7,505,789          6,234,385
   Unrealized depreciation on swap agreements                                 -            416,463
   Professional fees                                                    174,134            151,728
   Collateral management fees                                           591,507            639,705
   Net interest payable to swap counterparty                            759,841          1,425,010
   Trustee fees                                                          68,420             73,471
   Accrued expenses                                                     111,667            142,656
                                                                  -------------      -------------
Total Liabilities                                                   679,173,090        682,118,246
                                                                  -------------      -------------

Minority interest                                                    50,882,576         46,680,805

Members' Interests                                                    1,432,866            537,185
                                                                  -------------      -------------

Total Liabilities and Members' Interests                          $ 731,488,532      $ 729,336,236
                                                                  =============      =============
</TABLE>

See accompanying notes to consolidated financial statements.

                                                                               1
<PAGE>
                             Trapeza Funding II, LLC

                      Consolidated Schedule of Investments

                                    Unaudited
<TABLE>
<CAPTION>
                                                                 PRINCIPAL                       PRINCIPAL
                                                                  AMOUNT         2004 FAIR        AMOUNT      2003 FAIR
                                                                  (000)            VALUE          (000)         VALUE
                                                                 ---------       ---------       ---------    ---------
<S>                                                            <C>              <C>             <C>          <C>
INVESTMENTS IN TRUST PREFERRED SECURITIES - (100%) *
BANKS (80.14% AND 80.15%)*
B.P.C. Corp Statutory Trust I, 3 month libor + 3.250%, due
  6/18/2033 (a)                                                 $   3,000       $ 3,000,000     $  3,000     $ 3,000,000
Bank of Kentucky Capital Trust I, 3 month libor +3.350%, due
  11/14/2032 (a)                                                    6,000         6,000,685        6,000       6,000,697
Benjamin Franklin Capital Trust I, 6.940%, due 11/01/2032 (a)       9,000         8,929,802        9,000       8,929,001
BNC Bancorp Capital Trust I, 3 month libor + 3.250%, due
  4/15/2033 (a)                                                     5,000         4,951,356        5,000       4,950,525
Catawba Valley Capital Trust I, 3 month libor + 3.35%, due
  12/30/2032 (a)                                                    5,000         4,946,116        5,000       4,945,217
Catawba Valley Capital Trust II, 6.850%, due 12/30/2032 (a)         5,000         4,945,609        5,000       4,944,987
Cathay Capital Trust I, 3 month libor + 3.150%, due
  6/30/2033 (a)                                                     6,550         6,550,000        6,550       6,550,000
Century Bancshares Capital Trust I, 6.850%, due 1/15/2033 (a)       3,000         3,003,431        3,000       3,003,470
CIB Statutory Trust V, 3 month libor + 3.400%, due 9/27/2032            -                 -        9,000       5,400,000
Colonial Capital II, 8.920%, due 1/15/2027                         10,500        11,635,323       10,500      10,972,500
Community Bankshares Capital Trust IV, 6 month libor + 3.300%,
  due 4/15/2033 (a)                                                 5,000         5,013,654        5,000       5,013,887
Corus Statutory Trust II, 3 month libor + 3.100%, due
  6/30/2033 (a)                                                     9,000         8,931,197        9,000       8,929,953
CPB Capital Trust I, 3 month libor + 3.250%, due 4/7/2033 (a)       5,000         5,000,000        5,000       5,000,000
F.N.B Statutory Trust I, 3 month libor + 3.250%, due
  3/31/2033 (a)                                                     9,000         9,000,000        9,000       9,000,000
FBOP Capital Trust XII, 6 month libor + 3.625%, due
  7/30/2032 (a)                                                     1,000         1,000,000        1,000       1,000,000
FBOP Capital Trust XV, 6 month libor + 3.625%, due
  12/15/2032 (a)                                                   14,000        14,000,000       14,000      14,000,000
FBR Capital Trust I, 3 month libor + 3.250%, due 3/30/2033 (a)     19,000        18,852,747       19,000      18,850,241
First Banks Statutory Trust I, 8.100%, due 3/20/2033 (a)           21,000        21,000,000       21,000      21,000,000
First Financial Statutory Trust II, 3 month libor + 3.100%, due
  9/30/2033 (a)                                                     9,000         9,000,000        9,000       9,000,000
First Group Capital Statutory Trust III, 3 month libor + 3.35%,
  due 11/15/2032 (a)                                                5,000         5,040,103        5,000       5,040,788
First Group Capital Statutory Trust V, 3 month libor + 3.250%,
  due 4/15/2033 (a)                                                15,000        15,096,875       15,000      15,098,531
First Indiana Capital Trust I, 6.920%, due 10/30/2032 (a)          10,000         9,991,629       10,000       9,991,533
First Mariner Capital Trust II, 3 month libor + 3.350%, due
  12/10/2032 (a)                                                    4,000         3,962,183        4,000       3,961,542
First Mutual Capital Trust II, 6.870%, due 1/15/2033 (a)            4,000         3,954,426        4,000       3,953,907
First National Bank Group Inc, 6.580%, due 4/7/2013 (a)             8,500         8,312,023        8,500       8,309,805
First South Bancorp Statutory Trust I, 3 month libor + 3.250%,
  due 6/9/2033 (a)                                                  9,000         9,000,000        9,000       9,000,000
First Southern Bancorp Statutory Trust I, 3 month libor +
  3.250%, due 2/19/2033 (a)                                        11,000        11,000,000       11,000      11,000,000
FNB Statutory Trust I, 3 month libor + 3.250%, due 3/31/2033 (a)   13,330        13,330,000       13,330      13,330,000
FNB/MT Statutory II, 3 month libor + 3.250%, due 5/30/2033 (a)      5,000         4,996,585        5,000       4,996,528
Franklin Bancorp Capital Trust I, 3 month libor + 3.250%, due
  2/25/2033 (a)                                                     7,000         6,931,106        7,000       6,929,935
GB&T Bancshares Statutory Trust I, 3 month libor + 3.400%, due
  10/30/2032 (a)                                                    4,000         4,000,000        4,000       4,000,000
Guaranty (TX) Capital Trust II, 7.940%, due 10/30/2032 (a)          3,000         3,000,492        3,000       3,000,496
Hanmi Capital Trust II, 3 month libor + 2.90%, due 3/15/2034 (a)    5,301         5,301,000            -               -
Hudson United Capital Trust I, 6 month libor + 3.300%, due
  3/31/2033 (a)                                                    20,000        19,930,002       20,000      19,929,216
IBC Capital Financial II, 8.250%, due 12/31/2026 (a)                  300           300,000          300         300,000
Iberiabank Statutory Trust II, 3 month libor + 3.150%, due
  6/17/2033 (a)                                                     9,000         9,041,869        9,000       9,042,614
ITLA Capital Statutory Trust III, 6 month libor + 3.400%, due
  10/30/2032 (a)                                                    9,000         8,920,534        9,000       8,919,372
ITLA Capital Statutory Trust IV, 6 month libor + 3.400%, due
  12/10/2032 (a)                                                    4,330         4,292,102        4,330       4,291,477
Lakeland Bancorp Capital Trust II, 5.710%, due 6/30/2033 (a)        9,000         8,959,637        9,000       8,959,088
Macatawa Statutory Trust I, 3 month libor + 3.050%, due
  7/15/2033 (a)                                                     9,000         9,000,000        9,000       9,000,000
Main Street Banks Statutory Trust II, 3 month libor + 3.250%,
  due 6/30/2033 (a)                                                 9,000         9,000,000        9,000       9,000,000
MainSource Statutory Trust II, 3 month libor + 3.250%, due
  4/1/2033 (a)                                                     14,000        14,000,000       14,000      14,000,000
MainSource Statutory Trust III, 3 month libor + 3.150%, due
  6/15/2033 (a)                                                     7,000         6,987,817        7,000       6,987,603
Mariner Capital Trust II, 3 month libor + 3.350%, due
  12/10/2037 (a)                                                    2,000         1,980,774        2,000       1,980,538
MBNA Capital B, 3 month libor + 0.800%, due 2/1/2027                7,000         6,629,000        7,000       6,090,000
</TABLE>
                                                                               2
<PAGE>
                             Trapeza Funding II, LLC

                Consolidated Schedule of Investments (continued)

                                    Unaudited
<TABLE>
<CAPTION>
                                                                 PRINCIPAL                     PRINCIPAL
                                                                  AMOUNT       2004 FAIR        AMOUNT      2003 FAIR
                                                                  (000)          VALUE          (000)         VALUE
                                                                 ---------     ---------       ---------    ---------
<S>                                                            <C>              <C>             <C>          <C>
INVESTMENTS IN TRUST PREFERRED SECURITIES - (100%) *
BANKS (80.14% AND 80.15%)* - CONTINUED
Merchants & Manufacturers Statutory Trust I, 3 month libor +
  3.350%, due 11/12/2032 (a)                                        2,000      2,000,000         2,000      2,000,000
Merchants and Manufacturers Statutory Trust II, 8.250%, due
  5/30/2033 (a)                                                     9,000      9,000,000         9,000      9,000,000
Mystic Financial Capital Trust II, 3 month libor + 3.250%, due
  2/15/2033 (a)                                                     7,000      6,923,354         7,000      6,922,045
Nara Capital Trust III, 3 month libor + 3.150%, due
  6/15/2033 (a)                                                     5,000      4,972,210         5,000      4,971,731
New Mexico Banquest Capital Trust I, 3 month libor + 3.350%,
  due 12/19/2032 (a)                                                9,000      9,066,494         9,000      9,067,609
North American Capital Trust I, 3 month libor + 3.35%, due
  11/15/2032 (a)                                                    5,000      5,120,308         5,000      5,122,361
Northrim Capital Trust I, 3 month libor + 3.150%, due
  5/15/2033 (a)                                                     8,000      7,916,149         8,000      7,914,700
Old Second Capital I, 7.800%, due 6/30/2033 (a)                     1,500      1,500,000         1,500      1,500,000
Orion Bancorp Inc Statutory Trust I, 3 month libor + 3.250%,
  due 5/5/2033 (a)                                                  9,000      9,000,000         9,000      9,000,000
Pacific Crest Capital Trust I, 6.335%, due 3/20/2033 (a)           13,330     13,485,058        13,330     13,486,985
Pacific Crest Capital Trust II, 6.580%, due 4/30/2033 (a)           6,000      6,023,102         6,000      6,023,373
Provident Capital Trust I, 8.600%, due 12/1/2026                    9,395      9,886,754         9,395      9,223,669
Provident Trust I, 8.290%, due 4/15/2028                            6,500      6,745,414         6,500      6,565,001
Red River Statutory Trust II, 3 month libor + 3.250%, due
  5/28/2033 (a)                                                     3,000      3,000,000         3,000      3,000,000
Seacoast Capital Trust II, 6.650%, due 4/7/2033 (a)                 5,000      5,000,000         5,000      5,000,000
South Financial Capital Trust II, 6 month libor + 3.625%, due
  7/30/2032 (a)                                                     6,500      6,436,875         6,500      6,435,831
Southcoast Capital Trust II, 3 month libor + 3.350%, due
  12/16/2032 (a)                                                    7,000      6,933,747         7,000      6,932,636
State National Capital Trust I, 3 month libor + 3.050%, due
  9/30/2033 (a)                                                     6,000      6,014,811         6,000      6,015,073
Stearns Financial Capital Trust, 3 month libor + 3.150%, due
  3/30/2033 (a)                                                    10,000      9,984,485        10,000      9,984,216
Sterling Bank Houston Texas, 7.375%, due 4/15/2013                 12,330     12,435,494        12,330     12,363,300
Sterling Bancshares Statutory Trust I, 3 month libor + 3.450%,
  due 8/30/2032 (a)                                                10,000     10,000,000        10,000     10,000,000
UCBH Capital Trust II, 3 month libor + 3.450%, due 11/7/2032 (a)    9,000      9,000,000         9,000      9,000,000
Umpqua Statutory Trust II Units, 3 month libor + 3.350%, due
  10/17/2032 (a)                                                    9,000      8,886,065         9,000      8,884,111
United Bancorporation of Wyoming Capital Trust I, 3 month libor
  + 3.100%, due 9/30/2033 (a)                                       6,000      6,011,696         6,000      6,011,901
VCBI Capital Trust II, 6 month libor + 3.300%, due
  12/19/2032 (a)                                                    1,670      1,659,776         1,670      1,659,604
Virginia Capital Trust II, 6 month libor + 3.300%, due
  12/19/2032 (a)                                                   13,330     13,248,814        13,330     13,247,446
Wesbanco Capital Trust II, 5.800%, due 6/30/2033 (a)                9,000      8,985,404         9,000      8,985,209
Woodforest Statutory Trust IV, 3 month libor + 3.250%, due
  3/3/2033 (a)                                                     10,000     10,000,000        10,000     10,000,000
                                                                             -----------                  -----------
Total Banks (amortized cost $553,379,484 and $556,896,380)                   557,954,087                  555,920,252
                                                                             -----------                  -----------
</TABLE>
                                                                               3
<PAGE>
                             Trapeza Funding II, LLC

                Consolidated Schedule of Investments (continued)

                                    Unaudited
<TABLE>
<CAPTION>
                                                                 PRINCIPAL                     PRINCIPAL
                                                                  AMOUNT       2004 FAIR        AMOUNT      2003 FAIR
                                                                  (000)          VALUE          (000)         VALUE
                                                                 ---------     ---------       ---------    ---------
<S>                                                            <C>              <C>             <C>          <C>
INVESTMENTS   IN  TRUST   PREFERRED   SECURITIES  -  (100%)  *
  (CONTINUED)
THRIFTS (19.86% AND 19.85%)
BankUnited Statutory Trust IV, 3 month libor + 3.400%, due
  11/14/2032 (a)                                                  6,000         6,000,000        6,000      6,000,000
BBC Capital Trust VI, 3 month libor + 3.350%, due
  12/10/2032 (a)                                                 15,000        14,862,123       15,000     14,860,136
BBC Capital Trust XII, 6.650%, due 4/7/2033 (a)                   3,670         3,670,000        3,670      3,670,000
Beal Financial Trust I, 6 month libor + 3.625%, due
  7/30/2032 (a)                                                   9,000         8,912,596        9,000      8,911,151
Beal Financial Trust II, 3 month libor + 3.350%, due
  3/27/2033 (a)                                                  13,000        12,889,932       13,000     12,888,086
Capital One Capital I, 3 month libor + 1.550%, due 2/1/2027       4,000         3,980,000        4,000      3,400,000
Coastal Financial Capital Trust I, 3 month libor + 3.050%,
  due 7/3/2033 (a)                                                9,000         9,080,066        9,000      9,081,503
Flagstar Statutory Trust IV, 6.750%, due 3/19/2033 (a)           22,330        22,235,082       22,330     22,233,989
Franklin Bank Capital Trust I, 3 month libor + 3.35%, due
  11/15/2032 (a)                                                  9,000         8,920,702        9,000      8,919,349
HFC Capital Trust IV, 6 month libor +3.350%, due
  11/15/2032 (a)                                                  6,550         6,408,292        6,550      6,405,987
IndyMac Capital Trust, 6.050%, due 7/11/2033 (a)                  9,000         8,973,149        9,000      8,972,806
Progress Capital Trust III, 3 month libor + 3.350%, due
  11/15/2032 (a)                                                  4,000         3,966,970        4,000      3,966,406
Sterling Capital Trust IV, 3 month libor + 3.150%, due
  5/15/2033 (a)                                                   9,000         8,968,409        9,000      8,967,864
Waypoint Capital Trust II, 3 month libor + 3.300%, due
  1/7/2033 (a)                                                    3,000         3,000,000        3,000      3,000,000
Waypoint Statutory Trust III, 3 month libor + 3.250%, due
  3/13/2033 (a)                                                  15,000        15,000,000       15,000     15,000,000
WSFS Capital Trust I, 3 month libor +2.500%, due 12/1/2028        1,500         1,425,000        1,500      1,365,001
                                                                             ------------                ------------
Total Thrifts (amortized cost $137,190,229 and $137,142,913)                  138,292,321                 137,642,278
                                                                             ------------                ------------
Total Investments in Trust Preferred Securities (amortized
cost $690,569,713 and $694,039,293)                                          $696,246,408                $693,562,530
                                                                             ============                ============


                                                                              FAIR VALUE                   FAIR VALUE
                                                                            ---------------              ---------------
INTEREST RATE SWAP AGREEMENTS
Credit Suisse First Boston                                                    $   972,087                  $  (416,463)
                                                                              -----------                  -----------
Total Interest Rate Swap Agreements                                           $   972,087                  $  (416,463)
                                                                              ===========                  ===========
</TABLE>

*Amounts in parenthesis indicate percentage of investments in trust preferred
securities.
(a) Private placement, illiquid securities, where amortized cost approximates
fair value.

See accompanying notes to consolidated financial statements.

                                                                               4
<PAGE>
                             Trapeza Funding II, LLC
                      Consolidated Statements of Operations
                                    Unaudited
<TABLE>
<CAPTION>
                                                                       YEAR ENDED DECEMBER 31,
                                                                      2004               2003
                                                                  -------------      -------------
<S>                                                              <C>                <C>
INVESTMENT INCOME
Interest                                                          $  38,700,292      $  28,084,015
Reimbursement fees                                                            -            855,093
                                                                  -------------      -------------
TOTAL INVESTMENT INCOME                                              38,700,292         28,939,108
                                                                  -------------      -------------

EXPENSES
Interest                                                             23,374,628         16,375,576
Collateral management fees                                            1,741,272          1,195,421
Amortization                                                          1,559,366          1,034,381
Trustee fees                                                            249,125            139,278
Professional fees                                                       196,742            710,322
Administration fees                                                     104,762            102,243
Wages, payroll taxes and benefits                                             -            141,220
Travel, meals and entertainment                                               -             73,664
Overhead                                                                      -             73,615
Printing and copying                                                          -              3,214
Delivery services                                                             -                736
Other                                                                   293,664            356,292
                                                                  -------------      -------------
Total expenses                                                       27,519,559         20,205,962
                                                                  -------------      -------------
NET INVESTMENT INCOME                                                11,180,733          8,733,146
                                                                  -------------      -------------

Net realized gain (loss) and unrealized appreciation
  (depreciation) on investment transactions:
Net realized loss on investment transactions                         (3,616,391)                 -
Net unrealized appreciation (depreciation) on investments
  in trust preferred securities                                       6,153,459           (476,764)
Net unrealized appreciation (depreciation) on interest
  rate swap agreements                                                1,388,550            (61,789)
                                                                  -------------      -------------
Net realized gain (loss) and unrealized appreciation
  (depreciation) on investment transactions                           3,925,618           (538,553)
                                                                  -------------      -------------

Net income before minority interest                                  15,106,351          8,194,593
Minority interest                                                    12,226,236          6,110,384
                                                                  -------------      -------------
NET INCOME                                                        $   2,880,115      $   2,084,209
                                                                  ============       =============
</TABLE>

See accompanying notes to consolidated financial statements.


                                                                               5
<PAGE>
                             Trapeza Funding II, LLC

            Consolidated Statements of Changes in Members' Interests

                     Years Ended December 31, 2004 and 2003

                                    Unaudited



Balance at January 1, 2003                                    $     26,500
   Placement costs                                                      (1)
   Offering costs                                                       (1)
   Net income                                                    2,084,209
   Distributions to members                                     (1,573,522)
                                                              ------------
Balance at December 31, 2003                                       537,185
   Net income                                                    2,880,115
   Distributions to members                                     (1,984,434)
                                                              ------------
Balance at December 31, 2004                                  $  1,432,866
                                                              ============


See accompanying notes to consolidated financial statements.


                                                                               6

<PAGE>
                             Trapeza Funding II, LLC
                      Consolidated Statements of Cash Flows
                                    Unaudited
<TABLE>
<CAPTION>
                                                                         YEAR ENDED DECEMBER 31,
                                                                        2004                  2003
                                                                   -------------         --------------
<S>                                                               <C>                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                                         $   2,880,115         $    2,084,209
Adjustments to reconcile net income to net cash and cash
  equivalents provided by (used in) operating activities:
   Amortization of deferred debt issuance costs                        1,543,494              1,018,891
   Accretion of discount on investments in trust preferred
    securities                                                          (146,810)              (105,414)
   Minority interest                                                   4,201,771              8,024,947
   Net realized loss on investment transactions                        3,616,391                      -
   Net unrealized (appreciation) depreciation on investment
    transactions                                                      (7,542,009)               538,553
   Net change in operating assets and liabilities:
     Investment in trust preferred securities                                  -           (586,432,449)
     Interest receivable on trust preferred securities                  (328,266)            (1,504,284)
     Due from affiliate                                                        -                233,222
     Prepaid expenses                                                    (16,789)               (10,007)
     Other                                                                     -                    100
     Warehouse facility payable                                                -           (107,782,033)
     Interest payable                                                  1,271,404              5,942,581
     Professional fees                                                    22,406                (11,531)
     Collateral management fees                                          (48,198)               639,705
     Net interest payable to swap counterparty                          (665,169)             1,376,760
     Trustee fees                                                         (5,051)                73,471
     Accrued expenses                                                    (30,989)                (1,858)
                                                                   -------------         --------------
Net cash and cash equivalents provided by (used in) operating
  activities                                                           4,752,300           (675,915,137)
                                                                   -------------         --------------

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of notes                                                -            673,750,000
Principal payments on notes                                           (3,073,096)              (715,172)
Deferred debt issuance costs                                                   -            (17,994,692)
Proceeds from capital contributions, net of placement costs                    -                     (1)
Payments of offering costs                                                     -                     (1)
Distributions to members                                              (1,984,434)            (1,573,522)
                                                                   -------------         --------------
Net cash and cash equivalents (used in) provided by financing
  activities                                                          (5,057,530)           653,466,612
                                                                   -------------         --------------

Net decrease in cash and cash equivalents                               (305,230)           (22,448,525)
Cash and cash equivalents, beginning of year                          15,560,247             38,008,772
                                                                   -------------         --------------
Cash and cash equivalents, end of year                             $  15,255,017         $   15,560,247
                                                                   =============         ==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid                                                      $  22,976,508         $    9,056,235
                                                                   =============         ==============
</TABLE>

See accompanying notes to consolidated financial statements.

                                                                               7
<PAGE>
                             Trapeza Funding II, LLC

              Notes to Consolidated Unaudited Financial Statements

                                December 31, 2004

1. ORGANIZATION AND PURPOSE

Trapeza Funding II, LLC ("Funding"), was organized on August 26, 2002 as a
Delaware limited liability company. Funding commenced operations on November 1,
2002. Funding was organized for the purpose of being the general partner (the
"General Partner"), of Trapeza Partners II L.P. (the "Partnership"). Per the
partnership agreement, the limited partners have no right to remove Funding at
any time. Funding has complete and exclusive control of the management of the
business affairs of the Partnership.

The Partnership was organized on September 27, 2002 as a Delaware limited
partnership. The Partnership commenced operations on November 19, 2002. The
Partnership was organized for the purpose of investing in membership interests
and other securities to be issued by Trapeza CDO II, LLC ("Issuer II"), an
affiliated collateralized debt obligation, which was formed by Funding. On May
15, 2003, Trapeza Note I, LLC ("Note I") was formed to issue Class BB fixed rate
notes, purchase 100% of the membership interests of Issuer II and return a
portion of equity to the Partnership for the purpose of investing in membership
interests and other securities to be issued by Trapeza CDO III, LLC ("Issuer
III"), an affiliated collateralized debt obligation. Issuer III closed on June
25, 2003. The Partnership has an 11-year term, which the General Partner may
extend on a year-to-year basis.

All material intercompany transactions have been eliminated. Minority interest
reflects the 99.99% of partners' interest of the limited partners of the
Partnership. The consolidated entity is referred to as the "Company."

Funding and the Collateral Manager are owned equally by Financial Stocks, Inc.
("FSI") and Resource Financial Fund Management, Inc., a wholly owned subsidiary
of Resource America, Inc. ("REXI") (collectively, the "Owners"). FSI is a
Registered Investment Adviser under the Investment Advisers Act of 1940. REXI is
a publicly traded company operating in energy, real estate and financial
services sectors. The Owners and certain officers and directors of the Owners
hold partnership interests of approximately 17% of the Partnership. Funding has
complete and exclusive control of the management of the business affairs of the
Partnership.


                                                                               8
<PAGE>
                             Trapeza Funding II, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


1. ORGANIZATION AND PURPOSE (CONTINUED)

Issuer II and Issuer III's objective is to purchase, acquire, own, hold, sell,
endorse, transfer, assign, pledge, finance, refinance, exchange, restructure,
workout, advance and collect funds pursuant to and otherwise deal with and
exercise rights of ownership with respect to the collateral of Issuer II and
Issuer III, including other securities or equity interests owned from time to
time by Issuer II and Issuer III, all in accordance with the terms of the
indentures.

Trapeza Capital Management, LLC (the "Collateral Manager"), a Delaware limited
liability company, is responsible for supervising and directing the investment
the collateral of Issuer II and Issuer III. Issuer II and III are charged a
collateral management fee by the Collateral Manager, who is affiliated with
Funding through common ownership.

The business and affairs of Funding are managed by a Board of Managers. The
Board of Managers has full, complete and exclusive authority, power and
discretion to manage and control the business affairs and properties of Funding,
to make all decisions regarding those matters and to perform any activities
customary or incident to the management of Funding's business.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of the significant accounting policies followed by
the Company in the preparation of its financial statements.

BASIS OF ACCOUNTING

The Company's accounting policies are in conformity with accounting principles
generally accepted in the United States. The Company maintains its financial
records in United States dollars. For financial reporting purposes, the Company
follows the accrual basis of accounting.

CASH AND CASH EQUIVALENTS

The Company considers all demand deposits with banks and other highly liquid
investments with original maturities of three months or less to be cash
equivalents.

                                                                               9
<PAGE>
                             Trapeza Funding II, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

INVESTMENT TRANSACTIONS

The Company records transactions on their trade dates. Realized gains and losses
on investments are determined on the specific identification basis for financial
accounting purposes. Interest is accrued as earned or incurred and includes the
amortization/accretion of premiums and discounts on debt securities.

INVESTMENT VALUATION

Investments are carried at market or fair value. Securities for which market
quotations are not readily available are valued by procedures adopted by
Funding. In valuing investments in which market quotations are not readily
available, Funding utilizes data from a variety of different sources, taking
into account the characteristics of a security, any changes in the credit
quality of the securities in the portfolio, the overall movement of interest
rates and other factors which, in Funding's good faith and judgment, are
relevant to the value of a security. For exchange-traded securities, management
will obtain current market data and quotes from independent brokers.

The Company has invested a significant portion of the portfolio in private
placement, illiquid issues having no ready market. At December 31, 2004, these
securities aggregate $643,509,423 and have been valued in good faith by Funding
as described in the preceding paragraph. Because of the inherent uncertainty of
valuation, the fair values estimated by Funding may not necessarily represent
the amounts that could be realized from sales or other dispositions of
investments and the differences may be material.

CREDIT RISKS AND GENERAL LIQUIDITY CONSIDERATIONS

Investments in trust preferred securities are subject to credit, interest rate
and liquidity risks. Adverse changes in the financial condition of an issuer of
trust preferred securities or in general economic conditions or both may impair
the ability of the issuer to make payments of principal and interest. Debt
obligations are also subject to liquidity risk and the risk of market price
fluctuations. Adverse changes in the financial condition of an issuer may affect
the liquidity of the market for an issuer's securities and may reduce the market
price of such securities. In addition, changes in general economic and
regulatory conditions may affect the liquidity of the market for trust preferred
securities in general and may reduce the values of some or all of the
securities.

                                                                              10
<PAGE>
                             Trapeza Funding II, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

OFFERING COSTS

During 2003, the Partnership incurred offering costs related to the closing of
Issuer II and Issuer III of $247,867 and $192,446, respectively, of which $1 and
$0 was allocated to Funding, respectively. These costs were charged directly to
the partners' capital accounts.

ALLOCATION OF PROFITS AND LOSSES

The Company allocates profits to the members in proportion to their respective
capital account balances until the cumulative profits for this current period
and all prior fiscal years are equal to the cumulative losses allocated;
thereafter, among the members in proportion to their respective units. Losses
shall be allocated to the members in proportion to their respective capital
account balances.

Funding's investment in the Partnership is accounted for based on its pro-rata
share of its investment in the Partnership. Profits and losses from
non-portfolio income are allocated to all members in proportion to their
allocable shares. Twenty percent (20%) of the cumulative net profits from
portfolio investments are allocated to Funding.

Non-portfolio income of the Partnership, consisting primarily of income earned
on short-term investments, is allocated to all limited partners in proportion to
their respective capital account balances prior to the allocation of any other
item.

Portfolio income of the Partnership, consisting primarily of interest income and
profits and losses from the sale of such investments, are allocated to all
partners of the Partnership in proportion to their respective contributed
capital of the Partnership in relation to total contributed capital, but 20% of
the cumulative net profits otherwise allocable to all partners will be allocated
to Funding, defined as the incentive allocation. For the years ended December
31, 2004 and 2003, Funding received an incentive allocation of $2,430,901 and
$1,282,064, respectively.

TAXATION

The Company is treated as a partnership for Federal income tax purposes and,
therefore, no provision for federal income tax is recorded.

                                                                              11
<PAGE>
                             Trapeza Funding II, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities as of
the date of the financial statements and the reported amounts of income and
expenses during the reporting period. Actual results could differ from those
estimates.

3. CONTRIBUTIONS, WITHDRAWALS AND DISTRIBUTIONS

As of December 31, 2004, the Company has 100 membership units issued and
outstanding. No member shall be required to make any additional contributions
beyond their initial contribution. If the Board of Managers unanimously
determines that the Company requires additional funds, any member may, but is
not obligated to, advance such funds. For the years ended December 31, 2004 and
2003, the Company received no contributions from the members.

No member shall have the right to withdraw any of its capital contribution,
except upon dissolution and liquidation of the Company. For the years ended
December 31, 2004 and 2003, the Company made distributions of $1,984,434 and
$1,573,522, respectively, to the members.

In accordance with the partnership agreement, each partner has contributed a
specified amount of capital which is set forth in the partnership agreement. No
limited partner is required to contribute any capital in excess of its
commitment. As of December 24, 2002, all commitments of the Partnership were
fully funded.

A limited partner will not have the right to redeem its interest in the
Partnership. Funding, in its sole discretion, may redeem all or part of the
partnership interest of any limited partner, for an amount equal to the capital
account of the partnership interest being redeemed, if the limited partner
consents to such redemption and all redemptions in any year do not exceed five
percent of the aggregate allocable percentage of all limited partners.


                                                                              12
<PAGE>
                             Trapeza Funding II, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


3. CONTRIBUTIONS, WITHDRAWALS AND DISTRIBUTIONS (CONTINUED)

Funding will cause the Partnership to distribute the lesser of (i) ninety
percent (90%) of cash available from profits and (ii) all cash then available to
the partnership less any reserves for partnership expenses or liabilities. All
other distributions will be at the discretion of Funding. Funding will determine
at its sole discretion the source of funds for all distributions. For the years
ended December 31, 2004 and 2003, the Partnership made distributions of
$8,138,564 and $3,689,493, respectively, to the partners.

4. ISSUER II

DEFERRED DEBT ISSUANCE COSTS

Deferred debt issuance costs of $9,831,231 are being amortized over the expected
life of the related debt using the effective interest method. The expected life
of the debt is the period ending with the distribution date occurring in April
2013, as defined in the indenture ("Indenture II"). Amortization of deferred
debt issuance costs commenced on March 11, 2003.

COLLATERAL MANAGEMENT AND TRUSTEE FEES

Pursuant to a collateral management agreement, the Collateral Manager is
entitled to a semiannual fee, payable in arrears on the distribution dates,
equal to 0.10% per annum of the semi-annual asset amount ("Base Collateral
Management Fee"), of the net outstanding portfolio collateral, as defined in the
indenture. After certain expenses have been paid, the Collateral Manager is
entitled to an additional semiannual fee equal to 0.15% per annum, calculated in
the same manner as the Base Collateral Management Fee. For the years ended
December 31, 2004 and 2003, total collateral management fees were $993,352 and
$805,788, respectively, and are included in total collateral management fees
reflected on the consolidated statements of operations.

Pursuant to a trustee agreement, the trustee is entitled to a semiannual fee, on
each distribution date, equal to 0.023625% per annum of the sum of the aggregate
principal amount of the investments plus cash and cash equivalents at the
beginning of the period relating to such distribution dates, an annual fee of
$15,000, and reimbursement of out of pocket expenses. For the years ended
December 31, 2004 and 2003, total trustee fees were $114,226 and $94,607,
respectively, and are included in total trustee fees reflected on the
consolidated statements of operations.

                                                                              13
<PAGE>
                             Trapeza Funding II, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


4. ISSUER II (CONTINUED)

NOTES PAYABLE

On March 11, 2003, Issuer II issued notes (the "Notes") at their respective
principal values, which are secured by Issuer II's investments and are
non-recourse to the Company.

At December 31, 2004 and 2003, Notes outstanding consisted of the following:
<TABLE>
<CAPTION>
                    2004 PRINCIPAL        2003 PRINCIPAL          INTEREST RATE            STATED MATURITY
                   ------------------    ------------------    ---------------------      ------------------
<S>                <C>                   <C>                   <C>                         <C>
Class A1A Notes     $    131,999,114      $    131,999,496     Libor + 0.65% until         October 5, 2033
                                                                 the distribution
                                                                date in April 2013
                                                                and Libor + 1.30%
                                                                    thereafter

Class A1B Notes     $    100,000,000      $     99,999,618        Libor + 0.88%            October 5, 2033

Class B Notes       $     27,000,000      $     27,000,000        Libor + 0.70%            October 5, 2033

Class C-1           $     43,500,000      $     43,500,000        Libor + 1.90%            October 5, 2033
Floating Notes

Class C-2 Fixed     $     54,800,000      $     54,800,000       5.20% until the           October 5, 2033
Notes                                                           distribution date
                                                                in April 2008 and
                                                                  Libor + 1.90%
                                                                    thereafter

Class D Notes       $     18,450,000      $     18,450,000        Libor + 2.65%            October 5, 2033
</TABLE>

Holders of the Notes are to receive semiannual interest payments on October 5
and April 5, commencing in October 2003 (the "Initial Payment Date"). The order
of payment will be first to Class A1A, second, Class A1B, third, Class B, fourth
to Class C, and fifth Class D of notes being senior to each of the other classes
of notes. No payments of interest on any class of notes will be made until all
accrued and unpaid interest on the notes of each class that is senior to a class
and that remain outstanding has been paid in full. No payment of principal of
any class of notes will be made until the principal of, and all accrued and
unpaid interest, on the notes of each class that is senior to such class and
that remain outstanding have been paid in full.



                                                                              14
<PAGE>
                             Trapeza Funding II, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


4. ISSUER II (CONTINUED)

NOTES PAYABLE (CONTINUED)

In the event that the coverage tests, as defined in Indenture II, are not
satisfied as of any distribution date, each class of notes may be redeemed in
the manner specified in Indenture II.

Principal payments will be made in the following manner. First, payment of
principal of the Class A1A notes until the Class A1A notes have been paid in
full. Next, payment of principal on the Class A1B notes until the Class A1B
notes have been paid in full. Next, payment of principal of the Class B notes
until the Class B notes have been paid in full. Next, payment of principal of
the Class C notes until Class C notes have been paid in full. Next, payment of
principal of the Class D notes. Finally, the remainder to the members as a
dividend on the members' interests or as a return of capital of the members'
interests as provided in Issuer II's Agreement ("Agreement II").

If on any distribution date, the amount available in the payment account from
amounts received in the related due period are insufficient to make the full
amount of the disbursements required by the priority of payments to different
persons, the trustee will make the disbursements ratably in accordance with
Indenture II.

If the notes and the member's interests have not been released prior to October
5, 2033, it is expected that Issuer II or Collateral Manager, acting on behalf
of Issuer II, will sell all of the investments and sell or liquidate all other
collateral, and all net proceeds from such sales and liquidations and all
available cash after the payment (in the order of priorities set forth above) of
all (i) fees, (ii) expenses and (iii) interest (including any defaulted interest
and interest on defaulted interest, any Class C deferred interest and interest
on any Class C deferred interest and any Class D deferred interest and interest
on any Class D deferred interest) and principal of the notes, will be
distributed to the members in accordance with Agreement II.


                                                                              15
<PAGE>
                             Trapeza Funding II, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


4. ISSUER II (CONTINUED)

ACCELERATION OF MATURITY AND REDEMPTION

Indenture II provides for an acceleration of maturity or redemption of all of
the senior notes and accrued and unpaid interest upon the occurrence of a
default event. Default events include a) failure of Issuer II to pay interest
for a period of three business days on any Class A or B senior Notes, b) failure
of Issuer II to pay principal of any senior Note when such payment becomes due
and payable at its stated maturity or redemption date, c) failure of Issuer II,
on any distribution date to disburse amounts available to the interest
collection account or principal collection account in accordance with the order
of the priority of payments set forth in Indenture II, which continues for three
business days, d) Issuer II or pool of collateral becomes an investment company
required to be registered under the Investment Company Act, e) default in
performance, or a breach, of any other covenant or other agreement of Issuer II
under the Indenture II or any representation of warranty of Issuer II made in
Indenture II or in any certificate or other writing proves to be incorrect in
any material respect when made, and in both clauses, the continuation of such
default or breach for a period of thirty days after Issuer II or the Collateral
Manager has actual knowledge that such default or breach has occurred or after
written notice to Issuer II and the Collateral Manager by the trustee, or to
Issuer II, the Collateral Manager and the Trustee by the holders of at least 25%
in aggregate outstanding principal amount of the Notes of the controlling class
or hedge counterparty, f) one or more final judgments being rendered against
Issuer II that exceed, in the aggregate, $5,000,000, and which remain unstayed,
undischarged and unsatisfied for thirty days after such judgment(s) becomes
nonappealable, unless adequate funds have been reserved or set aside for the
payment thereof, and g) failure, on any measurement date, to cause the Class A/B
overcollateralization ratio to be equal to or greater than 100%. Each of these
conditions is further described in Indenture II.

5. NOTE I

DEFERRED DEBT ISSUANCE COSTS

Deferred debt issuance costs of $300,000 are being amortized over the expected
life of the related debt using the effective interest method. The expected life
of the debt is April 2010, as defined in the fiscal and collateral agency
agreement ("Note Agreement"), assuming all scheduled principal payments are made
when due. Amortization of deferred debt issuance costs commenced on May 15,
2003.

                                                                              16
<PAGE>
                             Trapeza Funding II, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


5. NOTE I (CONTINUED)

NOTES PAYABLE

On May 15, 2003, Note I issued Notes at their respective principal value, which
are secured by Note I's investments and are non-recourse to the Company.

At December 31, 2004 and 2003, the Notes outstanding consisted of the following:
<TABLE>
<CAPTION>
                                                                      INTEREST
                           2004 PRINCIPAL       2003 PRINCIPAL          RATE            STATED MATURITY
                          ----------------    ------------------     ------------    -----------------------
<S>                        <C>                 <C>                     <C>                      <C>
Class BB Notes             $    7,857,143      $      9,285,714        11.00%           October 5, 2033
</TABLE>

Holders of the Notes are to receive semiannual interest payments on October 5
and April 5, commencing in October 2003 (the "Initial Payment Date"). On each
payment date, in addition to scheduled interest, Note I shall prepay the
scheduled principal to the holders of the notes, if and only to the extent Note
I receives payments on membership interests and funds available on deposit in
the note collection account to pay scheduled principal. If Note I fails to pay
any of the scheduled principal due to insufficient funds received by Note I in
respect to the membership interests, such unpaid scheduled principal shall not
be considered "due and payable" for any purposes hereunder and will be deferred
until such date as Note I receives sufficient payments.

In the event that the coverage tests, as defined in the Note Agreement, are not
satisfied as of any distribution date, the notes may be redeemed in the manner
specified in the Note Agreement.

If the notes and the members' interests have not been released prior to October
5, 2033, it is expected that Note I or Collateral Manager, acting on behalf of
the Note I, will sell all of the investments and all eligible investments and
sell or liquidate all other collateral, and all net proceeds from such sales and
liquidations and all available cash after the payment (in the order of
priorities set forth above) of all (i) fees, (ii) expenses and (iii) interest
and principal of the notes, will be distributed to the members in accordance
with the Note Agreement.

The Note Agreement provides for an option by holders of more than 50% of the
notes outstanding an acceleration of maturity or redemption of all of the notes
and accrued and unpaid interest upon the occurrence of a default event. Default
events include a) Note I fails to perform its obligations under the Note
Agreement, and such failure could


                                                                              17
<PAGE>
                             Trapeza Funding II, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


5. NOTE I (CONTINUED)

NOTES PAYABLE (CONTINUED)

reasonably be expected to have a material adverse effect on the interest of the
holders and has not been cured within thirty days after the date of an officer
obtaining actual knowledge of such default, or, b) a court or governmental
authority of competent jurisdiction enters an order appointing, without consent
of Note I, a custodian, receiver, trustee or each officer with similar powers
with respect to Note I or with respect to any substantial part of Note I's
property, or constituting an order for relief or reorganization or any petition
in bankruptcy or for liquidation or to take advantage of any bankruptcy or
insolvency law of any jurisdiction, or ordering the dissolution, winding-up or
liquidation of Note I, or any such petition shall be filed against the issuer
and such petition shall not be dismissed within sixty days.

6. ISSUER III

DEFERRED DEBT ISSUANCE COSTS

Deferred debt issuance costs of $7,863,460 are being amortized over the expected
life of the related debt using the effective interest method. The expected life
of the debt is the period ending with the distribution date occurring in July
2013, as defined in the indenture ("Indenture III"). Amortization of deferred
debt issuance costs commenced on June 25, 2003.

COLLATERAL MANAGEMENT AND TRUSTEE FEES

Pursuant to a collateral management agreement, the Collateral Manager is
entitled to a semiannual fee, payable in arrears on the distribution dates,
equal to 0.10% per annum of the semi-annual asset amount ("Base Collateral
Management Fee"), of the net outstanding portfolio collateral, as defined in
Indenture III. After certain expenses have been paid, the Collateral Manager is
entitled to an additional semiannual fee equal to 0.15% per annum, calculated in
the same manner as the Base Collateral Management Fee. For the years ended
December 31, 2004 and 2003, total collateral management fees were $747,920 and
$389,633, respectively, and are included in total collateral management fees
reflected on the consolidated statements of operations.


                                                                              18
<PAGE>
                             Trapeza Funding II, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


6. ISSUER III (CONTINUED)

COLLATERAL MANAGEMENT AND TRUSTEE FEES (CONTINUED)

Pursuant to a trustee agreement, the trustee is entitled to a semiannual fee, on
each distribution date, equal to 0.0225% per annum of the sum of the aggregate
principal amount of the investments plus cash and cash equivalents at the
beginning of the period relating to such distribution dates, as defined in
Indenture III. For the years ended December 31, 2004 and 2003, total trustee
fees were $83,874 and $44,671, respectively, and are included in total trustee
fees reflected on the consolidated statements of operations.

NOTES PAYABLE

On June 25, 2003, Issuer III issued Notes at their respective principal values,
which are secured by Issuer III's investments and are non-recourse to the
Company.

At December 31, 2004 and 2003, the Notes outstanding consisted of the following:
<TABLE>
<CAPTION>
                                                                   INTEREST
                      2004 PRINCIPAL       2003 PRINCIPAL           RATE          STATED MATURITY
                     -----------------    -----------------      ------------   ---------------------
<S>                 <C>                  <C>                     <C>            <C>
Class A1A Notes       $   108,497,331      $   108,500,000         Libor +        January 20, 2034
                                                                    0.63%

Class A1B Notes       $    71,500,000      $    71,500,000         Libor +        January 20, 2034
                                                                    0.85%

Class B Notes         $    25,000,000      $    25,000,000        See Class       January 20, 2034
                                                                    B note

Class C-1 Notes       $    31,250,000      $    31,250,000         Libor +        January 20, 2034
                                                                    1.75%

Class C-2 Notes       $    31,250,000      $    31,250,000         Libor +        January 20, 2034
                                                                    1.75%

Class D Notes         $    13,715,288      $    14,500,000         Libor +        January 20, 2034
                                                                    2.65%

Class E Notes         $     6,857,142      $     8,000,000         10.00%         January 20, 2034
</TABLE>

                                                                              19
<PAGE>
                             Trapeza Funding II, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


6. ISSUER III (CONTINUED)

NOTES PAYABLE (CONTINUED)

Pursuant to the terms of the Class B agency agreement, the holders of the Class
B Notes will be entitled to receive interest, certain third parties will be
entitled to receive compensation, at an aggregate, floating rate per annum not
to exceed Libor plus 1.05% in the aggregate after taking into consideration the
effect of a basis swap to be entered into in connection with the Class B Notes.

Holders of the Notes are to receive semiannual interest payments on January 20
and July 20, commencing in January 2004 (the "Initial Payment Date"). The order
of payment will be first to Class A1A, second, Class A1B, third, Class B,
fourth, Class C (includes Class C-1 and Class C-2), fifth to Class D and sixth
to Class E with each Class of Notes being senior to each of the other classes of
notes. No payments of interest on any class of Notes will be made until all
accrued and unpaid interest on the Notes of each class that is senior to a class
and that remain outstanding has been paid in full. No payment of principal of
any class of Notes will be made until the principal of, and all accrued and
unpaid interest, on the Notes of each class that is senior to such class and
that remain outstanding have been paid in full.

In the event that the coverage tests, as defined in Indenture III, are not
satisfied as of any distribution date, each class of Notes may be redeemed in
the manner specified in Indenture III.

Principal payments will be made in the following manner. First, payment of
principal of the Class A1A Notes until the Class A1A Notes have been paid in
full. Next, payment of principal on the Class A1B Notes until the Class A1B
Notes have been paid in full. Next, payment of principal on the Class B Notes
until the Class B Notes have been paid in full. Next, payment of principal of
the Class C Notes until the Class C Notes have been paid in full. Next, payment
of principal of the Class D Notes. Next, payment of principal of the Class E
Notes. Finally, the remainder to the members as a dividend on the members'
interests or as a return of capital of the members' interests as provided in the
Trapeza CDO III, LLC Agreement ("Agreement III").

If on any distribution date, the amount available in the payment account from
amounts received in the related due period are insufficient to make the full
amount of the disbursements required by the priority of payments to different
persons, the trustee will make the disbursements ratably in accordance with
Indenture III.

                                                                              20
<PAGE>
                             Trapeza Funding II, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


6. ISSUER III (CONTINUED)

NOTES PAYABLE (CONTINUED)

If the Notes and the members' interests have not been released prior to January
20, 2034, it is expected that Issuer III or Collateral Manager, acting on behalf
of Issuer III, will sell all of the investments and all eligible investments and
sell or liquidate all other collateral, and all net proceeds from such sales and
liquidations and all available cash after the payment (in the order of
priorities set forth above) of all (i) fees, (ii) expenses and (iii) interest
(including any defaulted interest and interest on defaulted interest, any Class
C deferred interest and interest on any Class C deferred interest and any Class
D deferred interest and interest on any Class D deferred interest and any Class
E deferred interest and interest on any Class E deferred interest) and principal
of the Notes, will be distributed to the members in accordance with the
Agreement III.

ACCELERATION OF MATURITY AND REDEMPTION

Indenture III provides for an acceleration of maturity or redemption of all of
the senior Notes and accrued and unpaid interest upon the occurrence of a
default event. Default events include a) failure of Issuer III to pay interest
for a period of three business days on any Class A or B senior Notes, b) failure
of Issuer III to pay principal of any senior Note when such payment becomes due
and payable at its stated maturity or redemption date, c) failure of Issuer III,
on any distribution date to disburse amounts available to the interest
collection account or principal collection account in accordance with the order
of the priority of payments set forth in Indenture III, which continues for
three business days, d) Issuer III or pool of collateral becomes an investment
company required to be registered under the Investment Company Act, e) default
in performance, or a breach, of any other covenant or other agreement of Issuer
III under Indenture III or any representation of warranty of Issuer III made in
Indenture III or in any certificate or other writing proves to be incorrect in
any material respect when made, and in both clauses, the continuation of such
default or breach for a period of thirty days after Issuer III or the General
Partner has actual knowledge that such default or breach has occurred or after
written notice to Issuer III and the General Partner by the trustee, or to
Issuer III, the General Partner and the Trustee by the holders of at least 25%
in aggregate outstanding principal amount of the Notes of the controlling class
or hedge counterparty, f) one or more final judgments being rendered against
Issuer III that exceed, in the aggregate, $5,000,000, and which remain unstayed,
undischarged and unsatisfied for thirty days after such judgment(s) becomes
nonappealable, unless adequate funds have been reserved or set aside for the
payment thereof, and g) failure, on any measurement date, to cause the Class A/B
overcollateralization ratio to be equal to or greater than 100%. Each of these
conditions is further described in Indenture III.

                                                                              21
<PAGE>
                             Trapeza Funding II, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


7. INTEREST RATE SWAP AGREEMENTS

The Company maintains a policy of valuing its securities positions and
derivative instruments at market or fair values, with the resulting unrealized
gain or loss included in the consolidated statements of operations.

A swap is an agreement that obligates two parties to exchange a series of cash
flows at specified intervals based upon or calculated by reference to changes in
specified prices or rates for a specified amount of an underlying asset or
otherwise determined notional amount.

Risks may arise as a result of the failure of the counterparty to the swap
agreement. The loss incurred by the failure of a counterparty is generally
limited to the net payment to be received by the Company and/or the termination
value at the end of the agreement. Therefore, the Company considers the
creditworthiness of each counterparty to a swap agreement in evaluating
potential credit risk. Additionally, risks may arise from unanticipated
movements in interest rates.

The Company records a net receivable or payable for the net income or expense
expected to be received or paid in the interest period. Net amounts received or
paid on swap agreements are recorded as interest income or interest expense on
the consolidated statements of operations. The amount recorded as interest
income on basis swap agreements for the years ended December 31, 2004 and 2003
totaled $153,097 and $70,267, respectively.

The Company entered into interest rate swap agreements with Credit Suisse First
Boston ("CSFB") for the purpose of hedging interest rate and cash flow risk
between the fixed-rate investments and floating-rate investments.


                                                                              22
<PAGE>
                             Trapeza Funding II, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


7. INTEREST RATE SWAP AGREEMENTS (CONTINUED)

At December 31, 2004 and 2003, the Company had nine interest rate swap
agreements outstanding with CSFB, which pay as follows:
<TABLE>
<CAPTION>
                                   FLOATING RATE       RATE/AMOUNT PAID               DECEMBER 31
    NOTIONAL         MATURITY       RECEIVED BY             BY THE               2004              2003
     AMOUNT            DATE         THE COMPANY             COMPANY           FAIR VALUE        FAIR VALUE
 ----------------    ---------    -----------------    ------------------    --------------    -------------
<S>                  <C>         <C>                   <C>                   <C>              <C>
   $ 3,330,000        4/5/10      6 month Libor             7.375%            $   11,970       $    2,132
                                    + 3.4425%
     8,670,000        4/5/08      6 month Libor              6.65%                50,098          (29,155)
                                     + 3.30%
    13,330,000        4/5/08      6 month Libor              6.75%                54,714          (73,464)
                                     + 3.35%
    13,330,000        4/5/08      6 month Libor              6.335%              239,893          164,243
                                     + 3.35%
    13,330,000        4/5/08      6 month Libor              8.10%               106,241           (9,353)
                                     + 4.69%
    47,330,000        4/5/08      6 month Libor              6.952%             (173,298)        (732,678)
                                     + 3.32%
    69,500,000       7/20/08      6 month Libor              6.35%             1,025,085          468,036
                                     + 3.25%
    25,000,000       7/20/13      6 month Libor         6 month Libor +         (355,381)        (312,663)
                                    + 1.0875%                1.05%
     9,000,000       7/20/08      6 month Libor              6.05%               199,715          160,176
                                     + 3.145%
                                                                              ----------       ----------
                                                                              $1,159,037       $ (362,726)
                                                                              ==========       ==========
</TABLE>

At December 31, 2004 and 2003, the Company had one interest rate cap agreement
outstanding with CSFB, which pays on a semi-annual basis as follows:
<TABLE>
<CAPTION>
                                   FLOATING RATE       RATE/AMOUNT PAID               DECEMBER 31
    NOTIONAL         MATURITY       RECEIVED BY             BY THE               2004              2003
     AMOUNT            DATE         THE COMPANY             COMPANY           FAIR VALUE        FAIR VALUE
 ----------------    ---------    -----------------    ------------------    --------------    -------------
<S>                   <C>         <C>                  <C>                 <C>               <C>
   $82,000,000        4/5/07           N/A                  $69,000             (186,950)         (53,737)
</TABLE>

8. RELATED PARTY TRANSACTIONS

During 2003, Issuer II paid a one-time contractually determined reimbursement
fee $1,000,000 to Funding in connection with the formation of Issuer II. Issuer
II also paid a one-time contractually determined reimbursement fee for roadshow
expenses to Funding of $10,000.

During 2003, Issuer III paid a one-time contractually determined reimbursement
fee of $900,000 to Trapeza Funding III, LLC in connection with the formation of
Issuer III. Issuer III also paid a one-time contractually determined
reimbursement fee for roadshow expenses to Trapeza Funding III, LLC of $10,000.

                                                                              23
<PAGE>
                             Trapeza Funding II, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


8.   RELATED PARTY TRANSACTIONS (CONTINUED)

The Partnership pays Funding an administration fee (payable semi-annually in
advance) equal to one and one-half percent (1.5%) per annum of the aggregate
capital accounts of the limited partners, which will be used to cover management
fees and other ordinary and recurring administrative and related operating
expenses. For the years ended December 31, 2004 and 2003, administration fees
totaled $615,848 and $601,034, respectively. The Partnership also reimbursed
Funding for $78,315 for certain fees paid on behalf of the Partnership for the
year ended December 31, 2003.

In exchange for interests sold on behalf of the Partnership, Funding pays
external broker-dealers an administration fee, equal to the percentage of equity
raised by the broker-dealer multiplied by one-third of the total administration
fee being charged by Funding to the Partnership. For the years ended December
31, 2004 and 2003, total administration fee expense equaled $104,762 and
$102,243, respectively.


                                                                              24
<PAGE>


                                                                     Schedule e)










    TRAPEZA FUNDING III, LLC

    CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

    Years ended December 31, 2005 and 2004



<PAGE>


                            Trapeza Funding III, LLC

                        Consolidated Financial Statements

                     Years ended December 31, 2005 and 2004

                                    Unaudited




                                    CONTENTS


Consolidated Statements of Financial Condition................................3
Consolidated Schedules of Investments.........................................4
Consolidated Statements of Operations.........................................6
Consolidated Statements of Changes in Members' Interests......................7
Consolidated Statements of Cash Flows.........................................8
Notes to Consolidated Financial Statements....................................9





<PAGE>
                            Trapeza Funding III, LLC

                 Consolidated Statements of Financial Condition

                                    Unaudited
<TABLE>
<CAPTION>
                                                                            DECEMBER 31
                                                                     2005                 2004
                                                                --------------        --------------
<S>                                                            <C>                   <C>
ASSETS
Cash and cash equivalents                                       $    7,360,269        $    5,453,128
Prepaid expenses                                                        28,617                27,260
Investments in trust preferred securities, at fair value
  (amortized cost $399,499,096 and $399,481,628)                   400,172,908           400,145,681
Deferred debt issuance costs (net of accumulated amortization
  of $1,730,717 and $917,401)                                        7,729,905             8,543,221
Interest receivable on trust preferred securities                      800,625               617,180
Net interest receivable from swap counterparty                          85,208                -
Unrealized appreciation on swap agreements                           3,073,174             1,159,571
Other                                                                  142,966               132,998
                                                                --------------        --------------
Total Assets                                                    $  419,393,672        $  416,079,039
                                                                ==============        ==============

LIABILITIES AND MEMBERS' INTERESTS
Liabilities
   Class A1A Notes                                              $  144,996,417        $  144,996,417
   Class A1B Notes                                                  95,000,000            95,000,000
   Class B Notes                                                    33,000,000            33,000,000
   Class C-1 Notes                                                  44,500,000            44,500,000
   Class C-2 Notes                                                  44,500,000            44,500,000
   Class D Notes                                                    13,500,000            13,750,000
   Class E Notes                                                     7,142,856             8,571,428
   Interest payable                                                  2,124,435             1,517,483
   Professional fees                                                    93,275                86,965
   Collateral management fees                                          122,222               122,222
   Net interest payable to swap counterparty                                 -                64,656
   Trustee fees                                                         13,535                13,160
   Accrued expenses                                                    183,466               172,549
                                                                --------------        --------------
Total Liabilities                                                  385,176,206           386,294,880
                                                                --------------        --------------

Minority interest                                                   32,951,996            29,151,590

Members' Interests                                                   1,265,470             632,569
                                                                --------------        --------------
Total Liabilities and Members' Interests                        $  419,393,672        $  416,079,039
                                                                ==============        ==============
</TABLE>

See accompanying notes to consolidated financial statements.

                                                                               3
<PAGE>
                            Trapeza Funding III, LLC

                      Consolidated Schedules of Investments

                                    Unaudited
<TABLE>
<CAPTION>
                                                                                 DECEMBER 31, 2005            DECEMBER 31, 2004
                                                                             -------------------------    --------------------------
                                                                               PRINCIPAL      FAIR         PRINCIPAL        FAIR
                                                                             AMOUNT (000)     VALUE       AMOUNT (000)      VALUE
                                                                             ------------  -----------    ------------   -----------
<S>                                                                         <C>            <C>            <C>            <C>
INVESTMENTS IN TRUST PREFERRED SECURITIES - (100%) *
BANKS (85.84% AND 85.84%)*
Alabama National  Statutory Trust III, 3 month libor + 3.050%, due
  9/26/2033 (a)                                                                 $11,210    $11,210,000      $11,210      $11,210,000
Ambank Holdings Capital Trust I, 3 month libor + 3.150%, due 6/30/2033 (a)        9,000      8,936,265        9,000        8,935,326
Arrow Capital Statutory Trust II, 6.530%, due 7/23/2033 (a)                      10,000     10,000,000       10,000       10,000,000
Cathay Capital Trust I, 3 month libor + 3.150%, due 6/30/2033 (a)                10,450     10,450,000       10,450       10,450,000
CB Trico Capital Trust, 3 month libor + 3.050%, due 10/20/2033 (a)               10,000     10,000,000       10,000       10,000,000
Centerstate  Banks  Florida  Statutory  Trust I, 3 month libor + 3.050%,
  due 9/22/2033 (a)                                                              10,000     10,000,000       10,000       10,000,000
Corus Statutory Trust II, 3 month libor + 3.100%, due 6/30/2033 (a)              11,000     10,916,638       11,000       10,915,400
F.N.B. Statutory Trust I, 3 month libor + 3.250%, due 3/31/2033 (a)               1,000      1,000,000        1,000        1,000,000
FBR Capital Trust I, 3 month libor + 3.250%, due 3/30/2033 (a)                    1,000        992,309        1,000          992,196
FBR Capital Trust II, 3 month libor + 3.100%, due 9/30/2033 (a)                  11,000     11,014,878       11,000       11,015,094
First  Community  / CA  Statutory  Trust  VI,  3 month  libor +  3.050%,
  due 9/15/2033 (a)                                                              10,000     10,105,239       10,000       10,106,805
First Financial OH Statutory Trust II, 3 month libor + 3.100%, due
  9/30/2033 (a)                                                                  11,000     11,000,000       11,000       11,000,000
First  Group  Capital  Statutory  Trust  VII,  3 month  libor +  2.900%, due
  10/30/2033 (a)                                                                 12,000     12,065,017       12,000       12,066,063
First South Preferred Trust I, 3 month libor + 2.950%, due 9/30/2033 (a)         10,000     10,059,839       10,000       10,060,736
FNB Statutory Trust I, 3 month libor + 3.250%, due 3/31/2033 (a)                 11,000     11,000,000       11,000       11,000,000
Heartland Financial Statutory Trust III, 8.250%, due 10/10/2033 (a)              11,000     11,000,000       11,000       11,000,000
Iberiabank Statutory Trust II, 3 month libor + 3.150%, due 6/17/2033 (a)          1,000      1,004,610        1,000        1,004,679
Industry  Bancshares  Capital Trust II, 3 month libor + 3.050%, due
  8/30/2033 (a)                                                                   2,000      1,971,045        2,000        1,970,604
James Monroe Statutory Trust II, 3 month libor + 3.100%, due 7/31/2033 (a)        4,000      4,000,000        4,000        4,000,000
Lakeland Bancorp Capital Trust II, 5.710%, due 6/30/2033 (a)                     11,000     10,951,180       11,000       10,950,462
Lakeland Statutory Trust II, 3 month libor + 3.050%, due 10/1/2033 (a)           12,000     12,000,000       12,000       12,000,000
Lone Star National  Capital  Trust II, 3 month libor + 2.950%, due
  9/30/2033 (a)                                                                  10,000     10,057,909       10,000       10,058,776
Macatawa Statutory Trust I, 3 month libor + 3.050%, due 7/15/2033 (a)            11,000     11,000,000       11,000       11,000,000
Main Street Banks Statutory  Trust II, 3 month libor + 3.250%, due
  6/30/2033 (a)                                                                   9,000      9,000,000        9,000        9,000,000
Mariner Capital Trust IV, 3 month libor + 3.050%, due 8/30/2033 (a)              12,000     12,053,077       12,000       12,053,884
Merchants and Manufacturers Statutory Trust II, 8.250%, due 5/30/2033 (a)         1,000      1,000,000        1,000        1,000,000
Merchants and Manufacturers Statutory Trust III, 8.250%, due 10/15/2033 (a)       3,500      3,500,000        3,500        3,500,000
Merchants and Manufacturers  Statutory Trust IV, 3 month libor + 2.950%, due
  10/15/2033 (a)                                                                  7,500      7,500,000        7,500        7,500,000
National  Bancshares  Capital Trust II, 3 month libor + 3.000%, due
  9/15/2033 (a)                                                                   7,000      7,004,279        7,000        7,004,343
Orion Bancorp,  Inc.  Statutory Trust I, 3 month libor + 3.250%, due
  5/5/2033 (a)                                                                   11,000     11,000,000       11,000       11,000,000
Ozark Capital Statutory Trust II, 3 month libor + 2.900%, due 9/29/2033 (a)       6,000      6,000,000        6,000        6,000,000
Raton Capital Trust I, 3 month libor + 2.900%, due 9/30/2033 (a)                  5,000      5,048,242        5,000        5,048,971
Salin Statutory Trust I, 3 month libor + 2.950%, due 10/17/2033 (a)              11,000     11,000,000       11,000       11,000,000
Sleepy Hollow Capital Trust I, 3 month libor + 3.050%, due 8/30/2033 (a)          4,000      4,013,510        4,000        4,013,716
SNB Capital Trust IV, 3 month libor + 3.000%, due 9/30/2033 (a)                   5,000      5,028,481        5,000        5,028,904
Southside Statutory Trust III, 3 month libor + 2.940%, due 9/4/2033 (a)          12,000     12,000,000       12,000       12,000,000
St. Josephs Financial Capital Trust I, 3 month libor + 3.050%, due
  7/11/2033 (a)                                                                   3,000      3,036,681        3,000        3,037,227
Sterling Bank Houston Texas, 7.375%, due 4/15/2013 (a)                            4,670      4,670,000        4,670        4,670,000
Summit  Bank  Corporation  Capital  Trust  I, 3  month  libor +  3.100%, due
  9/30/2033 (a)                                                                  12,000     11,939,140       12,000       11,938,252
United  Bancorporation  of Wyoming  Capital  Trust I, 3 month libor + 3.100%,
  due 9/30/2033 (a)                                                               9,000      9,028,981        9,000        9,029,404
Wesbanco Capital Trust II, 5.800%, due 6/30/2033 (a)                              4,000      3,993,579        4,000        3,993,486
West Bancorporation Capital Trust I, 6.975%, due 7/18/2033 (a)                   11,000     10,943,954       11,000       10,943,302
Wintrust Capital Trust III, 3 month libor + 3.250%, due 4/7/2033 (a)              5,000      5,000,000        5,000        5,000,000
                                                                                           -----------                   -----------
Total Banks (amortized cost $343,494,853 and $343,497,630)                                 343,494,853                   343,497,630
                                                                                           -----------                   -----------
</TABLE>
                                                                               4
<PAGE>
                            Trapeza Funding III, LLC

                Consolidated Schedules of Investments (continued)

                                    Unaudited
<TABLE>
<CAPTION>
                                                                                 DECEMBER 31, 2005            DECEMBER 31, 2004
                                                                             -------------------------    --------------------------
                                                                               PRINCIPAL      FAIR         PRINCIPAL        FAIR
                                                                             AMOUNT (000)     VALUE       AMOUNT (000)      VALUE
                                                                             ------------  -----------    ------------   -----------
<S>                                                                         <C>            <C>            <C>            <C>
INVESTMENTS IN TRUST PREFERRED SECURITIES - (100%) * (CONTINUED)
THRIFTS (14.16% AND 14.16%)
BankSouth of Georgia Statutory Trust I, 3 month libor + 3.150%, due
  9/23/2033 (a)                                                              $    5,000    $ 5,000,000      $ 5,000       $5,000,000
BSC Capital Trust I, 3 month libor + 2.900%, due 9/30/2033 (a)                   12,000     12,033,000       12,000       12,033,496
Capital One Capital I, 3 month libor + 1.550%, due 2/1/2027                       3,000      3,015,000        3,000        2,985,002
Coastal Capital Trust II, 3 month libor + 3.050%, due 6/23/2033 (a)              10,000      9,970,082       10,000        9,969,634
Coastal  Financial  Capital  Trust I, 3 month  libor +  3.050%, due
  7/3/2033 (a)                                                                    6,000      6,052,897        6,000        6,053,685
Flagstar Statutory III, 6.550%, due 4/7/2033 (a)                                  5,000      5,000,000        5,000        5,000,000
Flagstar Statutory Trust IV, 6.750%, due 3/19/2033 (a)                            2,670      2,646,006        2,670        2,645,707
IndyMac Capital Trust V, 6.050%, due 7/11/2033 (a)                               12,000     11,964,543       12,000       11,964,055
Sterling Capital Trust IV, 3 month libor + 3.150%, due 5/15/2033 (a)              1,000        996,527        1,000          996,472
                                                                                          ------------                  ------------
Total Thrifts (amortized cost $56,004,243 and $55,983,998)                                  56,678,055                    56,648,051
                                                                                          ------------                  ------------
Total Investments in Trust Preferred Securities (amortized cost
  $399,499,096 and $399,481,628)                                                          $400,172,908                  $400,145,681
                                                                                          ============                  ============


                                                                                           FAIR VALUE                    FAIR VALUE
                                                                                          ------------                  ------------
INTEREST RATE SWAP AGREEMENTS
Credit Suisse First Boston                                                                $  3,073,174                  $  1,159,571
                                                                                          ------------                  ------------
Total Interest Rate Swap Agreements                                                       $  3,073,174                  $  1,159,571
                                                                                          ============                  ============
</TABLE>


*Amounts in parenthesis indicate percentage of investments in trust preferred
securities.
(a) Private placement, illiquid securities, where amortized cost approximates
fair value.


See accompanying notes to consolidated financial statements.

                                                                               5
<PAGE>
                            Trapeza Funding III, LLC

                      Consolidated Statements of Operations

                                    Unaudited
<TABLE>
<CAPTION>
                                                                       YEAR ENDED DECEMBER 31,
                                                                      2005              2004
                                                                  -------------     -------------
<S>                                                              <C>                <C>
INVESTMENT INCOME
   Interest                                                       $  26,594,501     $  20,405,244

EXPENSES
   Interest                                                          17,283,476        13,055,196
   Collateral management fees                                         1,000,000         1,000,201
   Amortization                                                         813,316           875,352
   Trustee fees                                                         121,365           118,989
   Professional fees                                                    109,620           103,665
   Administration fees                                                   32,858            29,672
   Other                                                                203,786           230,339
                                                                  -------------     -------------
Total expenses                                                       19,564,421        15,413,414
                                                                  -------------     -------------
NET INVESTMENT INCOME                                                 7,030,080         4,991,830
                                                                  -------------     -------------

Unrealized appreciation on investment transactions:
   Investments in trust preferred securities                              9,759           412,710
   Interest rate swap agreements                                      1,913,603           292,390
                                                                  -------------     -------------
Net unrealized appreciation on investment transactions                1,923,362           705,100
                                                                  -------------     -------------

Net income before minority interest                                   8,953,442         5,696,930
Minority interest                                                     7,500,787         4,749,073
                                                                  -------------     -------------
NET INCOME                                                        $   1,452,655     $     947,857
                                                                  =============     =============
</TABLE>

See accompanying notes to consolidated financial statements.

                                                                               6
<PAGE>
                            Trapeza Funding III, LLC

            Consolidated Statements of Changes in Members' Interests

                     Years ended December 31, 2005 and 2004

                                    Unaudited



Balance at January 1, 2004                                       $   200,805
   Net income                                                        947,857
   Distributions to members                                         (516,093)
                                                                 -----------
Balance at December 31, 2004                                         632,569
   Net income                                                      1,452,655
   Distributions to members                                         (819,754)
                                                                 -----------
Balance at December 31, 2005                                     $ 1,265,470
                                                                 ===========


See accompanying notes to consolidated financial statements.

                                                                               7
<PAGE>
                            Trapeza Funding III, LLC

                      Consolidated Statements of Cash Flows

                                    Unaudited
<TABLE>
<CAPTION>
                                                                            YEAR ENDED DECEMBER 31,
                                                                          2005                  2004
                                                                     ---------------       ---------------
<S>                                                                  <C>                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                                           $     1,452,655       $       947,857
Adjustments to reconcile net income to net cash and cash
  equivalents provided by operating activities:
   Amortization of deferred debt issuance costs                              813,316               875,352
   Accretion of discount on investments in trust preferred                   (17,468)              (18,412)
    securities
   Minority interest                                                       7,500,787             4,749,073
   Net unrealized appreciation on investment transactions                 (1,923,362)             (705,100)
   Net change in operating assets and liabilities:
     Interest receivable on trust preferred securities                      (183,445)              (76,134)
     Prepaid expenses                                                         (1,357)               41,652
     Other                                                                    (9,968)              (17,508)
     Interest payable                                                        606,952              (564,743)
     Professional fees                                                         6,310                19,479
     Collateral management fees                                                    -               (72,326)
     Net interest payable to swap counterparty                              (149,864)             (256,821)
     Trustee fees                                                                375                (7,928)
     Accrued expenses                                                         10,917                14,698
        Minority interest                                                 (3,700,381)           (1,972,479)
                                                                     ---------------       ---------------
Net cash and cash equivalents provided by operating activities             4,405,467             2,956,660
                                                                     ---------------       ---------------

CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on notes                                               (1,678,572)           (1,682,155)
Distributions to members                                                    (819,754)             (516,093)
                                                                     ---------------       ---------------
Net cash and cash equivalents used in financing activities                (2,498,326)           (2,198,248)
                                                                     ---------------       ---------------

Net increase in cash and cash equivalents                                  1,907,141               758,412
Cash and cash equivalents, beginning of year                               5,453,128             4,694,716
                                                                     ---------------       ---------------
Cash and cash equivalents, end of year                               $     7,360,269       $     5,453,128
                                                                     ===============       ===============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid                                                        $    16,813,807       $    13,863,234
                                                                     ===============       ===============
</TABLE>


See accompanying notes to consolidated financial statements.

                                                                               8
<PAGE>
                            Trapeza Funding III, LLC

              Notes to Consolidated Unaudited Financial Statements

                                December 31, 2005

1. ORGANIZATION AND PURPOSE

Trapeza Funding III, LLC ("Funding"), was organized on January 30, 2003 as a
Delaware limited liability company. Funding commenced operations on April 1,
2003. Funding was organized for the purpose of being the general partner of
Trapeza Partners III L.P. (the "Partnership"). Per the partnership agreement,
the limited partners have no right to remove Funding at any time. Funding has
complete and exclusive control of the management of the business affairs of the
Partnership.

The Partnership was organized on February 27, 2003 as a Delaware limited
partnership. The Partnership commenced operations on April 1, 2003. The
Partnership was organized for the purpose of investing in membership interests
and other securities to be issued by Trapeza CDO IV, LLC ("Issuer IV"), which
was formed by Funding. Funding also formed Trapeza CDO III, LLC ("Issuer III").
The Partnership has an 11-year term, which Funding may extend on a year-to-year
basis.

Minority interest reflects the 99.99% of partners' interest of the limited
partners of the Partnership. The consolidated entity is referred to as the
"Company."

Funding and the Collateral Manager are owned equally by Financial Stocks, Inc.
("FSI") and Resource Financial Fund Management, Inc., a wholly owned subsidiary
of Resource America, Inc. ("REXI") (collectively, the "Owners"). FSI is a
Registered Investment Adviser under the Investment Advisers Act of 1940. REXI, a
publicly traded company, is a specialized asset management company that uses
industry specific expertise to generate and administer investment opportunities
for their own account and for outside investors in the financial fund
management, real estate and equipment leasing sectors. The Owners hold
partnership interests of approximately 11% of the Partnership. Funding has
complete and exclusive control of the management of the business affairs of the
Partnership.

Issuer IV's objective is to purchase, acquire, own, hold, sell, endorse,
transfer, assign, pledge, finance, refinance, exchange, restructure, workout,
advance and collect funds pursuant to and otherwise deal with and exercise
rights of ownership with respect to the collateral of Issuer IV, including other
securities or equity interests owned from time to time by Issuer IV, all in
accordance with the terms of the indenture.

Trapeza Capital Management, LLC (the "Collateral Manager"), a Delaware limited
liability company, is responsible for supervising and directing the investment
of the collateral of Issuer IV. Issuer IV is charged a collateral management fee
by the Collateral


                                                                               9
<PAGE>
                            Trapeza Funding III, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


1. ORGANIZATION AND PURPOSE (CONTINUED)

Manager, who is affiliated with Funding through common ownership. All material
intercompany transactions have been eliminated.

The business and affairs of Funding are managed by a Board of Managers. The
Board of Managers has full, complete and exclusive authority, power and
discretion to manage and control the business affairs and properties of Funding,
to make all decisions regarding those matters and to perform any activities
customary or incident to the management of Funding's business.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of the significant accounting policies followed by
the Company in the preparation of its financial statements.

BASIS OF ACCOUNTING

The Company's accounting policies are in conformity with accounting principles
generally accepted in the United States. The Company maintains its financial
records in United States dollars. For financial reporting purposes, the Company
follows the accrual basis of accounting.

CASH AND CASH EQUIVALENTS

The Company considers all demand deposits with banks and other highly liquid
investments with original maturities of three months or less to be cash
equivalents.

INVESTMENT TRANSACTIONS

The Partnership records transactions on their trade dates. Realized gains and
losses on investments are determined on the specific identification basis for
financial accounting purposes. Interest is accrued as earned or incurred and
includes the amortization/accretion of premiums and discounts on debt
securities.

INVESTMENT VALUATION

Investments are carried at fair value. Securities for which market quotations
are not readily available are valued by procedures adopted by Funding. In
valuing investments in which market quotations are not readily available,
Funding utilizes data from a variety of different sources, taking into account
the characteristics of a security, any changes in the


                                                                              10
<PAGE>
                            Trapeza Funding III, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

INVESTMENT VALUATION (CONTINUED)

credit quality of the securities in the portfolio, the overall movement of
interest rates and other factors which, in Funding's good faith and judgment,
are relevant to the value of a security. For exchange-traded securities,
management will obtain current market data and quotes from independent brokers.

The Company has invested a significant portion of the portfolio in private
placement, illiquid issues having no ready market. At December 31, 2005, these
securities aggregate $397,157,908 and have been valued in good faith by Funding
as described in the preceding paragraph. Because of the inherent uncertainty of
valuation, the fair values estimated by Funding may not necessarily represent
the amounts that could be realized from sales or other dispositions of
investments and the differences may be material.

CREDIT RISKS AND GENERAL LIQUIDITY CONSIDERATIONS

Investments in trust preferred securities are subject to credit, interest rate
and liquidity risks. Adverse changes in the financial condition of an issuer of
trust preferred securities or in general economic conditions or both may impair
the ability of an issuer to make payments of principal and interest. Debt
obligations are also subject to liquidity risk and the risk of market price
fluctuations. Adverse changes in the financial condition of an issuer may affect
the liquidity of the market for an issuer's securities and may reduce the market
price of such securities. In addition, changes in general economic and
regulatory conditions may affect the liquidity of the market for trust preferred
securities in general and may reduce the values of some or all of the
securities.

ALLOCATION OF PROFITS AND LOSSES

The Company allocates profits to the members in proportion to their respective
capital account balances until the cumulative profits for this current period
and all prior fiscal years are equal to the cumulative losses allocated;
thereafter, among the members in proportion to their respective units. Losses
are allocated to the members in proportion to their respective capital account
balances.


                                                                              11
<PAGE>
                            Trapeza Funding III, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

ALLOCATION OF PROFITS AND LOSSES (CONTINUED)

Funding's investment in the Partnership is accounted for based on its pro-rata
share of its investment in the Partnership. Profits and losses from
non-portfolio income are allocated to all members in proportion to their
allocable shares. Twenty percent (20%) of the cumulative net profits from
portfolio investments are allocated to Funding.

Non-portfolio income of the Partnership, consisting primarily of income earned
on short-term investments, is allocated to all limited partners of the
Partnership in proportion to their respective capital account balances prior to
the allocation of any other item.

Portfolio income of the Partnership, consisting primarily of accrued interest
and profits and losses from the sale of such investments, is allocated to all
partners of the Partnership in proportion to their respective contributed
capital in relation to total contributed capital of the Partnership, but 20% of
the cumulative net profits otherwise allocable to all partners will be allocated
to Funding, defined as the incentive allocation. For the years ended December
31, 2005 and 2004, Funding received an incentive allocation of $1,219,613 and
$763,327, respectively.

TAXATION

The Company is treated as a partnership for Federal income tax purposes and,
therefore, no provision for federal income tax is recorded.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities as of
the date of the financial statements and the reported amounts of income and
expenses during the reporting period. Actual results could differ from those
estimates.

3. CONTRIBUTIONS, WITHDRAWALS AND DISTRIBUTIONS

As of December 31, 2005, the Company has 100 Membership Units issued and
outstanding. No member shall be required to make any additional contributions
beyond their initial contribution. If the Board of Managers unanimously
determines that the Company requires additional funds, any member may, but is
not obligated to, advance such funds.

                                                                              12

<PAGE>
                            Trapeza Funding III, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


3. CONTRIBUTIONS, WITHDRAWALS AND DISTRIBUTIONS (CONTINUED)

No member shall have the right to withdraw any of its capital contribution,
except upon dissolution and liquidation of the Company. The Company is required
to make a distribution to each member at least quarterly. For the years ended
December 31, 2005 and 2004, the Company made distributions of $819,754 and
$516,093, respectively, to the members.

In accordance with the partnership agreement, each partner has contributed a
specified amount of capital which is set forth in the partnership agreement. No
limited partner is required to contribute any capital in excess of its
commitment. As of June 4, 2003, all commitments of the Partnership are fully
funded.

A limited partner will not have the right to redeem its interest in the
Partnership. Funding, in its sole discretion, may redeem all or part of the
partnership interest of any limited partner, for an amount equal to the capital
account of the partnership interest being redeemed, if the limited partner
consents to such redemption and all redemptions in any year do not exceed five
percent of the aggregate allocable percentage of all limited partners.

Funding will cause the Partnership to distribute the lesser of (i) ninety
percent (90%) of cash available from profits and (ii) all cash then available to
the partnership less any reserves for partnership expenses or liabilities. All
other distributions will be at the discretion of Funding. Funding will determine
at its sole discretion the source of funds for all distributions. For the years
ended December 31, 2005 and 2004, the Partnership made distributions of
$2,934,377 and $1,551,940, respectively, to the partners.

4. ISSUER IV

DEFERRED DEBT ISSUANCE COSTS

Deferred debt issuance costs of $9,460,622 are being amortized over the expected
life of the related debt using the effective interest method. The expected life
of the debt is the period ending with the distribution date occurring in
November 2013, as defined in the indenture. Amortization of deferred debt
issuance costs commenced on October 21, 2003.


                                                                              13
<PAGE>
                            Trapeza Funding III, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


4. ISSUER IV (CONTINUED)

COLLATERAL MANAGEMENT AND TRUSTEE FEES

Pursuant to a collateral management agreement, the Collateral Manager is
entitled to a semiannual fee, payable in arrears on the distribution dates,
equal to 0.10% per annum of the semi-annual asset amount ("Base Collateral
Management Fee"), of the net outstanding portfolio collateral, as defined in the
indenture. After certain expenses have been paid, the Collateral Manager is
entitled to an additional semiannual fee equal to 0.15% per annum, calculated in
the same manner as the Base Collateral Management Fee. For the years ended
December 31, 2005 and 2004, collateral management fees were $1,000,000 and
$1,000,201, respectively, and are reflected on the consolidated statement of
operations.

Pursuant to a trustee agreement, the trustee is entitled to a semiannual fee, on
each distribution date, equal to 0.0225% per annum of the sum of the aggregate
principal amount of the investments plus cash and cash equivalents at the
beginning of the period relating to such distribution dates, as defined in the
indenture. For the years ended December 31, 2005 and 2004, total trustee fees
were $121,365 and $118,989, respectively, and are reflected on the consolidated
statement of operations.



                                                                              14

<PAGE>
                            Trapeza Funding III, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


4. ISSUER IV (CONTINUED)

NOTES PAYABLE

On October 21, 2003, Issuer IV issued notes (the "Notes") at their respective
principal values, which are secured by Issuer IV's investments and are
non-recourse to the Company.

At December 31, 2005 and 2004, the Notes outstanding consisted of the following:
<TABLE>
<CAPTION>
                          2005 PRINCIPAL     2004 PRINCIPAL          INTEREST RATE          STATED MATURITY
                          ---------------    ---------------    ------------------------    ----------------
<S>                     <C>                <C>                  <C>                        <C>
Class A1A Notes           $  144,996,417     $  144,996,417       Libor + 0.58% until        May 24, 2034
                                                                   and including the
                                                                  distribution date in
                                                                 November 2013; at all
                                                                   times thereafter,
                                                                     Libor + 1.16%

Class A1B Notes           $   95,000,000     $   95,000,000          Libor + 0.83%           May 24, 2034

Class B Notes             $   33,000,000     $   33,000,000        See Class B note          May 24, 2034

Class C-1 Notes           $   44,500,000     $   44,500,000          Libor + 1.65%           May 24, 2034

Class C-2 Notes           $   44,500,000     $   44,500,000      5.006% until the last       May 24, 2034
                                                                  day of the interest
                                                                   period immediately
                                                                      prior to the
                                                                  distribution date in
                                                                   November 2008 and
                                                                     Libor + 1.65%,
                                                                       thereafter

Class D Notes             $   13,500,000     $   13,750,000          Libor + 2.60%           May 24, 2034

Class E Notes             $    7,142,856     $    8,571,428             10.00%               May 24, 2034
</TABLE>

Pursuant to the terms of the Class B agency agreement, the holders of the Class
B Notes will be entitled to receive interest, certain third parties will be
entitled to receive compensation, at an aggregate, floating rate per annum not
to exceed Libor plus 1.25% in the aggregate, after taking into consideration the
effect of a basis swap to be entered into in connection with the Class B Notes.


                                                                              15
<PAGE>
                            Trapeza Funding III, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


4. ISSUER IV (CONTINUED)

NOTES PAYABLE (CONTINUED)

Holders of the Notes are to receive semiannual interest payments on May 24 and
November 24, commencing in May 2004 (the "Initial Payment Date"). The order of
payment will be first to Class A1A, second, Class A1B, third, Class B, fourth to
Class C, fifth to Class D and sixth to Class E with each Class of Notes being
senior to each of the other classes of Notes. No payments of interest on any
class of Notes will be made until all accrued and unpaid interest on the Notes
of each class that is senior to a class and that remain outstanding has been
paid in full. No payment of principal of any class of Notes will be made until
the principal of, and all accrued and unpaid interest, on the Notes of each
class that is senior to such class and that remain outstanding have been paid in
full.

In the event that the coverage tests, as defined in the indenture, are not
satisfied as of any distribution date, each class of notes may be redeemed in
the manner specified in the indenture.

Principal payments will be made in the following manner. First, payment of
principal of the Class A1A Notes until the Class A1A Notes have been paid in
full. Next, payment of principal on the Class A1B Notes until the Class A1B
Notes have been paid in full. Next, payment of principal of the Class B Notes
until the Class B Notes have been paid in full. Next, payment of principal of
the Class C Notes until the Class C Notes have been paid in full. Next, payment
of principal of the Class D Notes until the Class D Notes have been paid in
full. Next, payment of principal of the Class E Notes. Finally, the remainder to
the members as a dividend on the members' interests or as a return of capital of
the members' interests as provided in the Trapeza CDO IV, LLC Agreement (the
"Agreement").

If on any distribution date, the amount available in the payment account from
amounts received in the related due period are insufficient to make the full
amount of the disbursements required by the priority of payments to different
persons, the trustee will make the disbursements ratably in accordance with the
indenture.


                                                                              16
<PAGE>
                            Trapeza Funding III, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


4. ISSUER IV (CONTINUED)

NOTES PAYABLE (CONTINUED)

If the Notes and the members' interests have not been released prior to May 24,
2034, it is expected that the Company or Collateral Manager, acting on behalf of
the Company, will sell all of the investments and sell or liquidate all other
collateral, and all net proceeds from such sales and liquidations and all
available cash after the payment (in the order of priorities set forth above) of
all (i) fees, (ii) expenses and (iii) interest (including any defaulted interest
and interest on defaulted interest, any Class C deferred interest and interest
on any Class C deferred interest and any Class D deferred interest and interest
on any Class D deferred interest and any Class E deferred interest and interest
on any Class E deferred interest) and principal of the Notes, will be
distributed to the members in accordance with the Agreement.

ACCELERATION OF MATURITY AND REDEMPTION

The indenture provides for an acceleration of maturity or redemption of all of
the senior Notes and accrued and unpaid interest upon the occurrence of a
default event. Default events include a) failure of Issuer IV to pay interest
for a period of three business days on any Class A or B senior Notes, b) failure
of Issuer IV to pay principal of any senior Note when such payment becomes due
and payable at its stated maturity or redemption date, c) failure of Issuer IV,
on any distribution date to disburse amounts available to the interest
collection account or principal collection account in accordance with the order
of the priority of payments set forth in the Indenture, which continues for
three business days, d) Issuer IV or pool of collateral becomes an investment
company required to be registered under the Investment Company Act, e) default
in performance, or a breach, of any other covenant or other agreement of Issuer
IV under the indenture or any representation of warranty of Issuer IV made in
the indenture or in any certificate or other writing proves to be incorrect in
any material respect when made, and in both clauses, the continuation of such
default or breach for a period of thirty days after Issuer IV or the General
Partner has actual knowledge that such default or breach has occurred or after
written notice to Issuer IV and the General Partner by the trustee, or to Issuer
IV, the General Partner and the trustee by the holders of at least 25% in
aggregate outstanding principal amount of the Notes of the controlling class or
hedge counterparty, f) one or more final judgments being rendered against Issuer
IV that exceed, in the aggregate, $5,000,000, and which remain unstayed,
undischarged and unsatisfied for thirty days after such judgment(s) becomes
nonappealable, unless adequate funds have been reserved or set aside for the
payment thereof, and g) failure, on any measurement date, to cause the


                                                                              17
<PAGE>
                            Trapeza Funding III, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


4. ISSUER IV (CONTINUED)

ACCELERATION OF MATURITY AND REDEMPTION (CONTINUED)

Class A/B overcollateralization ratio to be equal to or greater than 100%. Each
of these conditions is further described in the indenture.

5. INTEREST RATE SWAP AGREEMENTS

The Company maintains a policy of valuing its derivative instruments at fair
values, with the resulting unrealized gain or loss included in the consolidated
statements of operations.

A swap is an agreement that obligates two parties to exchange a series of cash
flows at specified intervals based upon or calculated by reference to changes in
specified prices or rates for a specified amount of an underlying asset or
otherwise determined notional amount.

Risks may arise as a result of the failure of the counterparty to the swap
agreement. The loss incurred by the failure of a counterparty is generally
limited to the net payment to be received by the Company and/or the termination
value at the end of the agreement. Therefore, the Company considers the
creditworthiness of each counterparty to a swap agreement in evaluating
potential credit risk. Additionally, risks may arise from unanticipated
movements in interest rates.

The Company records a net receivable or payable for the net income or expense
expected to be received or paid in the interest period. Net amounts received or
paid on swap agreements are recorded as interest income or interest expense on
the consolidated statements of operations. The amount recorded as interest
income on basis swap agreements for the years ended December 31, 2005 and 2004
totaled $324,591 and $268,103, respectively.

The Company entered into interest rate swap agreements with Credit Suisse First
Boston ("CSFB") and SunTrust Equity Funding, LLC ("SunTrust"), for the purpose
of hedging interest rate and cash flow risk between the fixed-rate investments
and floating-rate investments.


                                                                              18
<PAGE>
                            Trapeza Funding III, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


5. INTEREST RATE SWAP AGREEMENTS (CONTINUED)

At December 31, 2005 and 2004, the Company has one interest rate swap agreement
outstanding with CSFB and one interest rate swap agreement outstanding with
SunTrust. They pay as follows:
<TABLE>
<CAPTION>
                                     FLOATING RATE         RATE/AMOUNT
   NOTIONAL         MATURITY        RECEIVED BY THE        PAID BY THE         2005 FAIR        2004 FAIR
    AMOUNT             DATE             COMPANY              COMPANY             VALUE            VALUE
----------------    -----------    ------------------    ----------------    --------------    -------------
<S>                 <C>            <C>                   <C>                 <C>              <C>
    $75,000,000      11/24/08       6 month Libor +          6.385%            $ 3,214,102     $  1,393,828
                                        3.15%
    $33,000,000      11/24/13      1 month Libor +        6 month Libor                            (164,868)
                                        1.25%               + 1.29%               (195,703)
                                                                               -----------     ------------
                                                                               $ 3,018,399     $  1,228,960
                                                                               ===========     ============
</TABLE>

At December 31, 2005 and 2004, the Company has one rate cap agreement
outstanding with CSFB which pays on a semi-annual basis, as follows:
<TABLE>
<CAPTION>
                                     FLOATING RATE         RATE/AMOUNT
   NOTIONAL         MATURITY        RECEIVED BY THE        PAID BY THE         2005 FAIR        2004 FAIR
    AMOUNT             DATE             COMPANY              COMPANY             VALUE            VALUE
----------------    -----------    ------------------    ----------------    --------------    -------------
<S>                 <C>            <C>                   <C>                 <C>              <C>
   $52,500,000       5/24/20             N/A               $ 85,000             $ 54,775        $  (69,389)
</TABLE>

                                                                              19

<PAGE>
                            Trapeza Funding III, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


6. RELATED PARTY TRANSACTIONS

The Partnership pays Funding an administration fee (payable semi-annually in
advance) equal to one and one-half percentage (1.5%) per annum of the aggregate
capital accounts of the limited partners, which will be used to cover management
fees and other ordinary and recurring administrative and related operating
expenses. For the years ended December 31, 2005 and 2004, administration fees
totaled $314,209 and $283,741, respectively.

In exchange for interests sold on behalf of the Partnership, Funding pays
external broker-dealers an administration fee, equal to the percentage of equity
raised by the broker-dealer multiplied by one-third of the total administration
fee being charged by Funding to the Partnership. For the years ended December
31, 2005 and 2004, total administration fee expense equaled $32,858 and $29,672,
respectively, and are reflected on the consolidated statements of operations.


                                                                              20
<PAGE>


                                                                     Schedule f)










    TRAPEZA FUNDING III, LLC

    Consolidated Financial Statements (Unaudited)

    Year ended December 31, 2004 and period from April 1, 2003
    (commencement of operations) to December 31, 2003



<PAGE>


                            Trapeza Funding III, LLC

                        Consolidated Financial Statements

           Year ended December 31, 2004 and period from April 1, 2003
                (commencement of operations) to December 31, 2003

                                    Unaudited





                                    CONTENTS





Consolidated Statements of Financial Condition...............................3
Consolidated Schedule of Investments.........................................4
Consolidated Statements of Operations........................................6
Consolidated Statements of Changes in Members' Interests.....................7
Consolidated Statements of Cash Flows........................................8
Notes to Consolidated Financial Statements...................................9









<PAGE>
                            Trapeza Funding III, LLC
                 Consolidated Statements of Financial Condition
                                    Unaudited
<TABLE>
<CAPTION>
                                                                           DECEMBER 31
                                                                     2004                2003
                                                                 -------------       -------------
<S>                                                             <C>                 <C>
ASSETS
Cash and cash equivalents                                        $   5,453,128       $   4,694,716
Prepaid expenses                                                        27,260              68,912
Investments in trust preferred securities, at fair value
  (amortized cost $399,481,628 and $399,463,216)                   400,145,681         399,714,559
Deferred debt issuance costs (net of accumulated amortization
  of $917,401 and $42,049)                                           8,543,221           9,418,573
Interest receivable on trust preferred securities                      617,180             541,046
Unrealized appreciation on swap agreements                           1,159,571             867,181
Other                                                                  132,998             115,490
                                                                 -------------       -------------
Total Assets                                                     $ 416,079,039       $ 415,420,477
                                                                 =============       =============

LIABILITIES AND MEMBERS' INTERESTS
Liabilities
   Class A1A Notes                                               $ 144,996,417       $ 145,000,000
   Class A1B Notes                                                  95,000,000          95,000,000
   Class B Notes                                                    33,000,000          33,000,000
   Class C-1 Notes                                                  44,500,000          44,500,000
   Class C-2 Notes                                                  44,500,000          44,500,000
   Class D Notes                                                    13,750,000          14,000,000
   Class E Notes                                                     8,571,428          10,000,000
   Interest payable                                                  1,517,483           2,082,226
   Professional fees                                                    86,965              67,486
   Collateral management fees                                          122,222             194,548
   Net interest payable to swap counterparty                            64,656             321,477
   Trustee fees                                                         13,160              21,088
   Accrued expenses                                                    172,549             157,851
                                                                 -------------       -------------
Total Liabilities                                                  386,294,880         388,844,676
                                                                 -------------       -------------

Minority interest                                                   29,151,590          26,374,996

Members' Interests                                                     632,569             200,805
                                                                 -------------       -------------
Total Liabilities and Members' Interests                         $ 416,079,039       $ 415,420,477
                                                                 =============       =============
</TABLE>


See accompanying notes to consolidated financial statements.

                                                                               3
<PAGE>
                           Trapeza Funding III L.L.C.

                      Consolidated Schedule of Investments

                                December 31, 2004

                                    Unaudited
<TABLE>
<CAPTION>
                                                                               PRINCIPAL     2004 FAIR      PRINCIPAL     2003 FAIR
                                                                             AMOUNT (000)      VALUE      AMOUNT (000)      VALUE
                                                                             ------------    ---------    ------------    ---------
<S>                                                                         <C>              <C>          <C>           <C>
INVESTMENTS IN TRUST PREFERRED SECURITIES - (100%) *
BANKS (85.84% AND 85.94%)*
Alabama National  Statutory Trust III, 3 month libor + 3.050%, due
  9/26/2033 (a)                                                                $ 11,210     $ 11,210,000     $ 11,210   $ 11,210,000
Ambank Holdings Capital Trust I, 3 month libor + 3.150%, due 6/30/2033 (a)        9,000        8,935,326        9,000      8,934,185
Arrow Capital Statutory Trust II, 6.530%, due 7/23/2033 (a)                      10,000       10,000,000       10,000     10,000,000
Cathay Capital Trust I, 3 month libor + 3.150%, due 6/30/2033 (a)                10,450       10,450,000       10,450     10,450,000
CB Trico Capital Trust, 3 month libor + 3.050%, due 10/20/2033 (a)               10,000       10,000,000       10,000     10,000,000
Centerstate Banks Florida Statutory Trust I, 3 month libor + 3.050%, due
  9/22/2033 (a)                                                                  10,000       10,000,000       10,000     10,000,000
Corus Statutory Trust II, 3 month libor + 3.100%, due 6/30/2033 (a)              11,000       10,915,400       11,000     10,913,895
F.N.B. Statutory Trust I, 3 month libor + 3.250%, due 3/31/2033 (a)               1,000        1,000,000        1,000      1,000,000
FBR Capital Trust I, 3 month libor + 3.250%, due 3/30/2033 (a)                    1,000          992,196        1,000        992,060
FBR Capital Trust II, 3 month libor + 3.100%, due 9/30/2033 (a)                  11,000       11,015,094       11,000     11,015,357
First Community / CA Statutory Trust VI,   month libor + 3.050%, due
  9/15/2033 (a)                                                                  10,000       10,106,805       10,000     10,108,693
First Financial OH Statutory Trust II, 3 month libor + 3.100%, due
  9/30/2033 (a)                                                                  11,000       11,000,000       11,000     11,000,000
First Group Capital Statutory Trust VII, 3 month  libor + 2.900%, due
  10/30/2033 (a)                                                                 12,000       12,066,063       12,000     12,067,247
First South Preferred Trust I, 3 month libor + 2.950%, due 9/30/2033 (a)         10,000       10,060,736       10,000     10,061,823
FNB Statutory Trust I, 3 month libor + 3.250%, due 3/31/2033 (a)                 11,000       11,000,000       11,000     11,000,000
Heartland Financial Statutory Trust III, 8.250%, due 10/10/2033 (a)              11,000       11,000,000       11,000     11,000,000
Iberiabank Statutory Trust II, 3 month libor + 3.150%, due 6/17/2033 (a)          1,000        1,004,679        1,000      1,004,762
Industry  Bancshares  Capital Trust II, 3 month libor + 3.050%, due
  8/30/2033 (a)                                                                   2,000        1,970,604        2,000      1,970,085
James Monroe Statutory Trust II, 3 month libor + 3.100%, due 7/31/2033 (a)        4,000        4,000,000        4,000      4,000,000
Lakeland Bancorp Capital Trust II, 5.710%, due 6/30/2033 (a)                     11,000       10,950,462       11,000     10,949,784
Lakeland Statutory Trust II, 3 month libor + 3.050%, due 10/1/2033 (a)           12,000       12,000,000       12,000     12,000,000
Lone Star National  Capital  Trust II, 3 month libor + 2.950%,  due
  9/30/2033 (a)                                                                  10,000       10,058,776       10,000     10,059,829
Macatawa Statutory Trust I, 3 month libor + 3.050%, due 7/15/2033 (a)            11,000       11,000,000       11,000     11,000,000
Main Street Banks Statutory  Trust II, 3 month libor + 3.250%,  due
  6/30/2033 (a)                                                                   9,000        9,000,000        9,000      9,000,000
Mariner Capital Trust IV, 3 month libor + 3.050%, due 8/30/2033 (a)              12,000       12,053,884       12,000     12,054,843
Merchants and Manufacturers Statutory Trust II, 8.250%, due 5/30/2033 (a)         1,000        1,000,000        1,000      1,000,000
Merchants and Manufacturers Statutory Trust III, 8.250%, due 10/15/2033 (a)       3,500        3,500,000        3,500      3,500,000
Merchants and Manufacturers  Statutory Trust IV, 3 month libor + 2.950%, due
  10/15/2033 (a)                                                                  7,500        7,500,000        7,500      7,500,000
National Bancshares Capital Trust II, 3 month libor + 3.000%, due 9/15/2033 (a)   7,000        7,004,343        7,000      7,004,420
Orion Bancorp, Inc. Statutory Trust I, 3 month libor + 3.250%, due 5/5/2033 (a)  11,000       11,000,000       11,000     11,000,000
Ozark Capital Statutory Trust II, 3 month libor + 2.900%, due 9/29/2033 (a)       6,000        6,000,000        6,000      6,000,000
Raton Capital Trust I, 3 month libor + 2.900%, due 9/30/2033 (a)                  5,000        5,048,971        5,000      5,049,856
Salin Statutory Trust I, 3 month libor + 2.950%, due 10/17/2033 (a)              11,000       11,000,000       11,000     11,000,000
Sleepy Hollow Capital Trust I, 3 month libor + 3.050%, due 8/30/2033 (a)          4,000        4,013,716        4,000      4,013,960
SNB Capital Trust IV, 3 month libor + 3.000%, due 9/30/2033 (a)                   5,000        5,028,904        5,000      5,029,417
Southside Statutory Trust III, 3 month libor + 2.940%, due 9/4/2033 (a)          12,000       12,000,000       12,000     12,000,000
St. Josephs Financial Capital Trust I, 3 month libor + 3.050%, due
  7/11/2033 (a)                                                                   3,000        3,037,227        3,000      3,037,892
Sterling Bank Houston Texas, 7.375%, due 4/15/2013 (a)                            4,670        4,670,000        4,670      4,670,000
Summit Bank Corporation Capital Trust I, 3 month libor + 3.100%, due
  9/30/2033 (a)                                                                  12,000       11,938,252       12,000     11,937,175
United Bancorporation of Wyoming Capital Trust I, 3 month libor + 3.100%,
  due 9/30/2033 (a)                                                               9,000        9,029,404        9,000      9,029,917
Wesbanco Capital Trust II, 5.800%, due 6/30/2033 (a)                              4,000        3,993,486        4,000      3,993,398
West Bancorporation Capital Trust I, 6.975%, due 7/18/2033 (a)                   11,000       10,943,302       11,000     10,942,693
Wintrust Capital Trust III, 3 month libor + 3.250%, due 4/7/2033 (a)              5,000        5,000,000        5,000      5,000,000
                                                                                             -----------                 -----------
Total Banks (amortized cost $343,497,630 and $343,501,291)                                   343,497,630                 343,501,291
                                                                                             -----------                 -----------
</TABLE>
                                                                               4
<PAGE>
                           Trapeza Funding III, L.L.C.

                Consolidated Schedule of Investments (continued)

                                December 31, 2004

                                    Unaudited
<TABLE>
<CAPTION>
                                                                               PRINCIPAL     2004 FAIR      PRINCIPAL     2003 FAIR
                                                                             AMOUNT (000)      VALUE      AMOUNT (000)      VALUE
                                                                             ------------    ---------    ------------    ---------
<S>                                                                         <C>              <C>          <C>           <C>
INVESTMENTS IN TRUST PREFERRED SECURITIES - (100%) * (CONTINUED)
THRIFTS (14.16% AND 14.06%)
BankSouth of Georgia Statutory Trust I, 3 month libor + 3.150%, due
  9/23/2033 (a)                                                                   5,000        5,000,000        5,000      5,000,000
BSC Capital Trust I, 3 month libor + 2.900%, due 9/30/2033 (a)                   12,000       12,033,496       12,000     12,034,102
Capital One Capital I, 3 month libor + 1.550%, due 2/1/2027                       3,000        2,985,002        3,000      2,549,999
Coastal Capital Trust II, 3 month libor + 3.050%, due 6/23/2033 (a)              10,000        9,969,634       10,000      9,969,089
Coastal  Financial  Capital  Trust I, 3 month  libor +  3.050%, due
  7/3/2033 (a)                                                                    6,000        6,053,685        6,000      6,054,644
Flagstar Statutory III, 6.550%, due 4/7/2033 (a)                                  5,000        5,000,000        5,000      5,000,000
Flagstar Statutory Trust IV, 6.750%, due 3/19/2033 (a)                            2,670        2,645,707        2,670      2,645,428
IndyMac Capital Trust V, 6.050%, due 7/11/2033 (a)                               12,000       11,964,055       12,000     11,963,596
Sterling Capital Trust IV, 3 month libor + 3.150%, due 5/15/2033 (a)              1,000          996,472        1,000        996,410
                                                                                            ------------                ------------
Total Thrifts (amortized cost $55,983,998 and $55,961,925)                                    56,648,051                  56,213,268
                                                                                            ------------                ------------
Total Investments in Trust Preferred Securities (amortized cost
  $399,481,628 and $399,463,216)                                                            $400,145,681                $399,714,559
                                                                                            ============                ============


                                                                                             FAIR VALUE                  FAIR VALUE
                                                                                            ------------                ------------
INTEREST RATE SWAP AGREEMENTS
Credit Suisse First Boston                                                                  $  1,159,571                $    867,181
                                                                                            ------------                ------------
Total Interest Rate Swap Agreements                                                         $  1,159,571                $    867,181
                                                                                            ============                ============
</TABLE>

*Amounts in parenthesis indicate percentage of investments in trust preferred
securities.
(a) Private placement, illiquid securities, where amortized cost approximates
fair value.


See accompanying notes to consolidated financial statements.

                                                                               5
<PAGE>
                            Trapeza Funding III, LLC

                      Consolidated Statements of Operations
                                    Unaudited
<TABLE>
<CAPTION>
                                                                                        PERIOD FROM APRIL 1,
                                                                                        2003 (COMMENCEMENT
                                                                      YEAR ENDED         OF OPERATIONS) TO
                                                                 DECEMBER 31, 2004       DECEMBER 31, 2003
                                                                 -----------------       -----------------
<S>                                                              <C>                    <C>
INVESTMENT INCOME
   Interest                                                        $  20,405,244           $  7,055,055
   Reimbursement fees                                                          -              2,280,962
                                                                   -------------           ------------
TOTAL INVESTMENT INCOME                                               20,405,244              9,336,017
                                                                   -------------           ------------

EXPENSES
   Interest                                                           13,055,196              4,123,224
   Collateral management fees                                          1,000,201                194,548
   Amortization                                                          875,352                 54,562
   Trustee fees                                                          118,989                 21,088
   Professional fees                                                     103,665                749,621
   Administration fees                                                    29,672                 16,558
   Wages, payroll taxes and benefits                                           -                703,991
   Overhead                                                                    -                234,744
   Travel, meals and entertainment                                             -                178,330
   Printing and copying                                                        -                 28,728
   Delivery services                                                           -                  4,817
   Other                                                                 230,339                248,784
                                                                   -------------           ------------
Total expenses                                                        15,413,414              6,558,995
                                                                   -------------           ------------
NET INVESTMENT INCOME                                                  4,991,830              2,777,022
                                                                   -------------           ------------

Unrealized appreciation on investment transactions:
   Investments in trust preferred securities                             412,710                251,342
   Interest rate swap agreements                                         292,390                867,181
                                                                   -------------           ------------
Net unrealized appreciation on investment transactions                   705,100              1,118,523
                                                                   -------------           ------------

Net income before minority interest                                    5,696,930              3,895,545
Minority interest                                                      4,749,073              2,640,854
                                                                   -------------           ------------
NET INCOME                                                         $     947,857           $  1,254,691
                                                                   =============           ============
</TABLE>

See accompanying notes to consolidated financial statements.

                                                                               6
<PAGE>
                            Trapeza Funding III, LLC

            Consolidated Statements of Changes in Members' Interests

           Year ended December 31, 2004 and period from April 1, 2003
                (commencement of operations) to December 31, 2003

                                    Unaudited



Balance at April 1, 2003                                          $          -
   Capital contributions                                                20,000
   Offering costs                                                           (1)
   Net income                                                        1,254,691
   Distributions to members                                         (1,073,885)
                                                                  ------------
Balance at December 31, 2003                                           200,805
   Net income                                                          947,857
   Distributions to members                                           (516,093)
                                                                  ------------
Balance at December 31, 2004                                      $    632,569
                                                                  ============


See accompanying notes to consolidated financial statements.

                                                                               7
<PAGE>
                            Trapeza Funding III, LLC

                      Consolidated Statements of Cash Flows

                                    Unaudited
<TABLE>
<CAPTION>
                                                                                          PERIOD FROM
                                                                                         APRIL 1, 2003
                                                                                        (COMMENCEMENT OF
                                                                     YEAR ENDED          OPERATIONS) TO
                                                                 DECEMBER 31, 2004     DECEMBER 31, 2003
                                                                 -----------------     -----------------
<S>                                                              <C>                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                                        $       947,857       $     1,254,691
Adjustments to reconcile net income to net cash and cash
  equivalents provided by (used in) operating activities:
   Amortization of deferred debt issuance costs                           875,352                42,049
   Accretion of discount on investments in trust preferred                (18,412)
    securities                                                                                   (3,023)
   Minority interest                                                    2,776,594            26,374,996
   Net unrealized appreciation on investment transactions                (705,100)           (1,118,523)
   Net change in operating assets and liabilities:
     Investment in trust preferred securities                                   -          (399,460,194)
     Interest receivable on trust preferred securities                    (76,134)             (541,046)
     Prepaid expenses                                                      41,652               (68,912)
     Other                                                                (17,508)             (115,490)
     Interest payable                                                    (564,743)            2,082,226
     Professional fees                                                     19,479                67,486
     Collateral management fees                                           (72,326)              194,548
     Net interest payable to swap counterparty                           (256,821)              321,477
     Trustee fees                                                          (7,928)               21,088
     Accrued expenses                                                      14,698               157,851
                                                                  ---------------       ---------------
Net cash and cash equivalents provided by (used in) operating
  activities                                                            2,956,660          (370,790,776)
                                                                  ---------------       ---------------

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of notes                                                 -           386,000,000
Principal payments on notes                                            (1,682,155)                    -
Deferred debt issuance costs                                                    -            (9,460,622)
Proceeds from capital contributions                                             -                20,000
Payments of offering costs                                                      -                    (1)
Distributions to members                                                 (516,093)           (1,073,885)
                                                                  ---------------       ---------------
Net cash and cash equivalents (used in) provided by financing
  activities                                                           (2,198,248)          375,485,492
                                                                  ---------------       ---------------

Net increase in cash and cash equivalents                                 758,412             4,694,716
Cash and cash equivalents, beginning of period                          4,694,716                     -
                                                                  ---------------       ---------------
Cash and cash equivalents, end of period                          $     5,453,128       $     4,694,716
                                                                  ===============       ===============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid                                                     $    13,863,234       $     1,529,775
                                                                  ===============       ===============
</TABLE>

See accompanying notes to consolidated financial statements.

                                                                               8
<PAGE>
                            Trapeza Funding III, LLC

              Notes to Consolidated Unaudited Financial Statements

                                December 31, 2004


1. ORGANIZATION AND PURPOSE

Trapeza Funding III, LLC ("Funding"), was organized on January 30, 2003 as a
Delaware limited liability company. Funding commenced operations on April 1,
2003. Funding was organized for the purpose of being the general partner of
Trapeza Partners III L.P. (the "Partnership"). Per the partnership agreement,
the limited partners have no right to remove Funding at any time. Funding has
complete and exclusive control of the management of the business affairs of the
Partnership.

The Partnership was organized on February 27, 2003 as a Delaware limited
partnership. The Partnership commenced operations on April 1, 2003. The
Partnership was organized for the purpose of investing in membership interests
and other securities to be issued by Trapeza CDO IV, LLC ("Issuer IV"), which
was formed by Funding. Funding also formed Trapeza CDO III, LLC ("Issuer III").
The Partnership has an 11-year term, which Funding may extend on a year-to-year
basis.

Minority interest reflects the 99.99% of partners' interest of the limited
partners of the Partnership. The consolidated entity is referred to as the
"Company."

Funding and the Collateral Manager are owned equally by Financial Stocks, Inc.
("FSI") and Resource Financial Fund Management, Inc., a wholly owned subsidiary
of Resource America, Inc. ("REXI") (collectively, the "Owners"). FSI is a
Registered Investment Adviser under the Investment Advisers Act of 1940. REXI is
a publicly traded company operating in energy, real estate and financial
services sectors. The Owners hold partnership interests of approximately 11% of
the Partnership. Funding has complete and exclusive control of the management of
the business affairs of the Partnership.

Issuer IV's objective is to purchase, acquire, own, hold, sell, endorse,
transfer, assign, pledge, finance, refinance, exchange, restructure, workout,
advance and collect funds pursuant to and otherwise deal with and exercise
rights of ownership with respect to the collateral of Issuer IV, including other
securities or equity interests owned from time to time by Issuer IV, all in
accordance with the terms of the indenture.

Trapeza Capital Management, LLC (the "Collateral Manager"), a Delaware limited
liability company, is responsible for supervising and directing the investment
of the collateral of Issuer IV. Issuer IV is charged a collateral management fee
by the Collateral Manager, who is affiliated with Funding through common
ownership. All material intercompany transactions have been eliminated.


                                                                               9
<PAGE>
                            Trapeza Funding III, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


1. ORGANIZATION AND PURPOSE (CONTINUED)

The business and affairs of Funding are managed by a Board of Managers. The
Board of Managers has full, complete and exclusive authority, power and
discretion to manage and control the business affairs and properties of Funding,
to make all decisions regarding those matters and to perform any activities
customary or incident to the management of Funding's business.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of the significant accounting policies followed by
the Company in the preparation of its financial statements.

BASIS OF ACCOUNTING

The Company's accounting policies are in conformity with accounting principles
generally accepted in the United States. The Company maintains its financial
records in United States dollars. For financial reporting purposes, the Company
follows the accrual basis of accounting.

CASH AND CASH EQUIVALENTS

The Company considers all demand deposits with banks and other highly liquid
investments with original maturities of three months or less to be cash
equivalents.

INVESTMENT TRANSACTIONS

The Partnership records transactions on their trade dates. Realized gains and
losses on investments are determined on the specific identification basis for
financial accounting purposes. Interest is accrued as earned or incurred and
includes the amortization/accretion of premiums and discounts on debt
securities.

INVESTMENT VALUATION

Investments are carried at market or fair value. Securities for which market
quotations are not readily available are valued by procedures adopted by
Funding. In valuing investments in which market quotations are not readily
available, Funding utilizes data from a variety of different sources, taking
into account the characteristics of a security, any changes in the credit
quality of the securities in the portfolio, the overall movement of interest
rates and other factors which, in Funding's good faith and judgment, are

                                                                              10
<PAGE>
                            Trapeza Funding III, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

INVESTMENT VALUATION (CONTINUED)

relevant to the value of a security. For exchange-traded securities, management
will obtain current market data and quotes from independent brokers.

The Company has invested a significant portion of the portfolio in private
placement, illiquid issues having no ready market. At December 31, 2004, these
securities aggregate $397,160,679 and have been valued in good faith by Funding
as described in the preceding paragraph. Because of the inherent uncertainty of
valuation, the fair values estimated by Funding may not necessarily represent
the amounts that could be realized from sales or other dispositions of
investments and the differences may be material.

CREDIT RISKS AND GENERAL LIQUIDITY CONSIDERATIONS

Investments in trust preferred securities are subject to credit, interest rate
and liquidity risks. Adverse changes in the financial condition of an issuer of
trust preferred securities or in general economic conditions or both may impair
the ability of an issuer to make payments of principal and interest. Debt
obligations are also subject to liquidity risk and the risk of market price
fluctuations. Adverse changes in the financial condition of an issuer may affect
the liquidity of the market for an issuer's securities and may reduce the market
price of such securities. In addition, changes in general economic and
regulatory conditions may affect the liquidity of the market for trust preferred
securities in general and may reduce the values of some or all of the
securities.

OFFERING COSTS

During 2003, the Partnership incurred offering costs related to the closing of
Issuer IV of $166,999, of which $1 was allocated to Funding. These costs were
charged directly to the partners' capital and members' capital accounts,
respectively.

ALLOCATION OF PROFITS AND LOSSES

The Company allocates profits to the members in proportion to their respective
capital account balances until the cumulative profits for this current period
and all prior fiscal years are equal to the cumulative losses allocated;
thereafter, among the members in proportion to their respective units. Losses
are allocated to the members in proportion to their respective capital account
balances.

                                                                              11
<PAGE>
                            Trapeza Funding III, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

ALLOCATION OF PROFITS AND LOSSES (CONTINUED)

Funding's investment in the Partnership is accounted for based on its pro-rata
share of its investment in the Partnership. Profits and losses from
non-portfolio income are allocated to all members in proportion to their
allocable shares. Twenty percent (20%) of the cumulative net profits from
portfolio investments are allocated to Funding.

Non-portfolio income of the Partnership, consisting primarily of income earned
on short-term investments, is allocated to all limited partners of the
Partnership in proportion to their respective capital account balances prior to
the allocation of any other item.

Portfolio income of the Partnership, consisting primarily of accrued interest
and profits and losses from the sale of such investments, is allocated to all
partners of the Partnership in proportion to their respective contributed
capital in relation to total contributed capital of the Partnership, but 20% of
the cumulative net profits otherwise allocable to all partners will be allocated
to Funding, defined as the incentive allocation. For the year ended December 31,
2004 and period ended December 31, 2003, Funding received an incentive
allocation of $763,327 and $518,390, respectively.

TAXATION

The Company is treated as a partnership for Federal income tax purposes and,
therefore, no provision for federal income tax is recorded.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities as of
the date of the financial statements and the reported amounts of income and
expenses during the reporting period. Actual results could differ from those
estimates.

3. CONTRIBUTIONS, WITHDRAWALS AND DISTRIBUTIONS

As of December 31, 2004, the Company has 100 Membership Units issued and
outstanding. No member shall be required to make any additional contributions
beyond their initial contribution. If the Board of Managers unanimously
determines that the Company requires additional funds, any member may, but is
not obligated to, advance such funds. For the year

                                                                              12
<PAGE>
                            Trapeza Funding III, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


3. CONTRIBUTIONS, WITHDRAWALS AND DISTRIBUTIONS (CONTINUED)

ended December 31, 2004 and period ended December 31, 2003, the Company received
total contributions of $0 and $20,000, respectively, from the members.

No member shall have the right to withdraw any of its capital contribution,
except upon dissolution and liquidation of the Company. The Company is required
to make a distribution to each member at least quarterly. For the year ended
December 31, 2004 and period ended December 31, 2003, the Company made
distributions of $516,093 and $1,073,885, respectively, to the members.

In accordance with the partnership agreement, each partner has contributed a
specified amount of capital which is set forth in the partnership agreement. No
limited partner is required to contribute any capital in excess of its
commitment. As of June 4, 2003, all commitments of the Partnership are fully
funded.

A limited partner will not have the right to redeem its interest in the
Partnership. Funding, in its sole discretion, may redeem all or part of the
partnership interest of any limited partner, for an amount equal to the capital
account of the partnership interest being redeemed, if the limited partner
consents to such redemption and all redemptions in any year do not exceed five
percent of the aggregate allocable percentage of all limited partners.

Funding will cause the Partnership to distribute the lesser of (i) ninety
percent (90%) of cash available from profits and (ii) all cash then available to
the partnership less any reserves for partnership expenses or liabilities. All
other distributions will be at the discretion of Funding. Funding will determine
at its sole discretion the source of funds for all distributions. For the year
ended December 31, 2004 and period ended December 31, 2003, the Partnership made
distributions of $1,551,940 and $1,223,014, respectively, to the partners.

4. ISSUER IV

DEFERRED DEBT ISSUANCE COSTS

Deferred debt issuance costs of $9,460,622 are being amortized over the expected
life of the related debt using the effective interest method. The expected life
of the debt is the period ending with the distribution date occurring in
November 2013, as defined in the indenture. Amortization of deferred debt
issuance costs commenced on October 21, 2003.

                                                                              13
<PAGE>
                            Trapeza Funding III, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


4. ISSUER IV (CONTINUED)

COLLATERAL MANAGEMENT AND TRUSTEE FEES

Pursuant to a collateral management agreement, the Collateral Manager is
entitled to a semiannual fee, payable in arrears on the distribution dates,
equal to 0.10% per annum of the semi-annual asset amount ("Base Collateral
Management Fee"), of the net outstanding portfolio collateral, as defined in the
indenture. After certain expenses have been paid, the Collateral Manager is
entitled to an additional semiannual fee equal to 0.15% per annum, calculated in
the same manner as the Base Collateral Management Fee. For the year ended
December 31, 2004 and period ended December 31, 2003, total collateral
management fees were $1,000,201 and $194,548, respectively, and are reflected on
the consolidated statement of operations.

Pursuant to a trustee agreement, the trustee is entitled to a semiannual fee, on
each distribution date, equal to 0.0225% per annum of the sum of the aggregate
principal amount of the investments plus cash and cash equivalents at the
beginning of the period relating to such distribution dates, as defined in the
indenture. For the year ended December 31, 2004 and period ended December 31,
2003, total trustee fees were $118,989 and $21,088, respectively, and are
reflected on the consolidated statement of operations.




                                                                              14
<PAGE>
                            Trapeza Funding III, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


4. ISSUER IV (CONTINUED)

NOTES PAYABLE

On October 21, 2003, Issuer IV issued notes (the "Notes") at their respective
principal values, which are secured by Issuer IV's investments and are
non-recourse to the Company.

At December 31, 2004 and 2003, the Notes outstanding consisted of the following:
<TABLE>
<CAPTION>
                          2004 PRINCIPAL     2003 PRINCIPAL          INTEREST RATE          STATED MATURITY
                          ---------------    ---------------    ------------------------    ----------------
<S>                      <C>                <C>                 <C>                         <C>
Class A1A Notes           $  144,996,417     $  145,000,000       Libor + 0.58% until        May 24, 2034
                                                                   and including the
                                                                  distribution date in
                                                                 November 2013; at all
                                                                   times thereafter,
                                                                     Libor + 1.16%

Class A1B Notes           $   95,000,000     $   95,000,000          Libor + 0.83%           May 24, 2034

Class B Notes             $   33,000,000     $   33,000,000        See Class B note          May 24, 2034

Class C-1 Notes           $   44,500,000     $   44,500,000          Libor + 1.65%           May 24, 2034

Class C-2 Notes           $   44,500,000     $   44,500,000      5.006% until the last       May 24, 2034
                                                                  day of the interest
                                                                   period immediately
                                                                      prior to the
                                                                  distribution date in
                                                                   November 2008 and
                                                                     Libor + 1.65%,
                                                                       thereafter

Class D Notes             $   13,750,000     $   14,000,000          Libor + 2.60%           May 24, 2034

Class E Notes             $    8,571,428     $   10,000,000             10.00%               May 24, 2034
</TABLE>

Pursuant to the terms of the Class B agency agreement, the holders of the Class
B Notes will be entitled to receive interest, certain third parties will be
entitled to receive compensation, at an aggregate, floating rate per annum not
to exceed Libor plus 1.25% in the aggregate, after taking into consideration the
effect of a basis swap to be entered into in connection with the Class B Notes.


                                                                              15
<PAGE>
                            Trapeza Funding III, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


4. ISSUER IV (CONTINUED)

NOTES PAYABLE (CONTINUED)

Holders of the Notes are to receive semiannual interest payments on May 24 and
November 24, commencing in May 2004 (the "Initial Payment Date"). The order of
payment will be first to Class A1A, second, Class A1B, third, Class B, fourth to
Class C, fifth to Class D and sixth to Class E with each Class of Notes being
senior to each of the other classes of Notes. No payments of interest on any
class of Notes will be made until all accrued and unpaid interest on the Notes
of each class that is senior to a class and that remain outstanding has been
paid in full. No payment of principal of any class of Notes will be made until
the principal of, and all accrued and unpaid interest, on the Notes of each
class that is senior to such class and that remain outstanding have been paid in
full.

In the event that the coverage tests, as defined in the indenture, are not
satisfied as of any distribution date, each class of notes may be redeemed in
the manner specified in the indenture.

Principal payments will be made in the following manner. First, payment of
principal of the Class A1A Notes until the Class A1A Notes have been paid in
full. Next, payment of principal on the Class A1B Notes until the Class A1B
Notes have been paid in full. Next, payment of principal of the Class B Notes
until the Class B Notes have been paid in full. Next, payment of principal of
the Class C Notes until the Class C Notes have been paid in full. Next, payment
of principal of the Class D Notes until the Class D Notes have been paid in
full. Next, payment of principal of the Class E Notes. Finally, the remainder to
the members as a dividend on the members' interests or as a return of capital of
the members' interests as provided in the Trapeza CDO IV, LLC Agreement (the
"Agreement").

If on any distribution date, the amount available in the payment account from
amounts received in the related due period are insufficient to make the full
amount of the disbursements required by the priority of payments to different
persons, the trustee will make the disbursements ratably in accordance with the
indenture.


                                                                              16
<PAGE>
                            Trapeza Funding III, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


4. ISSUER IV (CONTINUED)

NOTES PAYABLE (CONTINUED)

If the Notes and the members' interests have not been released prior to May 24,
2034, it is expected that the Company or Collateral Manager, acting on behalf of
the Company, will sell all of the investments and sell or liquidate all other
collateral, and all net proceeds from such sales and liquidations and all
available cash after the payment (in the order of priorities set forth above) of
all (i) fees, (ii) expenses and (iii) interest (including any defaulted interest
and interest on defaulted interest, any Class C deferred interest and interest
on any Class C deferred interest and any Class D deferred interest and interest
on any Class D deferred interest and any Class E deferred interest and interest
on any Class E deferred interest) and principal of the Notes, will be
distributed to the members in accordance with the Agreement.

ACCELERATION OF MATURITY AND REDEMPTION

The indenture provides for an acceleration of maturity or redemption of all of
the senior Notes and accrued and unpaid interest upon the occurrence of a
default event. Default events include a) failure of Issuer IV to pay interest
for a period of three business days on any Class A or B senior Notes, b) failure
of Issuer IV to pay principal of any senior Note when such payment becomes due
and payable at its stated maturity or redemption date, c) failure of Issuer IV,
on any distribution date to disburse amounts available to the interest
collection account or principal collection account in accordance with the order
of the priority of payments set forth in the Indenture, which continues for
three business days, d) Issuer IV or pool of collateral becomes an investment
company required to be registered under the Investment Company Act, e) default
in performance, or a breach, of any other covenant or other agreement of Issuer
IV under the indenture or any representation of warranty of Issuer IV made in
the indenture or in any certificate or other writing proves to be incorrect in
any material respect when made, and in both clauses, the continuation of such
default or breach for a period of thirty days after Issuer IV or the General
Partner has actual knowledge that such default or breach has occurred or after
written notice to Issuer IV and the General Partner by the trustee, or to Issuer
IV, the General Partner and the trustee by the holders of at least 25% in
aggregate outstanding principal amount of the Notes of the controlling class or
hedge counterparty, f) one or more final judgments being rendered against Issuer
IV that exceed, in the aggregate, $5,000,000, and which remain unstayed,
undischarged and unsatisfied for thirty days after such judgment(s) becomes
nonappealable, unless adequate funds have been reserved or set aside for the
payment thereof, and g) failure, on any measurement date, to cause the

                                                                              17
<PAGE>
                            Trapeza Funding III, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


4. ISSUER IV (CONTINUED)

ACCELERATION OF MATURITY AND REDEMPTION (CONTINUED)

Class A/B overcollateralization ratio to be equal to or greater than 100%. Each
of these conditions is further described in the indenture.

5.   INTEREST RATE SWAP AGREEMENTS

The Company maintains a policy of valuing its securities positions and
derivative instruments at market or fair values, with the resulting unrealized
gain or loss included in the consolidated statements of operations.

A swap is an agreement that obligates two parties to exchange a series of cash
flows at specified intervals based upon or calculated by reference to changes in
specified prices or rates for a specified amount of an underlying asset or
otherwise determined notional amount.

Risks may arise as a result of the failure of the counterparty to the swap
agreement. The loss incurred by the failure of a counterparty is generally
limited to the net payment to be received by the Company and/or the termination
value at the end of the agreement. Therefore, the Company considers the
creditworthiness of each counterparty to a swap agreement in evaluating
potential credit risk. Additionally, risks may arise from unanticipated
movements in interest rates.

The Company records a net receivable or payable for the net income or expense
expected to be received or paid in the interest period. Net amounts received or
paid on swap agreements are recorded as interest income or interest expense on
the consolidated statements of operations. The amount recorded as interest
income on basis swap agreements for the years ended December 31, 2004 and 2003
totaled $268,103 and $49,195, respectively.

The Company entered into interest rate swap agreements with Credit Suisse First
Boston ("CSFB") and Suntrust Equity Funding, LLC ("SunTrust"), for the purpose
of hedging interest rate and cash flow risk between the fixed-rate investments
and floating-rate investments.


                                                                              18
<PAGE>
                            Trapeza Funding III, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


5. INTEREST RATE SWAP AGREEMENTS (CONTINUED)

At December 31, 2004, the Company has one interest rate swap agreement
outstanding with CSFB and one interest rate swap agreement outstanding with
SunTrust. At December 31, 2003, the Company had one interest rate swap agreement
outstanding with CSFB. They pay as follows:
<TABLE>
<CAPTION>
                                     FLOATING RATE         RATE/AMOUNT
   NOTIONAL         MATURITY        RECEIVED BY THE        PAID BY THE         2004 FAIR         2003 FAIR
    AMOUNT             DATE             COMPANY              COMPANY             VALUE             VALUE
----------------    -----------    ------------------    ----------------    --------------     -------------
<S>                  <C>           <C>                    <C>                <C>                 <C>
  $75,000,000         11/24/08      6 month Libor +          6.385%          $  1,393,828        $  992,926
                                        3.15%
  $33,000,000         11/24/13      1 month Libor +       6 month Libor          (164,868)                -
                                        1.25%               + 1.29%
                                                                             ------------        ----------
                                                                             $  1,228,960        $  992,926
                                                                             ============        ==========
</TABLE>

At December 31, 2004 and 2003, the Company has one rate cap agreement
outstanding with CSFB which pays on a semi-annual basis, as follows:
<TABLE>
<CAPTION>
                                     FLOATING RATE         RATE/AMOUNT
   NOTIONAL         MATURITY        RECEIVED BY THE        PAID BY THE         2004 FAIR         2003 FAIR
    AMOUNT             DATE             COMPANY              COMPANY             VALUE             VALUE
----------------    -----------    ------------------    ----------------    --------------     -------------
<S>                  <C>           <C>                    <C>                <C>                 <C>
   $52,500,000       5/24/20             N/A                $85,000             (69,389)          (125,745)
</TABLE>

6. RELATED PARTY TRANSACTIONS

During 2003, Issuer III paid a one-time contractually determined reimbursement
fee of $900,000 to Funding in connection with the formation of Issuer III.
Issuer III also paid a one-time non-accountable reimbursement fee for roadshow
expenses to Funding of $10,000.

During 2003, Issuer IV paid a one-time contractually determined reimbursement
fee of $1,200,000 to Funding in connection with the formation of Issuer IV.
Issuer IV also paid a one-time non-accountable reimbursement for roadshow
expenses to Funding of $10,000.

                                                                              19
<PAGE>
                            Trapeza Funding III, LLC

        Notes to Consolidated Unaudited Financial Statements (continued)


6.   RELATED PARTY TRANSACTIONS (CONTINUED)

The Partnership pays Funding an administration fee (payable semi-annually in
advance) equal to one and one-half percentage (1.5%) per annum of the aggregate
capital accounts of the limited partners, which will be used to cover management
fees and other ordinary and recurring administrative and related operating
expenses. For the year ended December 31, 2004 and period from April 1, 2003 to
December 31, 2003, administration fees totaled $283,741 and $158,339,
respectively. The Partnership also reimbursed Funding for $160,962 for certain
fees paid on behalf of the Partnership.

In exchange for interests sold on behalf of the Partnership, Funding pays
external broker-dealers an administration fee, equal to the percentage of equity
raised by the broker-dealer multiplied by one-third of the total administration
fee being charged by Funding to the Partnership. For the year ended December 31,
2004 and period from April 1, 2003 to December 31, 2003, total administration
fee expense equaled $29,672 and $16,558, respectively, and are reflected on the
consolidated statements of operations.


                                                                              20
<PAGE>

                                                                     Schedule g)










    TRAPEZA CAPITAL MANAGEMENT, LLC

    AUDITED FINANCIAL STATEMENTS

    Years ended December 31, 2005 and 2004 with Report of Independent Auditors




<PAGE>



                         Trapeza Capital Management, LLC

                          Audited Financial Statements

                     Years ended December 31, 2005 and 2004




                                    CONTENTS




Report of Independent Auditors............................................... 1

Audited Financial Statements

Statements of Financial Condition............................................ 2
Statements of Operations..................................................... 3
Statements of Changes in Members' Interests.................................. 4
Statements of Cash Flows..................................................... 5
Notes to Audited Financial Statements........................................ 6


<PAGE>
                         Report of Independent Auditors

To the Members of
Trapeza Capital Management, LLC:

We have audited the accompanying statements of financial condition of Trapeza
Capital Management, LLC (the "Company"), as of December 31, 2005 and 2004, and
the related statements of operations, changes in members' interest and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. We were not engaged to perform an audit of the
Company's internal control over financial reporting. Our audits included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Company's
internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Trapeza Capital Management, LLC
at December 31, 2005 and 2004, and the results of its operations, changes in its
members' interest and its cash flows for the years then ended, in conformity
with accounting principles generally accepted in the United States.




/s/ Ernst & Young LLP


January 27, 2006

                                                                               1
<PAGE>
                         Trapeza Capital Management, LLC

                        Statements of Financial Condition
<TABLE>
<CAPTION>
                                                                                  DECEMBER 31
                                                                       2005                      2004
                                                                    -------------            -------------
<S>                                                                 <C>                      <C>
ASSETS
Cash and cash equivalents                                           $     462,006            $     638,992
Investment in Trapeza Partners II L.P.                                  4,444,074                3,908,503
Collateral management fees                                              1,630,506                1,383,074
Prepaid expense                                                           134,462                   79,145
Accounts receivable                                                             -                   30,000
Website redesign (net of accumulated depreciation of $27,153
  and $14,119)                                                             11,947                   24,981
Computer equipment and database configuration (net of
  accumulated depreciation of $57,327 and $21,158)                         51,293                   88,019
                                                                    -------------            -------------
Total Assets                                                        $   6,734,288            $   6,152,714
                                                                    =============            =============

LIABILITIES AND MEMBERS' INTERESTS
Liabilities
   Loan payable                                                     $     700,000            $   1,900,000
   Interest payable                                                         7,998                   12,836
   Professional fees                                                       44,000                   44,000
   License fee payable                                                          -                    5,110
   Accounts payable                                                        18,485                   15,000
   Trustee fees                                                           445,000                  543,001
   Accrued expenses                                                       283,521                  258,585
                                                                    -------------            -------------
Total Liabilities                                                       1,499,004                2,778,532
                                                                    -------------            -------------

Members' Interests                                                      5,235,284                3,374,182
                                                                    -------------            -------------
Total Members' Interests                                                5,235,284                3,374,182
                                                                    -------------            -------------
Total Liabilities and Members' Interests                            $   6,734,288            $   6,152,714
                                                                    =============            =============
</TABLE>


See accompanying notes to financial statements.

                                                                               2
<PAGE>
                         Trapeza Capital Management, LLC

                            Statements of Operations
<TABLE>
<CAPTION>
                                                                           YEAR ENDED DECEMBER 31,
                                                                        2005                     2004
                                                                    -------------            -------------
<S>                                                                <C>                       <C>
INVESTMENT INCOME
Collateral management fees                                          $   4,841,971            $   4,610,103
Equity in earnings of Trapeza Partners II L.P.                          1,076,438                  877,116
Assignment fee                                                            758,715                        -
Interest                                                                    5,960                    3,210
                                                                    -------------            -------------
TOTAL INVESTMENT INCOME                                                 6,683,084                5,490,429
                                                                    -------------            -------------

EXPENSES
Consulting and advisory fees                                              528,000                  528,000
Wages, payroll taxes and benefits                                         400,171                  303,703
Licensing fees                                                            129,413                   80,289
Taxes                                                                      96,091                   85,609
Interest expense                                                           55,139                   61,553
Amortization/Depreciation                                                  49,203                   72,033
Rent                                                                       42,525                   32,275
Professional fees                                                          39,810                   65,210
Other                                                                      15,554                    6,847
Supplies                                                                   14,247                   10,813
Financial publications                                                     14,028                   10,647
Telephone                                                                  10,354                    7,859
Delivery services                                                          10,229                    8,468
Trustee fees                                                                9,000                      950
Printing                                                                    1,461                    1,109
Amortization of deferred debt issuance costs                                    -                   37,842
                                                                    -------------            -------------
Total expenses                                                          1,415,225                1,313,207
                                                                    -------------            -------------
NET INCOME                                                          $   5,267,859            $   4,177,222
                                                                    =============            =============
</TABLE>


See accompanying notes to financial statements.

                                                                               3
<PAGE>
                         Trapeza Capital Management, LLC

                   Statements of Changes in Members' Interests

                     Years ended December 31, 2005 and 2004




Balance at January 1, 2004                                         $  1,521,300
   Capital contributions, net of placement costs                        140,000
   Net income                                                         4,177,222
   Distributions to members                                          (2,464,340)
                                                                   ------------
Balance at December 31, 2004                                          3,374,182
   Capital contributions, net of placement costs                         72,000
   Net income                                                         5,267,859
   Distributions to members                                          (3,478,757)
                                                                   ------------
Balance at December 31, 2005                                       $  5,235,284
                                                                   ============


See accompanying notes to financial statements.

                                                                               4
<PAGE>
                         Trapeza Capital Management, LLC

                            Statements of Cash Flows
<TABLE>
<CAPTION>
                                                                           YEARS ENDED DECEMBER 31,
                                                                          2005                 2004
                                                                      ------------        ------------
<S>                                                                  <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                                            $  5,267,859        $  4,177,222
Adjustments to reconcile net income to net cash and cash
  equivalents provided by operating activities:
   Amortization of deferred debt issuance costs                                  -              37,842
   Amortization/Depreciation                                                49,203              34,191
Net change in operating assets and liabilities:
   Investment in Trapeza Partners II L.P.                                 (535,571)           (283,412)
   Collateral management fees                                             (247,432)           (426,086)
   Prepaid expense                                                         (55,317)             18,047
   Accounts receivable                                                      30,000             (30,000)
   Computer equip. and database configuration                                  557            (109,177)
   Interest payable                                                         (4,838)             (1,300)
   Professional fees                                                             -             (15,000)
   License fee payable                                                      (5,110)              5,110
   Accounts payable                                                          3,485             (24,100)
   Trustee fees                                                            (98,001)             61,001
   Accrued expenses                                                         24,936             233,353
                                                                      ------------        ------------
Net cash and cash equivalents provided by operating activities           4,429,771           3,677,691
                                                                      ------------        ------------

CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on loan                                              (1,200,000)         (1,200,000)
Proceeds from capital contributions, net of placement costs                 72,000             140,000
Distributions to members                                                (3,478,757)         (2,464,340)
                                                                      ------------        ------------
Net cash and cash equivalents used in financing activities              (4,606,757)         (3,524,340)
                                                                      ------------        ------------

Net increase (decrease) in cash and cash equivalents                      (176,986)            153,351

Cash and cash equivalents, beginning of year                               638,992             485,641
                                                                      ------------        ------------
Cash and cash equivalents, end of year                                $    462,006        $    638,992
                                                                      ============        ============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid                                                         $    6 1,079        $     62,853
                                                                      ============        ============
</TABLE>

See accompanying notes to financial statements.

                                                                               5
<PAGE>
                         Trapeza Capital Management, LLC

                      Notes to Audited Financial Statements

                                December 31, 2005

1. ORGANIZATION AND PURPOSE

Trapeza Capital Management, LLC (the "Company"), was organized on August 26,
2002 as a Delaware limited liability company. The Company commenced operations
on November 19, 2002. The Company was organized for the purpose of supervising
and directing the investment and reinvestment of collateral for six
collateralized debt obligations, Trapeza CDO I, LLC ("Issuer I"), Trapeza CDO
II, LLC ("Issuer II"), Trapeza CDO III, LLC ("Issuer III"), Trapeza CDO IV, LLC
("Issuer IV"), Trapeza CDO V, Ltd. ("Issuer V"), and Trapeza CDO Edge, Ltd.
("Issuer Edge"), (collectively the "Issuers").

The Company shall provide services to the Issuers as follows, 1) supervise and
direct the administration of the collateral, 2) determine, upon request of the
trustee, when payments received in respect to the collateral shall be applied as
principal proceeds, 3) monitor the collateral on behalf of the Issuers and, on
an ongoing basis, provide to the Issuers and the trustee all schedules and other
information and data relating to the collateral which the Issuers or the
trustee, on behalf of the noteholders, is required to be prepared and delivered,
4) take or direct the trustee to sell or dispose of any collateral subject to
the requirements of such in the indentures and 5) cause the trustee to exercise
or acquire any rights or remedies with respect to such collateral (including
waiving any default or voting to accelerate the maturity of any defaulted
security).

The Company is owned equally by Financial Stocks, Inc. ("FSI") and Resource Fund
Financial Management, Inc., a wholly owned subsidiary of Resource America, Inc.
("REXI"). FSI is a Registered Investment Adviser under the Investment Advisers
Act of 1940. REXI, a publicly traded company is a specialized asset management
company that uses industry specific expertise to generate and administer
investment opportunities for their own account and for outside investors in the
financial fund management, real estate and equipment leasing sectors.

The business and affairs of the Company shall be managed by a Board of Managers.
The Board of Managers has full, complete and exclusive authority, power and
discretion to manage and control the business affairs and properties of the
Company, to make all decisions regarding those matters and to perform any
activities customary or incident to the management of the Company's business.
The Company shall continue in perpetuity, unless sooner terminated upon
unanimous determination of the members to terminate the Company.

The Company has a partnership interest of approximately 9% in Trapeza Partners
II L.P. (the "Partnership"). The Partnership was organized for the purpose of
investing in

                                                                               6
<PAGE>
                         Trapeza Capital Management, LLC

                Notes to Audited Financial Statements (continued)


1. ORGANIZATION AND PURPOSE (CONTINUED)

membership interests and other securities to be issued by Issuer II, an
affiliated collateralized debt obligation, which was formed by Trapeza Funding
II, LLC, a Delaware limited liability company.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of the significant accounting policies followed by
the Company in the preparation of its financial statements.

BASIS OF ACCOUNTING

The Company's accounting policies are in conformity with accounting principles
generally accepted in the United States. The Company maintains its financial
records in United States dollars. For financial reporting purposes, the Company
follows the accrual basis of accounting.

CASH AND CASH EQUIVALENTS

The Company considers all demand deposits with banks and other highly liquid
investments with original maturities of three months or less to be cash
equivalents.

ALLOCATION OF PROFITS AND LOSSES

Profits and losses shall be allocated to the members in proportion to their
respective capital account balances.

USE OF ESTIMATES

The preparation of these financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the financial statements and the reported amounts
of income and expenses during the reporting period. Actual results could differ
from those estimates.

TAXATION

The Company is treated as a partnership for Federal income tax purposes and,
therefore, no provision for federal income tax is recorded.

                                                                               7
<PAGE>
                         Trapeza Capital Management, LLC

                Notes to Audited Financial Statements (continued)


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

RECLASSIFICATIONS

Certain reclassifications have been made in the prior-year financial statements
to conform to the current-year presentation.

3. NOTE PURCHASE AND SECURITY AGREEMENT

Pursuant to an agreement dated March 11, 2003, the Company entered into a Note
Purchase and Security Agreement with Credit Suisse First Boston, LLC ("CSFB"),
the initial purchaser of the notes, and Credit Suisse First Boston, Cayman
Islands Branch, purchaser of the notes. Under the terms of the agreement, the
Company authorized the issue and sale of $3,700,000 aggregate principal amount
of its floating rate senior notes due October 15, 2006. At December 31, 2005 and
2004 the outstanding note balance was $700,000 and $1,900,000, respectively, as
the first principal payment was made on October 15, 2003. Set forth in the terms
of the agreement, the Company is required to prepay the remaining principal of
the notes in the following principal amounts:

                     PAYMENT DATE                  PRINCIPAL AMOUNT
                   ----------------               ------------------

                    April 15, 2006                     $600,000

                   October 15, 2006                    $100,000

To secure timely payment of all obligations and the performance of all
obligations, CSFB requires that the collateral management fee related to Issuer
II, the limited partnership interests of the Company, FSI, and REXI in the
Issuer, the interest collection account of the Issuer, and all proceeds of the
foregoing are pledged as security interests.

If any optional redemption or other redemption of the notes issued occurs prior
to the final payment date, the Company shall on the date of such redemption
prepay the outstanding principal amount of the notes plus all accrued and unpaid
interest thereon, any additional amounts and all other obligations outstanding.

The Company may opt to prepay at any time all, or from time to time any part of
the notes in an amount not less than 50% of the aggregate principal amount of
the notes then outstanding in the case of a partial prepayment, at 100% of the
principal amount. Each prepayment shall be in an amount of $100,000 or an
integral multiple thereof.

Interest on the principal amount of the notes is required to be paid to the
holder of the notes on each payment date, or early payment date, if applicable.
Computed interest shall equal the sum of the product of libor plus 1%, the sum
of the aggregate outstanding

                                                                               8
<PAGE>
                         Trapeza Capital Management, LLC

                Notes to Audited Financial Statements (continued)


3. NOTE PURCHASE AND SECURITY AGREEMENT (CONTINUED)

principal balance of the notes, any past due interest and any additional amounts
due and payable, on such payment date. For the years ended December 31, 2005 and
2004, interest expense attributable to the repayment of the notes is $55,139 and
$61,553, respectively, as reflected in the statements of operations.

4. TRUSTEE FEES PAYABLE

The Company maintains a cash account restricted for future payment of trustee
fees deposited from the closing of specific collateral. Depending upon the
contractual terms, the trustee fees will be paid to the Bank of New York or
Deutsche Bank annually over the next four years on the anniversary date of each
specific collateral involved. An initial trustee fee was paid to the Bank of New
York or Deutsche Bank at the time of the closing of the collateral.

5. CONTRIBUTIONS, WITHDRAWALS AND DISTRIBUTIONS

As of December 31, 2005, the Company has 100 membership units issued and
outstanding. No member shall be required to make any additional contributions
beyond their initial contribution. If the Board of Managers unanimously
determines that the Company requires additional funds, any member may, but is
not obligated to, advance such funds.

No member shall have the right to withdraw any of its capital contribution,
except upon dissolution and liquidation of the Company. For the years ended
December 31, 2005 and 2004, the Company made distributions of $3,478,757 and
$2,464,340, respectively, to the members.

6. RELATED PARTY TRANSACTIONS

Pursuant to the collateral management agreements with Issuers I, II, III, and
IV, the Collateral Manager is entitled to a semi-annual fee, payable in arrears
on the distribution dates of the issuers, equal to 0.10% per annum of the
semi-annual asset amount ("Base Collateral Management Fee"), of the net
outstanding portfolio collateral, as defined in the indenture. After certain
expenses have been paid, the Collateral Manager is entitled to an additional
semiannual fee equal to 0.15% per annum, calculated in the same manner as the
Base Collateral Management Fee. For years ended December 31, 2005 and 2004,
total collateral management fees were $3,553,425 and $3,559,723, respectively.


                                                                               9
<PAGE>
                         Trapeza Capital Management, LLC

                Notes to Audited Financial Statements (continued)


6. RELATED PARTY TRANSACTIONS (CONTINUED)

Pursuant to the collateral management agreement with Issuer Edge, the Collateral
Manager is entitled to a quarterly fee, payable in arrears on the distribution
dates of the issuers, equal to 0.10% per annum of the semi-annual asset amount
("Base Collateral Management Fee"), of the net outstanding portfolio collateral,
as defined in the indenture. After certain expenses have been paid, the
Collateral Manager is entitled to an additional semiannual fee equal to 0.15%
per annum, calculated in the same manner as the Base Collateral Management Fee.
For years ended December 31, 2005 and 2004, total collateral management fees
were $238,500 and $0, respectively.

Pursuant to the collateral management agreement with Issuer V, the Collateral
Manager is entitled to a semiannual fee, payable in arrears on the distribution
dates, equal to 0.10% per annum of the semi-annual asset amount ("Base
Collateral Management Fee"), of the net outstanding portfolio collateral, as
defined in the indenture. After certain expenses have been paid, the Collateral
Manager is entitled to an additional semiannual fee equal to 0.20% per annum,
calculated in the same manner as the Base Collateral Management Fee. The
Collateral Manager is entitled to additional incentive fees of 0.05%, 0.10%, and
0.25% per annum in arrears dependent upon the target returns reached on the
preference shares as defined in the indenture. For the years ended December 31,
2005 and 2004, total collateral management fees were $1,050,046 and $1,050,380,
respectively.

7. ASSIGNMENT FEE

During April 2005, the Company received an assignment fee in the amount of
$758,715 in connection with the facilitation of the purchase and sale of trust
preferred collateral from one financial institution to another during the
warehouse period of Issuer Edge. This fee was initially deferred as the Company
continued to manage the securities. In August 2005, the securities were sold
into Issuer Edge and the income was recognized at that time.

                                                                              10
<PAGE>

                                                                     Schedule h)










    TRAPEZA MANAGEMENT GROUP, LLC

    AUDITED FINANCIAL STATEMENTS

    Year ended December 31, 2005 and period from April 1, 2004 (commencement of
    operations) to December 31, 2004 with Report of Independent Auditors




<PAGE>
                          Trapeza Management Group, LLC

                          Audited Financial Statements

             Year ended December 31, 2005 and period from April 1, 2004
               (commencement of operations) to December 31, 2004




                                    CONTENTS




Report of Independent Auditors............................................... 1

Audited Financial Statements

Statements of Financial Condition............................................ 2
Statements of Operations..................................................... 3
Statements of Changes in Members' Interests.................................. 4
Statements of Cash Flows..................................................... 5
Notes to Audited Financial Statements........................................ 6



<PAGE>
                         Report of Independent Auditors

To the Members of
Trapeza Management Group, LLC:

We have audited the accompanying statements of financial condition of Trapeza
Management Group, LLC (the "Company"), as of December 31, 2005 and 2004, and the
related statements of operations, changes in members' interest and cash flows
for the year ended December 31, 2005 and period from April 1, 2004 (commencement
of operations) to December 31, 2004. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. We were not engaged to perform an audit of the
Company's internal control over financial reporting. Our audit included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Company's
internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Trapeza Management Group, LLC
at December 31, 2005 and 2004, and the results of its operations, changes in its
members' interest and its cash flows for the year ended December 31, 2005 and
period from April 1, 2004 (commencement of operations) to December 31, 2004, in
conformity with accounting principles generally accepted in the United States.




/s/ Ernst & Young LLP



January 27, 2006

                                                                               1
<PAGE>
                          Trapeza Management Group, LLC

                        Statements of Financial Condition
<TABLE>
<CAPTION>
                                                                               DECEMBER 31
                                                                       2005                    2004
                                                                   -------------           -------------
<S>                                                               <C>                     <C>
ASSETS
Cash and cash equivalents                                          $      87,558           $      31,171
Collateral management fees                                               903,624                 568,506
Prepaid expense                                                           46,458                  31,338
Database configuration (net of accumulated amortization of
  $11,598 and $4,273)                                                     10,377                  17,702
                                                                   -------------           -------------
Total Assets                                                       $   1,048,017           $     648,717
                                                                   =============           =============

LIABILITIES AND MEMBERS' INTERESTS
Liabilities
   Professional fees                                               $      12,500           $      15,000
   Accrued expenses                                                       31,630                  24,539
   License fee payable                                                         -                   2,023
   Taxes payable                                                               -                  32,293
                                                                   -------------           -------------
Total Liabilities                                                         44,130                  73,855
                                                                   -------------           -------------

Members' Interests                                                     1,003,887                 574,862
                                                                   -------------           -------------
Total Members' Interests                                               1,003,887                 574,862
                                                                   -------------           -------------
Total Liabilities and Members' Interests                           $   1,048,017           $     648,717
                                                                   =============           =============
</TABLE>


See accompanying notes to financial statements.

                                                                               2
<PAGE>
                          Trapeza Management Group, LLC

                            Statements of Operations
<TABLE>
<CAPTION>
                                                                                          PERIOD FROM
                                                                                          APRIL 1, 2004
                                                                                        (COMMENCEMENT OF
                                                                    YEAR ENDED           OPERATIONS) TO
                                                                 DECEMBER 31, 2005      DECEMBER 31, 2004
                                                                 -----------------      -----------------
<S>                                                               <C>                   <C>
INVESTMENT INCOME
Collateral management fees                                         $     2,737,777       $     1,249,047


Reimbursement income                                                             -             1,005,000
                                                                   ---------------       ---------------
Total investment income                                                  2,737,777             2,254,047
                                                                   ---------------       ---------------

EXPENSES
Wages, payroll taxes and benefits                                          131,644                68,381
Licensing fees                                                              87,348                 8,291
Taxes                                                                       73,960                44,293
Insurance                                                                   45,204                     -
Professional fees                                                           19,036                18,647
Rent                                                                        15,678                 8,144
Amortization/Depreciation                                                    7,325                 4,273
Supplies                                                                     5,500                 2,728
Financial publications                                                       5,172                 2,686
Telephone                                                                    3,818                 1,983
Delivery services                                                            3,523                 1,959
Other                                                                        3,431                   788
Printing                                                                       135                   244
                                                                   ---------------       ---------------
Total expenses                                                             401,774               162,417
                                                                   ---------------       ---------------
NET INCOME                                                         $     2,336,003       $     2,091,630
                                                                   ===============       ===============
</TABLE>

See accompanying notes to financial statements.

                                                                               3
<PAGE>
                          Trapeza Management Group, LLC

                   Statements of Changes in Members' Interests

             Year ended December 31, 2005 and period from April 1, 2004
               (commencement of operations) to December 31, 2004


Balance at April 1, 2004                                          $          -
Capital contributions                                                    6,000
Net income                                                           2,091,630
Distributions to members                                            (1,522,768)
                                                                  ------------
Balance at December 31, 2004                                           574,862
Net income                                                           2,336,003
Distributions to members                                            (1,906,978)
                                                                  ------------
Balance at December 31, 2005                                      $  1,003,887
                                                                  ============


See accompanying notes to financial statements.

                                                                               4
<PAGE>
                          Trapeza Management Group, LLC

                            Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                                          PERIOD FROM
                                                                                          APRIL 1, 2004
                                                                                        (COMMENCEMENT OF
                                                                    YEAR ENDED           OPERATIONS) TO
                                                                 DECEMBER 31, 2005      DECEMBER 31, 2004
                                                                 -----------------      -----------------
<S>                                                               <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                                         $     2,336,003       $     2,091,630

Adjustments to reconcile net income to net cash and cash
  equivalents provided by operating activities:
   Amortization/Depreciation                                                 7,325                 4,273
Net change in operating assets and liabilities:
   Collateral management fees                                             (335,118)             (568,506)
   Prepaid expense                                                         (15,120)              (31,338)
   Database configuration                                                        -               (21,975)
   Accounts payable                                                         (2,500)               15,000
   Accrued expenses                                                          7,091                24,539
   License fee payable                                                      (2,023)                2,023
   Taxes payable                                                           (32,293)               32,293
                                                                   ---------------       ---------------
Net cash and cash equivalents provided by operating activities           1,963,365             1,547,939
                                                                   ---------------       ---------------

CASH FLOWS FROM FINANCING ACTIVITIES
   Proceeds from capital contributions                                           -                 6,000
   Distributions to members                                             (1,906,978)           (1,522,768)
                                                                   ---------------       ---------------
Net cash and cash equivalents used in financing activities              (1,906,978)           (1,516,768)
                                                                   ---------------       ---------------

Net increase in cash and cash equivalents                                   56,387                31,171

Cash and cash equivalents, beginning of period                              31,171                     -
                                                                   ---------------       ---------------
Cash and cash equivalents, end of period                           $        87,558       $        31,171
                                                                   ===============       ===============
</TABLE>

See accompanying notes to financial statements.

                                                                               5
<PAGE>
                          Trapeza Management Group, LLC

                      Notes to Audited Financial Statements

                                December 31, 2005

1. ORGANIZATION AND PURPOSE

Trapeza Management Group, LLC (the "Company"), was organized on April 1, 2004 as
a Delaware limited liability company. The Company commenced operations on April
1, 2004. The Company was organized for the purpose of supervising and directing
the investment and reinvestment of collateral for two collateralized debt
obligations, Trapeza CDO VI, LLC ("Issuer VI") and Trapeza CDO VII, LLC ("Issuer
VII").

The Company shall provide services to the Issuers as follows, 1) supervise and
direct the administration of the collateral, 2) determine, upon request of the
trustee, when payments received in respect to the collateral shall be applied as
principal proceeds, 3) monitor the collateral on behalf of the Issuers and, on
an ongoing basis, provide to the Issuers and the trustee all schedules and other
information and data relating to the collateral which the Issuers or the
trustee, on behalf of the noteholders, is required to be prepared and delivered,
4) take or direct the trustee to sell or dispose of any collateral subject to
the requirements of such in the indentures and 5) cause the trustee to exercise
or acquire any rights or remedies with respect to such collateral (including
waiving any default or voting to accelerate the maturity of any defaulted
security).

The Company is owned equally by Financial Stocks, Inc. ("FSI"), SunTrust Equity
Funding, LLC ("SunTrust"), and Resource Fund Financial Management, Inc., a
wholly owned subsidiary of Resource America, Inc. ("REXI"). FSI is a Registered
Investment Adviser under the Investment Advisers Act of 1940. SunTrust is a
financial holding company that provides deposit, credit and trust and investment
services. REXI, a publicly traded company, is a specialized asset management
company that uses industry specific expertise to generate and administer
investment opportunities for their own account and for outside investors in the
financial fund management, real estate and equipment leasing sectors.

The business and affairs of the Company shall be managed by a Board of Managers.
The Board of Managers has full, complete and exclusive authority, power and
discretion to manage and control the business affairs and properties of the
Company, to make all decisions regarding those matters and to perform any
activities customary or incident to the management of the Company's business.
The Company shall continue in perpetuity, unless sooner terminated upon
unanimous determination of the members to terminate the Company.


                                                                               6
<PAGE>
                          Trapeza Management Group, LLC

                Notes to Audited Financial Statements (continued)


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of the significant accounting policies followed by
the Company in the preparation of its financial statements.

BASIS OF ACCOUNTING

The Company's accounting policies are in conformity with accounting principles
generally accepted in the United States. The Company maintains its financial
records in United States dollars. For financial reporting purposes, the Company
follows the accrual basis of accounting.

CASH AND CASH EQUIVALENTS

The Company considers all demand deposits with banks and other highly liquid
investments with original maturities of three months or less to be cash
equivalents.

ALLOCATION OF PROFITS AND LOSSES

Profits and losses shall be allocated to the members in proportion to their
respective capital account balances.

USE OF ESTIMATES

The preparation of these financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the financial statements and the reported amounts
of income and expenses during the reporting period. Actual results could differ
from those estimates.

TAXATION

The Company is treated as a partnership for Federal income tax purposes and,
therefore, no provision for federal income tax is recorded.

RECLASSIFICATIONS

Certain reclassifications have been made in the prior-year financial statements
to conform to the current-year presentation.

                                                                               7
<PAGE>
                          Trapeza Management Group, LLC

                Notes to Audited Financial Statements (continued)


3. CONTRIBUTIONS, WITHDRAWALS AND DISTRIBUTIONS

As of December 31, 2005, the Company has 300 membership units issued and
outstanding. No member shall be required to make any additional contributions
beyond their initial contribution. If the Board of Managers unanimously
determines that the Company requires additional funds, any member may, but is
not obligated to, advance such funds.

No member shall have the right to withdraw any of its capital contribution,
except upon dissolution and liquidation of the Company. For the year ended
December 31, 2005 and period from April 1, 2004 (commencement of operations) to
December 31, 2004, the Company made distributions of $1,906,978 and $1,522,768,
respectively, to the members.

4. RELATED PARTY TRANSACTIONS

Pursuant to the collateral management agreements with Issuer VI and VII, the
Collateral Manager is entitled to a semiannual fee, payable in arrears on the
distribution dates, equal to 0.10% per annum of the semi-annual asset amount
("Base Collateral Management Fee"), of the net outstanding portfolio collateral,
as defined in the indenture. After certain expenses have been paid, the
Collateral Manager is entitled to an additional semiannual fee equal to 0.25%
per annum, calculated in the same manner as the Base Collateral Management Fee.
The Collateral Manager is entitled to additional incentive fees of 0.05%, 0.10%,
and 0.25% per annum in arrears dependent upon the target returns reached on the
preference shares as defined in the indenture. For the year ended December 31,
2005 and period from April 1, 2004 (commencement of operations) to December 31,
2004, total collateral management fees were $2,737,777 and $1,249,047,
respectively.

During 2004, Issuer VII paid the Company a one time reimbursement fee of
$1,005,000 in connection with the formation of Issuer VII.


                                                                               8
<PAGE>


                                                                     Schedule i)











    TRAPEZA CAPITAL MANAGEMENT, LLC

    FINANCIAL STATEMENTS (UNAUDITED)

    Year Ended December 31, 2003




<PAGE>



                         Trapeza Capital Management, LLC

                              Financial Statements

                          Year Ended December 31, 2003

                                    Unaudited





                                    CONTENTS


Statement of Financial Condition..............................................3
Statement of Operations.......................................................4
Statement of Changes in Members' Interests....................................5
Statement of Cash Flows.......................................................6
Notes to Financial Statements.................................................7


<PAGE>
                         Trapeza Capital Management, LLC

                        Statement of Financial Condition

                                    Unaudited


                                                               DECEMBER 31,
                                                                   2003
                                                               ------------

ASSETS
Cash and cash equivalents                                      $   485,641
Investments in Trapeza Partners II L.P.                          3,625,091
Collateral management fees                                         956,988
Prepaid expense                                                     97,192
Website redesign                                                    38,014
Deferred debt issuance costs (net of accumulated
  amortization of $37,158)                                          37,842
                                                               -----------
Total Assets                                                   $ 5,240,768
                                                               ===========

LIABILITIES AND MEMBERS' INTERESTS
Liabilities
   Loan payable                                                $ 3,100,000
   Interest payable                                                 14,136
   Professional fees                                                59,000
   Accounts payable                                                 39,100
   Trustee fees                                                    482,000
   Accrued expenses                                                 25,232
                                                               -----------
Total Liabilities                                                3,719,468
                                                               -----------

Members' Interests                                               1,521,300
                                                               -----------
Total Members' Interests                                         1,521,300
                                                               -----------
Total Liabilities and Members' Interests                       $ 5,240,768
                                                               ===========


See accompanying notes to financial statements.


<PAGE>
                         Trapeza Capital Management, LLC

                             Statement of Operations

                                    Unaudited


                                                           YEAR ENDED
                                                          DECEMBER 31,
                                                              2003
                                                         ---------------

INVESTMENT INCOME
Collateral management fees                               $     2,257,155
Equity in earnings (loss) of Trapeza Partners II L.P.            479,951
                                                         ---------------
Total investment income                                        2,737,106
                                                         ---------------

EXPENSES
Consulting and advisory fees                                     528,000
Professional fees                                                114,810
Interest expense                                                  95,233
Amortization of deferred debt issuance costs                      37,158
Amortization - other                                              20,524
Wages, payroll taxes and benefits                                 13,503
Other                                                              3,286
                                                         ---------------
Total expenses                                                   812,514
                                                         ---------------
NET INCOME                                               $     1,924,592
                                                         ===============


See accompanying notes to financial statements.


<PAGE>
                         Trapeza Capital Management, LLC

                   Statement of Changes in Members' Interests

                          Year Ended December 31, 2003

                                    Unaudited



                                                                    MEMBERS'
                                                                   INTERESTS
                                                                   ----------
Balance at December 31, 2002                                       $   71,931
   Capital contributions, net of placement costs                       74,277
   Offering costs                                                     (39,717)
   Net income                                                       1,924,592
   Distributions to members                                          (509,783)
                                                                   ----------
Balance at December 31, 2003                                       $1,521,300
                                                                   ==========


See accompanying notes to financial statements.


<PAGE>
                         Trapeza Capital Management, LLC

                             Statement of Cash Flows
                                    Unaudited

                                                                    YEAR ENDED
                                                                   DECEMBER 31,
                                                                      2003
                                                                   ------------

CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                                         $  1,924,592
Adjustments to reconcile net income to net cash and cash
  equivalents provided by operating activities:
   Amortization of deferred debt issuance costs                          37,158
   Amortization - other                                                  20,524
Net change in operating assets and liabilities:
   Investment in Trapeza Partners II L.P.                              (321,125)
   Collateral management fees                                          (867,221)
   Prepaid expense                                                     (116,630)
   Website redesign                                                     (39,100)
   Interest payable                                                       9,494
   Professional fees                                                     59,000
   Accounts payable                                                      39,100
   Trustee fees                                                         482,000
   Accrued expenses                                                      25,232
Net cash and cash equivalents provided by operating activities        1,435,876

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loan                                                    3,700,000
Principal payments on loan                                             (600,000)
Principal payments on loan - affiliates                              (3,500,000)
Proceeds from capital contributions, net of placement costs              74,277
Deferred debt issuance costs                                            (75,000)

Payments for offering costs                                             (39,717)
Distributions to members                                               (509,783)
                                                                   ------------
Net cash and cash equivalents used in financing activities             (950,223)

Net increase in cash and cash equivalents                               485,653

Cash and cash equivalents, beginning of period                              (12)
                                                                   ------------
Cash and cash equivalents, end of period                           $    485,641
                                                                   ============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid                                                      $     85,739
                                                                   ============

See accompanying notes to financial statements.


<PAGE>
                         Trapeza Capital Management, LLC

                     Notes to Unaudited Financial Statements

                                December 31, 2003

1. ORGANIZATION AND PURPOSE

Trapeza Capital Management, LLC (the "Company"), was organized on August 26,
2002 as a Delaware limited liability company. The Company commenced operations
on November 19, 2002. The Company was organized for the purpose of supervising
and directing the investment and reinvestment of collateral for five
collateralized debt obligations, Trapeza CDO I, LLC ("Issuer I"), Trapeza CDO
II, LLC ("Issuer II"), Trapeza CDO III, LLC ("Issuer III"), Trapeza CDO IV, LLC
("Issuer IV"), and Trapeza CDO V, Ltd. (Issuer V), (collectively the "Issuers").

The Company shall provide services to the Issuers as follows 1) supervise and
direct the administration of the collateral, 2) determine, upon request of the
trustee, when payments received in respect to the collateral shall be applied as
principal proceeds, 3) monitor the collateral on behalf of the Issuers and, on
an ongoing basis, provide to the Issuers and the trustee all schedules and other
information and data relating to the collateral which the Issuers or the
trustee, on behalf of the noteholders, is required to be prepared and delivered,
4) take or direct the trustee to sell or dispose of any collateral subject to
the requirements of such in the indentures and 5) cause the trustee to exercise
or acquire any rights or remedies with respect to such collateral (including
waiving any default or voting to accelerate the maturity of any defaulted
security).

The Company is owned equally by Financial Stocks, Inc. ("FSI") and Resource Fund
Financial Management, Inc., a wholly owned subsidiary of Resource America, Inc.
("REXI"). FSI is a Registered Investment Adviser under the Investment Advisers
Act of 1940. REXI is a publicly traded company operating in energy, real estate
and financial services sectors.

The business and affairs of the Company shall be managed by a Board of Managers.
The Board of Managers has full, complete and exclusive authority, power and
discretion to manage and control the business affairs and properties of the
Company, to make all decisions regarding those matters and to perform any
activities customary or incident to the management of the Company's business.
The Company shall continue in perpetuity, unless sooner terminated upon
unanimous determination of the members to terminate the Company.




<PAGE>
                         Trapeza Capital Management, LLC

               Notes to Unaudited Financial Statements (continued)


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of the significant accounting policies followed by
the Company in the preparation of its financial statements.

BASIS OF ACCOUNTING

The Company's accounting policies are in conformity with accounting principles
generally accepted in the United States. The Company maintains its financial
records in United States dollars. For financial reporting purposes, the Company
follows the accrual basis of accounting.

CASH AND CASH EQUIVALENTS

The Company considers all demand deposits with banks and other highly liquid
investments with original maturities of three months or less to be cash
equivalents.

ALLOCATION OF PROFITS AND LOSSES

Profits and losses shall be allocated to the members in proportion to their
respective capital account balances.

USE OF ESTIMATES

The preparation of these financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the financial statements and the reported amounts
of income and expenses during the reporting period. Actual results could differ
from those estimates.

TAXATION

The Company is treated as a partnership for Federal income tax purposes and,
therefore, no provision for income tax is recorded.

3. INVESTMENT IN TRAPEZA PARTNERS II L.P. (THE "PARTNERSHIP)

Pursuant to agreements dated December 20, 2002, the Company entered into
promissory notes with FSI and REXI, respectively, for the purpose of providing
the Company with equity to invest in the Partnership. Under the terms of the
agreement, the Company promised to pay $1,750,000 each to FSI and REXI,
respectively, plus accrued interest at


<PAGE>
                         Trapeza Capital Management, LLC

               Notes to Unaudited Financial Statements (continued)


3. INVESTMENT IN TRAPEZA PARTNERS II L.P. (THE "PARTNERSHIP) (CONTINUED)

libor plus 3.00% before or by May 20, 2003, the maturity date. The loans were
repaid on March 11, 2003.

The Company has a partnership interest of approximately 9% in the Partnership.

4. NOTE PURCHASE AND SECURITY AGREEMENT

Pursuant to an agreement dated March 11, 2003, the Company entered into a Note
Purchase and Security Agreement with Credit Suisse First Boston, LLC ("CSFB"),
the initial purchaser of the notes, and Credit Suisse First Boston, Cayman
Islands Branch, purchaser of the notes. Under the terms of the agreement, the
Company authorized the issue and sale of $3,700,000 aggregate principal amount
of its floating rate senior notes due October 15, 2006. At December 31, 2003,
the outstanding note balance was $3,100,000, as the first principal payment was
made on October 15, 2003. Set forth in the terms of the agreement, the Company
is required to prepay the remaining principal of the notes in the following
principal amounts:

                 PAYMENT DATE                  PRINCIPAL AMOUNT
             -------------------------    ---------------------------

                April 15, 2004                     $600,000

               October 15, 2004                    $600,000

                April 15, 2005                     $600,000

               October 15, 2005                    $600,000

                April 15, 2006                     $600,000

               October 15, 2006                    $100,000


To secure timely payment of all obligations and the performance of the all
obligations, CSFB requires that the collateral management fee related to Issuer
II, the limited partnership interests of the Company, FSI, and REXI in the
Issuer, the interest collection account of the Issuer, and all proceeds of the
foregoing are pledged as security interests.


<PAGE>
                         Trapeza Capital Management, LLC

               Notes to Unaudited Financial Statements (continued)


4. NOTE PURCHASE AND SECURITY AGREEMENT (CONTINUED)

If any optional redemption or other redemption of the notes issued occurs prior
to the final payment date, the Company shall on the date of such redemption
prepay the outstanding principal amount of the notes plus all accrued and unpaid
interest thereon, any additional amounts and all other obligations outstanding.

The Company may opt to prepay at any time all, or from time to time any part of,
the notes, in an amount not less than 50% of the aggregate principal amount of
the notes then outstanding in the case of a partial prepayment, at 100% of the
principal amount. Each prepayment shall be in an amount of $100,000 or an
integral multiple thereof.

Interest on the principal amount of the notes is required to be paid to the
holder of the notes on each payment date, or early payment date, if applicable.
Computed interest shall equal the sum of the product of libor plus 1%, the sum
of the aggregate outstanding principal balance of the notes, any past due
interest and any additional amounts due and payable, on such payment date. For
the year ended December 31, 2003, interest expense attributable to the repayment
of the notes is $65,697, as reflected in the statement of operations.

5. TRUSTEE FEES PAYABLE

The Company maintains a cash account restricted for future payment of trustee
fees deposited from the closing of specific collateral. Depending upon the
contractual terms, the trustee fees will be paid to the Bank of New York or
Deutsche Bank annually over the next four years on the anniversary date of each
specific collateral involved. An initial trustee fee was paid to the Bank of New
York or Deutsche Bank at the time of the closing of the collateral.

6. CONTRIBUTIONS, WITHDRAWALS AND DISTRIBUTIONS

As of December 31, 2003, the Company has 100 membership units issued and
outstanding. No member shall be required to make any additional contributions
beyond their initial contribution. If the Board of Managers unanimously
determines that the Company requires additional funds, any member may, but is
not obligated to, advance such funds.

No member shall have the right to withdraw any of its capital contribution,
except upon dissolution and liquidation of the Company. For the period ended
December 31, 2003, the Company made distributions of $509,783 to the members.



<PAGE>
                         Trapeza Capital Management, LLC

               Notes to Unaudited Financial Statements (continued)


7. RELATED PARTY TRANSACTIONS

Pursuant to the collateral management agreements with Issuers I, II, III, and
IV, the Collateral Manager is entitled to a semiannual fee, payable in arrears
on the distribution dates of the issuers, equal to 0.10% per annum of the
semi-annual asset amount ("Base Collateral Management Fee"), of the net
outstanding portfolio collateral. After certain expenses have been paid, the
Collateral Manager is entitled to an additional semiannual fee equal to 0.15%
per annum, calculated in the same manner as the Base Collateral Management Fee.
For year ended December 31, 2003, total collateral management fees for Issuer I
was $829,243. For the period ended December 31, 2003, total collateral
management fees were $805,788, $389,633, and $194,548 for Issuer II, Issuer III,
and Issuer IV, respectively.

Pursuant to the collateral management agreement with Issuer V, the Collateral
Manager is entitled to a semiannual fee, payable in arrears on the distribution
dates, equal to 0.10% per annum of the semi-annual asset amount ("Base
Collateral Management Fee"), of the net outstanding portfolio collateral, as
defined in the indenture. After certain expenses have been paid, the Collateral
Manager is entitled to an additional semiannual fee equal to 0.20% per annum,
calculated in the same manner as the Base Collateral Management Fee. The
Collateral Manager is entitled to additional incentive fees of 0.05%, 0.10%, and
0.25% per annum in arrears dependent upon the target returns reached on the
preference shares as defined in the indenture. For the period ended December 31,
2003, total collateral management fees were $37,943.

<PAGE>

           3. EXHIBITS

              Exhibit No.         Description
              -----------         -----------

                  3.1       Restated Certificate of Incorporation of Resource
                            America. (1)
                  3.2       Amended and Restated Bylaws of Resource America,
                            Inc. (1)
                 10.1       Master Separation and Distribution Agreement between
                            Atlas America, Inc. and Resource America, Inc. dated
                            May 14, 2004. (2)
                 10.2       Registration Rights Agreement between Atlas America,
                            Inc. and Resource America, Inc. dated May 14,
                            2004. (2)
                 10.3       Tax Matters Agreement between Atlas America, Inc.
                            and Resource America, Inc. dated May 14, 2004. (2)
                 10.4       Transition Services Agreement between Atlas America,
                            Inc. and Resource America, Inc. dated May 14,
                            2004. (2)
                 10.5       Employment Agreement for Edward E. Cohen dated May
                            14, 2004. (2)
                 10.6(a)    Fourth Modification, dated June 30, 2005, of
                            Revolving Credit Agreement, Revolving Credit Loan
                            and Security Agreement dated July 27, 1999 by and
                            between Resource Properties, Inc., Resource
                            Properties 53, Inc., Resource Properties XXIV, Inc.
                            Resource Properties XL, Inc. and Sovereign Bank. (2)
                 10.6(b)    Fifth Modification, dated September 29, 2005, of
                            Revolving Credit Loan and Security Agreement dated
                            July 27, 1999 by and between Resource Properties,
                            Inc. Resource Properties 53, Inc. Resource
                            Properties XXIV, Inc., Resource Properties XL, Inc.
                            and Sovereign Bank.
                 10.7(a)    Fourth Amendment, dated December 19, 2003, to
                            Revolving Credit Agreement and Assignment dated June
                            11, 2002, between LEAF Financial Corporation and
                            National City Bank, and related guaranty of Resource
                            America, Inc. (4)
                 10.7(b)    Sixth Amendment, dated June 20, 2004, to Revolving
                            Credit Agreement and Assignment dated June 11, 2002,
                            between LEAF Financial Corporation and National City
                            Bank, and related guaranty of Resource America,
                            Inc. (2)
                 10.7(c)    Seventh Amendment, dated March 18, 2005, to
                            Revolving Credit Agreement and Assignment dated June
                            11, 2002, between LEAF Financial Corporation and
                            National City Bank, and related guaranty of Resource
                            America, Inc. (3)

                                      101
<PAGE>
                 10.7(d)    Eighth Amendment, dated June 29, 2005, to Revolving
                            Credit Agreement and Assignment dated June 11, 2002,
                            between LEAF Financial Corporation and National City
                            Bank, and related guaranty of Resource America,
                            Inc. (3)
                 10.7(e)    Ninth Amendment, dated July 28, 2005, to Revolving
                            Credit Agreement and Assignment dated June 11, 2002,
                            between LEAF Financial Corporation and National City
                            Bank, and related guaranty of Resource America, Inc.
                 10.7(f)    Tenth Amendment, dated September 14, 2005, to
                            Revolving Credit Agreement and Assignment dated June
                            11, 2002, between LEAF Financial Corporation and
                            National City Bank, and related guaranty of Resource
                            America, Inc.
                 10.7(g)    Eleventh Amendment, dated September 16, 2005, to
                            Revolving Credit Agreement and Assignment dated June
                            11, 2002, between LEAF Financial Corporation and
                            National City Bank, and related guaranty of Resource
                            America, Inc.
                 10.7(h)    First Amendment to Guaranty of Payment dated June
                            20, 2004 between Resource America, Inc. and National
                            City Bank. (2)
                 10.7(i)    Second Amendment to Guaranty of Payment dated March
                            2005 between Resource America, Inc. and National
                            City Bank. (3)
                 10.7(j)    Third Amendment to Guaranty of Payment dated July
                            28, 2005 between Resource America, Inc. and National
                            City Bank.
                 10.7(k)    Fourth Amendment to Guaranty of Payment dated
                            September 14, 2005 between Resource America, Inc.
                            and National City Bank.
                 10.8(a)    First Amendment, dated December 19, 2003, to
                            Revolving Credit Agreement and Assignment dated May
                            28, 2003 among LEAF Financial Corporation, Lease
                            Equity Appreciation Fund I, L.P., LEAF Funding, Inc.
                            and Commerce Bank, National Association. (4)
                 10.8(b)    Third Amendment, dated June 18, 2004, to Revolving
                            Credit Agreement and Assignment dated May 28, 2003
                            among LEAF Financial Corporation, Lease Equity
                            Appreciation Fund I, L.P., LEAF Funding, Inc. and
                            Commerce Bank, National Association. (2)
                 10.8(c)    First Amendment to Guaranty of Payment dated June
                            18, 2004 between Resource America, Inc. and Commerce
                            Bank, National Association. (2)
                 10.9       Revolving Credit Agreement and Assignment dated as
                            of May 27, 2004 among Lease Equity Appreciation Fund
                            I, L.P., LEAF Financial Corporation and Sovereign
                            Bank. (2)
                 10.10      Pooling and Servicing Agreement, dated July 13,
                            2005, among LEAF Funding, Inc., LEAF Financial
                            Corporation, Merrill Lynch, Pierce, Fenner & Smith
                            Incorporated and The Bank of New York.
                 10.11      2005 Equity Compensation Plan (5)
                 10.12      Grant of Incentive Stock Option Pursuant to the
                            Resource America, Inc. 2005 Omnibus Equity
                            Compensation Plan.
                 10.13      Grant of Non-Qualified Stock Option Pursuant to the
                            Resource America, Inc. 2005 Omnibus Equity
                            Compensation Plan.

                 21.1       Subsidiaries of Resource America, Inc.

                 23.1       Consent of Grant Thornton LLP (6)

                 23.2       Consent of Ernst & Young LLP

                 31.1       Rule 13a-14(a)/15d-14(a) Certification

                 31.2       Rule 13a-14(a)/15d-14(a) Certification

                 32.1       Section 1350 Certification

                 32.2       Section 1350 Certification

----------------
(1) Filed previously as an exhibit to our Quarterly Report on Form 10-Q for the
    quarter ended December 31, 1999 and by this reference incorporated herein.
(2) Filed previously as an exhibit to our Quarterly Report on Form 10-Q for the
    quarter ended June 30, 2004 and by this reference incorporated herein.
(3) Filed previously as an exhibit to our Quarterly Report on Form 10-Q for the
    quarter ended June 30, 2005 and by this reference incorporated herein.
(4) Filed previously as an exhibit to our Quarterly Report on Form 10-Q for the
    quarter ended December 31, 2003 and by this reference incorporated herein.
(5) Filed previously as an exhibit to our Report on Form 8-K filed May 13, 2005
    and by this reference incorporated herein.

(6) Filed previously as an exhibit to our Annual Report on Form 10-K filed
    December 14, 2005 and by this reference incorporated herein.


                                      102
<PAGE>
                                   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.



                                   RESOURCE AMERICA, INC. (Registrant)
     October 11, 2006              By:  /s/ Jonathan Z. Cohen
                                        -------------------------------------
                                        Chief Executive Officer and President


         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.



/s/ Edward E. Cohen          Chairman of the Board             October 11, 2006
-------------------------
EDWARD E. COHEN

/s/ Jonathan Z. Cohen        Director, President               October 11, 2006
-------------------------    and Chief Executive Officer
JONATHAN Z. COHEN

/s/ Carlos C. Campbell       Director                          October 11, 2006
-------------------------
CARLOS C. CAMPBELL

/s/ Andrew M. Lubin          Director                          October 11, 2006
-------------------------
ANDREW M. LUBIN

/s/ Michael J. Bradley       Director                          October 11, 2006
-------------------------
MICHAEL J. BRADLEY

/s/ Kenneth A. Kind          Director                          October 11, 2006
-------------------------
KENNETH A. KIND

/s/ John S. White            Director                          October 11, 2006
-------------------------
JOHN S. WHITE

/s/ Steven J. Kessler        Executive Vice President          October 11, 2006
-------------------------    and Chief Financial Officer
STEVEN J. KESSLER



                                      103