UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549



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FORM 10-K

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|---------- | ------------------------------------------------------------------------------------------
|(Mark one)
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|x          | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
  SECURITIES EXCHANGE ACT OF 1934    
|           |                                                                                           
|           | For the fiscal year ended December 31, 2005                                               
|OR         |                                                                                           
|           |                                                                                           
|o          | 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 333-71091*

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|IBF Fund Liquidating LLC                              
|                                                      
|(Exact Name of
Registrant as Specified in Its Charter)

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|------------------------------------------------------------------ |  | -----------------------------------
|Delaware                                                           |  | 06-1708882                         
|                                                                   |  |                                    
|(State or Other
  Jurisdiction
  of Incorporation or Organization) |  | (IRS Employer
  Identification No.)
|                                                                   |  |                                    
|c/o Arthur Steinberg,
  as ICA Trustee                             |  |                                    
|Kaye Scholer LLP                                                   |  |                                    
|425 Park Avenue                                                    |  |                                    
|New York, New York                                                 |  | 10022                              
|                                                                   |  |                                    
|(Address of Principal Executive Offices)                           |  | (Zip Code)                         
|                                                                   |  |                                    

Registrants telephone number, including area code: (212)
836-8564

Securities registered pursuant to Section 12(b)
of the Act: NoneSecurities registered pursuant to Section 12(g)
of the Act: None

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

Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Act.   o Yes   x No   NOT
APPLICABLE

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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 o
   No o
   Not applicable

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. o Not applicable

Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer or a non-accelerated filer. See definition of accelerated
filer and large accelerated filer in Rule 12b-2 of the Exchange Act.
(Check one):

Large accelerated filer o

Accelerated filer o

Non-accelerated filer xIndicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act). o Yes   x No

State
the aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity
was last sold, or the average bid and asked price of such common equity, as of
the last business day of the registrants most recently completed second fiscal
quarter. Not applicable

DOCUMENTS
INCORPORATED BY REFERENCE
None

*IBF
Fund Liquidating LLC (the Company, we, us or our) is the transferee of
the assets and certain liabilities of IBF Collateralized Finance Corporation
(CFC), IBF VI - Secured Lending Corporation (SLC) and IBF Premier Hotel
Group, Inc. (IBF Hotel) pursuant to the First Amended Joint Liquidating Plan
of Reorganization (the Plan) with Respect To InterBank Funding Corp. (IBF),
SLC, CFC and IBF Hotel (collectively, the Debtors) that was confirmed by
order of the United States Bankruptcy Court for the Southern District of New
York dated August 14, 2003 and approved in all respects by order dated
September 5, 2003 of the United States District Court for the Southern
District of New York. On December 10, 2003, the Plan went effective with
respect to CFC, SLC and IBF Hotel. Pursuant to oral no-action relief provided
by the Office of Chief Counsel, Division of Corporate Finance of the Commission
on August 12, 2003 (the No-Action Relief), the Company is submitting
this Annual Report under cover of Form 10-K under SLCs former Commission
file number. Pursuant to the No-Action Relief, this Annual Report need not and
does not comply with all of the requirements of Form 10-K and is not
deemed filed pursuant to Section 13 of the Securities Exchange Act of
1934.

2

Part
I

Item 1.
Business.As
reported to the ICA Trustee (as herein defined), InterBank Funding Corp.
(IBF) was formed in and around 1995 to make investments in operating
businesses, operating hotels, real estate development and properties,
securitization assets and other investments by raising investment capital
through offerings of debt and equity securities  typically, unsecured
high-yield notes sold in private placements through registered broker-dealers.
By January 31, 2002, the various funds established by IBF had raised
approximately $187 million in investment capital. IBF Collateralized
Finance Corporation (CFC) and IBF VI - Secured Lending Corporation (SLC
and, together with CFC, the Funds) were two such funds that survived a series
of merger transactions in 2001. The Funds were owned by IBF. All of the issued
and outstanding equity capital of IBF was owned by Simon A. Hershon.

On
June 7, 2002, IBF and the Funds each filed a voluntary petition for relief
under Chapter 11 of the Bankruptcy Code in the Southern District of New
York. IBF Premier Hotel Group, Inc. (IBF Hotel) filed its voluntary petition
for relief under Chapter 11 of the Bankruptcy Code in the Southern
District of New York on November 4, 2002. The Debtors (as defined below)
Chapter 11 cases were consolidated and were jointly administered.

On
July 23, 2002, the United States Securities and Exchange Commission (the
Commission) filed a complaint against IBF, the Funds and Mr. Hershon
(the Parties) in the United States District Court for the Southern District
of New York (the District Court) commencing a proceeding entitled Securities and Exchange Commission v. IBF
Collateralized Finance Corp., et al., No. 02-CV-5713 (JES) (the SEC
Litigation). Generally, the Commission alleged that the Funds were operated as
unregistered investment companies in violation of the Investment Company Act of
1940, as amended (the Investment Company Act), and that certain disclosures
made by IBF and the Funds to investors in various debt financings were
misleading. On motion of the Commission in the SEC Litigation, on
December 5, 2002, the District Court granted summary judgment and
appointed Arthur J. Steinberg as trustee (Mr. Steinberg, the ICA
Trustee, the Manager or the Liquidating Agent) under the Investment
Company Act for the Funds and their subsidiaries.

Following
his appointment on December 5, 2002, Mr. Steinberg assumed all
management responsibilities for the Funds and formulated the First Amended
Joint Liquidating Plan of Reorganization (the Plan) of IBF, the Funds and IBF
Hotel (collectively, the Debtors).

On
May 28, 2003, Mr. Steinberg, as ICA Trustee, filed the Plan, which was the
culmination of discussions and negotiations, and reflects the settlements and
compromises reached by Mr. Steinberg, the Debtors, the committee of
unsecured creditors appointed under the Bankruptcy Code and the staff of the
Commission.

The
Plan provided for, among other things, the substantive consolidation of the
Funds and IBF Hotel. The Bankruptcy Court confirmed the Plan on August 14,
2003 and the Plan became effective with respect to the Funds and IBF Hotel on
December 10, 2003 (the Effective Date). On the Effective Date,
Mr. Steinberg, as ICA Trustee, made the initial distributions

3

required by the Plan. Assets of the Debtors remaining
after this distribution were assigned, depending on the Debtor, to either IBF
Fund Liquidating LLC (the Company) or IBF Liquidating LLC (IBF LLC), along
with certain liabilities and pending claims against the Debtors. Both of these
entities are managed by Mr. Steinberg in his separate capacity as the Manager
and Liquidating Agent, and are monitored by the Bankruptcy Court and the
District Court pursuant to the Plan. On or about the Effective Date, membership
interests in the Company (Membership Interests) were distributed to holders
of allowed general unsecured claims pro rata in accordance with the amount of
their claims (such holders, the Members).

On
the Effective Date, after the Funds and IBF Hotels assets were transferred to
the Company, all outstanding shares of the Funds were automatically deemed
canceled.

The
Manager maintains a registry of Membership Interests in the Company and IBF
LLC; no certificates representing ownership of the Membership Interests have
been or will be issued. The terms of the Companys operating agreement provide
that the Membership Interests of a Member may not be transferred; provided, that the Membership Interests
may be assigned or transferred by will, intestate succession or operation of
law or by order of a court of competent jurisdiction, upon written notice to,
and written approval of, the Manager, which approval may be withheld or
conditioned as the Manager deems necessary or advisable in his sole discretion.

The
Company was organized for the purposes of liquidating, collecting and maximizing
the cash value of its assets, making distributions in accordance with the terms
of the Plan and taking actions as are necessary or appropriate to accomplish
those purposes, including holding cash in the form of cash, money market funds,
treasury bills or other cash equivalents, holding assets for the benefit of the
Members, making limited additional investments in assets in certain instances
to preserve and maximize the value of the assets and permit the orderly
liquidation of those assets, enforcing the rights of the Members and defending
claims against such assets. With limited exceptions for pre-approved
investments specified in the Plan and also reflected in the Companys operating
agreement, and for additional investments in an asset of an aggregate of
$250,000 or less, which investments the Manager may make in the exercise of his
business judgment, all additional investments in assets held by the Company
made by the Manager are subject to oversight of the District Court or the
liquidating committee formed pursuant to the Plan (the Liquidating Committee)
as follows:


If the aggregate additional investment would be for
  an amount between $250,001 and $1,000,000, the Manager must obtain the prior
  consent of the Liquidating Committee or, in the absence of such consent, the
  Manager must receive the approval of the District Court and provide notice to
  the Liquidating Committee and an opportunity for hearing before the District
  Court.
If the aggregate additional investment would equal
  or exceed $1,000,000, the Manager must receive the approval of the District
  Court and provide notice to all of the Members of the Company and an
  opportunity for hearing before the District Court.The
Manager expects to terminate the Company and make final distributions with
respect to the Company pursuant to the Plan upon the earlier of (i) the
fifth anniversary of the Effective

4

Date, and (ii) the date on which the Manager
determines, in his business judgment, that (a) all assets of the Company
have been liquidated, all causes of action have been resolved and there are no
potential sources of additional cash for distribution; (b) there remain no
claims against the applicable Debtor(s); (c) all debts and other
obligations of the Company have been paid or otherwise provided for; and
(d) he is in a position to make a final distribution in accordance with
applicable law. The existence of the Company may, however, be extended to more
than five years if the Manager applies for and obtains approval of the District
Court and, prior to such extension, the Manager has made a request for and has
received additional no-action assurances from the Commission.

Pursuant
to oral no-action relief provided by the Office of Chief Counsel, Division of
Corporate Finance of the Commission (the No-Action Relief), the Company is
exempt from the reporting requirements of the Securities Exchange Act of 1934,
as amended (the Exchange Act). However, pursuant to the No-Action Relief, the
Manager is required to issue reports to the Members annually and upon
termination of the Company showing the assets and liabilities of the Company at
the end of each year and upon termination and the receipts and disbursements of
the Manager for each such period and event. The annual reports also will
describe the changes in the Companys assets and liabilities during the
reporting period, and any action taken by the Manager during the period in the
performance of the Managers duties that have not been previously reported. The
financial statements contained in such reports will be prepared in accordance
with generally accepted accounting principles; however, the financial
statements will not be audited by independent public accountants. The annual
reports are filed with the Commission under cover of Form 10-K using SLCs
Commission file number. Additionally, notice of the annual reports is provided
to the holders of Membership Interests and the annual report is posted on the
Companys website at www.ibffund.com. Pursuant to the No-Action Relief, these
annual reports will not be deemed filed pursuant to Section 13 of the
Exchange Act.

Pursuant
to the No-Action Relief, the Manager will cause the Company to file with the
Commission a current report under cover of Form 8-K using SLCs Commission
file number whenever an event with respect to the Company occurs that would
require the filing of a Form 8-K by a company registered under the
Exchange Act or whenever a material event relating to the Companys assets or
liabilities has occurred, such as an interim distribution. The Plan
contemplates that the Company will make interim distributions approximately
every 180 days, so long as there are funds available for such purpose.
Twenty days before each proposed interim distribution, the ICA Trustee must
file with the District Court, and serve on each Member of the Company, a report
detailing (i) all actions taken during the prior six-month period,
(ii) the financial condition of the Company and (iii) the amount and
source of the proposed distribution. All interested parties will have an
opportunity to object to the proposed distribution, with any objection to be
resolved by the District Court. A current report under cover of Form 8-K
will be filed in connection with each interim distribution, disclosing the
information required by the Plan. Pursuant to the No-Action Relief, these
current reports will not be deemed filed pursuant to Section 13 of the
Exchange Act. Copies of each current report filed under cover of Form 8-K
also will be available on the Companys website, and notice of the filing of
each current report on Form 8-K will be provided to all holders of
Membership Interests.

5

Tax
Treatment

The
Company will issue an annual information statement to the Members with tax
information for their tax returns. Members are urged to consult with their own
tax advisors as to their own filing requirements and the appropriate tax
reporting of this information on their returns.

Distributions

In
December 2003, the Company issued a note in the original principal amount of
$5 million (with an interest rate of 3.5% per annum) (the Escrow Note)
payable to certain investors (Escrow Investors) who had invested in the Funds
after the close of business on December 14, 2001 and whose monies were
deposited at the time into an escrow account created pursuant to discussions
with the staff of the Commission. On October 19, 2004, the ICA Trustee
arranged for the Escrow Note to be paid in full on or about such date, and to
make a distribution to investors in the Funds holding general unsecured claims
(General Investors).

In
February 2005, the Company distributed $7 million under the Plan. Escrow
Investors were paid $254,298 and General Investors were paid $6,610,566. The
balance, $135,136, was reserved for members of IBF V-Alternative Investment
Holdings LLC (AIH) pending the closing of the acquisition of the assets of
AIH pursuant to the Purchase and Sale Agreement, dated as of February 22,
2005, between AIH and the Company (the AIH Transaction), and has since been
paid.

In
September 2005, the Company distributed $4 million under the Plan. Escrow
Investors were paid $145,314 and General Investors were paid $3,777,465. The
balance, $77,221, was reserved for members of AIH pending the closing of the
AIH Transaction, and has since been paid.

In
November 2005, the Company consummated the AIH Transaction and made a
distribution of $362,483 to members of AIH, meant as a catch-up payment to
account for earlier distributions to the Companys investors.

In
December 2005, the Company distributed $6 million under the Plan. Escrow
Investors were paid $217,971 and General Investors were paid $5,782,029.

Property
Sales

For
a description of property sold by the Company during the fiscal year ended
December 31, 2005, see the Third Interim Report Following Effective Date
of Joint Liquidating Plan with Respect to the Debtors, attached hereto as Annex A (the Third Interim Report),
and the Fourth Interim Report Following Effective Date of Joint Liquidating
Plan with Respect to the Debtors, attached hereto as Annex B (the Fourth Interim Report), each of which is
incorporated herein by reference.

6

Employees

The
Company has no employees. Two former employees of the Company are now
consultants to the Company.

Item 1A.
Risk Factors.

Certain
statements contained in this Annual Report that are not historical constitute
forward-looking statements. You can identify forward-looking statements by
the words anticipate, assume, believe, estimate, expect, plan,
intend, project, may, will and other similar expressions. These
statements are based upon our current expectations, estimates and projections,
and they are not guarantees of future results. The forward-looking statements
involve known and unknown risks, uncertainties and other factors which are, in
some cases, beyond our control and could materially affect our actual results.
Factors that could cause actual results to differ materially from those
expressed or implied by forward-looking statements include, but are not limited
to, the following risk factors.

We cannot assure the amounts or timing of
distributions. If the values of our assets
decline, or if the costs and expenses related to selling our remaining assets
exceed our current estimates, then the amounts of any future distributions to
the Members may be materially adversely affected. In addition, the ability to
sell or dispose of certain assets depends, in some cases, on the availability
of financing to buyers on favorable terms. If favorable financing is not
available, it may take longer than expected to sell our remaining assets at
desirable prices, and this may delay our ability to make distributions. We may
not be successful in disposing of our remaining assets for value approximating
those currently estimated by us or as to the timing of any related
distributions.

The amounts and timing of distributions may be
adversely affected by liabilities and indemnification obligations following
asset sales. In selling our assets, we may be
unable to negotiate agreements that provide for the buyers to assume all of the
known and unknown liabilities relating to the assets, including, without
limitation, environmental and structural liabilities. In addition, if we agree
to indemnify the buyers for such liabilities, we may be unable to limit the
scope or duration of such indemnification obligations to desirable levels or
time periods. As a result, we have from time to time determined, and may in the
future determine, that it is necessary or appropriate to reserve cash amounts
or obtain insurance in order to attempt to cover the liabilities not assumed by
the buyers and to cover potential indemnifiable losses and termination fees.
The reserves and insurance may not be sufficient to satisfy all liabilities and
indemnification obligations arising from assets we have, that we contemplate
may be sold or that may arise after the sale of our remaining assets, and any insufficiencies
may have a material adverse effect on the amounts and timing of any
distributions.

We may be unable to obtain all of the consents and
approvals necessary to transfer our remaining assets.
In general, an agreement relating to the purchase and sale of assets and other
properties often provides that the completion of the sale is subject to the
satisfaction of certain conditions, including the requirement to obtain
consents and approvals of specified third parties. If we fail to obtain all
consents and approvals that are necessary to transfer our assets, we may

7

fail to consummate dispositions, which could have a
material adverse effect on the amount and timing of distributions to our
members.

Terms of sales of assets are not subject to approval
by the Members and may not be satisfactory to all Members.
Our Manager has the authority to sell any or all of our assets on terms that he
determines are appropriate, subject in certain circumstances to court approval.
The Members will have no opportunity to vote on these matters and will,
therefore, have no right to approve or disapprove the terms of the sales
except, in certain circumstances, to file objections in court prior to a
contemplated disposition. As a result, the terms of sales of assets may not be
satisfactory to all Members. Pursuant to our operating agreement and the Plan,
our Manager has discretion to cause us to invest certain amounts in assets and
companies owned or effectively controlled by us and may request and receive
authorization from the Liquidating Committee or the District Court to exceed
such limits. These investments and the terms on which the investments may be
made are not subject to the approval or disapproval of the Members and may not
be satisfactory to all the Members. However, in certain instances, our Manager
will be required to obtain court approval prior to making any such investments.

We face risks arising from the markets in which we
hold assets. We hold investments in a broad range
of businesses in a variety of markets. By virtue of this investment diversity,
we face risks which may be unique to a particular business or market or to a
particular investment. Any such risk may materially affect the value that we
receive with respect to a particular asset upon disposition of such asset and
may materially and adversely affect the aggregate proceeds received by us upon
the disposition of our assets in the aggregate.

Item 1B.
Unresolved Staff Comments

None

Item 2.
Properties.The
  following is a description of the Companys assets as of December 31,
  2005. The Companys assets can be categorized as investments in Operating
  Businesses, Operating Hotels, Real Estate Development Properties and Securitization
  Assets. The Companys investments in Operating Businesses are comprised
  of minority debt and equity investments. Note that the dollar amounts of certain
  investments set forth herein do not reflect the realizable value of such assets
  upon disposition, but rather constitute the net investment in such assets made
  by the Debtors. Many of these assets are subject to risks and many of the loans
  are in default with the amount of recovery by the Company uncertain. The financial
  data set forth in Items 6 and 8 below are based on estimates as of December 10,
  2003 as adjusted for changes between December 10, 2003 and December 31,
  2005. The market for such assets is difficult to determine and is subject to
  significant changes over time. There can be no assurance that the Company will
  be successful in disposing of the assets for values approximating those currently
  estimated by it.

Operating Businesses

The
  Companys investments in Operating Businesses are comprised of minority
  debt and equity investments.
The
  Company holds a promissory note with respect to Capstone Capital LLC (Capstone),
  which is in default and had a balance owing as of December 31, 2005 of
  approximately $5.3 million; CFC also owned 50% of the equity of Capstone as
  of December 31, 2005.

8

As
a result of the consummation of the AIH Transaction on November 21, 2005,
the Company acquired shares of Investment and Benefit Services, Inc. (n/k/a
American Benefit Resources, Inc.) (ABR). On November 30, 2005, substantially
all of the assets of ABR were sold to National Investment Managers, Inc.
(NIM) pursuant to an Asset Purchase Agreement, dated as of November 1,
2005, between ABR and NIM. As a result of such transaction, the Company holds
$671,141 in restricted shares of common stock of NIM and may also collect funds
held in escrow having an approximate aggregate value of $1.05 million.

On
November 10, 2005, the transactions contemplated by the Amended and Restated
Merger Agreement, dated as of November 10, 2005, among the Company, Sunset
Brands, Inc. (Sunset), a subsidiary of Sunset and U.S. Mills, Inc. (USM)
(the USM Merger Agreement) were consummated. As a result of the consummation
of such transactions, the Company holds the following:


535,714 shares of Series B Preferred Stock of
  Sunset, exercisable into 5,357,142 shares of common stock of Sunset (Sunset
  Common Stock), having an initial conversion price of $0.56 per share (of
  which 214,286 shares of Series B Preferred Stock were deposited into
  escrow to secure the Companys post-closing indemnification obligations under
  the USM Merger Agreement);
warrants to purchase 4,200,000 shares of Sunset
  Common Stock having an exercise price of $0.70 per share;
a $5,000,000 12% Secured Convertible Debenture from
  Sunset that matures on November 10, 2008, which is convertible into
  shares of Sunset Common Stock at an exercise price of $0.37 per share;
warrants to purchase 2,173,913 shares of Sunset
  Common Stock having an exercise price of $0.46 per share;
a $1,000,000 senior subordinated note issued by
  Sunset and USM due November 9, 2008 (the Note); and
a $5,000,000 senior subordinated note issued by
  Sunset and USM due November 9, 2008.Sunset and USM failed to make the interest payments
due to the Company on January 31, 2006 under the Note, and Sunset and USM
are in violation of the minimum EBITDAM covenant set forth in the related
security agreements. Accordingly, the Note is currently in default. The Company
has not taken any action in respect of this default, other than to reserve its
rights to do so.

For
more information, see the Third Interim Report and the Fourth Interim Report.

9

Operating
Hotels

The
Company holds the following:


a loan in the principal amount of approximately $2
  million with respect to the Fairfield Inn (loan to IBF Hotel to buy a 90%
  limited partnership interest in Vinings Partners LP for the purchase of a
  Fairfield Inn in Vinings, Georgia); and
a loan in the principal amount of approximately $2
  million with respect to the Hilton Garden Inn (loan to IBF Hotel to buy a 75%
  limited partnership interest in Chisholm Partners, Ltd. for the purchase of a
  Hilton Garden Inn in Round Rock, Texas).For
more information relating to the Companys Operating Hotels during the fiscal
year ended December 31, 2005, see the Third Interim Report and the Fourth
Interim Report.

Real Estate Development
Properties

The
Company holds the following:


a loan in the amount of approximately $13 million as
  of December 31, 2005 to Cat Island Ventures, Ltd. with respect to
  property on Anguilla Beach; and
a 24% limited partnership interest in a joint
  venture with Lumbermens Investment Corp., the developer of a Marriott Resort
  in San Antonio, Texas; the Companys likelihood of realizing any value from
  this joint venture is remote.For
more information relating to the Companys Real Estate Development Properties
during the fiscal year ended December 31, 2005, see the Third Interim
Report and the Fourth Interim Report.

Securitization Assets

The
Company holds the following:


an equity investment interest of approximately
  $3.1 million in a residential mortgage loan securitization transaction
  with Lehman Brothers dated March 1, 2001 (ARC 2001-BC-1 (Lehman)); and
equity investment interests of approximately
  $4.0 million (through CFC) and approximately $450,000 (through SLC) in a
  residential mortgage loan securitization transaction with DLJ Mortgage Corp.
  and Credit Suisse First Boston dated November 2001 (CSFB ABS 2001-HE-25).For
more information relating to the Companys Securitization Assets during the
fiscal year ended December 31, 2005, see the Third Interim Report and the
Fourth Interim Report.

10

Other Assets

The
Company holds cash and other short-term investments, collection assets, various
litigation and similar claims against third parties and a receivable from IBF
Liquidating LLC.

For
more information relating to the Companys Other Assets during the fiscal year
ended December 31, 2005, see the Third Interim Report and the Fourth
Interim Report.

Item 3.
Legal Proceedings.The
Company is subject to legal claims and proceedings that arise in the ordinary
course of business. The Company is also involved in the legal proceedings
described in the Third Interim Report and the Fourth Interim Report. The
Manager believes that the outcome of these claims and proceedings will not have
a material adverse effect on the estimated amount of future cash distributions.
However, there can be no assurance in this regard.

Item 4.
Submission of Matters to a Vote of
  Security Holders.No
matters were submitted to a vote of the Members during the fiscal year ended
December 31, 2005.

Part
II

Item 5.            Market for Registrants Common
  Equity, Related Stockholder Matters and Issuer Purchases of Equity
  Securities.Market
Information

There
is no public market for the Membership Interests.

Holders

The
Membership Interests are not transferable except by will, intestate succession,
court order or operation of law. As of December 31, 2005, the Company had
3,133 Members of record.

Item 6.
Selected Financial Data.The
unaudited selected financial data of the Company presented below should be read
in conjunction with Managements Discussion and Analysis of Financial
Condition and Results of Operations and the Companys Consolidated Financial
Statements and the notes thereto included elsewhere in this Annual Report. The
results for the fiscal year ended December 31, 2003 do not reflect a full
year of results because the Company began operations as of December 10,
2003, and such results are therefore not comparable to any other period.

11

Year Ended
  December 31,
  2005

Year Ended
  December 31,
  2004

December 10,
  2003 through
  December 31,
  2003Changes In Net Asset Data:Total revenue

$
925,945

$
2,553,196

$
48,284Total expenses


3,351,336


5,888,818


311,176Net loss


(2,425,391
)

(3,335,622
)

(262,892
)Balance Sheet Data:Total assets

$
26,105,960

$
39,598,402

$
51,156,714Total
  liabilities


579,525


1,002,051


5,301,951Net assets in
  liquidation

$
25,526,435

$
38,596,351

$
45,854,763Item 7.
Managements Discussion and
  Analysis of Financial Condition and Results of Operations.Overview

The
following discussion should be read in conjunction with the Companys
consolidated financial statements appearing elsewhere in this Annual Report.

Actual
values realized for assets and settlement of liabilities may differ materially
from the amounts estimated. Factors that may cause such variations include,
among other factors, the possibility that assets may not be sold on the terms
currently provided and the other risk factors discussed in this Annual Report.

Results
of Operations

The
following describes the Companys results of operations for the fiscal years
ended December 31, 2005, 2004 and 2003. The results for the fiscal year
ended December 31, 2003 do not reflect a full year of results because the
Company began operations as of December 10, 2003, and such results are
therefore not comparable to any other period.

The
Company recorded a net loss of $2,425,391 in 2005. The net loss primarily
resulted from the loss on the sale of an investment and general and
administrative expenses. The Company recorded a net loss of $3,335,622 in 2004.
The net loss primarily resulted from the loss on sale of investment and general
and administrative expenses exceeding the Companys total revenue. General and
administrative expenses include consultants, legal fees, member communication
and other general office expenses. During the year ended 2003, the Company
recorded a net loss of $262,892. This loss was primarily the result of general
and administrative expense exceeding total revenue.

12

Net Assets
in Liquidation

Net
Assets in Liquidation at December 31, 2005 were $25,526,435 as compared to
$38,596,351 at December 31, 2004 and $45,854,763 at December 31,
2003. The valuation of Net Assets in Liquidation is based on estimates as of
December 10, 2003 as adjusted for changes between December 10, 2003
and December 31, 2005. The actual values realized for assets and
settlement of liabilities may differ materially from amounts estimated.

Distributions

During
the fiscal year ended December 31, 2005, the Company made liquidating
distributions pursuant to the Plan to the Members of $17 million. During
the fiscal year ended December 31, 2004, the Company made a liquidating
distribution pursuant to the Plan to the Members of $9,075,187. During the
fiscal year ended December 31, 2003, the Company made a liquidating
distribution pursuant to the Plan to the Members of $19,210,651.

Dispositions

During
the fiscal year ended December 31, 2005, the Company disposed of certain
assets, as described in the Third Interim Report and the Fourth Interim Report.
During the fiscal year ended December 31, 2004, the Company disposed of
certain assets, as described in the Companys First Interim Report Following
Effective Date of Joint Liquidating Plan with Respect to the Debtors and the
Companys Second Interim Report Following Effective Date of Joint Liquidating
Plan with Respect to the Debtors, each of which is incorporated by reference
into the Companys Annual Report on Form 10-K for its fiscal year ended
December 31, 2004. No assets were sold during the fiscal year ended
December 31, 2003.

Liquidity
and Capital Resources

The
Manager anticipates that the combination of cash from asset sales, cash flows
from operating activities and current cash reserves will provide adequate
capital for all operating expenses of the Company for at least the next few
years.

Item 7A.
Quantitative and Qualitative
  Disclosures About Market Risk.The
Companys non-cash assets consist primarily of debt and equity investments in
operating companies, hotels and real estate development projects and
investments in certain securitization assets. Most of the debt investments are
in default and there is uncertainty as to how much the Company will recover
from these assets. A substantial portion of the equity investments have little
or no value due to the high levels of debt of the issuers. A substantial
portion of that debt is in default (including the Note). While changes in
interest rates may have an effect on the realizable value of many of the
Companys assets, most of these assets consist of distressed investments in
which factors other than interest rates (such as the creditworthiness of the
debtor) are more material to the ultimate realizable value of the assets. As a
result, the Company does not believe that it is possible to quantify or
otherwise meaningfully describe the effect on the net realizable value of such
assets of changes in interest rates or other market risk factors.

13

Item 8.
Financial Statements and
  Supplementary Data.IBF
Fund Liquidating LLC
  Consolidated Statement of Net Assets (Liquidation Basis)*
December 31, 2005, 2004 and 2003
(Unaudited)

2005

2004

2003**ASSETS:Cash

$
11,687,088

$
9,935,321

$
10,909,077Investments:Investment in
  Operating Businesses


8,323,279


18,781,628


16,420,300Investment in
  Operating Hotels


205,000


645,000


1,040,000Investment in
  Real Estate Development Properties


5,290,000


5,290,000


9,273,937Investment in
  Securitization Assets


74,989


373,720


8,113,400Investment in
  Collection Assets





87,000


450,000Total
  Investments


13,893,268


25,177,348


35,297,637Miscellaneous
  Assets


525,604


4,485,733


4,950,000Total Assets

$
26,105,960

$
39,598,402

$
51,156,714LIABILITIES:Current
  Liabilities:Accounts Payable

$
479,525

$
602,051


Accrued Expenses
   Professional Fees


100,000


400,000


291,883Total Current
  Liabilities


579,525


1,002,051


291,883Long-Term
  Liabilities:Promissory Notes








5,000,000Accrued
  Liabilities








10,068Total Long-Term
  Liabilities








5,010,068Equity:Member Interest
  in LLC


31,550,340


42,194,865


46,117,655Retained
  earnings


(3,598,514
)

(262,892
)

Net Income


(2,425,391
)

(3,335,622
)

(262,892
)Total Equity


25,526,435


38,596,351


45,854,763Total
  Liabilities and Equity

$
26,105,960

$
39,598,402

$
51,156,714*
    The amounts used on this Consolidated Statement
      of Net Assets reflect values assigned at the Companys inception (December
      10, 2003) and do not reflect current market value.**
    The results for the fiscal year ended December 31,
        2003 do not reflect a full year of results because the Company began operations
        as of December 10, 2003, and such results are therefore not comparable
        to any other period.The
accompanying notes to the Consolidated Financial Statements are an integral
part of these financial statements.

14

IBF
Fund Liquidating LLC
Consolidated Statement of Cash Flows
For the Fiscal Years Ended
December 31, 2005 and 2004
(Unaudited)

Year Ended
  December 31, 2005

Year ended
  December 31, 2004Cash flow from
  operating activities before reorganization items:Cash paid to
  vendors

$
(50,486
)
$
(285,897
)Payroll and
  Benefits


(45,941
)

(190,378
)Net cash (used)
  by operating activities before reorganization itemsBefore
  Reorganization Items


(96,427
)

(476,275
)Cash flows from
  reorganization items:Additional
  Investments


(1,067,125
)

(4,140,888
)Return on
  Investments


12,506,092


15,435,816Collection of
  Litigation Claims


4,620,613


464,268Interest Earned
  on Accumulated Cash


101,480


80,961Interest Earned
  on Investments


8,207


202,071Liquidating
  Distribution


(10,787,531
)

(8,997,977
)Professional
  Fees for Services Rendered


(3,533,542
)

(3,541,732
)Net cash (used)
  by reorganization items


1,848,194


(497,481
)Net cash (used)
  by operating activities


1,751,767


(973,756
)Net decrease in
  cash and cash equivalents


1,751,767


(973,756
)Cash and cash
  equivalents at beginning of period


9,935,321


10,909,077Cash and cash
  equivalents at end of period

$
11,687,088
*
$
9,935,321The
accompanying notes to the Consolidated Financial Statements are an integral
part of these financial statements

*
This number does not account for the cash reduction
  associated with the December 28, 2005 distribution.15

IBF
Fund Liquidating LLC
Consolidated Statement of Profit and Loss
For the Fiscal Years Ended
December 31, 2005, 2004 and 2003
(Unaudited)

Year Ended
  December 31,
  2005

Year Ended
  December 31,
  2004

December 10,
  2003 through
  December 31,
  2003*Income:Gain on Sale of
  Investment

$
816,257

$
2,270,165

$
Interest Income


109,688


283,031


48,284Total
  income


925,945


2,553,196


48,284Expense:Professional
  Fees


3,254,909


4,112,488


300,571Interest Expense





142,086


10,068Office Expense


50,486


136,810


537Payroll and
  Benefits


45,941


190,377


Loss on Sale of
  Investment





1,307,057


Total
  expense


3,351,336


5,888,818


311,176Total
  income/(loss)

$
(2,425,391
)
$
(3,335,622
)
$
(262,892
)*
The results for the fiscal year ended
  December 31, 2003 do not reflect a full year of results because the
  Company began operations as of December 10, 2003, and such results are
  therefore not comparable to any other period.The
accompanying notes to the Consolidated Financial Statements are an integral
part of these financial statements.

16

IBF
FUND LIQUIDATING LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005
(Unaudited)

1.
PURPOSE OF IBF FUND LIQUIDATING LLCThe Company was established for the sole purpose of
liquidating, collecting and maximizing the cash value of its assets, making
distributions in accordance with the terms of the Plan, and taking actions as are necessary or
appropriate to accomplish those purposes, including holding cash in the form of
cash, money market funds, treasury bills or other cash equivalents, holding
assets for the benefit of the Members, making limited additional investments in
assets in certain instances to preserve and maximize the value of the assets
and permit the orderly liquidation of those assets, enforcing the rights of the
Members, and defending claims against such assets. With limited exceptions for
pre-approved investments specified in the Plan and also reflected in the
Companys operating agreement, and for additional investments in an asset of
$250,000 or less, which investments the Manager may make in the exercise of his
business judgment, all additional investments in assets held by the Company are
subject to oversight by the Bankruptcy Court, the District Court and the
liquidation committee of the Company.

2.
SUMMARY OF SIGNIFICANT ACCOUNTING
  POLICIES BASIS OF PRESENTATIONThe asset values reflected on the Consolidated
Statement of Net Assets are based on valuations performed as of December 10,
2003, as adjusted by operating activities from December 19, 2003 through
December 31, 2005. The actual values realized for assets and settlement of
liabilities may differ materially from the amounts estimated.

USE OF
ESTIMATES

The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires the Manager to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
materially from those estimates.

INCOME
TAXES

The Company will be treated as a partnership for tax
purposes and accordingly, will not be subject to federal or state income tax on
any income earned or gain recognized by the Company. The Company will recognize
taxable gain or loss when an asset is disposed of for an amount greater or less
than the fair market value of such asset at the time it was transferred to the
Company. Each Member will be treated as the owner of a pro rata portion of each
asset, including cash, received by and held by the Company and will be required
to report on his or her federal and state income tax return his or her pro rata
share of taxable income, including gains

17

and losses recognized by the Company. Accordingly,
there is no provision for federal or state income taxes in the accompanying
consolidated financial statements.

3.
SALES OF ASSETSDuring the year ended December 31, 2005, the Company
disposed of certain assets, as described in the Third Interim Report and Fourth
Interim Report. No assets were sold during the year ended December 31,
2003.

4.
LIQUIDATING DISTRIBUTIONSIn 2005, the Company made three liquidating
distributions to the Members in the aggregate amount of approximately $17
million.

Item 9.
Changes in and Disagreements With
  Accountants on Accounting and Financial Disclosure.The
Company did not employ independent accountants to perform an audit on the
financial statements contained in this Annual Report.

Item 9A.
Controls and Procedures.

Not
applicable.

Item 9B.
Other Information.

The
Company has disclosed in a Current Report on Form 8-K all information
required to be so disclosed during the fourth quarter of the fiscal year ended
2004.

18

Part
III

Item 10.
Directors and Executive Officers of
  the Registrant.Arthur J. Steinberg
Mr. Steinberg was appointed ICA Trustee on
  December 5, 2002 and manages the Company in his separate capacity as the
  Manager and Liquidating Agent. Mr. Steinberg is a partner at Kaye
  Scholer LLP and has been a member of the Firms Business Reorganization Group
  since 1979.Item 11.
Executive Compensation.Arthur J. Steinberg(1)
Legal fees and expenses paid to Kaye Scholer LLP for
  the fiscal years ended December 31, 2005 and 2004 and for the period
  from December 10, 2003 through December 31, 2003 were $2,970,621,
  $3,338,298 and $92,834, respectively. Legal expenses previously paid to Kaye
  Scholer LLP during the period from December 5, 2002 through
  December 10, 2003 through the bankruptcy process were approximately $2.5
  million.(1)
Mr. Steinberg is serving as ICA Trustee and the
  Manager of the Company and, when appropriate, as a lawyer. Mr. Steinberg
  is charging $500 per hour for services in his capacity as ICA Trustee
  pursuant to discussions with the Staff of the Commission. For all other work,
  he is charging his customary rate of $695 per hour, which rate is subject to
  periodic adjustment. Because in many instances it would be difficult to
  allocate between the two categories of services, Mr. Steinbergs time
  has been allocated using a formula of 40% lawyer-time and 60% ICA
  Trustee-time. In most instances, Mr. Steinberg serves solely as lawyer,
  which would be at the higher rate, but this methodology was proposed to avoid
  the burdensome and time consuming exercise of providing a more exact
  allocation.Item 12.
Security Ownership of Certain
  Beneficial Owners and Management and Related Stockholder Matters.There
is no public market for the Membership Interests. The Membership Interests are
not transferable except by will, intestate succession, order of a court or
operation of law. No Members hold Membership Interests constituting 5% or more
of the aggregate Membership Interests of the Company.

Item 13.
Certain Relationships and Related
  Transactions.Legal
fees and expenses paid to Kaye Scholer LLP for the fiscal years ended
December 31, 2005 and 2004 and for the period from December 10, 2003
through December 31, 2003 were $2,970,621, $3,338,298 and $92,834,
respectively. Legal expenses previously paid to Kaye Scholer LLP during the
period from December 5, 2002 through December 10, 2003

19

through the bankruptcy process were approximately $2.5
million. Mr. Steinberg, appointed ICA Trustee and the Manager and
Liquidating Agent of the Company, is a partner at Kaye Scholer LLP in New York.

Item 14.
Principal Accountant Fees and
  Services.The
Company did not employ independent accountants to perform an audit of the
financial statements contained in this Annual Report.

Part
IV

Item 15.
Exhibits and Financial Statement
  Schedules.(a)(1)(2)
The following financial statements are filed as part of this Annual Report
pursuant to Item 8 hereof, together with the notes thereto:


The Companys Consolidated Statement of Net Assets as
  of December 31, 2005, December 31, 2004 and December 31, 2003;
The Companys Consolidated Statement of Cash Flows
  for the fiscal years ended December 31, 2005 and December 31, 2004;
  and
The Companys Consolidated Statement of Profit and Loss
  for the fiscal years ended December 31, 2005, December 31, 2004 and
  December 31, 2003.(3)
Exhibits2.1
First Amended Joint Liquidating Plan of
  Reorganization with Respect To InterBank Funding Corp., IBF Collateralized
  Finance Corporation, IBF VI - Secured Lending Corporation and IBF Premier
  Hotel Group, Inc., declared effective by the United States Bankruptcy Court
  for the Southern District of New York by order dated August 14, 2003 and
  declared effective on December 10, 2003*2.2
IBF Fund Liquidating LLC Operating Agreement, dated
  September 24, 2003, by and among IBF Fund Liquidating LLC and each
  person who becomes a Member of the Company pursuant to the Plan*10.1
Letter Agreement, dated as of February 18,
  2005, among IBF Fund Liquidating LLC, Charles T. Verde and Cynthia
  Davis**10.2
Asset Purchase Agreement, dated as of
  February 22, 2005, among IBF Fund Liquidating LLC and IBF V-Alternative
  Investment Holdings, LLC**10.3
Amended and Restated Acquisition Agreement and Plan
  of Merger, dated as of November 10, 2005, among IBF Fund Liquidating
  LLC, U.S. Mills, Inc., USM Acquisition Sub, Inc. and Sunset Brands, Inc.***20

10.4
Investor Rights Agreement, dated as of November 10,
  2005, between the Company and Sunset Brands, Inc.10.5
Escrow Agreement, dated as of November 10, 2005,
  among the Company, Sunset Brands, Inc., U.S. Mills, Inc. and Continental
  Stock Transfer & Trust Company, as escrow agent.10.6
12% Secured Convertible Debenture in the original
  principal amount of $5,000,000 issued by Sunset Brands, Inc. to the
  Company.***10.7
Warrants to purchase 4,200,000 shares of common
  stock of Sunset Brands, Inc.***10.8
Warrants to purchase 2,173,913 shares of common
  stock of Sunset Brands, Inc.***10.9
Registration Rights Agreement, dated as of November
  10, 2005, between Sunset Brands, Inc. and the Company.10.10
Senior Subordinated Note in the original principal
  amount of $1,000,000, executed by Sunset Brands, Inc. and U.S. Mills, Inc. in
  favor of the Company.10.11
Senior Subordinated Note in the original principal
  amount of $5,000,000, executed by Sunset Brands, Inc. and U.S. Mills, Inc. in
  favor of the Company.10.12
Security Agreement, dated as of November 10, 2005,
  among Sunset Brands, Inc., U.S. Mills, Inc. and the Company.10.13
Stock Pledge Agreement, dated as of November 10,
  2005, between Sunset Brands, Inc. and the Company.10.14
Intellectual Property Security Agreement, dated as
  of November 10, 2005, among Sunset Brands, Inc., U.S. Mills, Inc. and the
  Company.10.15
Master Subordination and Intercreditor Agreement,
  dated as of November 10, 2005, among CapitalSource Finance LLC, Sunset
  Brands, Inc., U.S. Mills, Inc. and the Company.10.16
Junior Management Fee Subordination Agreement, dated
  as of November 10, 2005, among Sunset Holdings International, Ltd., Sunset
  Brands, Inc. and the Company.10.17
Junior Security Agreement, dated as of November 10,
  2005, among Sunset Brands, Inc., U.S. Mills, Inc. and the Company.10.18
Junior Stock Pledge Agreement, dated as of November
  10, 2005, between Sunset Brands, Inc. and the Company.10.19
Junior Intellectual Property Security Agreement,
  dated as of November 10, 2005, among Sunset Brands, Inc., U.S. Mills, Inc.
  and the Company.21

10.20
Junior Subordination and Intercreditor Agreement,
  dated as of November 10, 2005, among Sunset Brands, inc., U.S. Mills, Inc.
  and the Company.10.21
Assignment of Contract as Collateral Security, dated
  as of November 10, 2005, between Sunset Holdings International, Ltd. and the
  Company.10.22
Stock Pledge Agreement, dated as of November 10,
  2005, between Sunset Holdings International, Ltd. and the Company.*
Incorporated by reference from the Companys Annual
  Report on Form 10-K filed on March 30, 2004.**
Incorporated by reference from the Companys Current
  Report on Form 8-K filed on March 18, 2005.***
Incorporated by reference from Sunset Brands, Inc.s
  Current Report on Form 8-K filed on November 17, 2005.22

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.

IBF FUND LIQUIDATING LLCBy:
/s/ Arthur J. SteinbergArthur J. SteinbergManagerDated March 31, 2006

23

EXHIBIT
INDEX

Exhibit No.

Description2.1

First Amended Joint Liquidating Plan of
  Reorganization with Respect To InterBank Funding Corp., IBF Collateralized
  Finance Corporation, IBF VI - Secured Lending Corporation and IBF Premier
  Hotel Group, Inc., declared effective by the United States Bankruptcy Court
  for the Southern District of New York by order dated August 14, 2003 and
  declared effective on December 10, 2003*2.2

IBF Fund Liquidating LLC Operating Agreement, dated
  September 24, 2003, by and among IBF Fund Liquidating LLC and each
  person who becomes a Member of the Company pursuant to the Plan*10.1

Letter Agreement, dated as of February 18, 2005,
  among IBF Fund Liquidating LLC, Charles T. Verde and Cynthia Davis**10.2

Asset Purchase Agreement, dated as of
  February 22, 2005, among IBF Fund Liquidating LLC and IBF V-Alternative
  Investment Holdings, LLC**10.3

Amended and Restated Acquisition Agreement and Plan
  of Merger, dated as of November 10, 2005, among IBF Fund Liquidating
  LLC, U.S. Mills, Inc., USM Acquisition Sub, Inc. and Sunset Brands, Inc.***10.4

Investor Rights Agreement, dated as of November 10,
  2005, between the Company and Sunset Brands, Inc.10.5

Escrow Agreement, dated as of November 10, 2005,
  among the Company, Sunset Brands, Inc., U.S. Mills, Inc. and Continental
  Stock Transfer & Trust Company, as escrow agent.10.6

12% Secured Convertible Debenture in the original
  principal amount of $5,000,000 issued by Sunset Brands, Inc. to the
  Company.***10.7

Warrants to purchase 4,200,000 shares of common
  stock of Sunset Brands, Inc.***10.8

Warrants to purchase 2,173,913 shares of common
  stock of Sunset Brands, Inc.***10.9

Registration Rights Agreement, dated as of November
  10, 2005, between Sunset Brands, Inc. and the Company.10.10

Senior Subordinated Note in the original principal
  amount of $1,000,000, executed by Sunset Brands, Inc. and U.S. Mills, Inc. in
  favor of the Company.24

10.11

Senior Subordinated Note in the original principal
  amount of $5,000,000, executed by Sunset Brands, Inc. and U.S. Mills, Inc. in
  favor of the Company.10.12

Security Agreement, dated as of November 10, 2005,
  among Sunset Brands, Inc., U.S. Mills, Inc. and the Company.10.13

Stock Pledge Agreement, dated as of November 10,
  2005, between Sunset Brands, Inc. and the Company.10.14

Intellectual Property Security Agreement, dated as
  of November 10, 2005, among Sunset Brands, Inc., U.S. Mills, Inc. and
  the Company.10.15

Master Subordination and Intercreditor Agreement,
  dated as of November 10, 2005, among CapitalSource Finance LLC, Sunset
  Brands, Inc., U.S. Mills, Inc. and the Company.10.16

Junior Management Fee Subordination Agreement, dated
  as of November 10, 2005, among Sunset Holdings International, Ltd.,
  Sunset Brands, Inc. and the Company.10.17

Junior Security Agreement, dated as of November 10,
  2005, among Sunset Brands, Inc., U.S. Mills, Inc. and the Company.10.18

Junior Stock Pledge Agreement, dated as of November
  10, 2005, between Sunset Brands, Inc. and the Company.10.19

Junior Intellectual Property Security Agreement,
  dated as of November 10, 10025, among Sunset Brands, Inc., U.S. Mills,
  Inc. and the Company.10.20

Junior Subordination and Intercreditor Agreement,
  dated as of November 10, 2005, among Sunset Brands, inc., U.S. Mills,
  Inc. and the Company.10.21

Assignment of Contract as Collateral Security, dated
  as of November 10, 2005, between Sunset Holdings International, Ltd. and
  the Company.10.22

Stock Pledge Agreement, dated as of November 10,
  2005, between Sunset Holdings International, Ltd. and the Company.*
Incorporated by reference from the Companys Annual
  Report on Form 10-K filed on March 30, 2004.**
Incorporated by reference from the Companys Current
  Report on Form 8-K filed on March 18, 2005.***
Incorporated by reference from Sunset Brands, Inc.s
  Current Report on Form 8-K filed on November 17, 2005.25

Annex A

Arthur J. Steinberg (AS 1298)
Heath D. Rosenblat (HR 6430)
Kaye Scholer LLP
425 Park Avenue
New York, NY 10022
212/836-8000 telephone
212/836-7157 facsimile

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

SECURITIES AND EXCHANGE COMMISSION,
))Plaintiff,
))vs.

)
Case No. 02-CV-5713-JES)IBF COLLATERALIZED FINANCE CORP.,
)IBF-VI SECURED LENDING CORP.,
)INTERBANK FUNDING CORP., AND
)SIMON A. HERSHON INDIVIDUALLY,
))Defendants.
)THIRD
INTERIM REPORT FOLLOWING EFFECTIVE DATE OFJOINT LIQUIDATING PLAN WITH RESPECT TO THE DEBTORS

August 5, 2005

This
third interim report (Report) is submitted on behalf of IBF
Liquidating LLC (IBF LLC) and IBF Fund Liquidating LLC (Fund LLC
and, collectively, the Liquidating LLCs), pursuant to Section 9.3 of
the Plan (as defined herein) and Paragraph 1 of the Bankruptcy Courts Post-Confirmation Order and Notice dated
August
28, 2003. This Report is the third such update and addresses the period from
February 1, 2005 through July 31, 2005 (Third Interim Period).1

I.EXECUTIVE SUMMARY

A.
Receipts and Disbursements2In
the Third Interim Period, Fund LLC collected roughly $6,109,000 and disbursed roughly $8,703,000, for a decrease to available cash
of roughly $2,594,000.

Cash
flow for the period resulted primarily from (i) closing of the global settlement with Simon Hershon (Hershon)
($3.2 million), (ii) monthly collections from the residential mortgage
securitization assets ($914,001); (ii) closing of
the sale of the Best Western Universal Inn ($549,063); (iii) collection of
hotel receivables ($362,197) following the sale of the Comfort Inn Orlando,
which closed in the prior period; (iv) settlement
of claims against broker/dealers to recover commissions paid on account of
capital raised from investors in late Dec. 2001  Jan. 2002 ($346,240); (v) settlement of claims
against IBFs former accountants ($250,000) and counsel ($300,000); (vi)
further installment payments ($50,000) under
a settlement with a former borrower, 1970 Asset Management, and its principal,
Ed Stein (Stein); and (vii) recoveries
on

1
For a
  summary of earlier events, reference is made to the First Interim Report Following Effective Date Of
  Joint Liquidating Plan With Respect To The Debtors covering the
  period from December 10, 2003 (inception of Fund LLC) through June 30, 2004,
  and the Second Interim Report Following
  Effective Date Of Joint Liquidating Plan With Respect To The Debtors covering
  the period from July 1, 2004 through January 31, 2005, filed herein on July
  26, 2004 and February 1, 2005, respectively.
  Copies of the prior reports and other relevant documents are available
  at no cost for printing or downloading at the Liquidating LLCs website <www.ibffund.com>.2
The
  Third Interim Period just ended and so the financial data set forth herein is
  only preliminary in nature and is still being finalized.  If changes are required, the Liquidating
  LLCs will file an amended report in 10-15 days.other avoidance
claims asserted on Fund LLCs behalf ($48,000).

In
terms of disbursements, in February 2005, Fund LLC made its third distribution
under the Plan, distributing $7 million. Escrow Claimants (i.e., investors with
allowed claims in Classes CFC-3 and SLC-3 under the Plan) were paid $254,298,
bringing their total recovery to roughly $21,200,000, or 79%. Non-Escrow Claimants (i.e.,
investors and other creditors with allowed claims in Classes CFC-4, CFC-5,
SLC-4, SLC-5 and IBF Hotel-4) were paid $6,610,566, bringing their total
recovery to roughly $14,000,000, or 8.5%.
The balance, $135,136, is being reserved for AIH pending closing of the
transaction discussed below.

B.
Proposed DistributionFund
LLC is proposing that the fourth distribution be in the range of $4,000,000 to $10,000,000. Whether the
actual distribution will be at the high or low end of that range will depend on
whether the sale of US Mills (as defined herein) closes as scheduled in
mid-August. If the sale is delayed for any reason, Fund LLC is proposing to
make an initial distribution in September 2005 of $4,000,000, followed by an
additional distribution when the sale closes of $6,000,000. If the initial
distribution is $4,000,000, $3,777,465 will be paid to Non-Escrow Claimants and
$145,314 to Escrow Claimants, bringing their total recoveries to roughly
$17,732,000 (10.8%) and $21,329,000 (79.6%), respectively. If the distribution
is at the high end of the range or if a subsequent distribution is to be made
after closing the sale of US Mills, in total $9,443,666 will be paid to
Non-Escrow Claimants and $363,283 to Escrow Claimants, bringing their total
recoveries to roughly $23,400,000 (14.3%), and $21,545,000 (80.4%),
respectively.

3

C.
Procedures for Objecting to Proposed DistributionPursuant to Section 9.3 of the Plan, parties in
interest wishing to object to the proposed distribution(s) must file a written
objection with the Clerk of this Court and serve the objection on the ICA
Trustee and the Liquidating LLCs so as to be received at least five (5) days
prior to the date of the proposed distribution. For purposes hereof, the date
of the proposed distribution is August 31, 2005, so objections, if any, must be
filed and served no later than August 26,
2005. In the absence of any such objections, the Liquidating
LLCs will make the distribution(s) in the amount and manner so proposed on or
as soon after such date as may be practicable.

II.
PROGRESS REPORT FORTHIRD INTERIM PERIOD

A.
Distributions to InvestorsTo
date, Fund LLC3 has made three distributions under the Plan. The
first was made in December 2003, when Fund LLC distributed roughly $19,241,000,
as follows: (a) Escrow Claimants were paid $15,662,853, or 58% of their Claims,
and (b) Non-Escrow Claimants were paid $3,578,553, or 2% of their Claims.
Pursuant to the Plan, Fund LLC made the initial distribution from the SEC
Escrow (as defined in the Plan), which at the time had a balance of roughly
$24,450,000, and reserved $5,000,000 to cover administrative costs, in exchange
for which Fund LLC issued a five-year, 3.5% note (Escrow Note) payable
to Escrow Claimants.

The
second distribution was made in October 2004, when Fund LLC distributed
$9,152,153 as follows: (a) Escrow Claimants were paid $5,152,153, bringing
their total recovery

3
As previously reported, IBF LLC has no material
  assets and has made no distributions to IBFs creditors; nor does it appear
  that IBF LLC will recover any assets which could be distributed to IBFs
  creditors.  The Plan further requires
  that, before making any distributions to IBFs creditors, IBF LLC must first
  repay amounts advanced by the Funds during the Debtors chapter 11 cases to
  pay IBFs share of administrative expenses.
  Consequently, IBF LLC is not expected to make any distributions.  Fund LLC is currently continuing to pay
  IBF LLCs share of administrative costs, but the work required is minimal and
  the cost is not material.4

to roughly $21,000,000 (78%), and (b) Non-Escrow
Claimants were paid $4,000,000, bringing their total recovery to roughly
$7,600,000 (4.5%). Under the terms of the
Plan, the Escrow Note had to be repaid in full before any further distributions
to Non-Escrow Claimants; accordingly, the second distribution retired
the Escrow Note which, at the time, had a
balance of $5,152,153.

The
third distribution was made in February 2005, when Fund LLC distributed $7 million as
follows: (a) Escrow Claimants were paid $254,298, bringing their total
recovery to roughly $21,200,000 (79%); and (b) Non-Escrow Claimants were paid
$6,610,566, bringing their total recovery to
roughly $14,000,000 (8.5%). The balance, $135,136, is being reserved for
payment to AIH investors when Fund LLC completes its acquisition of AIHs
assets (see section G below).

Distributions
are now principally for the benefit of Non-Escrow Claimants, with two limited
exceptions. First, Fund LLC is asserting claims to recover commissions paid to
broker/dealers who sold securities to investors after December 14, 2001  a
cutoff established by agreement between IBF and the SEC. Proceeds raised after
that date were deposited into an escrow account, the SEC Escrow, for the
benefit of those later investors. Under the Plan, the commissions recovered
(subject to a cap of $3.79 million) must be distributed, net of expenses, to
Escrow Claimants. At the end of the Third Interim Period, Fund LLC had recovered roughly $640,000 from
broker/dealers (before expenses) and only a few small claims are left to be
resolved.

Second,
under the Plan, Escrow Claimants were also given General Unsecured Claims
against the Funds, called Deficiency Claims, calculated as the difference
between the amount of their investments and their recoveries to date. On
account of those Deficiency Claims, Escrow Claimants were given membership
interests in Fund LLC and are entitled to participate with Non-Escrow Claimants
in distributions on account of those Fund LLC interests. The

5

percentage may change depending on how much is
recovered on the broker commission claims but, currently, Deficiency Claims
represent about 3.63% of the Non-Escrow Claims.

B.
Tax/Reporting RequirementsIn
February 2005, the Liquidating LLCs accountants, Radin Glass & Co., LLP (i.e.,
the Funds former accountants) resigned and were replaced. Fund LLCs 2004 tax
returns were filed and 2004 IRS Form K-1s were mailed to Fund LLCs members in
late July  early August 2005.

C.
Investment PortfolioThe
following is a summary of activities during the Third Interim Period concerning
the investments in the Funds portfolios. Reference is made to Exhibit D
of the Preliminary Report of Arthur J.
Steinberg, Trustee (Preliminary Report), filed herein on
February 18, 2003, for a more thorough description of the amount and nature of
the Funds portfolio investments.

1.
Platform Companiesa.
I&BS/ABRInvestment
& Benefit Services, Inc., d/b/a American Benefit Resources, Inc. (I&BS),
is in the business of third-party administration of pension and 401K plans for
employees.

Operations
are improving. Recent figures for revenues fell short of, but were closer to,
projections, and revenue and EBITDA surpassed actual results for the same
period in 2004. I&BS continued in its efforts to integrate its
newly-acquired companies, ML Kerns in Houston, TX, and National Associates in
Seattle, WA (discussed in the Second Interim Report at p. 8).

Fund
LLC is continuing to explore exit strategies with I&BS. Currently, Fund LLC
is owed $20.3 million. In the Third Interim Period, the business was marketed
to potential strategic and financial buyers. Those efforts generated a number
of offers, following which the decision was made to subject I&BS to a
formal bidding process. In July 2005, the ICA Trustee circulated a form
purchase and sale agreement to interested parties and asked them to submit bids
and a

6

mark-up of the agreement they would be prepared to
sign as successful bidder. One of the bidders has executed a letter of intent
and is engaged in further due diligence. Based on the current level of
interest, it appears that I&BS may be a material recovery for Fund LLC in
2005.

b.
US MillsU.S.
Mills, Inc. (US Mills) is a marketer of natural and organic cereals and
related products marketed principally for their nutritional and health
benefits. Currently, it has five brands in its portfolio  Uncle Sam, Farina
Mills, Skinners, Erewhon and New Morning.

Efforts
are continuing to sell US Mills. In February 2005, US Mills signed an agreement
to sell its business to Sunset Brands, Inc. (Sunset). The proposal was
approved by the Bankruptcy Court in March 2005. Under that original deal, Sunset
was to acquire US Mills for $17 million
in cash at closing, plus a mix of shares of preferred stock and warrants
exercisable into common stock of the purchaser with a value of $3 million. The
proceeds were to be used to retire senior debt of $4.5 million, pay bonuses and
severance of approximately $900,000 to US Mills management, and pay
transaction costs and other debt of $950,000. The balance was then to be paid
to Fund LLC and applied, first, to satisfy Fund LLCs debt of $7.5 million and,
second, to pay the liquidation preference of $9.2 million for the Series D
Preferred Stock, owned 100% by Fund LLC. At the time, Fund LLC was projecting a
recovery of $11 million, plus the preferred equity.

The
original transaction was supposed to close in mid-April but was delayed due to
extended negotiations between Sunset and its proposed funders. At or around the
same time, US Mills was experiencing a decline in its projected business. As
result of the combination of these factors, the sale did not close.

After
further discussions, US Mills and Sunset agreed to pursue the transaction on revised
terms. In essence, whereas Sunset was originally paying $17 million in cash
plus $3 million in

7

preferred
stock and warrants, Sunset is now proposing to acquire US Mills for $12 million
in cash, plus $5 million in subordinated notes, plus $3 million in a
convertible debenture. The notes will be subordinated to a $6.5 - 7
million credit facility to be provided by a third-party lender pursuant to an
intercreditor agreement to be negotiated. The notes will mature in three years
and bear interest at 18% per annum. Interest will be capitalized for the first
year and thereafter 9% will be paid monthly and the remaining 9% will be
capitalized. As security for the notes, Fund LLC is receiving a junior lien in
the assets of Sunset and its operating subsidiaries. The notes will also be
guaranteed by the parent and all material subsidiaries of Sunset. As additional
security, Sunsets principal is extending a personal guaranty for $2,500,000 of
the notes, which can be put to the individual 18 months after closing.

In
July 2005, the Bankruptcy Court approved the revised terms. The transaction is
supposed to close by mid-August. The method for allocating the proceeds
approved by the Bankruptcy Court has not changed. Fund LLC is now projecting a
recovery of approximately $6 million in cash, plus the $5 million in notes
payable over three years, plus the convertible debenture.

The
immediate result of the revised terms of the Sunset sale is that Fund LLCs
initial cash recovery has decreased from $11 million to $6 million. However,
the difference may just be a timing issue, assuming that the venture is
successful and that the notes are repaid in full. The risk that the $5 million
note will not be repaid is mitigated to some extent by the projected equity
cushion following the transaction (currently, Fund LLC will be junior only to
the new senior debt of $6.5 - 7 million, and there is new equity of as much as
$6 million coming in junior to Fund LLC) and by the various guaranties. In
addition, Sunset has indicated its desire to obtain mezzanine financing to
prepay the notes and believes that, with the revised terms, it will find

8

such financing. The fact that the notes will bear
interest at 18% should also motivate Sunset to prepay the notes.

Fund
LLC will distribute its recovery from US Mills promptly after the sale closes.

c.
Capstone Capital LLCCapstone
was in the business of providing financial support and investment services to
companies by purchasing pre-sold inventory from domestic and offshore
manufacturers, vendors or suppliers and, upon shipment, re-selling to the
client companies factors. Fund LLC is owed $5,300,000, secured by a lien
against Capstones assets immediately junior to Northfork Banks loan of
roughly $900,000. Capstone ceased operations in 2003 and is liquidating its
assets  primarily, receivables. By far, the largest receivable is owed by
Vista Optical, now a debtor in a chapter 7 case pending in this District. Fund
LLCs recovery is predicated on how much Capstone collects on its receivables
(primarily Vista Optical) and whether there will be a balance remaining after
Northfork Bank is paid in full. The ICA Trustee is monitoring Capstones
collection efforts and the Vista Optical liquidation. It is not clear whether
any further amount will be repaid by Capstone.

2.
Operating Hotelsa.
Hilton Garden InnThe
situation remains unchanged concerning the Hilton Garden Inn, a 122-room hotel
in Round Rock, Texas, near the headquarters of Dell Computers. The hotel is
owned by Chisholm Partners, Ltd. and is subject to a first lien of $6.3 million
held by Union Bank & Trust Company. The real estate market is improving
but, because Fund LLC owns only a limited partnership interest (75%) in the
owner, the ICA Trustee has no ability to force a sale. The ICA Trustee is
monitoring the hotels operations but it is unclear whether there will be a
recovery by Fund LLC.

9

b.
Fairfield InnThere
is nothing significant to report concerning the Fairfield Inn (Marriott), a
144-room hotel in Vinings, Georgia, near the corporate headquarters of Home
Depot. The hotel is owned by Vinings Partners LP and subject to a first lien of
$5.6 million held by Union Bank & Trust Company. In April, the ICA Trustee
conducted a site visit and met with the general partner. The real estate market
is improving but again, because Fund LLC owns only a limited partnership
interest (90%) in the owner, the ICA Trustee has no ability to force a sale.
The ICA Trustee is monitoring operations but it is unclear whether there will
be a recovery by Fund LLC.

c.
Comfort InnThe
sale of the Comfort Inn in Orlando, Florida closed at the end of the prior
period. In 2003, the ICA Trustees advisors were projecting a recovery from the
hotel of $200,000. The actual recovery has exceeded that projection. At
closing, Fund LLC recovered an initial $177,471. In the Third Interim Period,
Fund LLC recovered an additional $362,197 from collections on receivables and
closing the operating account, bringing Fund LLCs total recovery to roughly
$540,000. There remains less than $3,000 to recover from hotel receivables. The
ICA Trustee is in the process of liquidating the entity that holds this asset.

d.
Best Western Universal InnOn
February 2, 2005, the ICA Trustee closed the sale of the Best Western Universal
Inn in Orlando, Florida. In 2003, the ICA Trustees advisors were projecting a
recovery of $240,000. The actual recovery has exceeded that projection. At
closing, Fund LLC recovered an initial $470,000. Post-closing, Fund LLC
collected hotel receivables and closed operating accounts, increasing its total
recovery to roughly $550,000. There is nothing further to recover. The ICA
Trustee is in the process of liquidating the entity that holds this asset.

10

3.
Development Propertiesa.
TribecaCFC
made loans to develop a 272-room hotel in the Tribeca section of lower
Manhattan. In 2003, the ICA Trustee negotiated a settlement with the owners of
the primary development parcel which resulted in Fund LLC recovering $228,000,
plus a sharing of future benefits respecting development and/or sale of the
parcel. In 2004, the ICA Trustee agreed to terms with the owner of the
secondary parcel, which resulted in Fund LLC recovering another $250,000 and
brought Fund LLCs total recovery to $478,000. The ICA Trustee has no control
over the project and no ability to compel a sale but is monitoring the project
and Fund LLCs residual interest.

There
is nothing recent of significance to report. During the Third Interim Period,
the ICA Trustee negotiated a forgiveness of a potential multi-million dollar
claim asserted in the Debtors chapter 11 cases by the developer, Triarc
International (discussed below).

b.
SAHRSAHR
is a 50-acre Marriott Resorts development project in San Antonio, Texas, part
of a 2,855-acre mixed-use development project. In 2004, Fund LLC contributed
its interest in the project (plans, architectural drawings, specifications,
etc.) to a joint venture partnership with the developer, Lumbermens, in
exchange for a 24% limited partnership interest. Because Fund LLC is only a
limited partner, the ICA Trustee has no ability to force a sale. The ICA
Trustee is monitoring the project. There is nothing recent of significance to
report  Lumbermens continues to explore development opportunities, including
discussions with a major hotel franchise, but at this point it is unclear what
will be recovered by Fund LLC and when.

11

c.
AnguillaIn
1999, CFC loaned $5.2 million to fund the development of a resort on 1,407
acres on Anguilla Beach, Cat Island, Bahamas. The loan was made through a
special purpose company, IBF Bahamas Ltd. (IBF Bahamas), to the
developer, Cat Island Ventures, Ltd. The loan was supposed to have been secured
by a first mortgage but a lien search by IBFs former counsel in the Bahamas
failed to disclose a prior first mortgage of $2.5 million held by Gulf Union
Bank.

The
project never made it out of the planning phase and efforts are on-going to
locate a new investor to partner with the owner, Erwin Knowles, or sell the
property. Any new plans will require approval of the local government. The
process is controlled by the first lienholder, Gulf Union. Gulf Union has
inquired as to Fund LLCs interest in acquiring its first mortgage but the ICA
Trustee believes further investment in the project would not be in the
investors best interests. Consequently, the ICA Trustee is monitoring the
situation to the extent that Gulf Union and Knowles share information but has
no control over the projects direction.

In
2003, Gulf Union marketed the property for sale with a broker but subsequently
agreed to allow Knowles to conduct a search for a new joint venture partner. In
2004, Gulf Union advised that Knowles had located a new partner and submitted
plans for approval by the government. Gulf Union subsequently advised that the
plans had cleared the first of several phases of the approval process. At a
hearing in July 2005, Knowles reported that the investor has signed a contract
and that the plans are still under consideration with the government.

The
ICA Trustee has requested a copy of the current agreement and is asking to be
included in the sale process. The ICA Trustee is also considering proactive
steps to locate a back-up purchaser in the event that the pending deal is not
approved by the government or fails to close. The ICA Trustee is in contact
with two investors with experience in the area who have expressed interest in
the property. The ICA Trustee is also in discussions with a former IBF

12

employee, Brendan Sullivan, who previously identified
potential buyers and may have additional leads.

The
failed project spawned two pieces of litigation in the Bahamas. First, in 2000,
the owner filed a preemptive lawsuit to prevent a sale to a new investor
brought in by IBF. Shortly thereafter, the court entered an injunction
prohibiting efforts to sell the property and the new investor withdrew. In
2003, on request of the ICA Trustee, the injunction was dissolved.

The
second piece of litigation is a malpractice lawsuit IBF filed against its
former local attorney, Thomas Evans, in 2001. Evans advised IBF at the time
that his insurance coverage is capped at $2 million. Evans is vigorously
opposing the claim. He is asserting two defenses  first, that the title
company, Computitle, is accountable for the failure to discover the first lien;
and second, that IBF has not suffered any damages because the property is of
sufficient value to secure both Gulf Unions $3 million first lien and Fund
LLCs $13 million second lien.

At
the start of the Third Interim Period, IBF asked the Bahamian court to
bifurcate the case against Evans into liability and damages phases and applied
for summary judgment as to liability. In March 2005, the court denied the
application for summary judgment. The court did not elaborate on its reasons
but did state a desire to resolve the question of who was the proper defendant
 Evans or Computitle  before proceeding. Following the hearing, Fund LLC met
with Evans but he made it clear that he was still unwilling to discuss
settlement. Consequently, in July, the court scheduled the matter for mediation
in September 2005. The court also encouraged the parties to meet prior to the
mediation.

4.
SecuritizationsFund
LLC is holding residential mortgage securitizations assets from two
transactions, one underwritten by Lehman Brothers and the other by DLJ and
Credit Suisse First Boston.

In
the fall of 2004, with assistance from its securitization advisors, the
Berkshire Group

13

(Berkshire), Fund LLC marketed the assets to
potential buyers and received bids from a number of parties. It was subsequently
determined that the bids received were not at levels supported by Berkshires
analysis and so the ICA Trustee decided to postpone a sale.

The
amounts collected on the assets over the past eleven (11) months have far
exceeded the bids received, meaning the decision to hold was the correct one.
Since the auction, Fund LLC has collected roughly $7.3 million on the CSFB
assets and $586,000 on the Lehman or ARC assets. For comparisons sake, the
high bids in September 2004 were $6.1 million and $250,000, respectively. Plus,
Fund LLC still holds the rights to future collections, which are expected to
drop to zero in the near term for several years but still should have a
residual value.

The
ICA Trustee is monitoring the market to determine when is the appropriate time
to sell to a buyer better positioned to assume the risk of long-tail
collections. Berkshire has stayed in contact with several bidders from last
fall and, in June, solicited bids and allowed a new buyer to perform due
diligence on the ARC assets. The bids were too low and so the sale was
postponed again but the spread has narrowed and the assets may be sold in the
near term.

D.
Claims ObjectionsIn
the course of his administration, the ICA Trustee objected to a large number of
claims asserted against the Debtors, rejecting or reclassifying more than 630
claims. At the start of the Third Interim Period, only a few remained, all of
which are being resolved as set forth below.

1.
PinehillsThe
developer filed two potentially large claims against the Debtors, both of which
were withdrawn with prejudice in the Third Interim Period following the sale of
Pinehills.

14

2.
TriarcAs
noted above, Triarc asserted four multi-million dollar claims against the
Debtors. In the Third Interim Period, the Bankruptcy Court approved a release
agreement and stipulation signed as part of the ICA Trustees settlement with
Triarc and the claims were withdrawn.

3.
Indemnification ClaimsAt
the start of the Third Interim Period, there were nine disputed claims filed by
two of the Debtors former directors and officers still to be resolved. The
claims sought indemnification or reimbursement for potential personal liability
in the various litigation surrounding the Debtors chapter 11 cases. All nine
claims are being withdrawn as part of the global settlement herein with
Hershon.

E.
Litigation1.
Radin GlassIn
May 2005, the ICA Trustee reached a settlement with the Debtors former
accountants, Radin Glass & Co, LLP (RG) enabling Fund LLC to
recover $250,000. RG provided pre-petition audit, tax and other accounting
services to the Debtors, for which it was paid $333,500. Until recently, RG was
providing services to the Liquidating LLCs  principally, the preparation of
tax filings  for which it was paid $264,000 and claimed it was owed another
$11,000.

RG
was initially a defendant in the various class action proceedings consolidated
in the District Court for the District of Columbia. The class claims against RG
were based on the assertion that RG was a participant in or otherwise
accountable for alleged securities fraud. The class claims against RG were
dismissed with prejudice in August 2004. Following dismissal, the plaintiffs
filed a motion for reconsideration that was denied. The lead plaintiffs
subsequently appealed that denial to the D.C. Circuit Court of Appeals, which
appeal is pending.

15

In
the course of his investigation, the ICA Trustee examined RGs services to
determine whether any of the fees paid were recoverable. The ICA Trustee also
considered whether there were claims to be asserted on Fund LLCs behalf,
separate and apart from the investors class claims, based on RGs role in the
events that culminated in the Debtors financial collapse.

Following
the investigation, the ICA Trustee and RG engaged in extensive discussions,
following which the parties reached a settlement signed in May 2005. The
settlement was approved by the Bankruptcy Court on June 14, 2005 and closed
later that month. In essence, RG paid Fund LLC the sum of $250,000 in exchange
for which the parties gave mutual releases.

b.
Brown & WoodIn
May 2005, the ICA Trustee negotiated a settlement with IBFs former counsel,
Brown & Wood, n/k/a Sidley Austin Brown & Wood (BW),
recovering $300,000 for Fund LLC.

BW
provided services to IBF in the period from January 2000 to May 2001, on
account of which it was paid close to $700,000. The ICA Trustee examined the
services BW rendered to determine whether the fees paid were appropriate and,
among other things, whether BW properly advised the Debtors on the issue of
whether the Funds were exempt from registration under the ICA.

The
parties engaged in limited informal discovery, following which there was a
settlement conference in May 2005. After further discussions, the parties
agreed to a settlement signed that same month. In essence, Fund LLC recovered
$300,000 and the parties exchanged mutual releases. The settlement was approved
by the Bankruptcy Court on June 9, 2005.

2.
CIBCIn
March 2005, the ICA Trustee settled claims asserted to recover certain commissions
paid to IBFs largest broker, CIBC, recovering $300,000 for Fund LLC. Fund LLC
was seeking

16

to recover commissions paid to CIBC in connection with
proceeds raised from investors after December 14, 2001 and deposited into the
SEC Escrow. The parties met in January 2005 and, following further discussions,
reached the settlement signed in March 2005. In essence, CIBC paid Fund LLC the
sum of $300,000 in exchange for which the parties gave mutual releases. The
settlement was approved by the Bankruptcy Court on April 28, 2005.

3.
BB&TIn
May 2005, the ICA Trustee reached a settlement resolving the adversary case
filed against Branch Banking & Trust Co. (BBT), recovering
$225,000 for Fund LLC.

The
Liquidating LLCs filed their complaint against BBT on June 4, 2004, alleging
that BBT allowed its pre-petition line of credit to be manipulated in such a
way as to overstate the Funds finances and mislead investors. In July 2004,
BBT filed a motion in the District Court requesting that the reference be withdrawn
from the Bankruptcy Court. Discussions ensued but broke down in early 2005 and
the litigation went forward. On January 19, 2005, BBT filed a motion to dismiss
Fund LLCs complaint. The parties briefed and argued both motions, after which
the parties resumed discussions and reached the settlement signed in May 2005.

The
settlement was approved by the Bankruptcy Court and this Court by orders dated
June 20, 2005 and June 27, 2005, respectively. In essence, Fund LLC recovered
$225,000, the parties exchanged mutual releases and BBT provided a release in
favor of Hershon (required per the terms of the global settlement discussed
herein). The settlement closed in August 2005.

4.
Stein/1970 Asset MgtIn
2004, the ICA Trustee signed a settlement concluding litigation with a former
borrower, 1970 Asset Management, and its principal, Stein. The settlement calls
for monthly installment payments  currently, $12,500 per month. The settlement
was predicated on a determination that a judgment against the two defendants
would be essentially uncollectible.

17

In
the Third Interim Period, Fund LLC collected another $50,000 from Stein, bringing its total
recovery to $325,500. Recently, Stein
failed to make a payment and has requested a forbearance. The ICA Trustee
requested financial information and is considering the request.

5.
Claims Against Other Third PartiesIn
2004, the
Liquidating LLCs filed 19 adversary complaints in the Bankruptcy Court, seeking
to avoid and recover preferential payments or fraudulent transfers the Debtors
made prior to the Petition Date. 10 of the 19 adversary proceedings have been
settled, two are in pre-trial litigation, and default judgments were obtained
in the other seven. In six of the default cases, efforts are being made to
enforce the judgments; in the seventh, the defendant entered into a consent
judgment and is documenting a financial hardship claim for the ICA Trustees
review.

Fund
LLC was required to file an additional, small adversary complaint during the
Third Interim Period when settlement negotiations with a vendor broke down,
bringing the total of complaints filed to 20. The matter was subsequently
settled for a recovery of $4,000.

The
ICA Trustee is also concluding discussions with parties that signed tolling
agreements. Of the original 31 cases tolled, only five cases are left to be
resolved. The ICA Trustee expects to either resolve the remaining five claims
or file adversary cases in the next period.

In
the Third Interim Period, the ICA Trustee recovered $944,240 from the settlement
of avoidance claims on Fund LLCs behalf (inclusive of RG, BW, and CIBC). Of
that amount, $346,240 was collected from broker/dealers, making the total
commissions recovered (before expenses) $640,000. Under the Plan, the
broker/dealer commissions recovered are payable, net of expenses, to the Escrow
Claimants. Only a few small claims are left and no significant recoveries are
expected.

18

F.
Global Settlement with HershonThe
ICA Trustee closed the global settlement with Hershon et al. on
July 19, 2005, resulting in the recovery of $3.2 million by Fund LLC. The
settlement was a complicated one, in essence resolving (a) the SECs charges
against Hershon in this enforcement action, (b) the class claims against
Hershon in the various class actions consolidated in the District Court for the
District of Columbia, (c) the Liquidating LLCs claims against Hershon, and (d)
competing claims by the ICA Trustee and former directors and officers of IBF
for coverage under two insurance policies issued on the Debtors behalf by St.
Paul Mercury Insurance Co. (St. Paul).

The
$3.2 million recovered by Fund LLC consists of $2.35 million paid under the
insurance policies issued by St. Paul4 and $913,000 contributed by
Hershon. The settlement with Hershon was predicated on the ICA Trustees
determination that any judgment against Hershon would be largely uncollectable
and that the litigation required to pursue a judgment would exhaust Hershons
assets further as well as cost Fund LLC significant sums of money.

The
various settlements were approved by this Court and the Bankruptcy Court in
January 2005. In the Third Interim Period, the settlement of the class claims
against Hershon were approved by the D.C. Court, following a fairness hearing
held in January 2005. The final step in the process was formal approval by the
SEC, which was obtained in July 2005.

The
$3.2 million is being paid out by Fund LLC as part of the proposed
distribution.

4
The
  $2.35 million is in addition to approximately $700,000 the ICA Trustee
  collected under the St. Paul policies in September 2003, making Fund LLCs
  total recovery under the policies roughly $3.05 million.19

G.
Settlement with Investors of AIHIBF
V-Alternative Investment Holdings LLC (AIH) is an affiliate of the
Funds that did not file a chapter 11 case and is not a defendant in this
litigation. AIH is a private equity fund that invested in the equity of two of
the platform companies in the Funds portfolios  I&BS and US Mills.
Currently, 72 investors own 77% of AIH; Fund LLC owns the remaining 23%.

In
the discussions that led to the Plan, the ICA Trustee was asked by the Staff of
the SEC to consider means to resolve investor claims against AIH in the context
of the Plan. Those discussions formed the basis for Section 7.7 of the Plan,
which gave the ICA Trustee authority to treat investor claims against AIH in
the same manner as Non-Escrow Claims under the Plan.

In
February 2005, the ICA Trustee signed an agreement (APA) to acquire
the assets of AIH. Solicitation materials were mailed to AIH investors and the
transaction was approved by the requisite percentage of AIH investors. In
essence, the APA calls for AIH to sell its equity positions in I&BS and US
Mills to Fund LLC, in exchange for which Fund LLC is contributing (a) $280,000,
to be distributed to AIH investors, (b) an approximate 1.93% membership
interest in Fund LLC, and (c) Fund LLCs 23% ownership stake in AIH.

The
ICA Trustees advisors have since worked to satisfy the closing conditions,
only one of which remains  closing of the sale of US Mills, expected in
mid-August. Promptly following closing, AIH will make a distribution to its
investors to allow them to receive their ratable share of prior distributions
made to Fund LLCs members  using the $280,000 received at closing  and
thereafter, AIHs investors will share in distributions as a 1.93% owner of
Fund LLC.

20

III.
FINANCIAL CONDITIONOF LIQUIDATING LLCS

Unaudited
balance sheets and statements of operations summarizing the Liquidating LLCs
financial condition as of July 31, 2005, are attached hereto as Exhibit A.
As noted above, because the Third Interim Period just ended, the financial data
is only preliminary in nature and is still being finalized. If changes are
necessary, an amended report will be filed in 10-15 days.

Dated:
New York, New York
  August 5, 2005IBF Liquidating LLC andIBF Fund Liquidating LLCBy:
/s/ Arthur J. SteinbergArthur J. Steinberg, ICA Trustee, asManager and Liquidating AgentCounsel to the ICA
Trustee:

Arthur J. Steinberg (AS 1298)
Heath D. Rosenblat (HR 6430)
Kaye Scholer LLP
425 Park Avenue
New York, NY 10022
212/836-8000 telephone
212/836-7157 facsimile

21

Exhibit A

IBF
Fund Liquidating, LLCBalance Sheet
For the period ending July 31, 2005
(Unaudited)

ASSETS




$
8,714,581CashInvestmentsInvestment
  in Operating Businesses


18,781,628Investment
  in Operating Hotels


205,000Investment
  in Real Estate Development Properties


5,290,000Investment
  in Securitization Assets


197,224Investment
  in Collection Assets


24,500Total Investments





24,498,352Miscellaneous Assets





547,605Total Assets







$
33,760,538LIABILITIESCurrent LiabilitiesAccounts Payable

$
318,033Accrued Expenses-Professional Fees


200,000Total Current Liabilities





518,033EquityMember Interest in LLC


35,748,692Net Income/(Loss)


(2,506,187
)Total Equity





33,242,505Total Liabilities and Equity




$
33,760,538IBF Fund Liquidating, LLC
Profit and Loss Statement 
for the period February 1, 2005 thru July 31, 2005
(Unaudited)

IncomeNet Gain on
  Sale of Investments


$
1,378,023Net Gain on
  Claims



436,373Interest
  Income



36,358Total Income


1,850,754ExpenseProfessional
  Fees



1,703,223Office
  Expense



22,821Payroll and
  Benefits



49,005Total Expense


1,775,049Total Net Income

$
75,705IBF Fund Liquidating, LLCStatement of Cash Flows (Unaudited)for the period February 1, 2005 thru July 31, 2005CASH FLOW FROM OPERATING ACTIVITIES BEFORE
REORGANIZATION ITEMSCash paid to Vendors

$
(31,893
)Payroll and Benefits


(48,025
)Net Cash (Used) by Operating Activities Before Reorganization Items


(79,918
)CASH FLOWS FROM REORGANIZATION ITEMSReturn on Investments


1,867,050Collection of Litigation Claims


4,205,313Interest Earned on Accumulated Cash


28,151Interest Earned on Investments


8,207Liquidating Distribution


(6,864,864
)Professional Fees for Services Rendered


(1,758,230
)Net Cash (Used) by Reorganization Items


(2,514,373
)NET CASH (USED) BY OPERATING ACTIVITIES


(2,594,291
)Net (Decrease) in Cash and Cash Equivalents


(2,594,291
)Cash and Cash Equivalents at Beginning of Period


11,308,872Cash and Cash Equivalents at End of Period

$
8,714,581IBF Fund Liquidating, LLCReceipts from Fund Assetsfor the period February 1, 2005 thru July 31, 2005AssetName
    
    Month
    
    Description
    
    AmountComfort Inn
    
    02/05
    
    Sale Proceeds
    
    270,00002/05
    
    Sale Proceeds
    
    24,48503/05
    
    Sale Proceeds
    
    50004/05
    
    Sale Proceeds
    
    36,00005/05
    
    Sale Proceeds
    
    82106/05
    
    Sale Proceeds
    
    23,50006/05
    
    Sale Proceeds
    
    5,78107/05
    
    Sale Proceeds
    
    1,110Total Receipts
    
    362,1971970 Asset Management
    
    02/05
    
    Settlement payments
    
    12,50003/05
    
    Settlement payments
    
    12,50004/05
    
    Settlement payments
    
    12,50005/05
    
    Settlement payments
    
    12,500Total Receipts
    
    50,000Best Western
    
    02/05
    
    Sale Proceeds
    
    469,26302/05
    
    Sale Proceeds
    
    37,00004/05
    
    Sale Proceeds
    
    33,00006/05
    
    Sale Proceeds
    
    9,800Total Receipts
    
    549,063ARC 2001-1
    
    02/05
    
    Class X Distribution
    
    48,72403/05
    
    Class X Distribution
    
    90,97007/05
    
    Class X Distribution
    
    36,803Total Receipts
    
    176,497CFSB HE-25
    
    02/05
    
    NIM Class B Distribution
    
    230,00703/05
    
    NIM Class B Distribution
    
    153,44604/05
    
    NIM Class B Distribution
    
    161,14405/05
    
    NIM Class B Distribution
    
    72,99206/05
    
    NIM Class B Distribution
    
    98,34907/05
    
    NIM Class B Distribution
    
    13,355Total Receipts
    
    729,293Total Receipts
    
    1,867,050Annex B
Arthur J.
Steinberg (AS 1298)
Heath D. Rosenblat (HR 6430)
Kaye Scholer LLP
425 Park Avenue
New York, NY 10022
212/836-8000 telephone
212/836-7157 facsimile

UNITED STATES
DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK


SECURITIES AND EXCHANGE COMMISSION,
))Plaintiff,
))vs.

)
Case No. 02-CV-5713-JES)IBF COLLATERALIZED FINANCE CORP.,
)IBF-VI SECURED LENDING CORP.,
)INTERBANK FUNDING CORP., AND
)SIMON A. HERSHON INDIVIDUALLY,
))Defendants.
)FOURTH INTERIM REPORT FOLLOWING EFFECTIVE
DATE OFJOINT LIQUIDATING PLAN WITH RESPECT TO THE DEBTORS

February 21, 2006

This
fourth interim report (Report) is submitted on behalf of IBF
Liquidating LLC (IBF LLC) and IBF Fund Liquidating LLC (Fund LLC
and, collectively, the Liquidating LLCs), pursuant to Section 9.3 of
the Joint Liquidating Plan with Respect to the Debtors1 (as amended,
Plan) and Paragraph 1 of the Bankruptcy Courts Post-Confirmation
Order and Notice dated August 28, 2003. This Report is the fourth such update
and addresses the period from August 1, 2005 through January 31, 2006 (Fourth
Interim Period).2

I.EXECUTIVE SUMMARY

A.
Receipts and DisbursementsIn
the Fourth Interim Period, Fund LLC collected roughly $9,487,934 and disbursed
roughly $12,656,536, for a net decrease to cash of roughly $3,168,602.

Collections
were significant during the period due to the sales of the Funds two largest
portfolio companies  U.S. Mills, Inc. (US Mills) and Investment &
Benefit Services, Inc. (k/n/a American Benefit Resources, Inc.) (I&BS)
 which closed in November 2005. Fund LLC received initial cash of roughly $1
million, and $7,458,665, respectively, and further recoveries are expected over
the next few years (Fund LLC also received $6 million in subordinated notes and
$5 million in convertible debentures from the sale of US Mills and $1 million
in restricted common stock obtained in connection with the sale of I&BS).


1
Debtors refers to
  InterBank Funding Corp. (IBF), IBF Collateralized Finance Corp. (CFC),
  IBF VI-Secured Lending Corp. (SLC) and IBF Premier Hotel Group,
  Inc., all debtors in chapter 11 cases pending in the Bankruptcy Court for
  this District, In re InterBank Funding Corp. et al., No. 02-41590
  (BRL) (Jointly Administered). CFC and SLC are referred to collectively
  throughout this Report as the Funds. ICA Trustee refers to
  Arthur Steinberg, in his capacity as trustee of IBF, the Funds and their
  respective subsidiaries under the Investment Company Act of 1940, pursuant to
  this Courts appointment on December 5, 2002.2
For a summary of earlier
  events, reference is made to the three prior interim reports dated July 26,
  2004, February 1, 2005, and August 5, 2005, respectively. Copies of the prior
  reports and other important documents are available for printing or
  downloading at no cost at the Liquidating LLCs website, <www.ibffund.com>.Additional
cash flow for the period came primarily from (i) settlement of additional
avoidance claims asserted on Fund LLCs behalf ($283,000); (ii) collections
from the two residential mortgage securitization assets ($243,598); (iii)
monthly payments due under a settlement with a former borrower, 1970 Asset
Management, and its principal, Ed Stein ($87,500); and (iv) settlement of
additional claims to recover commissions paid to broker/dealers who raised
capital from investors in late Dec. 2001  early Jan. 2002 ($2,000).

Fund
LLC made two distributions during the Fourth Interim Period, its fourth and
fifth under the Plan, distributing $10 million. Escrow Claimants (the 286
investors with allowed claims in Classes CFC-3 and SLC-3 under the Plan) were
paid $363,285, bringing their total recovery to roughly $21,547,000, or 80.4%.
Non-Escrow Claimants (i.e., investors and other creditors with allowed claims
in Classes CFC-4, CFC-5, SLC-4, SLC-5 and IBF Hotel-4) were paid $9,559,494,
bringing their total recovery to roughly $23,877,000, or 14.2%.

Looking
ahead, recoveries should start to taper off. The most valuable assets have been
liquidated, most litigation claims have been resolved and the global settlement
with Simon Hershon (former owner of IBF), the Debtors insurance carrier and
the plaintiffs in the securities class actions filed in Washington, D.C. has
closed. Future recoveries are expected to come principally from (i) the
subordinated notes and debentures from the sale of US Mills, (ii) the
development or disposition of the Funds failed resort project on Anguilla
Beach, Cat Island, Bahamas, (iii) the common stock obtained in connection with
the sale of I&BS, (iv) the remaining value, if any, of the securitization
assets, and (v) the Funds passive interests in the remaining development projects
(Tribeca, SAHR) and hotels (Hilton Garden in Round Rock, TX, Fairfield Inn in
Vinings, GA).

3

B.
Acquisition of AIHIn
the Fourth Interim Period, Fund LLC closed its acquisition of the assets of IBF
V-Alternative Investment Holdings, LLC (AIH). The purpose of the acquisition,
discussed below, was to allow for the winddown of AIH and the treatment of
AIHs investors on par with the Funds investors. In November 2005, Fund LLC
distributed roughly $362,000 to AIHs members as a catch-up payment to
account for prior distributions to the Funds investors. Going forward, AIH
members will share, as Non-Escrow Claimants, in future distributions with the
Funds investors.

C.
Proposed DistributionFund
LLC made two distributions in the Fourth Interim Period, paying out $10
million. There are no significant realization events on the immediate horizon.
Fund LLC does not anticipate making a distribution until at least the summer of
2006, but if the situation changes, the ICA Trustee will notify the investors
and file the required notice with the Court.

II.
PROGRESS REPORT FORFOURTH INTERIM PERIOD

A.
Prior Distributions by Fund LLC3As
of the end of the Fourth Interim Period (i.e., January 31, 2006), Fund
LLC has made five distributions under the Plan, paying out a total of
$45,423,671 to investors 

          In
  December 2003, Fund LLC made its initial distribution, distributing
  $19,284,162: (a) Escrow Claimants were paid $15,632,103, or 58.3% of their
  Claims, and (b) Non-Escrow Claimants were paid $3,566,510, or 2.2% of their
  Claims. Certain investors in lieu of participating in the liquidation process
  choose to receive a one time3
As previously reported,
  IBF LLC has no material assets and has made no distributions to IBFs
  creditors; nor does it appear that IBF LLC will recover any assets which
  could be distributed to IBFs creditors. The Plan further requires that,
  before making any distributions to IBFs creditors, IBF LLC must first repay
  amounts advanced by the Funds during the chapter 11 cases to pay IBFs share
  of administrative expenses. Consequently, IBF LLC is not expected to make any
  distributions. Fund LLC is continuing to pay IBF LLCs share of
  administrative costs, but the work required is minimal and the cost is not
  material.4

payment
  (cash-out claim); these payments totaled roughly $12,000. The remaining
  balance, $72,907, was reserved for (and has since been paid to) members of
  AIH.          In
  October 2004, Fund LLC made its second distribution, distributing $9,152,153:
  (a) Escrow Claimants were paid $5,297,466, bringing their total recovery to
  $20,929,569 (78.1%), and (b) Non-Escrow Claimants were paid $3,777,468,
  bringing their total recovery to $7,343,978 (4.5%). The balance, $77,220, was
  reserved for (and has since been paid to) members of AIH.          In
  February 2005, Fund LLC made its third distribution, distributing $7,000,000:
  (a) Escrow Claimants were paid $254,298, bringing their total recovery to
  $21,183,867 (79.0%), and (b) Non-Escrow Claimants were paid $6,610,566,
  bringing their total recovery to $13,954,544 (8.5%). The balance, $135,135,
  was reserved for (and has since been paid to) members of AIH.          In
  September 2005, Fund LLC made its fourth distribution, distributing
  $4,000,000: (a) Escrow Claimants were paid $145,314, bringing their total
  recovery to $21,329,181 (79.6%), and (b) Non-Escrow Claimants were paid
  $3,777,465, bringing their total recovery to $17,732,009 (10.8%). The
  balance, $77,221, was reserved for (and has since been paid to) members of
  AIH.          In
  November 2005, Fund LLC acquired the assets of AIH and made a distribution of
  $362,483 to AIH members, meant as a catch-up payment to account for earlier
  distributions to the Funds investors. Following that payment, AIH members
  are entitled to share pro rata in distributions to Non-Escrow Claimants.          In
  December 2005, Fund LLC made its fifth and most recent distribution,
  distributing $6,000,000: (a) Escrow Claimants were paid $217,971, bringing
  their total recovery to $21,547,152 (80.4%), and (b) Non-Escrow Claimants
  were paid $5,782,029, bringing their total recovery to $23,876,521 (14.2%).B.
Entitlement to Future DistributionsFund
LLC made the initial distribution from an escrow account, the SEC Escrow,
established pursuant to discussions with the Staff of the SEC to segregate
proceeds raised from investors in late Dec. 2001  early Jan. 2002. At the time
of the initial distribution, the SEC Escrow had a value of roughly $24,450,000,
of which $19,284,162 was paid out and the balance was reserved to fund the
costs of administration, in exchange for which Fund LLC issued to Escrow
Claimants a five-year, 3.5% note, the Escrow Note. Under the terms of the
Plan, the Escrow Note had to be retired before any further distributions to
Non-Escrow Claimants.

5

In
October 2004, Fund LLC retired the Escrow Note. Subsequent distributions were,
and will continue to be, primarily for the benefit of Non-Escrow Claimants,
subject to the following 

          First,
  Fund LLC is seeking to recover commissions paid to broker/dealers who sold
  the Funds securities to investors in late Dec. 2001  early Jan. 2002. Under
  the Plan, any commissions recovered (subject to a cap of $3.79 million) must
  be distributed, net of expenses, to Escrow Claimants. So far, Fund LLC has
  recovered total commissions of $642,300, before expenses, and only a few
  smaller claims are left to be resolved.          Second,
  as part of their recovery package, Escrow Claimants received Deficiency
  Claims equal to the difference between their initial investments (appx.
  $26,864,853) and their recoveries from the SEC Escrow (appx. $15.6 million)
  and Escrow Note (appx. $5.1 million). Under the Plan, Escrow Claimants
  exchanged their Deficiency Claims for Fund LLC interests, making them a
  minority owner of Fund LLC. The percentage may decrease slightly depending on
  how much they recover in broker/dealer commissions, however, for the time
  being, Escrow Claimants own 3.63% of Fund LLC.          Finally,
  as part of Fund LLCs acquisition of the assets of AIH, AIH became a minority
  owner of Fund LLC. The percentage may increase slightly depending on how much
  Escrow Claimants recover in broker/dealer commissions but, for the time
  being, AIH owns, for the benefit of its members, 1.93% of Fund LLC.C.
Tax/Reporting RequirementsFund
LLC is in the midst of compiling year-end numbers for 2005 and is working with
its accountants to make preparations for Fund LLCs 2005 tax returns. It is
anticipated that tax returns will be filed, and Form K-1s will be mailed to investors,
by late spring 2006. As in prior years, depending on when the tax returns are
completed and Form K-1s are mailed, investors may need to request an extension
of the deadline for filing their 2005 tax returns. Investors are strongly
encouraged to consult their personal tax advisors for advice on how this may
affect them.

D.
Investment PortfoliosThe
following is a summary of activities during the Fourth Interim Period
concerning the investments remaining in the Funds portfolios. Reference is
made to Exhibit D of the Preliminary Report of Arthur J. Steinberg,
Trustee (Preliminary Report), filed herein on February 18, 2003, for a
more thorough description of the Funds portfolio investments.

6

1.
Platform Companiesa.
I&BS/ABRI&BS
is in the business of third-party administration of pension and 401K plans for
employees. In November 2005, I&BS was sold to National Investment Managers,
Inc. (NIM). I&BS was marketed and sold with substantial assistance
from the ICA Trustee and his advisors. Such assistance included, among other
things, meeting with prospective buyers; managing due diligence; negotiating
letters of intent; drafting and negotiating the purchase and sale agreement;
and addressing closing issues.

NIM
ultimately acquired the business for $8,000,000 in cash (subject to certain
adjustments), plus $1 million in restricted shares of common stock of
NIM, plus NIM agreed to assume all or substantially all of I&BSs
liabilities. Fund LLC received initial cash of $7,458,665. For comparisons
sake, the Plan projected that Fund LLCs recovery, before additional advances,
from its investment in I&BS would be in the range of $7.3 million. Aside
from additional advances, Fund LLC has already exceeded that recovery and, when
the value of the NIM common stock is factored in, it is clear that Fund LLCs
recovery from this asset will exceed the original projections.

b.
US MillsIn
November 2005, U.S. Mills was sold to Sunset Brands. The transaction proved to
be a complicated one and went through a number of iterations and several rounds
of court approval. Closing was in jeopardy for much of the time due to factors
beyond Fund LLCs control  principally, problems with Sunsets financing and a
slowdown in US Mills business. When the sale finally closed, Fund LLC received
initial cash of roughly $1 million. Fund LLC also received $6 million in
subordinated notes and $5 million in convertible debentures with attached
warrants, which it continues to hold.

7

The
original sale documents were signed in February 2005. Over the course of the
next nine months, the economics of the transaction were revised on at least
four occasions. The first two rounds of changes occurred in the Third Interim
Period and are discussed in the Third Interim Report (pp. 7-9). Those changes
were approved by the Bankruptcy Court in March 2005.

In
the Fourth Interim Period, the terms went through two more rounds of changes.
The first set of changes was agreed to in July 2005. Under the original deal
signed in February 2005, Sunset was to acquire US Mills for $17 million in cash
and $3 million in preferred equity and warrants. Following the changes
negotiated in July 2005, the terms had eroded to initial cash of $11 million, a
$1 million subordinated note, a $5 million subordinated note, $1.5 million in
preferred shares at closing and an additional $1.5 million of preferred shares
to be earned based on the new ventures performance over the 15 to 17 months
following closing.

In
October 2005, Sunset disclosed that its equity sponsor was no longer interested
in becoming a financing source for the venture. Extended discussions ensued,
following which Fund LLC agreed, in order to salvage the transaction, to reduce
the initial cash from $11 million to $6 million and convert the difference to a
$5 million convertible debenture with attached warrants. The changes were
approved by the Bankruptcy Court, on motion of Fund LLC, and the transaction
closed on November 10, 2005.

The
subordinated notes  the $1 million note and the $5 million note  will mature
in three years. The $1 million note is accruing interest at the same rate as a
working capital facility Sunset obtained from a third party lender. The $5
million note is accruing interest at 12%, with interest deferred for the first
year and thereafter 50% paid in cash and 50% accrued or paid in kind. Both
notes are contractually subordinate to the working capital facility.

8

As
security for the notes, Fund LLC was granted junior liens in substantially all
of the assets of US Mills and Sunset. Fund LLC was also given rights to put
up to $2.5 million of the $5 million convertible debenture to a third party
arranged by Sunset. The convertible debenture is the last tranche of the debt
obligations owed to Fund LLC, thus, the most junior debt piece is protected by
third-party collateral. The more senior tranches of debt (as well as the junior
convertible debenture) are protected by the value of the US Mills business
itself.


In negotiations, Sunset said it was contemplating a PIPE (Private
Investment in Public Equity) offering to raise capital to pay the convertible
debenture in full. The aforesaid $2.5 million put was intended to give Fund
LLC assurance that this type of refinancing will occur in a relatively short
time.

c.
Capstone Capital LLCThere
is nothing recent to report regarding Capstone. Capstone was in the business of
providing financial support to companies by purchasing pre-sold inventory and,
upon shipment, reselling to the client companies factors. In 2003, Capstone
ceased operations and has since been liquidating its assets  primarily
receivables. Fund LLC is owed $5,300,000, secured by a lien against Capstones
assets. Fund LLCs lien is immediately junior to a first mortgage in favor of
Northfork Bank, which has a balance of approximately $800,000.

Capstones
largest receivable is owed by Vista Optical, a debtor in a chapter 7 case
pending in this District. Fund LLCs recovery is predicated on how much
Capstone collects on its receivables and whether there will be a surplus after
Northfork Banks senior loan is repaid in full. At this time, it appears that
Capstone will not be a material source of recovery for Fund LLC but the ICA
Trustee is continuing to monitor Capstones collection efforts closely.

9

2.
Operating Hotelsa.
Hilton Garden InnThere
is nothing significant to report regarding the Hilton Garden Inn, a 122-room
hotel in Round Rock, Texas (near the headquarters of Dell Computers). The hotel
is owned by Chisholm Partners, Ltd. and is subject to a first lien of $6.3
million held by Union Bank & Trust Co. Fund LLC owns only a limited
partnership interest (75%) in the owner and has no ability to force a sale. The
ICA Trustee is continuing to monitor the situation and the hotels revenues
appear to be improving but it is unclear whether there will be a recovery by
Fund LLC.

b.
Fairfield InnSimilarly,
there is nothing significant to report regarding the Fairfield Inn (Marriott),
a 144-room hotel in Vinings, Georgia (near the headquarters of Home Depot). The
hotel is owned by Vinings Partners LP and subject to a first lien of $5.6
million held by Union Bank & Trust Co. Fund LLC owns only a limited
partnership interest (90%) in the owner and has no ability to force a sale. The
ICA Trustee is continuing to monitor the situation and the hotels revenues
appear to be improving but it is unclear whether there will be a recovery by
Fund LLC.

c.
Comfort InnThe
sale of the hotel closed in 2005, as previously reported, and Fund LLCs
recovery exceeded projections by a significant margin. In July, the management
company received a notice of assessment of additional sales and use tax by the
Florida Department of Revenue, claiming additional taxes owed of approximately
$100,000. Fund LLC is investigating.

10

3.
Development Propertiesa.
TribecaThere
is nothing recent to report concerning the hotel project located in the Tribeca
section of lower Manhattan. The ICA Trustee settled with the owners of the
primary development parcel in 2003, and with the owner of the adjacent parcel
in 2004. Fund LLCs total recovery was $478,000, plus a sharing of future
benefits. Fund LLC has no ability to compel a sale or control the development
but is continuing to monitor its residual interest.

b.
SAHRThere
is nothing recent to report concerning this hotel development project in San
Antonio, Texas. In 2004, Fund LLC contributed its interest (plans,
architectural drawings, specifications, etc.) in the project to a joint venture
with the developer, Lumbermens, in exchange for which Fund LLC received a 24%
limited partnership interest. The site is part of a 2,855-acre mixed-use
development. Fund LLC is a limited partner and has no ability to force a sale.
Lumbermens continues to explore development opportunities and the proposition
of taking Fund LLCs position out. The ICA Trustee is continuing to monitor the
value of its limited partnership interest but at this time it is not clear
whether there will be a recovery.

c.
Anguilla1)
Relevant BackgroundIn
1999, CFC loaned approximately $5.2 million to fund the development of a resort
on 1,407 acres on Anguilla Beach, Cat Island, Bahamas. The loan was made
through a special purpose company, IBF Bahamas Ltd., to the developer, Cat
Island Ventures, Ltd. The loan was supposed to be secured by a first mortgage
but a lien search by IBFs former counsel in the Bahamas failed to disclose an
existing mortgage held by Gulf Union Bank (Gulf Union).

11

The
developer subsequently defaulted on the loan and stopped work on the project.
The loan was never repaid and has a balance in excess of $13 million. The first
mortgage is also in default and has an estimated balance of $3 million. The
process is controlled by the first lienholder, Gulf Union, which itself is in
liquidation. In the past, Gulf Unions liquidators inquired as to Fund LLCs
interest in acquiring the first mortgage but Fund LLC lacked the liquidity and
the ICA Trustee continues to believe that further investment would not be in
the investors best interests. Accordingly, the ICA Trustee is monitoring the
situation and is exploring various exit strategies.

2)
Efforts to Sell PropertyIn
2003, Gulf Unions liquidators marketed the property for sale with a broker but
later pulled the advertising and agreed to allow the owner, Erwin Knowles, to
continue his search for a new joint venture partner. In 2004, Gulf Unions
liquidators advised the ICA Trustee that the owner had located a new investor
and submitted revised plans for government approval. Gulf Unions liquidators
further advised that the plans had cleared the first of several phases of the
approval process and prospects were good. At a hearing in July 2005, the
owners lawyer reported that the new investor signed a contract and that
progress was being made with the government. The ICA Trustee requested a copy
of the agreement and asked to be included in the discussions but the requests
were ignored and so the ICA Trustee initiated steps to locate a back-up buyer in
the event that the plans were not approved or the new investor didnt
materialize.

At
a scheduling conference in September 2005 (discussed below), the ICA Trustee
pressed the issue with the judge and the owners attorney conceded that the new
investor had pulled out but claimed not to know the specifics. Following the
hearing, the ICA Trustee initiated discussions with several different investor
groups familiar with the property. In

12

addition, the
ICA Trustee opened a dialogue with a large regional bank to determine whether
it or any of its customers had an interest in acquiring Fund LLCs debt or
purchasing the property. The ICA Trustee is also corresponding with a former
IBF employee, Brendan Sullivan, who previously identified a number of potential
buyers and is searching for additional leads.

The
project itself was an ambitious one, and the problems experienced in searching
for a buyer are compounded by the fact that the property is located on an outer
island. The island can only be reached by boat or charter plane and has little
existing infrastructure.

At
this time, the most encouraging discussions are those with a foreign investor
that claims to have the experience, liquidity and desire to assume the project.
The investor recently submitted a rough proposal that is serving as the
framework for further discussions. In the event a deal can be struck with Fund
LLC, it will likely also require an agreement on the terms of Gulf Unions
mortgage as well as a resolution of the former owners involvement.

3)
Pending LitigationAs
previously reported, the project spawned two pieces of litigation in the
Bahamas. The first is the owners preemptive lawsuit filed in 2000 to prevent a
sale to a new investor identified by IBF. The court initially entered an
injunction prohibiting efforts to sell the property and the new investor
withdrew. In 2003, at the ICA Trustees request, the injunction was dissolved.
IBF Bahamas was later dismissed from the case, which is inactive but still on
the courts docket.
The second litigation is the malpractice lawsuit IBF filed
against its former local attorney, Thomas Evans, in 2001. IBF was advised at
the time that his insurance coverage is capped at $2 million. The lawyer is
vigorously opposing the lawsuit and refuses to discuss settlement.
In September
2005, the court conducted a scheduling conference. The parties made brief
presentations of their cases. IBFs former lawyer is asserting two defenses 
first, that the title

13

company,
Computitle, is accountable for the failure to discover the existing first lien,
and second, that IBF has not suffered any damages because the property is of
sufficient value to secure both Gulf Unions $3 million mortgage and Fund LLCs
$13 million mortgage. The ICA Trustee argued that the measure of damages is the
amount required to retire the first lien and put Fund LLC in the position it
bargained for, that of first lienholder, so it can control power of sale.

Following
the parties arguments, the court referred the matter to mandatory, non-binding
mediation before another judge, which is scheduled for late February 2006. The
court further indicated, over the ICA Trustees objection, that it would
determine who was the proper defendant, the title company or the lawyer, before
it considered the underlying charges. The ICA Trustee is pressing the matter
but progress has been slow.

4.
Securitization AssetsFund
LLC holds residential mortgage securitization assets from two transactions, the
first underwritten by Lehman Brothers and the other by DLJ and Credit Suisse
First Boston. The investments have produced some of the highest returns in the
Funds portfolios. In September 2004, the ICA Trustee marketed the assets and
conducted a limited auction. A number of bids were received but none were in
the range of fair market value and so he decided to hold. That decision was the
correct one and recoveries since that time have far exceeded those bids.

Consistent
with projections, collections tapered off in the Fourth Interim Period, with
Fund LLC collecting only $122,235 on the Lehman assets and $121,363 on the CSFB
assets. Collections are expected to drop further in the near term for a period
of several years but there remains the possibility of long tail collections
from the residual value of the loans in the future. The ICA Trustee is
continuing to monitor the market but is of the belief that, at least for the
time being, based on the scarce market for these types of securitizations, Fund
LLC is better off holding them.

14

E.
Claims ObjectionsIn
the course of his administration, the ICA Trustee objected to a large number of
claims asserted in the Debtors chapter 11 cases. Those efforts resulted in the
Bankruptcy Courts rejection or reclassification of over 630 claims. The nine
(9) remaining claims reported in the Third Interim Report that were filed by
two of the Debtors former directors and officers were resolved in the Fourth
Interim Period and have been withdrawn. All claims objections have now been
resolved.

F.
Litigation1.
BB&TAs previously
discussed, Fund LLC settled its adversary proceeding against Branch Banking
& Trust Co. (BBT) in the Third Interim Period. The terms were approved by
the Bankruptcy Court and the District Court and, in August 2005, Fund LLC
collected $225,000 from BBT. The settlement is now closed and the adversary
case was dismissed with prejudice.

2.
Stein/1970 Asset MgtFund
LLC continues to collect on the settlement signed in 2004 by the ICA Trustee
and a former borrower, 1970 Asset Management, and its principal, Ed Stein (Stein).
The settlement calls for monthly installment payments of $12,500 per month. In
the Fourth Interim Period, Fund LLC collected an additional $87,500, bringing
its total recovery to $425,500. In the Third Interim Report, it was reported
that Stein fell behind on his payments and was seeking a forbearance. Stein
caught up and for most of the Fourth Interim Period was making payments,
however, recently he fell behind again. The settlement calls for installment
payments of $12,500 through December 2008.

15

3.
Avoidance ClaimsOver
time, Fund LLC filed 19 adversary proceedings to recover preferential or
fraudulent transfers and entered into tolling agreements with another 31
potential defendants. A number of these claims were resolved in the Fourth
Interim Period and only four open matters remain.

Specifically,
as of July 2006, there were nine open adversary cases and five tolled matters.
Of the nine adversary cases, default judgments were obtained in seven cases and
the remaining two are in litigation. One of the default judgments settled and
Fund LLC collected $10,000; the other six are being enforced. Of the five
tolled matters, three settled in the Fourth Interim Period and two are left.
Both should be filed or resolved in the next 6 months.

In
terms of collections, Fund LLC collected an additional $285,000 from the
settlement of avoidance claims during the Fourth Interim Period. Of that
amount, $2,000 was collected from broker/dealers and is payable, net of
expenses, to Escrow Claimants under the Plan. That makes the total
broker/dealer commissions recovered, prior to expenses, $642,300. There are
only a few small broker/dealer claims left and no further significant
recoveries are expected.

G.
Global Settlement with HershonThe
Third Interim Report (p. 19) provides a detailed account of the global
settlement with Hershon et al. That settlement closed on July 19, 2005,
and Fund LLC recovered $3.2 million (an additional $2.35 million under the
Debtors two insurance policies maintained with St. Paul Mercury Insurance (St.
Paul),4plus $913,000 contributed by Hershon). The
global settlement resolved a number of matters, including, (a) the SECs
charges against Hershon in this enforcement action, (b) the class claims
against Hershon in the various class actions consolidated in the District Court
for the District of Columbia (DC District Court), (c) the Liquidating


4
The $2.35 million is in
  addition to approximately $700,000 the ICA Trustee collected under the St.
  Paul policies in September 2003, making Fund LLCs total recovery under the
  policies roughly $3.05 million.16

LLCs claims
against Hershon, and (d) competing claims by the ICA Trustee and IBFs former
directors and officers against the proceeds of the two insurance policies
issued by St. Paul. Fund LLC distributed the additional $3.2 million to
investors as part of the fourth distribution in September 2005.

On
January 17, 2006, the Court of Appeals for the District of Columbia vacated in
part and remanded for clarification the earlier ruling of the DC District Court
concerning the dismissal with prejudice of the investor class claims against
Radin Glass & Co. (Radin) (the Funds former accountants) and CIBC
World Markets Corp. (CIBC) (a broker of the Funds securities). This
decision calls for the DC District Court to dismiss without prejudice (allowing
the investor class to amend and re-file its complaint) or to provide an
explanation of its dismissal with prejudice. Should it turn out that the class
is able to reassert its claims against Radin and CIBC there is a possibility
for additional investor recoveries arising out of the DC District Court case.

H.
Settlement with Investors of AIHDuring
the Fourth Interim Period, Fund LLC closed its acquisition of the assets of
AIH. AIH is a non-debtor affiliate of the Funds that operated as a private
equity fund. The acquisition was made pursuant to discussions with the Staff of
the SEC as a means to resolve claims by investors of AIH and was authorized by
Section 7.7 of the Plan, which was approved by both the Bankruptcy Court and
the District Court, on notice to all investors. Due to the relative amounts
involved, the acquisition will not have a material impact on recoveries by the
Funds investors.

The
terms of the acquisition were set forth in an asset purchase agreement (APA)
signed by AIH and Fund LLC in February 2005. Closing was delayed pending the
sale of US Mills, which closed on November 10, 2005. Under the terms of the
APA, AIH sold its assets as of closing, principally its equity investments in
I&BS, to Fund LLC in exchange for (a) cash of

17

roughly $362,000
(approximately 10.8% of AIHs total claim), (b) an approximate 1.93% membership
interest in Fund LLC (calculated as percentage of total claims held by AIH
investors versus total claims held by the Funds investors), and (c) the
redemption of IBFs former 23% ownership stake in AIH.

Following
closing, Fund LLC distributed the cash of $362,000 to AIH members. That amount
represented AIHs share of the four distributions made by Fund LLC to the
Funds investors over the last two (2) years. Since AIH was not a member of
Fund LLC at the time, AIH investors did not participate in these distributions.
At closing, AIH investors were entitled to catch-up payments to bring them on
par with the Funds investors. To avoid any further delay, Fund LLC and AIH
also agreed that all payments to AIH investors may be made by Fund LLC, under
the ICA Trustees supervision. Going forward, AIH members are now entitled to
share pro rata with Non-Escrow Claimants in future distributions by Fund LLC.

[Remainder Of Page
Intentionally Blank]

18

III.
FINANCIAL CONDITIONOF LIQUIDATING LLCS

Unaudited
balance sheets and statements of operations summarizing the Liquidating LLCs
financial condition as of January 31, 2006, are attached hereto as Exhibit A.5

Dated:
New
  York, New YorkFebruary 21,
  2006IBF
  Liquidating LLC andIBF Fund
  Liquidating LLCBy:
/s/ Arthur J. SteinbergArthur J.
  Steinberg, ICA Trustee, as
  Manager and Liquidating AgentCounsel to the ICA Trustee:

Arthur J.
Steinberg (AS 1298)Heath D. Rosenblat (HR 6430)
Kaye Scholer LLP
425 Park Avenue
New York, NY 10022
212/836-8000 telephone
212/836-7157 facsimile

5
The amounts used on the
balance sheet attached hereto reflect values assigned at Fund LLCs inception
and do not reflect current market value. Further, the amounts included in
Exhibit A are for purposes of this Report only, and should not be used for
tax accounting purposes.19

Exhibit A
IBF
Fund Liquidating, LLC
Balance Sheet
For the period ending January 31, 2006
(Unaudited)

ASSETSCash







5,545,979InvestmentsInvestment
  in Operating Businesses


8,323,279Investment
  in Operating Hotels


205,000Investment
  in Real Estate Development Properties

5,290,000Investment
  in Securitization Assets

74,989Total Investments




13,893,268Miscellaneous Assets







525,604Total Assets






19,964,851LIABILITIESCurrent LiabilitiesAccounts Payable


287,956Accrued Expenses-Professional Fees

100,000Total Current Liabilities





387,956EquityMember Interest in LLC


25,828,351Net Income


(6,251,457
)Total Equity







19,576,894Total Liabilities and Equity




19,964,851* The amounts used herein reflect values assigned at Fund LLCs
        inception and do not reflect current market value. Further, the amounts
        included herein are for purposes of the Report only, and should not be
        used for tax accounting purposes.IBF
Fund Liquidating, LLC
Profit and Loss Statement
For the period August 1, 2005 thru January 31, 2006
(Unaudited)

IncomeInterest
  Income



12,352Interest Income-Money Market



52,175Total Income






64,526ExpenseProfessional
  fees



1,518,973Office
  expense



12,600Payroll and
  benefits



173Loss of sale
  of investments



2,270,801Total Expense




3,802,547Total Income/(Loss)




(3,738,020
)IBF
Fund Liquidating, LLC
Statement of Cash Flows (Unaudited)
for the period August 1, 2005 thru January 31, 2006

CASH FLOW FROM OPERATING ACTIVITIES BEFOREREORGANIZATION ITEMSCash paid to Vendors

$
(106,956
)Payroll and Benefits


(173
)Net Cash (Used) by Operating Activities
 Before Reorganization Items


(107,129
)CASH FLOWS FROM REORGANIZATION ITEMSReturn on Investments


9,138,408Collection of Litigation Claims


285,000Interest Earned on Accumulated Cash


64,526Interest Earned on Investments


Additional investments


(1,067,125
)Liquidating Distribution


(10,285,151
)Professional Fees for Services Rendered


(1,197,131
)Net Cash (Used) by Reorganization Items


(3,061,473
)NET CASH (USED) BY OPERATING ACTIVITIES


(3,168,602
)Net (Decrease) in Cash and Cash Equivalents


(3,168,602
)Cash and Cash Equivalents at Beginning of Period


8,714,581Cash and Cash Equivalents at End of Period

$
5,545,979IBF
Fund Liquidating, LLC
Receipts from Fund Assets
for the period August 1, 2005 thru January 31, 2006

AssetName

Month

Description


AmountComfort Inn

08/05

Sale Proceeds


2,01209/05

Sale Proceeds


217Total Receipts


2,229US Mills

11/05

Sale Proceeds


1,256,34911/05

Sale Proceeds


87,000Total Receipts


1,343,349I&BS

11/05

Sale Proceeds


5,729,63111/05

Sale Proceeds


1,001,90911/05

Sale Proceeds


727,125Total Receipts


7,458,665Detour (Stein)

08/05

Settlement payments


12,50009/05

Settlement payments


25,00006/05

Settlement payments


12,50011/05

Settlement payments


12,50011/05

Settlement payments


12,5001/06

Settlement payments


12,500Total Receipts


87,500Best Western

08/05

Sale Proceeds


2,28709/05

Sale Proceeds


28509/05

Sale Proceeds


496Total Receipts


3,068ARC 2001-1

08/05

Class X
  Distribution


88,89409/05

Class X
  Distribution


33,341Total Receipts


122,235CFSB HE-25

08/05

NIM Class B Distribution


25,82509/05

NIM Class B Distribution


44,36410/05

NIM Class B Distribution


13,37211/05

NIM Class B Distribution


17,21412/05

NIM Class B Distribution


13,39101/06




7,197Total Receipts


121,363Total Receipts


9,138,409