UNITED ~~STATES SECURITIES AND EXCHANGE COMMISSION~~ STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

~~Check one~~(Mark one)

þ x Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the quarterly period ended ~~June 30~~December 31, ~~2006~~2008 or

o ¨ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission file number 000-50160

HECHINGER LIQUIDATION TRUST

(Exact name of Registrant as specified in its charter)

Delaware		52-7230151
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
405 East Gude Drive, Suite 206, Rockville, Maryland		20850
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (301) 838-4311

405 East Gude Drive, Suite 206, Rockville, Maryland	20850
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code: (301) 838-4311

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 þx No o¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer., or a smaller reporting company. See ~~definition~~the definitions of “large accelerated filer,” “accelerated filer” and ~~large~~“smaller ~~accelerated~~reporting ~~filer~~company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o¨ Accelerated filer o¨ Non-accelerated filer þ¨ Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes o¨ No þx

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

Yes þx No o¨

HECHINGER LIQUIDATION TRUST ~~INDEX TO FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2006~~

Description	Page
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Unaudited Statements of Net Assets in Liquidation		3
Unaudited Statements of Changes in Net Assets in Liquidation		4
Unaudited Statements of Cash Receipts and Disbursements		5
Notes to Unaudited Financial Statements		6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		14
Item 3. Quantitative and Qualitative Disclosures About Market Risk		20
Item 4. Controls and Procedures		21
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings		21
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		22
Item 3. Defaults Upon Senior Securities		22
Item 4. Submission of Matters to a Vote of Security Holders		22
Item 5. Other Information		22
Item 6. Exhibits		22
SIGNATURES		23
INDEX TO EXHIBITS		24

INDEX TO FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2008

Description		Page

PART I. FINANCIAL INFORMATION:

Item 1.	Financial Statements
	Unaudited Statements of Net Assets in Liquidation	3
	Unaudited Statements of Changes in Net Assets in Liquidation	4
	Unaudited Statements of Cash Receipts and Disbursements	5
	Notes to Unaudited Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21
Item 4T.	Controls and Procedures	21

PART II. OTHER INFORMATION:

Item 1.	Legal Proceedings	22
Item 1A.	Risk Factors	22
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 3.	Defaults Upon Senior Securities	23
Item 4.	Submission of Matters to a Vote of Security Holders	23
Item 5.	Other Information	23
Item 6.	Exhibits	23

SIGNATURES		24

INDEX TO EXHIBITS		25

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Hechinger Liquidation Trust ~~Unaudited Statements of Net Assets in Liquidation~~

	As of		As of
($ in thousands)	June 30, 2006		September 30, 2005
Assets
Cash and cash equivalents
Cash designated as available for distribution to holders of impaired claims	$	3,254	$	3,054
Reserved cash		21,298		22,206
Other cash		2,491		1,389
Total cash and cash equivalents		27,043		26,649
Committee action settlement receivable		—		7,000
Preference receivables (net of costs of recovery of $133 and $152, respectively)		880		869
Other assets		3		3
Total assets		27,926		34,521
Liabilities
Unimpaired and convenience claims payable		1,337		1,337
Uncashed claims checks		440		361
Distributions payable		491		292
Estimated costs of liquidation
Wind-down reserve		790		1,436
Litigation reserve		371		730
Fleet settlement accrual		8,250		3,500
Total liabilities		11,679		7,656
Net Assets in Liquidation	$	16,247	$	26,865

Unaudited Statements of Net Assets in Liquidation

($ in thousands)

	As of		As of
	December 31, 2008		September 30, 2008

Assets
Cash and cash equivalents
Cash designated as available for distribution to holders of impaired claims	$	312	$	1,818
Reserved cash		5,866		5,972
Other cash		1,058		295

Total cash and cash equivalents		7,236		8,085

Preference receivables (net of costs of recovery of $54 and $54, respectively)		211		211
Other assets		2		37

Total assets		7,449		8,333

Liabilities
Unimpaired and convenience claims payable		1,303		1,337
Uncashed claims checks		573		426
Distributions payable		312		825
Estimated costs of liquidation
Wind-down reserve		690		757
Litigation reserve		-		152

Total liabilities		2,878		3,497

Net Assets in Liquidation	$	4,571	$	4,836

See accompanying notes to unaudited financial statements.

Hechinger Liquidation Trust ~~Unaudited Statements of Changes in Net Assets in Liquidation~~

	For the three			For the three
	months ended			months ended
($ in thousands)	June 30, 2006			June 30, 2005
Increase/(decrease) in Net Assets in Liquidation
Fleet settlement accrual	$	(4,750	)	$	(3,500	)
(Decrease)/increase in estimated fair value of preference receivables, net		(4	)		396
Increase in estimated costs of liquidation:
Wind-down reserve		—			(124	)
Interest income		282			187
Other increases		2			104
Net decrease in Net Assets in Liquidation before distributions authorized		(4,470	)		(2,937	)
Distributions authorized		—			( 7,055	)
Net decrease in Net Assets in Liquidation after distributions authorized		(4,470	)		(9,992	)
Net Assets in Liquidation at beginning of period		20,717			29,447
Net Assets in Liquidation at end of period	$	16,247		$	19,455

Unaudited Statements of Changes in Net Assets in Liquidation

	For the nine			For the nine
	months ended			months ended
	June 30, 2006			June 30, 2005
Increase/(decrease) in Net Assets in Liquidation
Fleet settlement accrual	$	(4,750	)	$	(3,500	)
Increase in estimated fair value of preference receivables, net		31			329
Decrease in estimated fair value of unimpaired and convenience claims payable		—			23
Increase in estimated costs of liquidation:
Wind-down reserve		—			(124	)
Interest income		768			447
Other increases		12			1,115
Net decrease in Net Assets in Liquidation before distributions authorized		(3,939	)		(1,710	)
Distributions authorized		(6,679	)		(7,277	)
Net decrease in Net Assets in Liquidation after distributions authorized		(10,618	)		(8,987	)
Net Assets in Liquidation at beginning of period		26,865			28,442
Net Assets in Liquidation at end of period	$	16,247		$	19,455

($ in thousands)

	For the three			For the three
	months ended			months ended
	December 31, 2008			December 31, 2007

Increase/(decrease) in Net Assets in Liquidation
Increase in estimated costs of liquidation	$	(275	)	$	-
Decrease in estimated fair value of unimpaired claims		85			-
Interest income		2			201
Other increases, net		124			291

Net (decrease)/increase in Net Assets in Liquidation before distributions authorized, net		(64	)		492

Distributions authorized		(904	)		-
Distributions forfeited		703			-

Distributions authorized, net		(201	)		-

Net (decrease)/increase in Net Assets in Liquidation after distributions authorized, net		(265	)		492

Net Assets in Liquidation at beginning of period		4,836			15,980

Net Assets in Liquidation at end of period	$	4,571		$	16,472

See accompanying notes to unaudited financial statements.

Hechinger Liquidation Trust

Unaudited Statements of Cash Receipts and Disbursements

	For the nine			For the nine
	months ended			months ended
($ in thousands)	June 30, 2006			June 30, 2005
Cash receipts
Collection of committee action settlement	$	7,000		$	—
Preference collections, before costs of recovery		199			3,742
Interest income		768			447
Other receipts		12			691
Total cash receipts		7,979			4,880
Cash disbursements
Costs of liquidation
Operating expenses		438			1,497
Legal and professional fees
Litigation		359			1,203
Preference recoveries		179			1,156
Liquidation Trust operations		208			546
Unimpaired and convenience claims		—			11
Voided claims checks, net of reissues		(79	)		(153	)
Total cash disbursements		1,105			4,260
Increase in cash and cash equivalents before distributions paid		6,874			620
Distributions paid		(6,480	)		(7,242	)
Increase/(decrease) in cash and cash equivalents		394			(6,622	)
Cash and cash equivalents at beginning of period		26,649			34,375
Cash and cash equivalents at end of period	$	27,043		$	27,753

($ in thousands)

	For the three			For the three
	months ended			months ended
	December 31, 2008			December 31, 2007

Cash receipts
Interest income	$	2		$	201
Other receipts		124			293
Total cash receipts		126			494

Cash disbursements
Costs of liquidation
Operating expenses		252			147
Legal and professional fees
Litigation		150			148
Liquidation Trust operations		92			29
Preference recoveries		-			2
(Voided)/reissued claims checks, net		(419	)		-

Total cash disbursements before distributions paid,net of voided claims checks		75			326

Increase in cash and cash equivalents before distributions paid		51			168

Distributions paid		900			-

(Decrease)/increase in cash and cash equivalents		(849	)		168

Cash and cash equivalents at beginning of period		8,085			19,478

Cash and cash equivalents at end of period	$	7,236		$	19,646

See accompanying notes to unaudited financial statements.

Hechinger Liquidation Trust ~~Notes to Unaudited Financial Statements~~

Notes to Unaudited Financial Statements

Background and Basis of Presentation

Background

Hechinger Liquidation Trust (the “Liquidation Trust”) was established effective October 26, 2001 (the “Effective Date”) in accordance with the Revised First Amended Consolidated Plan of Liquidation (the “Plan”) for Hechinger Investment Company of Delaware, Inc. and affiliates (the “Debtors”), confirmed by the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) by an order dated October 5, 2001.

The Liquidation Trust has no authority to engage in any trade or business. The purpose of the Liquidation Trust is to (i) liquidate any and all remaining assets of the Debtors; (ii) pursue causes of action assigned to the Liquidation Trust, including preference, fraudulent conveyance and other avoidance actions; (iii) resolve, either consensually or through litigation, all disputed claims asserted against the Debtors (“Disputed Claims”), pursuant to the Plan; and (iv) make all distributions required under the Plan (“Distributions”), and payments to holders of claims allowed under the terms of the Plan (“Allowed Claims” and, together with the Disputed Claims, the “Claims”). The Liquidation Trust will terminate upon the earlier of (a) the fulfillment of its purpose by the liquidation of all of its assets and the distribution of the proceeds of the liquidation thereof in accordance with the Plan, or (b) by ~~October 26,~~March ~~2006~~31, 2009, unless the Bankruptcy Court approves ana further extension of ~~this~~ the term. The Liquidation Trust intends to seek a further extension of the term to accomplish the wind-down activities discussed below.

Pursuant to the Bankruptcy Code, certain types of Allowed Claims will be paid in full under the Plan. Such Claims are therefore referred to as “Unimpaired Claims.” The Plan defines which types of Claims are paid in full.

The Liquidation Trust exists primarily for the benefit of the majority of claimants who will not be repaid in full for the amounts the Debtors owed them as of the bankruptcy filing. These Claims are referred to as “Impaired Claims” because the rights of the claimants have been impaired by the Debtors’ bankruptcy. Each holder of an Allowed Claim in the Plan’s Class 4A (Senior Unsecured Claims), Class 4B (General Unsecured Claims), and Class 5 (Subordinated Debentures Claims) (each a “Class”) is deemed to hold a pro rata beneficial interest (the “Beneficial Interests”) in the Liquidation Trust based upon the amount of their Allowed Impaired Claim as compared to the total amount of all ~~Impaired Claims ultimately~~ Allowed. ~~When and to the extent Disputed~~ Impaired Claims ~~become Allowed Impaired Claims, holders of such Claims become holders of Beneficial Interests in accordance with the Plan~~.

The holders of Beneficial Interests receive all remaining net proceeds of the ~~Liquidation~~ Liquidation Trust, if any, after the expenses and all creditors of the Liquidation Trust are paid, including Allowed Unimpaired and Convenience Claims (certain small Claims ~~to be~~ paid at 7.5% of their Allowed amounts in accordance with the Plan) ~~are paid~~, and after all contingencies are resolved. Holders of each ~~Class~~ Class of Beneficial Interests (i.e., each Class of Impaired Claims) have the same rights, except with respect to payment of Distributions.

Through December ~~June 30~~31, ~~2006~~2008, the Liquidation Trust has authorized Distributions to holders of of Beneficial Interests (i.e., to holders of Allowed Impaired Claims) ofat ~~10.2911% of the Allowed~~a ~~amount~~cumulative ofrate ~~the Impaired Claims, and established a reserve~~ of 1011.~~2911~~9411% of the ~~estimated~~Allowed amount of ~~Disputed~~ ~~Impaired Claims, based on~~ the ~~estimated amount of such Claims approved by the Bankruptcy Court for reserve purposes (the “Disputed~~ Impaired Claims ~~Reserve”)~~.

~~Basis~~As of December ~~Presentation~~31, 2008, substantially all assets of the Debtors, including resolving causes of action, have been liquidated and all remaining Disputed Claims are expected to be waived. Significant unresolved items, for which the timing of resolution is not under the Liquidation Trust’s control, include one remaining preference action and one significant Allowed Claim, the amount of which remains subject to substantiation by the holder of the Claim (see Notes 5 and 6, respectively). The Liquidation Trust is in the process of winding up its limited operations, and expects to request that the Bankruptcy Court authorize a final Distribution during the first half of calendar year 2009 and terminate the Liquidation Trust before the end of the fiscal year ending September 30, 2009.

~~and~~As ~~liabilities~~part of preparing for the Liquidation Trust’s termination, ~~including~~commencing during the three ~~projected~~months ~~total~~ended ~~cost~~December of31, ~~liquidating~~2008, the ~~assets~~Liquidation ~~and~~Trust ~~winding~~has ~~down~~acted to judicially resolve Claims-related liabilities which it has been unable to pay. Pursuant to the ~~affairs~~Court-authorized terms of the ~~Liquidation~~Plan, ~~Trust~~Distribution and Claims payment checks which are not timely cashed become Unclaimed Property, and atfurthermore, ~~estimated~~holders ~~fair~~of ~~value.~~Allowed ~~Unimpaired~~Impaired Claims, towhich behave ~~paid~~not incashed a ~~full,~~check are ~~reflected~~not inpaid subsequent Distributions unless the ~~Statements~~holder ofmakes ~~Net~~a ~~Assets~~written request inthat future Distributions be paid. During November 2008, the Liquidation asTrust ~~liabilities~~notified atall ~~estimated~~such holders that their uncashed checks and any ~~aggregate~~subsequent ~~settlement~~Distributions ~~amounts.~~have ~~The~~become ~~unpaid~~Unclaimed ~~amount~~Property ofwhich, pursuant to the Plan, ~~authorized~~reverts ~~Distributions~~to the Liquidation Trust (the “Unclaimed Property Notice”). In addition, upon notice to holders of Allowed Impaired Claims iswhich ~~also~~had ~~reflected~~not asprovided atheir ~~liability.~~taxpayer Inidentification ~~addition~~number, ~~liabilities~~the Bankruptcy ~~include~~Court ~~loss contingency~~issued ~~accruals~~an ~~for~~Order ~~losses~~(the ~~considered~~“TIN ~~probable~~Motion and ~~estimable.~~Order”) ~~The~~declaring Distributions ~~Statements~~due ofto ~~Changes~~such ~~in Net~~holders ~~Assets~~as inUnclaimed ~~Liquidation~~Property ~~primarily~~which, ~~reflect~~pursuant ~~authorized~~to ~~Distributions~~the Plan, reverts to ~~holders~~the ofLiquidation ~~Beneficial~~Trust. These actions are ~~Interests~~collectively ~~and~~referred ~~changes~~to inas the ~~estimated~~“November ~~fair~~2008 ~~value~~Notices.” Pursuant ofto the November 2008 Notices, the Liquidation Trust’s ~~assets~~has ~~and~~reclassified Unclaimed ~~liabilities~~Property from various liability accounts (see Notes 4, ~~including~~7, ~~changes~~8 ~~resulting~~and ~~from~~11), ~~significant~~increasing Net ~~events~~Assets in Liquidation, orbased ~~the~~on ~~resolution~~its ~~of,~~assessment that all such uncashed checks ~~litigation~~and ~~pursued~~unpaid byDistributions ~~the~~have ~~Liquidation~~reverted ~~Trust.~~permanently ~~The~~to the Liquidation Trust’s pursuant ~~fiscal~~to ~~year~~the ~~ends~~terms onof ~~September 30~~the Plan.

~~The accompanying unaudited financial statements reflect all adjustments, consisting only of~~Basis ~~normal recurring adjustments that are, in the opinion~~ of the Liquidation Trustee, necessary for a fair statement of the results for the interim periods presented. Such financial statements and these notes thereto should be read in conjunction with the audited Liquidation Trust financial statements as of September 30, 2005 and September 30, 2004, and for the fiscal years ended September 30, 2005, September 30, 2004 and September 30, 2003, and the notes thereto. Presentation

The Liquidation Trust’s financial statements have been prepared using the liquidation basis of accounting. Under this method of accounting, the Statements of Net Assets in Liquidation reflect all assets and liabilities, including the projected total cost of liquidating the assets and winding down the affairs of the Liquidation Trust, at estimated fair value. Unimpaired Claims, to be paid in full, are reflected in the Statements of Net Assets in Liquidation as liabilities at estimated aggregate settlement amounts. The unpaid amount of the authorized Distributions to holders of Allowed Impaired Claims is also reflected as a liability. In addition, liabilities include loss contingency accruals for any losses considered probable and estimable. The Statements of Changes in Net Assets in Liquidation primarily reflect authorized Distributions to holders of Beneficial Interests, forfeiture of unclaimed Distributions reverting to the Liquidation Trust, and changes in the estimated fair value of the Liquidation Trust’s assets and liabilities, including changes resulting from significant events in, or the resolution of, litigation pursued by the Liquidation Trust. The Liquidation Trust’s fiscal year ends on September 30.

The accompanying unaudited financial statements reflect all adjustments, consisting only of normal recurring adjustments that are, in the opinion of the Liquidation Trustee, necessary for a fair statement of the results for the interim periods presented. Such financial statements and these notes thereto should be read in conjunction with the audited Liquidation Trust financial statements as of September 30, 2008 and September 30, 2007, and for the fiscal years ended September 30, 2008, September 30, 2007 and September 30, 2006, and the notes thereto.

The amounts shown in this document are rounded and are therefore approximate.

2.	Significant Accounting Policies

Use of Estimates

The preparation of the financial statements in conformity with generally accepted accounting principles requires the Liquidation Trustee to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities. Actual results are likely to differ from those estimates and those differences may be significant.

Cash and Cash Equivalents

The Liquidation Trust considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. The Liquidation Trust holds substantially all cash balances in operating and investment accounts in excess of federally insured limits. Cash is classified as: Designated as Available for Distribution to Holders of Impaired Claims, Reserved Cash and Other Cash (see Note 34).

Taxes

The Liquidation Trust is intended to qualify as a liquidating trust for federal income tax purposes, and therefore should be taxable as a grantor trust. The holders of Beneficial Interests are treated as grantors; accordingly, their pro rata share of all items of income, gain, loss, deduction and credit is included in the income tax returns of the holders of Beneficial Interests.

The Liquidation Trust pays applicable taxes on the taxable net income and gain allocable to holders of Disputed Impaired Claims on behalf of such holders. When such Disputed Claims are ultimately resolved, holders whose Disputed Claims were determined to be Allowed Claims receive Distributions from the Liquidation Trust net of taxes, if any, which the Liquidation Trust previously paid on their behalf.

The Liquidation Trust incurs no taxable income or gain on its own behalf; therefore, no tax provision is recorded in the financial statements of the Liquidation Trust.

73. Fair Value Measurements

3Statement of Financial Accounting Standards No. ~~Cash~~157 (“SFAS 157”) “Fair Value Measurements,” provides a consistent definition of fair value, establishes a framework for measuring fair value, and ~~Cash~~requires ~~Equivalents~~additional disclosures about fair-value-related measurements. It does not require any amounts to be measured at fair value which were not previously so measured under existing accounting standards. Under the liquidation basis of accounting, all assets and liabilities are presented at estimated fair value. Adopting SFAS 157, effective October 1, 2008, did not result in changes to the valuation techniques the Liquidation Trust had previously used to measure the fair value of its assets and liabilities. The primary impact on the Liquidation Trust of adopting this standard was to expand fair value measurement disclosure.

~~Cash~~SFAS is157 defines ~~invested~~fair invalue ~~highly~~as ~~liquid~~the ~~investments~~price ~~with~~that awould ~~maturity~~be ofreceived ~~three~~to ~~months~~sell oran ~~less,~~asset ~~and~~or inpaid ~~accordance~~to ~~with~~transfer ~~Section 345~~a ofliability ~~the~~in ~~Bankruptcy~~an ~~Code~~orderly ortransaction asbetween ~~otherwise~~market ~~permitted~~participants byat the ~~order~~measurement ofdate. SFAS 157 prioritizes the ~~Bankruptcy~~ ~~Court.~~inputs ~~Under~~to ~~the~~valuation techniques ~~terms~~(which ofmay include the ~~Plan~~market approach, ~~the~~income ~~Liquidation~~approach, ~~Trust~~and/or iscost approach, ~~not~~as ~~required~~applicable) tointo ~~segregate funds~~three ~~for~~broad ~~reserves~~levels, ~~(see~~as ~~Note 11).~~ follows:

Level 1 – highest priority – quoted prices in active markets for identical assets or liabilities

Level 2 – inputs other than quoted prices, but which are observable for the assets or liabilities, either directly or indirectly

Level 3 – lowest priority – unobservable inputs for the asset or liability

The Liquidation Trust’s assets and liabilities measured at fair value on a recurring basis were as follows:

($ in thousands)

			Fair Value Measurements as of December 31, 2008 using
			Quoted Prices in
			Active Markets		Significant Other		Significant
			for Identical Items		Observable Inputs		Unobservable Inputs
	December 31, 2008		(Level 1)		(Level 2)		(Level 3)

Assets:
Preference receivables	$	211					$	211
Total assets measured at fair value	$	211	$	-	$	-	$	211

Liabilities:
Unimpaired and convenience claims payable	$	1,303					$	1,303
Estimated costs of liquidation		690						690
Total liabilities measured at fair value	$	1,993	$	-	$	-	$	1,993

Gains and losses on all assets and liabilities, whether realized or unrealized, are reported in the Statement of Changes in Net Assets in Liquidation.

4. Cash and Cash Equivalents

Cash is invested in highly liquid investments with a maturity of three months or less, and in accordance with Section 345 of the Bankruptcy Code or as otherwise permitted by order of the Bankruptcy Court. Under the terms of the Plan, the Liquidation Trust is not required to segregate funds for reserves (see Note 10).

Cash Designated as Available for Distribution to Holders of Impaired Claims (“Available Cash”) is designated solely to assure the availability of funds for payment to holders of Impaired Claims who have not received their Distributions (see Notes 8 and 11).

Available Cash consists of:

	As of		As of
($ in thousands)	As of		As of
($ in thousands)	June 30, 2006		September 30, 2005
	December 31, 2008		September 30, 2008
Distributions payable	$	~~491~~312	$	~~292~~825
Reserve for remaining disputed impaired claims at 10.2911% and 9.1%, respectively		2,763		2,762
Reserve for remaining disputed impaired claims at 11.9411%		-		993
Total available cash	$	~~3,254~~312	$	31,~~054~~818

~~Reserved Cash is held by the Liquidation Trust~~ Pursuant to ~~assure payment of~~ the ~~Liquidation Trust’s~~November ~~obligations~~2008 inNotices ~~accordance~~(see ~~with~~Note ~~the~~1), ~~Plan~~$0.5 ~~Under~~million ~~the~~included ~~terms of the Plan, Reserved Cash is~~in ~~intended~~Distributions toPayable ~~provide~~as ~~for (a) operating expenses~~ of ~~the~~September ~~Liquidation Trust~~30, ~~(b) estimated~~2008 ~~payments~~has ~~to holders~~been ofreclassified ~~Allowed Unimpaired and Convenience Claims in accordance with the Plan, and (c) payments~~from ~~which~~Available ~~may~~Cash ~~become~~to ~~necessary~~Other ifCash ~~and~~ as ~~Disputed~~of ~~Unimpaired~~December ~~Claims become Allowed~~31, ~~or if certain specific contingencies should occur~~2008. ~~See Note 11 for details of specific reserves and their related amounts.~~

As of December 31, 2008, all remaining Disputed Impaired Claims have been resolved (see Note 11), eliminating the need for the Disputed Impaired Claims Reserve.

Reserved Cash is held by the Liquidation Trust to assure payment of the Liquidation Trust’s obligations in accordance with the Plan. Under the terms of the Plan, Reserved Cash is intended to provide for (a) operating expenses of the Liquidation Trust, (b) estimated payments to holders of Allowed Unimpaired and Convenience Claims in accordance with the Plan, and (c) payments which may become necessary if and as Disputed Unimpaired Claims become Allowed, or if certain contingencies should occur. See Note 10 for details of specific reserves and their related amounts.

Other Cash is cash and cash equivalents not designated to a specific reserve or fund.

4. Committee Action Settlement Receivable

The Liquidation Trust has been pursuing an adversary proceeding known as the “Committee Action” against certain former officers and directors of Hechinger Company (the “Officer and Director Defendants”), certain former lenders of the Debtors, and others (see Note 13).

During September 2005, the Liquidation Trust reached a settlement with the Officer and Director Defendants with respect to the Committee Action. Pursuant to the terms of the agreement, $7.0 million in cash was paid to the Liquidation Trust during October 2005, and the Liquidation Trust dismissed the Committee Action as against the Officer and Director Defendants. The settlement had no effect on the Liquidation Trust’s claims against any other defendant in the Committee Action.

5. Preference Receivables

The Liquidation Trust’s preference receivables are reflected in the accompanying Statements of Net Assets in Liquidation at their estimated fair value ~~of $0.9 million~~, net of estimated costs of recovery. As of ~~$0.1 million~~December 31, as2008 ~~of June~~and September 30, ~~2006~~2008, ~~and~~Preference ~~$0.9 million,~~Receivables ~~net~~consisted mainly of ~~estimated~~one remaining ~~costs~~significant ofaction. During ~~recovery~~June 2005, the Bankruptcy Court ofawarded the Liquidation Trust $01.2 0 million asin ofthis ~~September 30, 2005~~action. ~~Most~~During ofMarch 2006, the ~~value~~District ofCourt ~~preference~~upheld ~~receivables~~the ~~consists~~Bankruptcy ofCourt ruling in its entirety. The defendant appealed the ~~sole~~affirmation ~~remaining~~by ~~preference~~the ~~recovery~~District Court ~~action~~to ~~being~~the ~~actively~~Court ~~pursued.~~of Appeals. During June ~~2005~~ 2007, ~~following~~the Court of Appeals remanded the ~~February 2005~~case ~~trial~~to ofthe ~~this~~District ~~action~~Court, ~~the~~with instructions to remand to the Bankruptcy Court ~~awarded~~for specific findings. Pursuant to the ~~Liquidation~~Bankruptcy Court’s ~~Trust~~scheduling ~~$1.0~~order, both parties filed briefings by February ~~million~~2008. The ~~defendant~~Bankruptcy ~~appealed~~Court may decide the ~~decision~~case ~~and~~or ~~award~~schedule further proceedings, up to and ~~the~~including ~~appellate~~a ~~court~~trial, ~~upheld~~at ~~the~~its discretion. The ~~Bankruptcy~~Liquidation ~~Court~~Trust ~~ruling~~and in its ~~entirety~~counsel ~~during~~intend ~~March 2006.~~to ~~Although~~vigorously pursue collection of the original ~~defendant~~judgment. The ~~has~~Liquidation ~~further~~Trust’s current estimate of the ~~appealed~~fair value of preference receivables is primarily based on the ~~case,~~content of the Court ~~Liquidation~~of ~~Trust~~Appeals ~~believes~~ruling ~~that~~and ~~ultimate~~on ~~collection~~the status of ~~the~~negotiations ~~full~~with ~~award~~the isdefendant in ~~likely~~this action.

8The fair value of the preference receivables is reassessed quarterly and adjustments to estimated fair values are reflected in the period in which they become known. The eventual net realizable value of preference receivables is likely to differ from their estimated net fair value and these differences may be significant.

The fair value of Liquidation Trust assets is reassessed at least quarterly and adjustments to estimated fair values are reflected in the period in which they become known. The eventual net realizable value of preference receivables is likely to differ from their estimated net fair value and these differences may be significant.

6. Unimpaired and Convenience Claims Payable

Unimpaired Claims payable represents the estimated aggregate settlement amount of Unimpaired Claims against the Debtors prior to the Effective Date of the Plan, which will be paid out at 100% of their Allowed amount. Such Claims are valued at the Liquidation Trust’s best estimate of the amount that will ultimately be allowed. Convenience Claims, also included in this classification, are not significant.

Unimpaired and Convenience Claims payable consists of:

	As of		As of
($ in thousands)	June 30, 2006		September 30, 2005
Allowed unimpaired claims	$	1,335	$	1,335
Estimated fair value of disputed unimpaired claims		—		—
Convenience claims		2		2
Total	$	1,337	$	1,337
Number of disputed unimpaired claims		3		3

($ in thousands)

Pursuant to the Plan, certain fees and expenses which Kmart Corporation (“Kmart”) incurred in connection with the Debtors’ bankruptcy filing were allowed as an Unimpaired Claim. Allowed Unimpaired Claims as of June 30, 2006 and September 30, 2005 include this Claim, which has not yet been substantiated by Kmart as required by the Plan, at its estimated amount of $1.3 million.

	As of		As of
	December 31, 2008		September 30, 2008

Allowed unimpaired claims	$	1,303	$	1,335
Convenience claims		-		2

Total	$	1,303	$	1,337

Number of disputed unimpaired claims		3		3

~~The~~Pursuant to ~~amount asserted by~~ the ~~holders~~Plan, ofcertain ~~the~~fees ~~remaining~~and ~~Disputed~~expenses ~~Unimpaired~~which ~~Claims~~Kmart isCorporation (“Kmart”) ~~insignificant~~incurred asin ofconnection ~~June 30,~~with ~~2006~~the ~~and~~Debtors’ ~~September 30,~~bankruptcy ~~2005.~~filing ~~The~~were ~~Liquidation~~allowed ~~Trust~~as ~~believes that the~~an ~~likelihood~~Unimpaired ofClaim. Allowed ~~paying~~Unimpaired ~~any~~Claims as of ~~the~~December ~~Claims~~31, ~~is remote~~ 2008 and ~~anticipates~~September ~~that~~30, ~~each~~2008 ofinclude ~~these~~this ~~Claims~~Claim, ~~will~~which ~~be expunged~~has ornot ~~waived;~~yet ~~accordingly,~~been nosubstantiated by ~~liability~~Kmart ~~has~~as ~~been~~required ~~recorded~~by ~~with~~the ~~respect~~Plan, toat ~~the~~its ~~remaining Disputed~~estimated ~~Unimpaired~~amount ~~Claims~~of $1.3 million.

~~Unimpaired~~The amount ~~Claims~~asserted ~~are valued~~ by ~~reviewing~~ the ~~facts~~holders ~~available~~of to the ~~Liquidation~~remaining ~~Trust, including~~Disputed ~~the~~Unimpaired ~~Debtors’~~Claims ~~records~~is insignificant ~~and~~as ~~information~~of ~~submitted~~December ~~by the claimants~~31, 2008 and ~~estimating~~September ~~the~~30, 2008. The ~~ultimate~~Liquidation ~~settlement~~Trust ~~value~~believes ofthat the ~~Claims.~~likelihood ~~The~~of ~~fair~~paying ~~value~~any of ~~Unimpaired~~these Claims ~~payable~~ is ~~reassessed~~ atremote ~~least quarterly~~ and ~~adjustments~~anticipates tothat ~~estimated~~each ~~fair~~of ~~values~~these ~~are~~Claims ~~reflected~~will inbe ~~the~~waived; ~~period in which they become known. However~~accordingly, no liability ~~assurance~~has ~~can~~been berecorded ~~given~~with asrespect to the ~~ultimate allowance, disallowance or settlement of the~~ remaining Disputed Unimpaired Claims~~, individually or in the aggregate~~.

Unimpaired Claims are valued by reviewing the facts available to the Liquidation Trust, including the Debtors’ records and information submitted by the claimants, and estimating the ultimate settlement value of the Claims. The fair value of Unimpaired Claims payable is reassessed quarterly and adjustments to estimated fair values are reflected in the period in which they become known. However, no assurance can be given as to the ultimate allowance, disallowance or settlement of the remaining Disputed Unimpaired Claims, individually or in the aggregate.

7. Uncashed Claims Checks

Pursuant to the Plan, any Claims payments and Distributions which remain uncashed for 90 ~~days~~ days following their issuance date are forfeited to the Liquidation ~~Trust for distribution to other~~ ~~holders of Allowed Claims~~Trust. Pending a final order from the Bankruptcy Court, the Liquidation Trust has treated such items as a liability., ~~Such~~and ~~checks~~has ~~currently may be~~ reissued uncashed checks upon ~~timely~~ request of the payee, subject to applicable fees.

9Pursuant to the November 2008 Notices (see Note 1), $0.3 million ($0.1 million related to Unimpaired Claims and $0.2 million related to Impaired Claims) included in uncashed Claims checks as of September 30, 2008 has been reclassified from this liability account, increasing Net Assets in Liquidation and making the unclaimed funds available to the Liquidation Trust.

During December 2008, uncashed Claims checks increased by $0.5 million as a result of uncashed checks from the most recent interim Distribution, made during August 2008 (the “Sixth Interim Distribution”). The uncashed Claims checks from the Sixth Interim Distribution were not included in the November 2008 Notices.

8. Distributions Payable

Distributions payable represents the amount of authorized Distributions which the Liquidation Trust has been unable to pay to holders of Allowed Impaired Claims. A number of holders of such Allowed Claims, while otherwise eligible for Distributions, ~~have~~had either not yet provided all information necessary for payment~~; were subject to an offsetting claim by the Liquidation Trust~~ ~~which had not yet been resolved;~~ or, because they had not cashed a previous Distribution check, were not paid any subsequent Distributions. Until all such issues are resolved, the holder of an Allowed Claim may not receive a Distribution.

Pursuant to the November 2008 Notices (see Note 1), $0.5 million included in Distributions Payable as of September 30, 2008 has been reclassified from this liability account, increasing Net Assets in Liquidation and making the unclaimed funds available to the Liquidation Trust. Substantially all of the remaining balance in Distributions payable as of December 31, 2008 has been paid subsequent to December 31, 2008.

9. Estimated Costs of Liquidation

The Wind-down Reserve and the Litigation Reserve ~~described below~~ together constitute the estimated costs of liquidation in the accompanying Statements of Net Assets in Liquidation.

Under the Plan, the Liquidation Trust was required to establish and fund a reserve to pay administration costs and costs of holding and liquidating the Liquidation Trust’s assets (the “Wind-down Reserve”). The ~~Substantially~~amounts ~~all~~included ofin the ~~day~~Wind-~~to-day~~down ~~operations~~Reserve represent the projected costs of operating the Liquidation Trust ~~have been~~through ~~terminated;~~its ~~however~~expected termination. These costs, ~~provision~~which ~~has~~include ~~been~~professional ~~made~~fees, ~~for~~insurance and ~~necessary~~personnel, ~~management~~among ~~oversight~~other ~~and administrative~~things, ~~legal~~are ~~and~~based ~~accounting~~on ~~processes~~various toassumptions ~~continue through~~ regarding the ~~end~~number of ~~2006.~~employees, ~~These~~the ~~final items~~use ~~include resolution~~ of ~~the~~professionals ~~remaining Disputed Claims and all litigation~~ (~~excluding~~particularly ~~the~~in ~~costs~~connection ~~provided~~with ~~for~~continuing inClaims ~~the~~resolution ~~Litigation~~and ~~Reserve~~litigation), athe ~~final~~anticipated ~~Distribution,~~termination date ifof ~~applicable,~~the ~~and~~Liquidation ~~filings~~Trust ~~with regulatory authorities~~ and ~~with~~other ~~the Bankruptcy Court~~matters.

Pursuant to the Plan, the Liquidation Trust also established and funded a reserve to pay the costs of pursuing certain actions referred to as the “Bondholder Action” and the “Committee Action” (the “Litigation Reserve”). The amount of the Litigation Reserve as of June 30, 2006 and September 30, 2005 is intended to fund the appeal of the District Court’s Summary Judgment Decision and related judgment with respect to the Committee Action in the Court of Appeals (see Note 13).

The fair value of the estimated costs of liquidation is reassessed at least quarterly and adjustments to estimated fair values are reflected in the period in which they become known. Actual costs are likely to differ from the estimated costs and these differences may be significant.

10. Fleet Settlement Accrual

The Fleet settlement accrual of $8.3 million as of June 30, 2006 was recorded based on a settlement in principle with Fleet Retail Finance Inc. (“Fleet”) and General Electric Credit Corporation (“GECC”), defendants in the Bondholder Action and the Committee Action (the “Actions”). Under the terms of a stipulated order between Fleet and the Liquidation Trust which established the Fleet Reserve (the “Fleet Stipulation”), all as discussed in Notes 11 and 13, below, and subject to review by the Bankruptcy Court, Fleet may seek reimbursement of certain legal fees incurred in its defense of the Actions. Subsequent to June 30, 2006, and subject to certain conditions, including Fleet documenting certain expenditures to the satisfaction of the Liquidation Trustee, the Liquidation Trust, Fleet and GECC have agreed in principle to release each other from further claims and, upon payment to Fleet of $8.3 million of the $11.0 million Fleet Reserve, Fleet and GECC will release any claim to the balance of the Fleet Reserve. The settlement is also subject to the approval of the Bankruptcy Court, and no assurance can be given as to its ultimate outcome.

The Fleet loss contingency accrual of $3.5 million as of September 30, 2005, now incorporated into the Fleet settlement accrual, represented the Liquidation Trust’s best estimate, in accordance with SFAS No. 5, “Accounting for Contingencies”, of the loss it might incur in conjunction with Fleet prevailing against the Liquidation Trust in the Bondholder Action (see Note 13).

11. Bankruptcy Reserves Required The reserves for which Reserved Cash is maintained consist of the following:

	As of		As of
($ in thousands)	June 30, 2006		September 30, 2005
Liability reserves
Fleet settlement accrual	$	8,250	$	3,500
Wind-down		790		1,436
Litigation		371		730
Unimpaired and convenience claims		1,337		1,337
Uncashed claims checks		440		361
Total liability reserves		11,188		7,364
Contingency reserves
Fleet reserve		2,750		7,500
Litigation appeals provision		4,000		4,000
Excess disputed unimpaired claims		300		300
Preference settlement claims		60		42
Minimum reserve		3,000		3,000
Total contingency reserves		10,110		14,842
Total reserves	$	21,298	$	22,206

The Fleet settlement accrual, totaling $8.3 million of the Fleet Reserve initially established at $11.0 million, has been recorded as a liability based on a settlement in principle between the Liquidation Trust, Fleet and GECC reached subsequent to June 30, 2006 (see Note 10). The $2.8 million balance of the Fleet Reserve remains classified as a contingency reserve as of June 30, 2006, and until the settlement reached in principle is consummated and approved by the Bankruptcy Court.

The litigation appeals provision represents cash held in reserve to allow the Liquidation Trust to pursue or defend a future trial and appeals of the Committee Action. The Liquidation Trustee designated this contingency reserve after concluding that future cash receipts of the Liquidation Trust might not be sufficient to fund such actions prospectively. No liability has been accrued in connection with such possible future actions because the Liquidation Trust has not determined that any such action required will necessitate additional funding of the Litigation Reserve.

The minimum reserve, established pursuant to the Plan and intended to assure adequate liquidity for the Liquidation Trust, is to be maintained, subject to reduction by an order of the Bankruptcy Court, until the Liquidation Trust makes a final Distribution, if any, or is otherwise terminated.

~~12.~~Substantially all ~~Impaired~~of ~~Claims~~the ~~The~~day-to-day operations of the Liquidation Trust’s ~~estimate~~were terminated during June 2005; however, provision has been made for necessary management oversight and administrative, legal and accounting processes to continue through its expected termination before the end of ~~Impaired~~the ~~Claims~~fiscal ~~consists~~year ending September 30, 2009. These final items include resolution of: the remaining Disputed Claims and all litigation, a final Distribution, if applicable, and any necessary filings with regulatory authorities and with the Bankruptcy Court.

	As of		As of
($ in thousands)	June 30, 2006		September 30, 2005
Allowed impaired claims	$	706,043	$	706,043
Estimated fair value of disputed impaired claims		13,784		13,775
Total estimated impaired claims	$	719,827	$	719,818
Asserted value of disputed impaired claims	$	52,028	$	55,179
Number of disputed impaired claims		15		16

Pursuant to the Plan, the Liquidation Trust also established and funded a reserve to pay the costs of pursuing certain actions, including the case referred to as the “Committee Action” (the “Litigation Reserve”). The Liquidation Trust determined not to further pursue the Committee Action following a May 2008 adverse decision in the Court of Appeals regarding this Action.

~~During~~The ~~November 2005,~~fair value of the ~~Liquidation~~estimated ~~Trust~~costs ~~authorized~~of aliquidation ~~Distribution~~is ofreassessed ~~1.1911%~~quarterly ~~of the~~and ~~Allowed~~adjustments ~~amount~~ to ~~holders~~estimated offair ~~Allowed~~values ~~Impaired~~are ~~Claims,~~reflected ~~which~~in ~~was~~the ~~paid~~period ~~during~~in ~~December 2005.~~which ~~Because~~they ~~this~~become ~~Distribution~~known. Actual ~~resulted~~costs ~~from~~are ~~the~~likely ~~$7.0 million~~to ~~proceeds~~differ offrom the ~~Committee Action settlement,~~estimated ~~pursuant~~costs toand ~~the~~these ~~Plan,~~differences ~~Kmart’s~~may ~~$150.0 million~~be ~~General Unsecured Claim was excluded from the Distribution~~significant.

~~Distributions to holders of Allowed Impaired Claims have been authorized, through June 30, 2006, in the cumulative amount of~~ 10.2911% of the Allowed amount of the Impaired Claims. A total of $70.6 million has been paid to holders of Allowed Impaired Claims through June 30, 2006. In conjunction with the authorized Distributions, as of June 30, 2006, the Liquidation Trust held a total of $3.3 million of Available Cash for Distribution to holders of Impaired Claims, including the $2.8 million Disputed Impaired Claims Reserve for Distribution to holders of Disputed Impaired Claims should such Disputed Claims become Allowed, and $0.5 million in Distributions payable to holders of Allowed Impaired Claims (see Notes 3 and 8). The Disputed Impaired Claims Reserve is determined based on the cumulative Distribution rate and on the estimated amount, approved by the Bankruptcy ~~Court for reserve purposes, of each remaining Disputed Impaired Claim.~~Reserves Required

No The ~~assurance~~reserves ~~can~~for bewhich ~~given~~Reserved Cash asis tomaintained ~~the~~consist ~~ultimate allowance, disallowance or settlement~~ of the ~~remaining~~ ~~Disputed Impaired Claims, individually or in the aggregate.~~ following:

13. Contingencies

($ in thousands)
	As of		As of
	December 31, 2008		September 30, 2008
Liability reserves
Unimpaired and convenience claims	$	1,303	$	1,337
Uncashed claims checks		573		426
Wind-down		690		757
Litigation		-		152

Total liability reserves		2,566		2,672

Contingency reserves
Minimum reserve		3,000		3,000
Excess disputed unimpaired claims		300		300

Total contingency reserves		3,300		3,300

Total reserves	$	5,866	$	5,972

The ~~Bondholder~~minimum ~~Action~~reserve, established pursuant to the Plan and intended to assure adequate liquidity for the Liquidation Trust, is to be maintained, subject to reduction by an order of the Bankruptcy Court, until the Liquidation Trust makes a final Distribution, if any, or is otherwise terminated.

InThe reserved ~~March 2004~~amount ~~the~~for ~~District~~Disputed ~~Court~~Unimpaired ~~issued~~Claims ~~an opinion and order~~ (~~collectively,~~ the ~~“Decision”)~~Excess ~~in the~~Disputed ~~Bondholder Action, directing the entry of judgment in favor of Fleet and GECC. The Liquidation~~Unimpaired ~~Trust~~Claims ~~appealed~~Reserve) ~~the~~is ~~Decision,~~based ~~and~~on ~~in July 2005~~ the ~~Court~~estimated ofamount ~~Appeals issued its Opinion affirming the March 2004 Decision. The Liquidation Trust’s motion for reconsideration and reversal~~ of ~~the~~such ~~Court of~~Claims ~~Appeals~~approved ~~Opinion was denied~~ by the Bankruptcy Court offor ~~Appeals~~reserve ~~during August 2005, and the Liquidation Trust has determined not to pursue the action further~~purposes. ~~Subsequent to June 30, 2006, the Liquidation Trust, Fleet and GECC reached an agreement in principle to settle all claims, the terms of which are described immediately below.~~

The Committee Action

~~Appeals its notice of appeal from the Summary Judgment Decision and related judgment in the Committee Action~~11. Impaired ~~A March 2006 mediation ordered and conducted by the Third Circuit Court of Appeals did not result in a settlement among the remaining parties to the Committee Action.~~ Claims

The ~~Liquidation Trust continued to negotiate with some of the remaining parties, reaching an~~ ~~agreement in principle with both Fleet and GECC subsequent to June 30, 2006. Subject to certain conditions, including Fleet documenting certain expenditures to the satisfaction of the~~ Liquidation ~~Trustee,~~ ~~the Liquidation~~ Trust, Fleet and GECC have agreed in principle to release each other from further claims and, upon payment to Fleet of $8.3 million of the $11.0 million Fleet Reserve, Fleet and GECC will release any claim to the balance of the Fleet Reserve. The settlement is also subject to the approval of the Bankruptcy Court. The settlement in principle has no effect on the Liquidation Trust’s ~~claims~~estimate ~~against~~of ~~any~~Impaired ~~other~~Claims ~~defendant~~consists ~~in the Committee Action.~~ of:

During September 2005, the Liquidation Trust reached a settlement with the Officer and Director Defendants with respect to the Committee Action. Under the terms of the agreement, $7.0 million in cash was paid to the Liquidation Trust during October 2005, and the Liquidation Trust dismissed the Committee Action as against the Officer and Director Defendants. The settlement had no effect on the Liquidation Trust’s claims against any other defendant in the Committee Action.

($ in thousands)	As of		As of
	December 31, 2008		September 30, 2008

Allowed impaired claims	$	719,980	$	712,412
Estimated fair value of disputed impaired claims		-		7,703

Total estimated impaired claims	$	719,980	$	720,115

Asserted value of disputed impaired claims	$	-	$	8,086

Number of disputed impaired claims		-		5

~~The~~Distributions to ~~various~~holders ~~remaining~~of ~~defendants~~Allowed ~~are~~Impaired ~~vigorously~~Claims ~~opposing~~have ~~this~~been ~~action.~~authorized, ~~There~~through isDecember ~~no assurance~~31, ~~that~~2008, in the ~~Liquidation~~cumulative ~~Trust~~amount ~~will~~of ~~prevail~~11.9411% onof the ~~appeal~~Allowed ~~filed~~amount ~~with~~of ~~respect~~the toImpaired Claims. A ~~the~~total ~~Committee~~of ~~Action~~$83. ~~While~~4 ~~the~~million ~~Liquidation~~has ~~Trust~~been ispaid ~~vigorously~~to ~~pursuing~~holders ~~this~~of ~~litigation~~Allowed Impaired Claims through December 31, 2008. In conjunction with the authorized ~~intent~~Distributions, toas ~~obtain~~of aDecember ~~very substantial~~31, ~~recovery~~2008, the Liquidation Trust ~~cannot~~held ~~predict~~a total ~~with~~of ~~any~~$0.3 ~~certainty~~million ~~the~~of ~~outcome~~Available Cash, consisting of ~~the~~Distributions payable to ~~litigation~~holders orof ~~the~~Allowed ~~amount~~Impaired orClaims ~~range~~(see ofNotes ~~potential~~4 ~~recoveries~~and 8).

Pursuant to the November 2008 Notices (see Note 1), in accordance with the terms of the Plan, $0.7 million (comprised of $0.2 million of uncashed checks (see Note 7) and $0.5 million of Distributions payable (see Note 8)) of Distributions previously authorized to holders of Allowed Impaired Claims who had not met all the requirements for a Distribution payment, generally by not providing their taxpayer identification number, or who had not cashed a Distribution check and therefore have not been paid subsequent Distributions, were forfeited by such holders and reversed, increasing Net Assets in Liquidation and making the unclaimed funds available to the Liquidation Trust.

During the three months ended December 31, 2008, one Disputed Impaired Claim was settled for an amount approximating its estimated value of $7.6 million, and an Order issued by the Bankruptcy Court expunged all remaining Disputed Impaired Claims.

12. Contingencies

Litigation and Other Proceedings on behalf of the Liquidation Trust

As of December 31, 2008, the Liquidation Trust was pursuing one significant preference litigation action. During March 2006, the District Court upheld the Bankruptcy Court’s award to the Liquidation Trust of $1.0 million in this case. The defendant further appealed the affirmation by the District Court to the Court of Appeals. During June 2007, the Court of Appeals remanded the case to the District Court, with instructions to remand to the Bankruptcy Court for specific findings. Pursuant to the Bankruptcy Court’s scheduling order, both parties filed briefings by February 2008. The Bankruptcy Court may decide the case or schedule further proceedings, up to and including a trial, at its discretion. The Liquidation Trust and its counsel intend to vigorously pursue collection of the original judgment.

Litigation and Other Proceedings against the Liquidation Trust

Settling Claims filed with the Bankruptcy Court is the ordinary course of business for the Liquidation Trust. As of December 31, 2008, none of the three remaining Disputed Claims, if resolved in favor of the claimant, would have a material effect on the financial condition of the Liquidation Trust.

Other than as described herein, the Liquidation Trust is not a defendant in any action or proceeding which, if the Liquidation Trust were to be found liable in such action or proceeding, would materially adversely impact the Liquidation Trust’s financial condition.

13. Other

During the three months ended December 31, 2008, the Liquidation Trust received a $0.1 million payment of funds escheated for the benefit of one of the Debtors. Until collectability of the amount was established by receiving the payment from the state to which the funds were escheated, the amount was not recorded as an asset of the Liquidation Trust.

During the three months ended December 31, 2007, the Liquidation Trust received a $0.3 million distribution in the liquidation of the former company-owned life insurance policy carrier for one of the Debtors. The Debtors were entitled to these liquidation proceeds solely as a result of the occurrence and particular terms of this insurance carrier’s liquidation, and therefore no receivable from the carrier had been recorded as an asset of the Liquidation Trust.

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

Reference is made to the unaudited financial statements of the Liquidation Trust as of ~~June~~ 30December 31, ~~2006~~2008 and September 30, ~~2005~~2008 and for the three months ~~and the nine months~~ ended ~~June 30~~December 31, ~~2006~~ 2008 and ~~June 30~~December 31, ~~2005~~2007, and the notes thereto (the “Unaudited Liquidation Trust Financial Statements”), included as Item 1. of this Form 10-Q. The following information concerning the Liquidation Trust’s financial performance and condition should be read in conjunction with the ~~audited~~ audited Liquidation Trust financial statements as of September 30, ~~2005~~2008 and September 30, ~~2004~~2007, and for the fiscal years ended September 30, ~~2005~~2008, September 30, ~~2004~~2007 and September 30, ~~2003~~2006, and the notes thereto.

The Unaudited Liquidation Trust Financial Statements have been prepared on the same basis as the audited Liquidation Trust financial statements, using the liquidation basis of accounting, and, in the opinion of the Liquidation Trustee, contain all adjustments, consisting of normal recurring adjustments necessary for a fair presentation of the Liquidation Trust’s results for such periods. The Liquidation Trust’s results for the three months ended December ~~June 30~~31, ~~2006~~2008 are not necessarily indicative of the results to be expected for any other interim period or any future fiscal year. All amounts are rounded and are therefore approximate.

I.	Accounting Policies and Estimates

The following discussion and analysis of the Liquidation Trust’s changes in net assets in liquidation, cash receipts and disbursements, and net assets in liquidation is based on the Unaudited Liquidation Trust Financial Statements which have been prepared in accordance with accounting principles generally accepted in the United States of America and in accordance with the liquidation basis of accounting. During preparation of these financial statements, the Liquidation Trustee is required to make certain estimates and assumptions which affect the reported amounts of assets and liabilities in liquidation at estimated fair value, including estimates and assumptions concerning resolution of disputed claims, resolution of current and potential litigation, and the fair value, and related disclosure, of contingent assets and liabilities. On an ongoing basis, the Liquidation Trustee evaluates and updates these estimates and assumptions based on historical experience and on various other assumptions the Liquidation Trustee believes are reasonable under the circumstances. Actual results may differ from these estimates and different assumptions would lead to different estimates.

The Liquidation Trust’s critical accounting policies are described in Management’s ~~Discussion~~ Discussion and Analysis of Financial Condition and Results of Operations in the Liquidation Trust’s annual report on Form 10-K for the year ended September 30, ~~2005.~~ 2008.

As part of preparing for the Liquidation Trust’s termination, commencing during the three months ended December 31, 2008, the Liquidation Trust has acted to judicially resolve Claims-related liabilities which it has been unable to pay. Pursuant to the Court-authorized terms of the Plan, Distribution and Claims payment checks which are not timely cashed become Unclaimed Property, and furthermore, holders of Allowed Impaired Claims which have not cashed a check are not paid subsequent Distributions unless the holder makes a written request that future Distributions be paid. During November 2008, the Liquidation Trust notified all such holders that their uncashed checks and any subsequent Distributions have become Unclaimed Property which, pursuant to the Plan, reverts to the Liquidation Trust (the “Unclaimed Property Notice”). In addition, upon notice to holders of Allowed Impaired Claims which had not provided their taxpayer identification number, the Bankruptcy Court issued an Order (the “TIN Motion and Order”) declaring Distributions due to such holders as Unclaimed Property which, pursuant to the Plan, reverts to the Liquidation Trust. These actions are collectively referred to as the “November 2008 Notices.” Pursuant to the November 2008 Notices, the Liquidation Trust has reclassified Unclaimed Property totaling $0.8 million from various liability accounts (primarily uncashed Claims checks of $0.1 million related to Unimpaired Claims and $0.2 million related to Impaired Claims, and Distributions payable of $0.5 million), increasing Net Assets in Liquidation, based on its assessment that all such uncashed checks and unpaid Distributions have reverted permanently to the Liquidation Trust pursuant to the terms of the Plan.

II. Changes in Net Assets in Liquidation

Net assets in liquidation are subject to material change when either (a) Distributions to holders of Allowed Impaired Claims are authorized, or forfeited, or (b) estimates of the fair value of the Liquidation Trust’s assets and/or liabilities change, including as a result of significant events in, or the resolution of, litigation pursued by the Liquidation Trust. The authorization ~~Both~~and ~~the~~forfeiture ~~authorization~~ of Distributions and changes in estimates are non-cash changes. These changes are shown in the Liquidation Trust’s Statements of Changes in Net Assets in Liquidation and are discussed below.

~~Most~~Many cash transactions, on the other hand, such as collection of receivables and payments of of liabilities and Distributions, cause offsetting changes in the associated components of assets and liabilities, but do not change net assets in liquidation. The Liquidation Trust’s Statements of Cash Receipts and Disbursements show the results of these transactions, which are also discussed later under the heading “Cash Receipts and Disbursements.”

The following table summarizes the significant changes in net assets in liquidation for the periods as indicated:

	For the three months ended
($ in thousands)	June 30, 2006			June 30, 2005
Fleet settlement accrual	$	(4,750	)	$	(3,500	)
Distributions authorized		—			(7,055	)
(Decrease)/increase in estimated fair value of preference receivables, net		(4	)		396
Increase in estimated costs of liquidation:
Wind-down reserve		—			(124	)
Interest income and net other increases		284			291
Net decrease in net assets in liquidation	$	(4,470	)	$	(9,992	)

($ in thousands)

	For the nine months ended
	For the three			For the three
($ in thousands)	June 30, 2006			June 30, 2005
	months ended			months ended
Fleet settlement accrual	$	(4,750	)	$	(3,500	)
	December 31, 2008			December 31, 2007
Distributions authorized		(6,679	)		(7,277	)
Increase/(decrease) in net assets in liquidation
Increase in estimated fair value of preference receivables, net		31			329
Distributions authorized	$	(904	)	$	-
Increase in estimated costs of liquidation:
Distributions forfeited		703
Wind-down reserve		—			(124	)
Increase in estimated costs of liquidation		(275	)		-
Interest income and net other increases		780			1,585
Decrease in estimated fair value of unimpaired claims		85			-
Net decrease in net assets in liquidation	$	(10,618	)	$	(8,987	)
Interest income		2			201
Other increases, net		124			291
Net (decrease)/increase in net assets in liquidation	$	(265	)	$	492

A. ~~Fleet settlement accrual~~ Distributions

Pursuant to a stipulation between the Liquidation Trust and Fleet Retail Finance Inc. (“Fleet”) (the “Fleet Stipulation”), the Liquidation Trust established a Fleet Reserve totaling $11.0 million. The Fleet Stipulation contains provisions pursuant to which Fleet may seek reimbursement of certain legal fees and expenses in the event of certain outcomes in proceedings by the Liquidation Trust against Fleet, including the ultimate resolution of the Committee Action and/or the Bondholder Action (see Part II, Item 1., ~~“Legal~~Distributions ~~Proceedings,” below) in favor of Fleet.~~ authorized

~~The~~During the ~~Fleet~~three ~~Stipulation~~months ~~provides~~ended ~~that~~December 31, in2008, ~~the~~no ~~event~~new ~~the~~interim ~~Committee~~Distribution ~~Action~~was authorized; ~~and/or~~however, ~~the~~Distributions ~~Bondholder Action~~at (the ~~“Actions”)~~cumulative ~~are~~rate ~~ultimately resolved in favor~~ of ~~Fleet (by a final~~11.9411%, ~~non-appealable order~~totaling or$0.9 ~~settlement~~million, ~~approved~~were byauthorized during the ~~Bankruptcy~~three ~~Court),~~months ~~Fleet~~ended ~~may~~December ~~seek~~31, ~~immediate~~2008 ~~reimbursement of the~~to ~~reasonable~~the ~~legal~~holder ~~fees~~of ~~and~~a ~~expenses~~$7.6 ~~incurred~~million byImpaired ~~Fleet~~Claim innewly ~~defense~~allowed ofduring ~~either~~the ~~or both Actions~~period, ~~up to~~ ~~the~~decreasing ~~$11.0 million~~Net ~~balance~~Assets ofin ~~the Fleet Reserve~~Liquidation. No ~~Such~~new ~~reimbursement~~interim ~~cannot~~Distribution bewas authorized, ~~demanded~~and ~~until~~no ~~the appeal~~Impaired ~~period~~Claims ~~has~~were ~~passed~~newly allowed, ~~and~~during isthe ~~subject~~three tomonths ended ~~review~~December by31, ~~the Bankruptcy Court~~2007.

As of June 30, 2006, based on the agreement in principle arrived at with Fleet and with another defendant in the Actions, General Electric Credit Corporation (“GECC”), subsequent to June 30, 2006, the Liquidation Trust determined that recording an estimated loss totaling $82.~~3 million, consistent~~ ~~with~~Distributions the total amount of the settlement reached in principle, was necessary. The Liquidation Trust therefore recorded a decrease in net assets in liquidation of $4.8 million (in addition to the loss contingency accrual of $3.5 million recorded previously) and transferred that portion of the Fleet Reserve from contingency reserves to the liability designated as the Fleet settlement accrual. forfeited

~~During~~As a result of the ~~three~~November ~~months~~2008 ~~ended~~Notices ~~June 30,~~(discussed ~~2005~~above), ~~related~~previously ~~to the adverse Court of Appeals decision~~authorized inDistributions ~~the~~totaling ~~Bondholder~~$0.7 ~~Action~~million (~~discussed~~comprised inof ~~Part II, Item 1~~$0.,2 ~~“Legal~~million ~~Proceedings,”~~of ~~below)~~uncashed checks and ~~based~~$0.5 ~~on certain~~million ~~terms~~ of ~~the~~Distributions ~~Fleet~~payable) ~~Stipulation,~~were ~~the~~forfeited ~~Liquidation~~and ~~Trust~~reversed, increasing ~~recorded~~Net aAssets ~~decrease~~ in ~~net~~Liquidation, ~~assets~~during ~~in liquidation~~the asthree amonths ~~loss~~ended ~~contingency~~December ~~accrual of $3~~31, 2008.~~5 million~~ No ~~and~~such ~~transferred~~Notice ~~that~~or ~~portion~~forfeitures ofoccurred ~~the~~during ~~Fleet Reserve from contingency reserves to~~ the ~~Fleet~~three ~~loss contingency accrual (now incorporated into the~~months ~~Fleet~~ended ~~settlement~~December ~~accrual)~~31, 2007.

B. Distributions authorized

No new interim Distribution was authorized during the three months ended June 30, 2006. During November 2005, the Liquidation Trust authorized a Distribution of 1.1911% of the Allowed amount to holders of Allowed Impaired Claims, totaling $6.6 million, which was paid during December 2005. Because this Distribution resulted from the $7.0 million cash proceeds of the Committee Action settlement (discussed below under “Legal Proceedings”), pursuant to the Plan, Kmart’s $150.0 million General Unsecured Claim was excluded from the Distribution. In addition, included in Distributions authorized for the nine months ended June 30, 2006, the Liquidation Trust paid $0.1 million of applicable taxes on certain calendar year 2005 taxable net income and gain allocable to holders of Disputed Impaired Claims on behalf of such holders (the “2005 Tax Payment”).

During May 2005, the Liquidation Trust authorized a Distribution of 1.0% of the Allowed amount to holders of Allowed Impaired Claims, totaling $7.1 million, which was paid during May 2005. Distributions at the previous cumulative rate of 8.1%, totaling $0.1 million, were also authorized during the nine months ended June 30, 2005 to holders of $1.7 million of Impaired Claims newly allowed during the period. In addition, included in Distributions authorized for the nine months ended June 30, 2005, the Liquidation Trust paid $0.1 million of applicable taxes on certain calendar year 2004 taxable net income and gain allocable to holders of Disputed Impaired Claims on behalf of such holders (the “2004 Tax Payment”).

As a result of the ongoing Claims resolution process, fewer Impaired Claims remain to be resolved as of each successive period.

C. Changes in estimated fair value of preference receivables, net

The estimated fair value of preference receivables was adjusted slightly during the three months ended June 30, 2006, and during the nine months ended June 30, 2006 based on settlements achieved in excess of previously estimated amounts as of June 30, 2006, offset by an increase in estimated costs of recovery which occurred principally as of December 31, 2005. Costs of recovery during the three months ended December 31, 2005 included contingent fees of $0.1 million payable to preference collections counsel with respect to additional value the Liquidation Trust recognized from waivers of otherwise valid Impaired Claims obtained in the course of preference settlements. The Liquidation Trust recognizes additional value from such Impaired Claims waivers with each additional Distribution, because Impaired Claims waivers decrease the amount of Claims the Liquidation Trust must pay in each subsequent Distribution. The $0.1 million of additional contingent fees recognized during the three months ended December 31, 2005 were related to the Distribution paid during December 2005.

During the three months ended June 30, 2005, the Bankruptcy Court awarded $1.0 million in favor of the Liquidation Trust in the one significant remaining preference recovery action. Although the defendant appealed the decision and award, the Liquidation Trust increased the estimated fair value of preference receivables by the net amount of $0.4 million to reflect the full amount of the $1.0 million award. The increase of $0.4 million for the three months ended June 30, 2005 is net of increased costs of collecting the higher amount, and net of contingent fees of $0.1 million paid to the Liquidation Trust’s preference collections counsel with respect to the value it received for waivers of otherwise valid Impaired Claims obtained in the course of preference settlements, related to the Distribution paid during May 2005. The increase of $0.3 million for the nine months ended June 30, 2005 is net of an increase in the estimated costs of collection.

D. Changes in estimates – estimated costs of liquidation

No significant change in the status of the Liquidation Trust’s wind-down activities or the Committee Action occurred during the three months or the nine months ended June 30, 2006. During the three months and nine months ended June 30, 2005 the Wind-down Reserve was increased by $0.1 million, because the Liquidation Trust’s wind-down activities proceeded more slowly than previously estimated.

~~Upon the 2005 re-evaluation of the activity required to complete the wind-down, the~~B. Estimated ~~Liquidation Trust determined that the expected wind-down period should be extended into mid-2006, primarily spreading previously estimated~~ costs ~~over~~of a longer period, but also increasing costs as a result. While the Liquidation Trust has continued past the mid-2006 estimate and its termination date is uncertain, total estimated expenditures have not changed. liquidation

EBased on revised forecasts of operational requirements prior to and associated with the expected termination of the Liquidation Trust, the remaining Wind-down Reserve was increased by $0.3 million ~~Interest~~during ~~income~~the three months ended December 31, 2008, both as a result of the remaining obligations of the Liquidation Trust taking longer to complete than expected, and ~~net~~because ~~other~~the ~~increases~~estimated cost of the termination process has increased. No such change in estimate occurred during the three months ended December 31, 2007.

~~Interest income and net other increases during the three months and the nine months ended June 30, 2006 consisted primarily of interest income~~C. ~~Interest income and net other increases during~~ Unimpaired the three months and the nine months ended June 30, 2005 consisted primarily of a $0.6 million settlement in connection with litigation against a former insurance company of the Debtors, a $0.4 million distribution in the liquidation of the Debtors’ former company-owned life insurance policy carrier, and interest income. claims

The November 2008 Notices discussed above were also sent to holders of Allowed Unimpaired Claims who had either not cashed their Claim payment check, or who had not met all the requirements for payment of their Claims, generally by not providing sufficient information for payment. As a result of the November 2008 Notices, a total of $0.1 million of uncashed checks and remaining payables to holders of Allowed Unimpaired Claims were forfeited and reversed, increasing Net Assets in Liquidation, during the three months ended December 31, 2008. No such Notice or forfeitures occurred during the three months ended December 31, 2007.

D. Interest income

Interest income decreased during the three months ended December 31, 2008 as compared to the three months ended December 31, 2007, primarily as a result of significantly declining interest rates, but also because the Liquidation Trust held decreased cash balances available for investment as a result of the Sixth Interim Distribution in August 2008.

E. Other increases, net

Other increases, net during the three months ended December 31, 2007 consisted primarily of a $0.3 million distribution in the liquidation of the former company-owned life insurance policy carrier for one of the Debtors. The Debtors were entitled to these liquidation proceeds solely as a result of the occurrence and particular terms of this insurance carrier’s liquidation, and therefore no receivable from the carrier had been recorded as an asset of the Liquidation Trust.

III. Cash Receipts and Disbursements

The following table summarizes the cash receipts and disbursements for the periods as indicated:

	For the nine months ended
($ in thousands)	June 30, 2006			June 30, 2005
Cash receipts
Collection of committee action settlement	$	7,000		$	—
Preference collections, before costs of recovery		199			3,742
Other receipts		780			1,138
Total cash receipts		7,979			4,880
Cash disbursements
Operating expenses		438			1,497
Legal and professional fees
Litigation		359			1,203
Preference recoveries		179			1,156
Liquidation Trust operations		208			546
Claims payments		—			11
Voided claims checks, net of reissues		(79	)		(153	)
Total cash disbursements		1,105			4,260
Distributions paid		(6,480	)		(7,242	)
Increase/(decrease) in cash and cash equivalents	$	394		$	(6,622	)

($ in thousands)

	For the three			For the three
	months ended			months ended
	December 31, 2008			December 31, 2007

Cash receipts
Interest income	$	2		$	201
Other receipts		124			293

Total cash receipts		126			494

Cash disbursements
Distributions paid		900			-
Operating expenses		252			147
Legal and professional fees
Litigation		150			148
Liquidation Trust operations		92			29
Preference recoveries		-			2
(Voided) claims checks, net of reissues		(419	)		-

Total cash disbursements, net of voided claims checks		975			326

(Decrease)/increase in cash and cash equivalents	$	(849	)	$	168

A.	Cash receipts

~~During~~Changes in ~~September 2005,~~interest ~~the~~income ~~Liquidation Trust reached a settlement with certain former officers~~ and ~~directors~~other ofreceipts ~~Hechinger~~during ~~Company (~~the ~~“Officer~~three ~~and~~months ~~Director~~ended ~~Defendants”)~~December ~~with~~31, 2008 ~~respect~~as compared to the ~~Committee~~ ~~Action.~~three ~~Under~~months ~~the~~ended ~~terms~~December of31, ~~the~~2007 ~~agreement,~~are ~~$7.0 million~~discussed in “Changes ~~cash~~in ~~was~~Net ~~paid~~Assets toin ~~the~~ Liquidation,” ~~Trust during October 2005~~above.

~~Cash receipts from collections of preference receivables have been ongoing since the preference actions were filed in mid-2001~~B. ~~Preference collections during the nine months ended~~ Distributions ~~June 30, 2006 were nominal, resulting from collections efforts on recently settled cases and certain default judgments issued.~~ paid

17Distributions paid depend primarily on the amount of Allowed Impaired Claims, including Claims newly allowed, and on the Distributions authorized from time to time. During the three months ended December 31, 2008, no new interim Distribution was authorized; however, Distributions at the cumulative rate of 11.9411%, totaling $0.9 million, were authorized and paid to the holder of a $7.6 million Impaired Claim newly allowed during the period. No new interim Distribution was authorized, and no Impaired Claims newly allowed or paid, during the three months ended December 31, 2007.

Collections during the nine months ended June 30, 2005 were substantially higher than during the nine months ended June 30, 2006, primarily because of four substantial preference recovery actions (totaling $3.3 million in settlement value), among others, which were settled immediately prior to trial and collected during the nine months ended June 30, 2005.

With the exception of one substantial case, no preference actions remain to be litigated as of June 30, 2006. In the one remaining case, the Bankruptcy Court awarded the Liquidation Trust $1.0 million. The defendant appealed the decision and award, and the appellate court upheld the Bankruptcy Court ruling in its entirety. Although the defendant has further appealed the case, the Liquidation Trust believes that ultimate collection of the full award is likely. Future preference receipts, other than from this one case, are expected to be insignificant.

Other receipts resulted mainly from interest income.

B. Operating expenses

Operating expenses during the ~~nine~~three months ended ~~June 30~~December 31, ~~2006~~2008 were ~~substantially~~significantly higher ~~lower~~ than those during the ~~nine~~three months ended ~~June 30~~December 31, ~~2005~~2007, primarily because, atof differences in the ~~end~~terms of insurance coverage purchased. During the ~~nine~~three months ended ~~June 30~~December 31, ~~2005~~2007, the Liquidation Trust ~~still~~paid ~~had~~for ~~three~~one ~~full-time~~year ~~employees,~~of ~~while,~~business asand aliability ~~result~~coverage, ofrepresenting ~~its~~a ~~reduced~~significant ~~level~~portion of ~~operation,~~operating expenses during the period. During ~~Liquidation~~the ~~Trust~~three ~~required~~months ~~only~~ended ~~part-time~~December ~~employees~~31, ~~during~~ 2008, the Liquidation ~~nine~~Trust paid for six months ~~ended~~of ~~June 30,~~business ~~2006.~~and ~~Approximately~~liability ~~60 percent~~insurance coverage, ofas ~~operating~~well ~~expenses~~as for ~~the~~extended ~~nine months~~reporting ~~ended~~period ~~June 30,~~liability coverage. The ~~2006~~net ~~consisted~~additional cost of ~~annual~~ insurance ~~premiums~~payments ~~for~~during the three ~~Liquidation~~months ~~Trust~~ended December 31, in2008 anrepresented substantially all of the ~~amount~~increase ~~comparable~~in tooperating expenses ~~payments~~as ~~during~~compared to the ~~preceding~~three ~~years.~~months ended December 31, 2007.

C. Legal and professional fees

Legal and professional fees reflect the activity level in various areas of the Liquidation Trust’s responsibilities.

The litigation fees paid for the ~~Bondholder~~now ~~Action~~concluded ~~and the~~ Committee Action during the ~~nine~~three months ended ~~June 30~~December 31, ~~2006~~2008 were ~~significantly~~comparable ~~less~~to ~~than~~ those paid during the ~~nine~~ three months ended ~~June 30~~ December 31, ~~2005~~2007. Fees paid during the ~~nine~~three months ended ~~June 30~~December 31, ~~2005~~2008 ~~related~~represented ~~to filing~~ the Liquidation Trust’s ~~appeal~~final ~~briefs~~payment ~~in the Bondholder Action, and~~ to ~~defending various motions,~~an ~~including~~expert ~~motions~~witness. Fees ~~for~~paid ~~summary~~during ~~judgment, filed by defendants in~~ the ~~Committee~~three ~~Action. During the nine~~ months ended ~~June 30,~~December ~~2006~~31, ~~however, fees related mainly to preparation of the initial appeal~~ ~~brief~~2007 inrepresented the ~~Committee~~Liquidation ~~Action,~~Trust’s infinal ~~addition to a $0.1 million~~ payment to ~~an expert in key matters.~~litigation counsel.

~~Total~~Legal ~~preference~~and professional ~~recovery~~ fees ~~during~~for ~~the~~Liquidation ~~nine~~Trust ~~months~~operations ~~ended~~include ~~June 30,~~all ~~2006 were not comparable~~legal, asaccounting, aand ~~percentage~~other ofsupport ~~preference~~services ~~collections,~~except tofor ~~such fees during~~ the ~~nine~~expenses ~~months~~of ~~ended June 30, 2005.~~prosecuting ~~The~~the ~~collection~~Committee ~~fees for most preference settlements are contingent~~Action, and ~~are~~expenses ~~set~~related ~~at a declining rate (generally ranging from 35%~~ to ~~7% of collections) for larger cases. In addition,~~ preference ~~recovery fees include expenses incurred in support of preference~~ collections ~~and associated litigation~~. During ~~The costs incurred during~~ the ~~nine~~three months ended ~~June 30~~December 31, ~~2005~~2008, ~~included $0.2 million of~~the ~~fees~~Liquidation ~~for~~Trust ~~expert~~incurred ~~reports~~higher inlegal ~~connection~~and ~~with~~professional ~~preference~~fees ~~litigation.~~than ~~In addition,~~ during the ~~nine~~ three months ended ~~June 30~~December 31, ~~2005~~2007, ~~the~~primarily ~~Liquidation~~because ~~Trust paid contingent fees~~ of ~~$0.1 million~~counsel’s ~~to its~~involvement ~~preference~~in ~~collections~~efforts ~~counsel with respect~~ to ~~additional~~facilitate ~~value~~ the ~~Liquidation~~termination ~~Trust recognized from waivers~~ of ~~otherwise valid Impaired Claims obtained in~~ the ~~course of preference settlements. The~~ Liquidation Trust ~~recognizes~~during ~~additional value from such Impaired Claims waivers with each~~recent ~~additional~~months. Counsel ~~Distribution,~~carried ~~because~~out ~~Impaired~~diminished ~~Claims~~activity ~~waivers~~on ~~decrease~~ the ~~amount of Claims the~~ Liquidation ~~Trust must pay in each subsequent Distribution. Substantially all of the Liquidation~~ Trust’s ~~preference~~behalf ~~recovery~~during ~~fees for~~ the ~~nine~~three months ended ~~June 30~~December 31, ~~2006 were additional contingent fees paid relative to the Distributions authorized during November 2005~~2007, ~~rather~~pending ~~than relating to~~the ~~preference~~final ~~collections~~resolution ~~received~~of ~~during~~ the ~~period~~Committee Action.

~~Legal and professional fees for Liquidation Trust operations include all legal, accounting,~~D. Voided ~~and~~claims ~~other support services except for the expenses of prosecuting the Bondholder Action and the Committee~~ checks

18During December 2008, $0.5 million of uncashed checks from the Sixth Interim Distribution paid during August 2008 were voided by the payment agent and the funds returned to the Liquidation Trust, and the Liquidation Trust reissued certain previously voided Claims checks. No similar activity occurred during the three months ended December 31, 2007, primarily because no Distribution was paid during the preceding several months.

Action, and expenses related to preference collections pursued on a contingency-fee basis. The higher fees for Liquidation Trust operations during the nine months ended June 30, 2005 as compared to the nine months ended June 30, 2006 resulted primarily from legal fees associated with settlement of claims against the Debtors, as well as prosecution of claims against certain former vendors of the Debtors. During the nine months ended June 30, 2006, however, legal fees were minimal because most such cases were previously resolved.

D. Distributions paid

Distributions paid depend primarily on the amount of Allowed Impaired Claims, including Claims newly allowed, and on the Distributions authorized from time to time. During November 2005, the Liquidation Trust authorized a Distribution of 1.1911% of the Allowed amount to holders of Allowed Impaired Claims, totaling $6.6 million, of which $6.4 million was paid during December 2005. Because this Distribution resulted from the $7.0 million proceeds of the Committee Action settlement, pursuant to the Plan, Kmart’s $150.0 million General Unsecured Claim was excluded from the Distribution. In addition, during the nine months ended June 30, 2006, the Liquidation Trust paid the 2005 Tax Payment.

During May 2005, the Liquidation Trust authorized a Distribution of 1.0% of the Allowed amount to holders of Allowed Impaired Claims, totaling $7.1 million, substantially all of which was paid during May 2005. In addition, during the nine months ended June 30, 2005, holders of $1.1 million of Allowed Impaired Claims received payments at the previous cumulative Distribution rate of 8.1%, and the Liquidation Trust paid the 2004 Tax Payment. In general, as a result of the ongoing Claims resolution process, fewer Impaired Claims remain to be resolved and paid as of each successive period.

IV. Net Assets in Liquidation

A. Assets

~~The Liquidation Trust’s cash and cash equivalents balance of $27~~1.~~0 million~~ ~~and~~Cash ~~$26.6 million as of June 30, 2006~~ and ~~September 30, 2005, respectively, is classified as either (a)~~ cash ~~designated~~ ~~as available for distribution to holders of Impaired Claims (“Available Cash”), (b) Reserved Cash or (c) Other Cash.~~ equivalents

~~Available Cash is designated to assure the availability of funds for payment to holders of Impaired Claims who have not received authorized Distributions.~~ The ~~required amount of Available~~ ~~Cash~~Liquidation ofTrust’s ~~$3.3 million~~cash asand ofcash ~~June 30,~~equivalents ~~2006~~balance ~~was based primarily on the cumulative Distribution rate~~ of ~~10.2911%,~~ ~~for~~ $287.5 2 million ~~of Disputed Impaired Claims (at their estimated value for reserve purposes),~~ as ~~well as unpaid Distributions to holders~~ of ~~Allowed Impaired Claims who have not met~~ ~~all~~December ~~the requirements for a Distribution~~31, or2008 ~~have not cashed a Distribution check~~ and ~~therefore have not been paid subsequent Distributions, in accordance with the Plan. The required amount of Available Cash of~~ $38.1 million as of September 30, ~~2005~~2008 ~~was~~is ~~based~~classified ~~primarily on the then current~~as ~~cumulative~~either ~~Distribution rate of 9.1%, for $31.6 million of Disputed Impaired Claims~~ (~~at their estimated value for reserve purposes~~a) ascash ~~well~~designated as ~~unpaid~~available ~~Distributions~~for distribution to holders of ~~Allowed~~ Impaired Claims. ~~The~~(“Available ~~value of Disputed Claims~~Cash”), ~~for~~(b) ~~the~~Reserved ~~purpose~~Cash ofor ~~establishing~~(c) ~~adequate~~Other ~~reserves, was estimated by the Liquidation Trust and approved by the Bankruptcy Court in an order establishing the amounts of Disputed Claims Reserves~~Cash.

~~Reserved~~Available Cash ~~cash~~ is ~~held~~designated byto assure the ~~Liquidation~~availability ~~Trust~~of tofunds ~~assure~~for payment to holders of Allowed ~~the~~and ~~Liquidation~~Disputed ~~Trust’s~~Impaired Claims who have not received previously authorized ~~obligations~~Distributions. The ~~Under~~required ~~the~~amount ~~terms~~of Available Cash of ~~the~~$0.3 ~~Plan~~million as of December 31, ~~reserved~~2008 ~~cash~~represented isDistributions ~~intended~~payable to ~~provide~~holders ~~for~~of ~~(a) operating~~Allowed ~~expenses~~Impaired Claims. The balance of ~~the~~Available ~~Liquidation~~Cash ~~Trust~~decreased by $1.5 million as of December 31, ~~(b) estimated~~2008, ~~payments~~compared to ~~holders~~the ofbalance ~~Allowed~~at ~~Unimpaired~~September ~~and~~30, 2008, ~~Convenience~~as ~~Claims~~a inresult ~~accordance~~of ~~with~~$0.5 ~~the~~million ~~Plan,~~related ~~and~~to ~~(c) payments~~Distributions ~~which~~payable ~~may~~being ~~become~~reclassified to ~~necessary~~Other ifCash as a result of the November 2008 Notices, and because the asresolution of the final Disputed ~~Unimpaired~~Impaired Claims ~~become~~eliminated ~~allowed,~~the orrequirement iffor the ~~certain~~remaining ~~specific~~$1.0 ~~contingencies~~million ~~should~~Impaired ~~occur~~Claims Reserve. The required ~~Reserved~~amount ~~cash~~of ~~decreased~~Available byCash of $01.9 8 million ~~from~~as of September 30, ~~2005~~2008 towas ~~June 30,~~based primarily ~~2006,~~on tothe aImpaired ~~balance~~Claims Reserve of $1.0 million, at the cumulative Distribution rate of 11.9411%, for $218.3 million of Disputed Impaired Claims (at their estimated value for reserve purposes), ~~primarily~~as well as aDistributions ~~result~~payable of $0.8 ~~disbursements~~million. The ~~from~~value of Disputed Claims, for the ~~Wind-down~~purpose ~~and~~of establishing ~~Litigation~~adequate ~~Reserves~~reserves, was estimated by the Liquidation Trust and asapproved ~~discussed~~by ~~below.~~the Bankruptcy Court in an order establishing the amounts of Disputed Claims Reserves.

Reserved cash is held by the Liquidation Trust to assure payment of the Liquidation Trust’s obligations. Under the terms of the Plan, reserved cash is intended to provide for (a) operating expenses of the Liquidation Trust, (b) estimated payments to holders of Allowed Unimpaired and Convenience Claims in accordance with the Plan, and (c) payments which may become necessary if and as Disputed Unimpaired Claims become allowed, or if certain specific contingencies should occur. Reserved cash decreased to a balance of $5.9 million as of December 31, 2008, a change of $0.1 million from September 30, 2008, primarily as a result of activity in uncashed claims checks and in the Wind-down Reserve and the Litigation Reserve, all as discussed below.

Other cash is cash and cash equivalents not designated to a specific reserve or fund. The increase in other cash to a balance of $1.1 million as of December 31, 2008, a change of $0.7 million from September 30, 2008, primarily relates to Distributions forfeited as a result of the November 2008 Notices.

Preference receivables

As of December 31, 2008 and September 30, 2008, preference receivables consisted mainly of one remaining significant action. During June 2005, the Bankruptcy Court awarded the Liquidation Trust $1.0 million in this action. During March 2006, the District Court upheld the Bankruptcy Court ruling in its entirety. The defendant appealed the affirmation by the District Court to the Court of Appeals. During June 2007, the Court of Appeals remanded the case to the District Court, with instructions to remand to the Bankruptcy Court for specific findings. Pursuant to the Bankruptcy Court’s scheduling order, both parties filed briefings by February 2008. The Bankruptcy Court may decide the case or schedule further proceedings, up to and including a trial, at its discretion. The Liquidation Trust and its counsel intend to vigorously pursue collection of the original judgment. The Liquidation Trust’s current estimate of the fair value of preference receivables is primarily based on the content of the Court of Appeals ruling and on the status of negotiations with the defendant in this action.

B.	Liabilities and Reserves

~~The most significant component of liabilities and contingency reserves is the Fleet Reserve, established at a total of $11~~1.~~0 million~~ ~~pursuant~~Unimpaired ~~to a stipulated order between Fleet~~ and ~~the Liquidation~~convenience Trust. As of June 30, 2006, the Fleet settlement accrual, totaling $8.3 million of the $11.0 million Fleet Reserve, has been recorded based on a settlement in principle between the Liquidation Trust, Fleet and GECC reached subsequent to June 30, 2006. Subject to certain conditions, including Fleet documenting certain expenditures to the satisfaction of the Liquidation Trustee, the Liquidation Trust, Fleet and GECC have agreed in principle to release each other from further claims and, upon payment to Fleet of $8.3 million of the $11.0 million Fleet Reserve, Fleet and GECC will release any claim to the balance of the Fleet Reserve. The settlement is also subject to the approval of the Bankruptcy Court. payable

InAs ~~order~~of December ~~for~~31, ~~the~~2008 ~~Liquidation~~and ~~Trust~~September to30, ~~provide for a settlement accrual totaling $8.3 million~~2008, ~~consistent~~ ~~with~~substantially ~~the~~all ~~total amount~~ of the ~~settlement~~balance ~~reached in principle, as~~ of ~~June 30, 2006, the~~ ~~Liquidation~~Unimpaired ~~Trust~~and ~~recorded~~convenience aClaims ~~decrease~~payable inconsisted ~~net~~of ~~assets~~an inestimated ~~liquidation of~~ $41.~~8 million~~3 ~~(in addition to~~million ~~the~~of ~~loss~~fees ~~contingency~~and ~~accrual~~expenses ofwhich ~~$3.5 million~~Kmart ~~recorded~~Corporation ~~previously~~(“Kmart”). Asincurred ofin ~~June 30, 2005, a loss~~connection ~~contingency~~with ~~accrual~~the ofDebtors’ ~~$3.5 million~~bankruptcy ~~had~~filing, ~~been~~which ~~recorded~~were allowed as aan ~~liability~~Unimpaired ~~related~~Claim pursuant to the ~~resolution~~Plan. This ~~of the~~Claim ~~Bondholder~~has ~~Action~~not inyet ~~favor~~been ofsubstantiated ~~Fleet,~~by Kmart as ~~explained~~required inby ~~“Legal~~the ~~Proceedings,” below~~Plan. The ~~$2.8 million~~Liquidation ~~remaining~~Trust ~~Fleet~~has ~~Reserve~~requested substantiation ~~balance remains classified as a contingency reserve as~~ of ~~June 30~~this Claim, ~~2006,~~ ~~given~~and ~~the~~is ~~possibility~~currently ~~that~~working ~~the~~with ~~settlement~~Kmart ~~reached~~ in ~~principle~~an ~~may not be consummated, or~~effort ~~approved~~to byresolve the ~~Bankruptcy Court, in which case the Fleet Reserve might not be released~~matter.

~~Estimated costs of liquidation decreased by $1.0 million, to a balance of $1.~~2 ~~million as of June 30, 2006, compared to September 30, 2005~~. ~~The~~Uncashed ~~decrease~~claims ~~is due to disbursements totaling $0.6 million from the Wind-down Reserve and $0.4 million from the Litigation Reserve.~~ checks

VDuring the three months ended December 31, 2008, uncashed Claims checks increased to $0.6 ~~Contingencies~~million, compared to $0.4 million as of September 30, 2008, as follows:

~~The Liquidation Trust is pursuing litigation against various parties, in particular the~~($ ~~“Committee Action,” as described~~ in ~~“Legal Proceedings,” below. The Liquidation Trust cannot predict with any certainty the ultimate outcome of the remaining litigation or the amount or range of potential recoveries.~~ thousands)

VI. Forward-Looking Statements

Balance as of September 30, 2008	$	426
Voided checks returned		462
Uncashed checks reclassified		(272	)
Previously voided checks reissued		(43	)
Balance as of December 31, 2008	$	573

During December 2008, $0.5 million of uncashed checks from the Sixth Interim Distribution paid during August 2008 were voided by the payment agent and the funds returned to the Liquidation Trust. The uncashed Claims checks from the Sixth Interim Distribution paid during August 2008 were not included in the November 2008 Notices. Pursuant to the November 2008 Notices, $0.3 million included in uncashed Claims checks as of September 30, 2008 has been reclassified from this liability account as of December 31, 2008, increasing Net Assets in Liquidation and making the unclaimed funds available to the Liquidation Trust.

Distributions payable

During the three months ended December 31, 2008, Distributions payable decreased by $0.5 million, to a balance of $0.3 million, compared to $0.8 million as of September 30, 2008, primarily because, pursuant to the November 2008 Notices, $0.5 million included in Distributions Payable as of September 30, 2008 has been reclassified from this liability account, increasing Net Assets in Liquidation and making the unclaimed funds available to the Liquidation Trust. Substantially all of the remaining balance in Distributions payable as of December 31, 2008 has been paid out during January and February 2009.

4. Estimated costs of liquidation

Estimated costs of liquidation decreased by $0.2 million, to a balance of $0.7 million as of December 31, 2008, compared to $0.9 million as of September 30, 2008, as follows:

($ in thousands)

Balance as of September 30, 2008	$	909
Disbursements – litigation reserve		(150	)
Disbursements – wind-down reserve		(344	)
Increase in estimated costs of liquidation		275
Balance as of December 31, 2008	$	690

The increase to the Wind-down Reserve is discussed above under “Changes in Net Assets in Liquidation,” and disbursements are discussed above under “Cash Receipts and Disbursements.”

V. Forward-Looking Statements

This quarterly report on Form 10-Q contains forward-looking statements about the business, financial condition and prospects of the Liquidation Trust. The actual results of the Liquidation Trust could differ materially from those indicated by the forward-looking statements because of various risks and uncertainties, including, without limitation, the Liquidation Trust’s success in securing claims settlements on the terms currently contemplated in ongoing negotiations and in other estimates of settlement value, the effect of substantial delays in settling contingent assets and liabilities, resulting in a prolonged period of liquidation, economic conditions, changes in tax and other government rules and regulations applicable to the Liquidation Trust and other risks. These risks are beyond the ability of the Liquidation Trust to control, and in many cases, the Liquidation Trust cannot predict the risks and uncertainties that could cause its actual results to differ materially from those indicated by any forward-looking statements included in this Form 10-Q. When used in this quarterly report, the words “believes,” “estimates,” “plans,” “expects,” “anticipates” and other similar expressions as they relate to the Liquidation Trust or the Liquidation Trustee are intended to identify forward-looking statements.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

The Liquidation Trust does not hold any market risk sensitive instruments.

20 Item 4T. Controls and Procedures

Item 4. Controls and Procedures

The Liquidation Trust has designed and maintains disclosure controls and procedures to ensure that information required to be disclosed in its reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and regulations. These controls and procedures are also designed to ensure that such information is communicated to the Liquidation Trustee, to allow him to make timely decisions about required disclosures.

The Liquidation Trust, including the Liquidation Trustee, has conducted an evaluation of the effectiveness of disclosure controls and procedures pursuant to Exchange Act Rules 13a-15 and 15d-15. Based on that evaluation, the Liquidation Trustee concluded that the Liquidation Trust’s disclosure controls and procedures are effective as of June 30, 2006. 21

There has been no change in the Liquidation Trust’s internal control over financial reporting that occurred during the Liquidation Trust’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Liquidation Trust’s internal control over financial reporting.

The remaining responsibilities of the Liquidation Trust no longer require the full-time attention of the Liquidation Trustee or of Liquidation Trust employees. The Liquidation Trustee and one other employee are performing necessary management oversight and administrative, legal and accounting processes on a part-time basis, with periodic assistance from two other ~~former~~part-time employees. While the Liquidation Trustee believes that these individuals will consistently make themselves available as needed to perform their assigned responsibilities, including functions related to ~~internal~~ internal control over financial reporting, there can be no assurance that this availability will continue. As a result, there may be future deficiencies in internal accounting controls related to a lack of segregation of duties.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

~~Further~~Litigation and ~~background~~Other ~~information~~Proceedings ~~about~~on ~~the~~behalf ~~following cases is disclosed in Part I, Item 3., “Legal Proceedings,”~~ of the Liquidation Trust~~’s Form 10-K for the fiscal year ended September 30, 2005.~~

As of December 31, 2008, one significant preference litigation action continued – of approximately 1,800 preference actions filed by the Debtors in 2001. During March 2006, the District Court upheld the Bankruptcy Court’s ~~Case~~award to the Liquidation Trust of $1.0 million in this case. The defendant further appealed the affirmation by the District Court to the Court of Appeals. During June 2007, the Court of Appeals remanded the case to the District Court, with instructions to remand to the Bankruptcy Court for specific findings. Pursuant to the Bankruptcy Court’s scheduling order, both parties filed briefings by February 2008. The Bankruptcy Court may decide the case or schedule further proceedings, up to and including a trial, at its discretion. The Liquidation Trust and its counsel intend to vigorously pursue collection of the original judgment. Prosecution of all other significant preference litigation has been completed.

~~As of June 30, 2006, one defendant in a preference litigation action had appealed a Bankruptcy~~Litigation Court award to the Liquidation Trust of $1.0 million to the United States District Court for the District of Delaware (the “District Court”). During March 2006, the District Court upheld the decision and ~~award~~Other ofProceedings ~~the~~against ~~Bankruptcy Court. The defendant has further appealed~~ the ~~affirmation~~Liquidation by the District Court to the United States Court of Appeals for the Third Circuit (the “Court of Appeals”). A June 2006 mediation ordered and conducted by the Court of Appeals did not result in a settlement. Prosecution of all other significant preference litigation has been completed. Trust

~~Federal~~Settling Claims filed with the Bankruptcy Court ~~Cases~~is the ordinary course of business for the Liquidation Trust. As of December 31, 2008, a total of three Disputed Claims remained unresolved. None of these Disputed Claims, if resolved in favor of the claimant, would have a material effect on the financial condition of the Liquidation Trust.

~~The~~Other than ~~Bondholder~~as ~~Action~~described herein, the Liquidation Trust is not a defendant in any action or proceeding which, if the Liquidation Trust were to be found liable in such action or proceeding, would materially adversely impact the Liquidation Trust’s financial condition.

InItem ~~March 2004 the District Court issued an opinion and order (collectively, the “Decision”) in the Bondholder Action, directing the entry of judgment in favor of Fleet and GECC~~1A. ~~The~~Risk Liquidation Trust appealed the Decision, and in July 2005 the Court of Appeals issued its Opinion affirming the March 2004 Decision. The Liquidation Trust’s motion for reconsideration and reversal of the Court of Appeals Opinion was denied by the Court of Appeals during August 2005, and the Liquidation Trust has determined not to pursue the action further. Subsequent to June 30, 2006, the Liquidation Trust, Fleet and Factors

21There are no material changes in risk factors as previously disclosed in the Liquidation Trust’s annual report on Form 10-K for the year ended September 30, 2008.

~~GECC reached an agreement in principle to settle all claims, the terms of which are described immediately below.~~ 22

The Committee Action

During July 2005, the District Court issued a memorandum opinion and order on pending summary judgment motions (collectively, the “Summary Judgment Decision”), dismissing the Liquidation Trust’s claims against Fleet Retail, GECC, and certain other defendants in the Committee Action. During August 2005, the District Court substantively denied the Liquidation Trust’s motion for reconsideration of the Summary Judgment Decision. During December 2005, the Liquidation Trust filed with the Court of Appeals its notice of appeal from the Summary Judgment Decision and related judgment in the Committee Action. A March 2006 mediation ordered and conducted by the Court of Appeals did not result in a settlement among the remaining parties to the Committee Action.

The Liquidation Trust continued to negotiate with some of the remaining parties, reaching a settlement in principle with both Fleet and GECC subsequent to June 30, 2006. Subject to certain conditions, including Fleet documenting certain expenditures to the satisfaction of the Liquidation Trustee, the Liquidation Trust, Fleet and GECC have agreed in principle to release each other from further claims and, upon payment to Fleet of $8.3 million of the $11.0 million Fleet Reserve, Fleet and GECC will release any claim on the balance of the Fleet Reserve. The settlement is also subject to the approval of the Bankruptcy Court. The settlement in principle has no effect on the Liquidation Trust’s claims against any other defendant in the Committee Action.

The various remaining defendants are vigorously opposing this action. There is no assurance that the Liquidation Trust will prevail on the appeal filed with respect to the Committee Action. While the Liquidation Trust is vigorously pursuing this litigation with the intent to obtain a very substantial recovery, the Liquidation Trust cannot predict with any certainty the outcome of the litigation or the amount or range of potential recoveries.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Submission of Matters to a Vote of Security Holders

None.

Item 5.

Other Information

None.

Item 6.

Exhibits

Exhibit
Number		Document

31.1		Certification by Liquidation Trustee

32.1		Liquidation Trustee’s Certification Pursuant to 18 U.S.C. Section 1350

22 23

SIGNATURES

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

	HECHINGER LIQUIDATION TRUST	~~HECHINGER LIQUIDATION TRUST~~
Date: August 14, 2006		By:	/s/ Conrad F. Hocking
Date: February 13, 2009	By:	/s/ Conrad F. Hocking
		Name: Conrad F. Hocking
	Name:	Conrad F. Hocking
		Title: Liquidation Trustee
	Title:	Liquidation Trustee

INDEX TO EXHIBITS FORM 10-Q

Exhibit No.

31.1		Certification by Liquidation Trustee
32.1		Liquidation Trustee’s Certification Pursuant to 18 u.s.c. Section 1350

INDEX TO EXHIBITS

FORM 10-Q

Exhibit No.

31.1	Certification by Liquidation Trustee

32.1	Liquidation Trustee’s Certification Pursuant to 18 U.S.C. Section 1350

Filing Compare · HECHINGER LIQUIDATION TRUST