ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
Centex is incorporated in the State of Nevada. The Company's common stock, par value $.25 per share ("Centex Common Stock") began trading publicly in 1969. As of May 1, 1996, 28,425,851 shares of Centex Common Stock, which are traded on the New York Stock Exchange ("NYSE") and The International Stock Exchange of the United Kingdom and the Republic of Ireland, Ltd., were outstanding.
Since its founding in 1950 as a Dallas, Texas-based residential and commercial construction company, Centex has evolved into a multi-industry company. Centex currently operates in three principal business segments: Home Building, Financial Services and Contracting and Construction Services. Centex also has a 49% interest in Centex Construction Products, Inc., a NYSE listed company in the construction products business.
Centex is one of the nation's largest home builders, having built and delivered, through its wholly-owned subsidiary Centex Real Estate Corporation d/b/a Centex Homes ("CREC" or "Centex Homes"), 11,970 homes in its fiscal year ended March 31, 1996. Centex's Home Building operations currently involve the construction and sale of residential housing in 282 neighborhoods in 49 different markets. These activities also include the purchase and development of land. Centex has participated in the home building business since 1950.
Centex's Financial Services operations in fiscal 1996 included mortgage origination and other related services on homes sold by Centex subsidiaries and by third parties. Centex has been in the mortgage banking business since 1973. Centex is a leading retail mortgage originator (originating approximately $4.9 billion of residential mortgages in fiscal 1996). In 1988 the Company acquired a savings and loan operation in central Texas. The savings and loan deposits and branch operations were sold in December 1994.
Centex entered the contracting and construction services business in 1966 with the acquisition of a Dallas- based contractor which had been in business since 1936. Additional significant acquisitions of construction companies were made in 1978, 1982 and 1990. Centex currently ranks among the nation's largest general building contractors. The contracting and construction activities of the Company involve the construction of buildings for both private and government interests, including office, commercial and industrial buildings, hospitals, hotels, museums, libraries, airport facilities and educational institutions.
Centex's involvement in the construction products business started in 1963 when it began construction of its first cement plant. Since that time, this segment has expanded to include additional cement production and distribution facilities
and the production, distribution and sale of aggregates, readymix concrete and gypsum wallboard. In April 1994, the Company's formerly wholly-owned Construction Products group, Centex Construction Products, Inc. (CXP), completed an initial public offering of 51% of its stock, which shares are now traded on the NYSE. CXP is the 6th largest U.S. owned cement producer and the nation's 13th largest cement producer. Centex retained a 49% interest in this group.
In fiscal 1988, Centex established CDC. Reference is made to PART B of this Report for a discussion of the business of CDC.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
Note (I) of the Notes to Consolidated Financial Statements of Centex on pages 42-43 of the Centex 1996 Annual Report contain additional information about the Company's business segments for years ended March 31, 1996, 1995 and 1994 and are incorporated herein by reference.
NARRATIVE DESCRIPTION OF BUSINESS
HOME BUILDING
The Company's Home Building operations primarily involve the construction and sale of residential housing, including the development of land into residential communities and the purchase of developed lots. The Company's Home Building operations have ranked, by the number of units produced in a calendar year, as the largest U.S. builder of single-family homes from 1989 to 1994 and the second largest builder in 1995. Centex is also the only company to rank among Professional Builder's top 10 home builders for each of the past 27 years. Centex sells to both first time and move-up buyers. Approximately 96% of the houses Centex sells are single-family detached homes and the remainder are townhomes and low-rise condominiums.
Markets
Centex follows a strategy of reducing exposure to local market volatility by spreading operations across geographically and economically diverse markets. Centex presently builds in 49 market areas in 20 states and the United Kingdom. The markets are listed below by geographic areas.
In fiscal 1996, Centex closed 11,970 houses, including first time, move-up and, in some markets, custom homes, ranging in price from approximately $69,000 to about $577,000 with the average sale price being approximately $163,900. In the Dallas and San Antonio locations, Centex has custom home divisions which offer higher-end homes.
Summarized below by geographic area are Centex's home closings, sales (orders) backlog and sales (orders) for each of the five fiscal years ended March 31, 1996.
Inventory Turnover
The Company's policy has been to acquire land with the intent to complete the sale of housing units within approximately 24 - 36 months from the date of acquisition. Generally, this involves acquiring land that is properly zoned and is either ready for development or, to a much lesser degree, already developed.
The Company has acquired a substantial amount of its finished and partially improved lots and land under option agreements which are exercised over specified time periods, or in certain cases, as the lots are needed. The purchase of finished lots generally allows the Company to shorten the lead time to commence construction and reduces the risks of unforeseen improvement costs and volatile market conditions.
Competition and Other Factors
The residential housing industry is essentially a "local" business and is highly competitive. Centex competes in each of its market areas with numerous other home builders. The Company's Home Building operations account for approximately 1% of the total housing starts in the United States. The main competitive factors affecting Centex's Home Building operations are location, price, cost of providing mortgage financing for customers, construction costs, design and quality of homes, marketing expertise, availability of land and reputation. Management believes the Company competes effectively by maintaining geographic diversity, being responsive to the specific demands of each market and managing the operations at a local level.
The home building industry is cyclical and is particularly affected by changes in local economic conditions and in long-term and short-term interest rates and, to a lesser extent, changes in property taxes and energy costs, federal income tax laws, federal mortgage financing programs and various demographic factors. The political and economic environment affects both the demand for housing constructed by the Company and the Company's cost of financing. Unexpected climatic conditions, such as unusually heavy or prolonged rain or snow, may affect operations in certain areas.
The housing industry is subject to extensive and complex regulations. The Company and its subcontractors must comply with various federal, state and local laws and regulations including worker health and safety, zoning, building, advertising, consumer credit rules and regulations and the extensive and changing federal, state and local laws, regulations and ordinances governing the protection of the environment ("Environmental Laws"), including protection of endangered species. The Company is also subject to other rules and regulations in connection with its manufacturing and sales activities, including requirements as to building materials to be used and building designs. The Company's homes are inspected by local authorities. All of the foregoing regulatory requirements are applicable to all home building companies, and to date, compliance with the foregoing requirements has not had a material impact on the Company. The Company believes that it is in material compliance with all such requirements.
Centex purchases materials, services and land from numerous sources and believes that it can deal effectively with any problems it may experience relating to the supply or availability of materials and services as well as land.
Vista Acquisition
During the quarter ended September 30, 1995, the Company acquired certain equity interests in Vista Properties, Inc. ("Vista") for a net investment of approximately $85 million in cash. At the time of the acquisition, Vista's real property portfolio consisted of approximately 3,400 acres of land located in seven states; Texas, Florida, California,
Georgia, North Carolina, Washington, D.C. and Tennessee. The Company has major operations in each of the markets where Vista owns substantial property. Vista's real property portfolio generally consists of land that is zoned, planned or developed for single- and multi-family residential, office, retail, industrial and other commercial uses. The acquisition by the Company of equity interests in Vista was a part of a pre-packaged bankruptcy plan which was approved by the Unites States Bankruptcy Court for the District of Delaware.
The management of Vista and the Company are continuing to evaluate what benefits could be derived from coordinating, combining or consolidating the business activities of Vista with those of certain of the Company's subsidiaries. To date, Vista and the Company have initiated joint planning and development work at several key residential sites included in Vista's portfolio and have identified commercial development opportunities in three of Vista's major projects. Vista has also initiated discussions regarding potential joint venture activities (which involve both subsidiaries of the Company and unaffiliated third parties) with respect to selected properties. With respect to the balance of its properties, Vista is continuing to implement its existing plans to manage, maintain, develop and sell or otherwise dispose of such properties in the ordinary course of business.
As a result of the above evaluations and in a further effort to optimize the benefits derived from the complementary businesses of Vista and the Company, the managements of the Company and Vista are working on a potential business combination ("Combination") pursuant to which the assets and operations of Vista would be combined with the Company's existing home building operations. The managements of the Company and Vista believe that a Combination would result in a more efficient means of operating their business activities and would facilitate the zoning, development and buildout of certain of Vista's properties as well as the disposition of the Company's excess real estate parcels. If a Combination is ultimately consummated, certain of Vista's net operating loss carryforwards and other tax-related benefits may become useable in future years, which could result in a significant contribution to the Company's consolidated earnings during the next several years. For additional information regarding Vista's financial information and potential tax-related benefits, see Note (K) of the Notes to Consolidated Financial Statements, which are incorporated by reference in this Annual Report.
There can be no assurance that, if the managements of Vista and the Company make a proposal to their boards, the board of each company would approve the Combination, or that if approved, the potential operational or other benefits referred to above would be realized.
United Kingdom Joint Venture
In February 1995, Centex announced its wholly-owned subsidiary, Centex Homes (UK) Limited, had entered into a joint venture agreement with a London-area home builder, The Charles Church Group Limited ("Charles Church"), to build homes in the United Kingdom. The venture represents a limited entry into the international home building marketplace for Centex Homes. Centex Homes (UK) Limited and Charles Church have each contributed approximately $1.1 million in cash, with the remaining $9 million financed by a United Kingdom bank, which is guaranteed by Centex. The Centex/Charles Church joint venture acquired a parcel of undeveloped land in Berkshire County, west of London. Located in Sunningdale, the parcel consists of 2.1 acres on which 11 homes will be built. Homes in this development are in the 3,500-4,000 square foot range and will sell for approximately $750,000. At this time, Centex Homes does not expect to expand the joint venture's developments or broaden Centex's European activities.
FINANCIAL SERVICES
Financial Services consist of mortgage banking and, until December 1994, the savings and loan operations. The Company's mortgage banking activities are conducted through Centex's wholly-owned subsidiary, CTX Mortgage Company ("CTX"), which offers mortgage origination and other related services on homes sold by Centex Homes and by third parties. The savings and loan deposits and branch operations, which were conducted through Texas Trust Savings Bank, FSB, were sold in December 1994.
CTX Mortgage Company
CTX was established in 1973 to provide mortgage financing for homes built by Centex Homes, Centex's home building operation. The opening of CTX mortgage offices in substantially all of Centex Homes' housing markets has enabled it to consistently provide mortgage financing for an average of 72% of the homes built by Centex Homes ("Builder Loans") over the past five years. In 1985, CTX expanded its operations to include third-party loans ("Spot Loans") that are not associated with the sale of homes built by Centex. At March 31, 1996, CTX had 132 offices located in 25 states. The offices vary in size depending on volume in each locality.
The unit breakdown of Builder and Spot Loans for the five years ended March 31, 1996 are set forth in the following table:
CTX provides mortgage origination and other mortgage related services for Federal Housing Administration ("FHA"), Veterans Administration ("VA") and conventional loans on homes built and sold by the Company or by others, as well as resale homes. The Company's mortgage loans are first-lien mortgages secured by 1-4 family residences. A majority of the conventional loans are conforming loans which qualify for inclusion in guaranteed programs sponsored by Fannie Mae ("FNMA") or Freddie Mac ("FHLMC"). The remainder of the conventional loans are pre-approved and individually underwritten by private investors who purchase such loans on a whole-loan basis for their investment portfolios.
The principal sources of income from CTX's mortgage banking business are: loan origination fees; revenues from sale of servicing rights; positive carry (discussed below); and marketing gains and losses. Generally, CTX sells its right to service the mortgage loans to various loan servicing companies, and therefore retains no mortgage servicing rights. Accordingly, CTX avoids the servicing risk associated with early payoffs and foreclosures. CTX enters into various financial agreements, in the normal course of business, in order to manage the exposure to changing interest rates as a result of having issued loan commitments to its customers at a specified price and period. By selling the mortgages for future delivery, the interest rate risk is minimized.
CTX borrows money at short-term rates to fund its mortgage loans. During the 30- to 60-day period between the closing of a loan and delivery of such loan to the purchaser, CTX earns the interest accrued on the mortgage, which is normally a higher interest rate than the rate paid on the short-term loans used to fund the mortgage during this 30- to 60-day holding period. This positive spread between the long-term interest rate earned and the short-term interest rate paid is referred to as "positive carry," and generally represents one of the important sources of income.
Competition and Other Factors
The mortgage banking industry in the United States is highly competitive. CTX competes with other mortgage banking companies as well as financial institutions to supply mortgage financing at attractive rates to purchasers of Centex homes as well as to the general public. Mortgage banking results in fiscal 1996 continued to be negatively impacted by a very competitive environment. Rapidly rising interest rates commencing in February 1994 substantially slowed refinancing activity and caused consumers to shift from more profitable fixed-rate mortgages to lower-margin adjustable rate products. During a major portion of fiscal 1996, these trends reversed as interest rates fell.
CTX is subject to the rules and regulations of, and examinations by, the Federal National Mortgage Association ("FNMA"), the Federal Home Loan Mortgage Corporation ("FHLMC"), the Department of Veterans' Affairs ("VA"), Department of Housing and Urban Development ("HUD"), the Federal Housing Administration ("FHA"), the Government National Mortgage Association ("GNMA") and state regulatory authorities with respect to originating, processing, underwriting, making, selling, securitizing and servicing residential mortgage loans. In addition, there are other federal and state statutes and regulations affecting such activities. These rules and regulations, among other things, impose licensing obligations on CTX, establish eligibility criteria for mortgage loans, provide for inspection and appraisals of properties, regulate payment features and, in some cases, fix maximum interest rates, fees and loan amounts. CTX is required to maintain specified net worth levels by, and submit annual audited financial statements to HUD, VA, FNMA, FHLMC and GNMA and certain state regulators. CTX's affairs are also subject to examination by the Federal Housing Commissioner at all times to assure compliance with FHA regulations, policies and procedures. Among other federal and state consumer credit laws, mortgage origination and servicing activities are subject to the Equal Credit Opportunity Act, the Federal Truth-In-Lending Act, the Real Estate Settlement Procedures Act and the regulations promulgated under such statutes, which prohibit discrimination and unlawful kickbacks and referral fees and require the disclosure of certain information to borrowers concerning credit and settlement costs. Many of these regulatory requirements are designed to protect the interest of consumers, while others protect the owners or insurers of mortgage loans. Failure to comply with these requirements can lead to loss of approved status, demands for indemnification or loan repurchases from investors, class action lawsuits by borrowers, administrative enforcement actions and, in some cases, rescission or voiding of the mortgage loan by the mortgagor.
Other financial-related services provided by CTX affiliates include acting as an agent for the issuance of homeowners' insurance policies, title insurance policies and providing escrow services. CTX Insurance Agency provides hazard insurance to home buyers in Texas and Florida through third-party insurance companies. In fiscal year 1995, CTX entered into a joint venture agreement with another home builder to provide mortgage origination for homes built by this home builder. In addition, during fiscal 1995, an affiliate of CTX entered the "B" and "C" mortgage and second lien markets whereby this CTX affiliate will originate "B" and "C" first mortgages and second mortgages for home improvements and home equity lines of credit. The affiliate is establishing its own branch network and marketing program to solicit potential customers.
In April 1996, Centex acquired substantially all of the assets of Advanced Financial Technology, Inc. (Adfitech) and Loan Processing Technologies, Inc. (LPT), headquartered in Oklahoma City, Oklahoma. Adfitech is one of the largest and lowest cost providers of quality control mortgage services, and LPT owns and operates an automated mortgage processing system. The acquisitions should expand and create more flexible mortgage processing capacity for Financial Services, enhancing Financial Services' existing systems capabilities. LPT is also offering these processing services to other mortgage companies.
Savings and Loan
In December 1988, Centex acquired the operations of four Texas savings and loan associations under the Federal Savings and Loan Insurance Corporation's (the "FSLIC") assisted transactions process commonly known as the "Southwest Plan". The acquisition was made by Texas Trust Savings Bank, FSB ("Texas Trust"), a federal stock savings bank and an indirect wholly-owned subsidiary of Centex.
In December 1994, Texas Trust negotiated an early termination of various agreements with the Federal Deposit Insurance Corporation (as successor to the FSLIC), and in December, 1994 sold Texas Trust's branch operations to a financial institution and all deposit liabilities were assumed by the purchaser. Immediately following the branch sale, Texas Trust was dissolved, thereby completing Centex's exit from the savings and loan industry.
The following is a summary of average balances and average interest rates for the periods ended December 30, 1994 and March 31, 1994.
TEXAS TRUST SAVINGS BANK, FSB AVERAGE BALANCES AND INTEREST RATES ($ IN THOUSANDS)
CONTRACTING AND CONSTRUCTION SERVICES
Centex's contracting and construction services work is performed nationwide. As a group, Centex's Contracting and Construction Services subsidiaries rank as one of the largest building contractors in the country as well as one of the largest U.S.-owned construction groups. The Construction Group is made up of four firms with various geographic locations and project niches. Healthcare facility construction has represented nearly 40% of its business mix during recent years. New contracts for fiscal 1996 totaled $857.0 million versus $1.15 billion for fiscal 1995. The backlog of uncompleted contracts at March 31, 1996 was $1.20 billion, compared to $1.33 billion at March 31, 1995. The group's principal subsidiaries are as follows:
CENTEX CONSTRUCTION COMPANY, INC. - This entity, emerging from the merger of Centex Bateson Construction Company, Inc., Centex-Simpson Construction Company, Inc., and Centex Landis Construction Co., Inc. is headquartered in Dallas with operational offices in Virginia and Louisiana. This company will pursue competitively bid projects nationwide, in addition to negotiated work in its regional market areas.
CENTEX-RODGERS CONSTRUCTION COMPANY - This nationwide healthcare construction specialist is headquartered in Nashville, with operational offices in San Diego, Irvine and Sacramento, California; Detroit, Michigan and West Palm Beach, Florida.
CENTEX-ROONEY CONSTRUCTION COMPANY, INC. - This Ft. Lauderdale-based subsidiary performs all types of work principally within the state of Florida.
CENTEX FORCUM LANNOM, INC. - This company, which focuses on industrial client construction projects, is located in Dyersburg, Tennessee and operates in Tennessee and surrounding states.
As a general contractor or construction manager, Centex provides the supervisory personnel for the construction of the building or facility. In addition, Centex may perform varying amounts of the actual construction work on a project, but will generally hire subcontractors to perform the majority of the work. As a result, the Company's Contracting and Construction Services operation requires a relatively small asset base.
Construction contracts are primarily entered into under two formats: competitively-bid and negotiated jobs. In a competitively-bid format, Centex will bid a fixed amount for which it will agree to construct the project based on an evaluation of detailed plans and specifications. In a negotiated job, the contractor bids a fee (fixed or percentage) over the cost of the project and, in many instances, agrees that the final cost will not exceed a designated amount. Such contracts may include a provision whereby the owner will pay a part of any savings from the guaranteed amount to the contractor. The Company's highest margins in contracting operations have historically been on competitively-bid jobs. Currently, the margins on competitively-bid and negotiated jobs are about equal. On average, about half of Centex's projects are competitively-bid, public jobs and the other half are negotiated contracts with private owners. The Company's public work for federal, state and local governments includes hospitals, jails, airports, parking garages, office buildings, military facilities, post offices and convention and performing arts centers. Most of Centex's private owner contracts are for hotels, medical facilities and office buildings, plus some correctional facilities and shopping centers.
Competition and Other Factors
The construction industry is very competitive, and Centex competes with numerous other companies. With respect to competitively-bid projects and negotiated healthcare work, Centex generally competes throughout the United States and with local, regional and national contractors, depending upon the nature of the project. For negotiated projects other than healthcare, Centex's subsidiaries compete primarily in the general geographical area where they are located and with other local, regional and national contractors. Centex solicits new projects by attending project bid meetings and meeting with builders and owners and through existing customers. Centex competes successfully on the basis of its reputation, knowledge and understanding of its clients' needs and financial strength.
The Company's Contracting and Construction Services operations are affected by federal, state and local laws and regulations relating to worker health and workplace safety as well as Environmental Laws. With respect to health and safety matters, the Company believes that appropriate precautions are taken to protect employees and others from workplace hazards. Current Environmental Laws may require the Company's operating subsidiaries to work in concert with project owners to acquire the necessary permits or other authorizations for certain activities, including the construction of projects located in or near wetland areas. The Company's Contracting and Construction Services operations are also affected by Environmental Laws regulating the use and disposal of hazardous materials encountered during demolition operations.
The Company believes that the Contracting and Construction Services group's current procedures and practices are consistent with industry standards and that compliance by the Construction Group with the health and safety laws and Environmental Laws does not constitute a material burden or expense for the Company.
The Company's Contracting and Construction Services operations obtain materials and services from numerous sources. The Company believes that its construction companies can deal effectively with any problems they may experience in the supply of materials and services.
EMPLOYEES
The breakdown of employees by line of business as of March 31, 1996 is presented in the following table:
ITEM 2.

ITEM 2. PROPERTIES
(a) Holding
Due to the nature of its business, Holding does not own or hold for investment any real or personal properties other than cash, receivables and other similar assets, and the securities relating to its subsidiary, Development.
(b) CDC
The remaining Original Properties and the Additional Properties consist of properties located in Illinois, Texas, New Jersey, and Florida. Such properties predominantly consist of undeveloped sites zoned for light industrial, agricultural, general retail, office industrial, business park, research and development and single- and multi-family residential property purposes.
At March 31, 1996, there were four remaining Original Properties owned by CDC of material value. None of the Additional Properties are considered material. Set forth below is a brief description of such properties, including the present zoning.
Colony South Planning Unit. Colony South Planning Unit is located in suburban Dallas, Texas in the cities of The Colony (approximately 347 acres) and Lewisville (approximately 152 acres). The Colony acreage is zoned office, general retail, business park and residential. The Lewisville acreage is zoned light industrial.
East Windsor. East Windsor comprises approximately 600 acres with four separate residential tracts, 8 farm parcels and 100 acres of office industrial zoned property in East Windsor, New Jersey, a township located in the vicinity of Princeton. The residential tracts have final plan approval for a total of 75 half-acre lots and 174 quarter-acre lots and zoning for approximately 76 half-acre lots and 274 quarter acre lots. One hundred twenty-five of the quarter-acre lots and 15 of the half-acre lots have been sold to CREC, which has an agreement with CDC to purchase an additional 109 quarter-acre lots. The farm parcels vary in size from 7 to 36 acres and total 174 acres.
Bryan Place. Bryan Place is located in Dallas, Texas just east of downtown and Central Expressway. It is comprised of 20 non-contiguous parcels, zoned office, commercial, retail and residential ranging from approximately 2,000 square feet to 154,000 square feet. The total area of the property is approximately 650,000 square feet of which 578,000 square feet are Original Properties and the balance are Additional Properties.
Carrollton Property. The Carrollton Property is located in the City of Carrollton, a suburb of Dallas, Texas. This property consists of one office and five fabrication-warehouse buildings on approximately 17 acres, zoned industrial, with a rail spur. This property is leased to CREC through March 31, 1998. See "Item 13. Certain Relationships and Related Transactions."
ITEM 3.

ITEM 3. LEGAL PROCEEDINGS
Holding is not a party to, and its assets are not the subject of, any material pending legal proceedings. CDC may be involved from time to time in litigation matters incident to its day-to-day business; however, management of Development believes that such litigation, if determined unfavorably to CDC, would not have a material adverse effect on the financial condition or operations of CDC.
ITEM 4.

Item 4.
SERVICES AGREEMENT
Holding has no full time employees. The directors and executive officers of Holding, who hold the same directorships and offices in Development, perform all executive management functions. See "Item 11. Executive Compensation". All tax, accounting, bookkeeping, clerical and similar services that are necessary to operate the business of Holding are provided pursuant to a services agreement (the "Services Agreement") entered into between Holding and Centex Service Company ("CSC"), an indirect subsidiary of Centex. See "Item 13. Certain Relationships and Related Transactions". The term of the Services Agreement is subject to automatic renewal for successive one-year terms unless either party elects to terminate the Services Agreement upon at least 30 days written notice prior to December 31 of any year. However, the Services
Agreement may not be terminated by Holding (other than in the event of a breach by CSC constituting gross negligence or willful or wanton misconduct) prior to the payment in full of the Holding Note, the full and complete detachment of the Stockholder Warrants from Centex Common Stock or the occurrence of Payout. Service fees of $30,000 were paid pursuant to the Services Agreement during fiscal 1996.
(b) CDC
GENERAL PARTNER AND MANAGEMENT
CDC has no directors, officers or employees and, instead, is managed by Development, its sole general partner. Directors and officers of Development perform all executive management functions required for CDC. Except as provided in the Plan with respect to the Original Properties, the limited partners of CDC have no power to direct or participate in the control of CDC, and Development makes all decisions regarding the acquisition, disposition or development of real estate belonging to CDC and all other decisions regarding CDC's business or operations. See "Item 1. Business". CDC has entered into a management agreement pursuant to which CDMC will operate, manage and develop the properties of CDC for and on behalf of CDC. See "Management Agreement" below in this Item 10. Except for the allocations of profit and loss and distributions of cash and other property to which Development is entitled under the Partnership Agreement, and except for the right to be reimbursed for certain expenses, Development does not receive any compensation from CDC in respect of its duties and obligations as general partner of CDC. See "Item 11. Executive Compensation".
DIRECTORS AND EXECUTIVE OFFICERS OF DEVELOPMENT
Information concerning the present directors and executive officers of Development is set forth below. All of such persons have served in their capacities since the organization of Development, except as indicated.
_________ *Member of the audit committee of the Board of Directors.
(1) Mr. Bilheimer is an employee of CDMC and served as Executive Vice President of CREC from April 1987 until March 31, 1988. Mr. Bilheimer was a director of Development from its date of incorporation until his resignation as of June 1, 1987. Mr. Bilheimer was re-elected to the Board of Directors on May 24, 1989.
(2) Mr. Low serves as Senior Vice President of Donaldson, Lufkin & Jenrette Securities Corporation (since February 1985). Mr. Low is also a director of Holding. Mr. Low was elected as a director of Development as of June 1, 1987.
(3) Mr. Sherer has been President of David M. Sherer Associates, Inc., a commercial real estate, investment and brokerage firm, for more than five years. Mr. Sherer is also a director of Holding. Mr. Sherer was elected as a director of Development as of June 1, 1987.
(4) Mr. Sefzik is an employee of CDMC and served as Vice President of CTX Mortgage Company from May 1987 to March 1988 and Executive Vice President of Centex Title Company from July 1986 to March 1988. Mr. Sefzik was elected to his present positions with Development as of April 1, 1988.
All directors are elected annually by the shareholders to serve until the next annual meeting of stockholders and until their successors have been elected and qualified, subject to removal by a vote of the holders of not less than two-thirds of the outstanding shares of the common stock, par value $1.00 per share, of Development. All executive officers of Development are elected annually by the Board of Directors to serve until the next annual meeting of the Board of Directors
or until their successors have been duly elected and qualified. There are no family relationships among or between Development's directors or executive officers.
The current executive officers of Development are employees of Centex or one of its subsidiaries, and it is presently anticipated that this arrangement will continue. See "Item 11. Executive Compensation".
MANAGEMENT AGREEMENT
All services (other than executive management decision-making) necessary to operate CDC's business are provided to CDC pursuant to a management agreement (the "Management Agreement") entered into with Holding. Under the Management Agreement, Holding keeps all necessary books and records, and provides all additional accounting and clerical services that Development may deem necessary. Holding's responsibilities related to real estate management also include ensuring that CDC's properties are operated, managed and maintained in full compliance with all relevant laws and regulations, that all real property and any improvements thereon are maintained and repaired, that all income produced by CDC's properties is collected and that any development on any property is done in an efficient manner. Because Holding currently does not have any employees, it contracts with Centex subsidiaries to provide such services to CDC.
Holding is entitled to reimbursement from CDC for all reasonable costs and expenses incurred and paid by Holding in connection with the performance of its duties and obligations under the Management Agreement, plus a 25% managerial fee. During fiscal 1996, Holding earned fees from CDC totaling $1,295,000 for its services.
The Management Agreement also provides that Holding will provide, consistent with the Plan, pre-development and development services on behalf of CDC, and the Management Agreement specifically provides that Holding is delegated full authority to carry out and perform on behalf of CDC all aspects of the Plan.
The term of the Management Agreement is subject to automatic renewal for successive one-year terms unless either party elects to terminate the Management Agreement upon at least 30 days written notice prior to December 31 of any year. However, it may not be terminated by CDC (other than in the event of a breach by Holding constituting gross negligence or willful or wanton misconduct) prior to the latest of the complete detachment of the Stockholder Warrants from Centex Common Stock, Payout or the payment in full of the Holding Note.
From time to time, Holding delegates the performance of certain of its responsibilities to CSC and CREC, upon terms and conditions to be determined. These responsibilities may include enhancement of properties owned or controlled by CDC, for which reasonable additional compensation may be paid by CDC to Holding pursuant to terms to be negotiated between them. In turn, some or all of such additional compensation may be paid by Holding to CSC or CREC.
ITEM 11. EXECUTIVE COMPENSATION
Holding and CDC
The information called for by this Item 11 with respect to Holding and CDC is incorporated herein by reference to the information included and referenced under the caption "Executive Compensation" in the 1996 Holding Proxy Statement.
CDC does not have any directors, officers or employees, and is managed by its sole general partner, Development. Except for the allocations of profit and loss and distributions of cash and other property to which Development is entitled under the Partnership Agreement, and except for the right to be reimbursed for certain expenses, Development does not receive any compensation from CDC in respect of its duties and obligations as general partner for CDC. As general partner, Development is entitled to be allocated certain items of income and loss of CDC and to receive certain distributions of cash from CDC depending upon the level of income and cash available for distribution and whether Payout has occurred. The terms and conditions upon which Development will be allocated items of income and loss and will receive distributions
are set forth in the Partnership Agreement. For a summary of these rights and benefits, see Note (F) of the Notes to the Holding/CDC Combining Financial Statements included on pages 65-66 of the Holding/CDC 1996 Annual Report, which Note (F) is incorporated herein by this reference.
The directors and executive officers of Development perform all executive management functions for CDC. See "Item 10. Directors and Executive Officers of the Registrant". Services required by CDC in its operations are also provided pursuant to a Management Agreement with Holding pursuant to which Holding operates, manages and develops the properties of CDC for and on behalf of CDC. See "Item 10. Directors and Executive Officers of the Registrant--Management Agreement". The executive officers of Development did not receive any remuneration from Development or CDC for the year ended March 31, 1996. Directors of Development who are neither officers nor employees of Development, Centex or Centex's subsidiaries received compensation from Development in the form of directors' and committee members' fees. During the 1996 fiscal year, each executive officer of Development received remuneration from Centex or one of its subsidiaries in his capacity as a director, officer or employee thereof. None of the directors or executive officers of Development received any additional compensation from Centex or any of its subsidiaries for services rendered on behalf of Development or CDC during the 1996 fiscal year.
During fiscal 1996, J. Stephen Bilheimer, a Director and the President of Development, Roger D. Sefzik, Vice President and Treasurer of Development, both of whom are employees of subsidiaries of Centex, have devoted a majority of their time and attention to the management of Development and Holding. Messrs. Bilheimer and Sefzik provided such services to Development on behalf of and in their capacities as officers of Holding pursuant to the Management Agreement. Each current executive officer of Development continues to receive remuneration from Centex or one of its subsidiaries in his capacity as an officer or employee thereof and is not compensated by Development or CDC.
The directors of Development, who also hold the same directorships in Holding and are neither officers nor employees of Development, Centex or Centex's subsidiaries, each receive annually in the form of directors' and committee members' fees in their capacities as directors and/or committee members of Development ($8,000) and Holding ($8,000). In addition, Development reimburses these directors for the reasonable expenses incurred in attending directors' and committee meetings.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Holding
The information called for by this Item 12 with respect to Holding is incorporated herein by reference to the information included and referenced under the caption "Security Ownership of Management and Certain Beneficial Owners" in the 1996 Holding Proxy Statement.
(b) CDC
The following table sets forth certain information with respect to the ownership of the equity securities of CDC as of May 1, 1996 by Development, the directors of Development, individually itemized, all directors and executive officers of Development as a group, and any person known to CDC to be the beneficial owner of more than 5% of any class of CDC's equity securities. Except as otherwise indicated, all securities are owned directly, and the beneficial owner of such securities has the sole voting and investment power with respect thereto.
__________ *Under the terms of the Partnership Agreement, CDC is managed by a sole corporate general partner and none of the present classes of CDC's securities are "voting securities" within the meaning of the rules and regulations of the Commission promulgated pursuant to the Exchange Act. Nonetheless, information with respect to each class of CDC's equity securities has been set forth in accordance with such rules and regulations.
**The address of any person who is the beneficial owner of more than five percent of a class of CDC's securities is also included.
***Less than 1%.
(1) In connection with the formation of CDC, Development made a capital contribution to CDC of $767,182, in exchange
for Development's general partner interest in CDC. As general partner, Development is entitled to receive allocations of income and loss and distributions of property from CDC. See "Item 11. Executive Compensation".
(2) The Class A Units were issued to the Original Limited Partners in exchange for the contribution to CDC of the Original Properties. Record title to the Class A Units presently is held by CREC, a subsidiary of Centex. See "Item 1. Business--General Development of Business". As of the date or dates when the Stockholder Warrants are deemed to have been exercised, the Class A Units will be automatically converted into (i) a number of Class B Units equal to 20% of the total number of Class B Units that would be outstanding after conversion based on the actual exercise of the Stockholder Warrants and the assumed exercise of all the then exercisable Centex Class B Unit Warrants (see footnote (3)) and (ii) a like number of Class A Units. The Class A Units will be automatically canceled upon Payout and the exercise and/or expiration of all of the Stockholder Warrants and the Centex Class B Unit Warrants.
(3) The Nominee holds record title to the Stockholder Warrants, which are exercisable for Class B Units, for the benefit of Centex Stockholders pursuant to the Nominee Agreement. See "Item 5.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) Holding
The information called for by this Item 13 with respect to Holding is incorporated herein by reference to the information included under the caption "Certain Transactions" in the 1996 Holding Proxy Statement.
(b) CDC
Holding entered into a services agreement in May, 1987 with Centex Service Company ("CSC"), whereby CSC provides certain tax, accounting and other similar services for Holding at a fee of $2,500 per month. Service fees of $30,000 were paid pursuant to this agreement for fiscal year 1996.
CDC has entered into an agreement with Holding to provide management services to CDC in connection with the development, operation and maintenance of CDC property and other administrative services. Management fees and reimbursable costs totaling $1,295,000 were incurred under this agreement during fiscal 1996.
In connection with Holding's acquisition of additional shares of common stock of Development in 1987, Holding borrowed $7,700,000 from Centex pursuant to a secured promissory note (the "Holding Note"). The Holding Note, which had a fluctuating balance during 1996, bears interest, payable quarterly, at the prime rate of interest of NationsBank of Texas, N.A. ("NationsBank") plus 1% (9 1/4% at May 1, 1996). As of May 1, 1996, the outstanding principal balance of the Holding Note was $7,155,000. The Holding Note is secured by a pledge of all the issued and outstanding shares of Development. The Holding Note, as amended, matures on the earlier to occur of April 1, 1998 or the last detachment of Holding Common Stock and the Stockholders Warrants from Centex Common Stock pursuant to the Nominee Agreement. There was interest expense of $558,000 related to the Holding Note for the year ended March 31, 1996.
In fiscal year 1996, CDC sold to CREC certain tracts of land for $4,416,000 and has agreements to purchase an additional 109 lots from CDC.
In 1987, Development loaned $7,700,000 to CREC, pursuant to an unsecured note (the "CREC Note") and related loan agreement. The CREC Note bears interest, payable quarterly, at the prime rate of interest of NationsBank plus 7/8% (9 1/8% at May 1, 1996). As of May 1, 1996, the outstanding principal balance on the CREC Note was $7,700,000. The CREC Note, as amended, matures on April 30, 1998. Fiscal year 1996 interest income on the CREC Note totaled $750,000.
CREC has guaranteed a bank line of credit for CDC (currently $5,000,000) to utilize in conjunction with development of lots to be sold to CREC. This line of credit, which had an outstanding balance of $1,373,000 at May 1, 1996, bears interest at LIBOR plus 3/4% (6 3/16% at May 1, 1996), is unsecured.
CDC owns property in the City of Carrollton, a suburb of Dallas, Texas, which consists of one office and five fabrication-warehouse buildings on approximately 17 acres. CDC leases this property to CREC pursuant to a five-year lease terminating on March 31, 1998. For fiscal 1996, CDC received rent from CREC for this property in the amount of $200,000.
PART IV
ITEM 14.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Report:
(1) and (2) See the Index to Financial Statements below for a list of the Financial Statements filed herewith.
All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.
(3) EXHIBITS
(A) Holding
The information on exhibits required by this Item 14 is set forth in the Holding Index to Exhibits appearing on pages 62-63 of this Report.
(B) CDC
The information on exhibits required by this Item 14 is set forth in the CDC Index to Exhibits appearing on pages 64-66 of this Report.
(b) Reports on Form 8-K:
Neither Holding nor CDC filed any reports on Form 8-K during the quarter ended March 31, 1996.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.
*Pursuant to authority granted by powers of attorney, copies of which are filed herewith.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, 3333 Development Corporation, as general partner of, and on behalf of, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of 3333 Development Corporation, as general partner of, and on behalf of, the registrant in the capacities and on the dates indicated.
__________
*Pursuant to authority granted by powers of attorney, copies of which are filed herewith.
INDEX TO EXHIBITS
CENTEX CORPORATION AND SUBSIDIARIES
INDEX TO EXHIBITS
CENTEX CORPORATION AND SUBSIDIARIES--CONTINUED
INDEX TO EXHIBITS
CENTEX CORPORATION AND SUBSIDIARIES--CONTINUED
INDEX TO EXHIBITS
CENTEX CORPORATION AND SUBSIDIARIES--CONTINUED
____________ * Management contract or compensatory plan or arrangement.
** With the exception of the information expressly incorporated by reference in this Report from the Centex 1996 Annual Report and the Holding/CDC 1996 Annual Report, these two annual reports are not deemed filed with the Commission as part of this Report.
INDEX TO EXHIBITS 3333 HOLDING CORPORATION AND SUBSIDIARY
INDEX TO EXHIBITS
3333 HOLDING CORPORATION AND SUBSIDIARY--CONTINUED
* With the exception of the information expressly incorporated by reference in this Report from the Centex 1996 Annual Report and the Holding/CDC 1996 Annual Report, these two annual reports are not deemed filed with the Commission as part of this report.
INDEX TO EXHIBITS
CENTEX DEVELOPMENT COMPANY, L.P.
INDEX TO EXHIBITS
CENTEX DEVELOPMENT COMPANY, L.P.--CONTINUED
INDEX TO EXHIBITS
CENTEX DEVELOPMENT COMPANY, L.P.--CONTINUED
_________
* With the exception of the information expressly incorporated by reference in this Report from the Centex 1996 Annual Report and the Holding/CDC 1996 Annual Report, these two annual reports are not deemed filed with the Commission as part of this report.


Item 1. Business
As of December 31, 1996, NAFCO Auto Funding L.P. (The "Partnership") was the originator of three Auto Loan Trusts (the "Trusts") which had issued publicly registered securities. The Registrant for each of these trusts was, respectively, NAFCO Auto Trust-1, NAFCO Auto Trust- 2 and NAFCO Auto Trust-3. NAFCO Auto Trust-1 was formed pursuant to an Amended and Restated Pooling and Servicing Agreement dated August 1, 1994. NAFCO Auto Trust-2 was formed pursuant to an Amended and Restated Pooling and Servicing Agreement dated June 1, 1995. NAFCO Auto Trust-3 was formed pursuant to Amended and Restated Pooling and Servicing Agreement dated October 1, 1995. On August 16, 1996, the partners of the Partnership sold their partnership interests in the Partnership. Following the sale, NYLIFE SFD Holding Inc. as the Master Administrator for each of the Trusts (in such capacity, the "Master Administrator"), assumed responsibility for filing all reports pursuant to the Securities and Exchange Act of 1934 and accordingly is filing this report on behalf of each of the trusts.
The assets of each of the Trusts consists of consumer automobile loans and certain other rights and properties pertaining thereto, all as more fully described in the Registration Statements with respect to such Trusts. The Trusts do not engage in any business except as may be incidental to management of their assets.
NYLIFE SFD Holding Inc. is currently discussing certain aspects of the servicing of the auto loans with Electronic Data Systems Corporation, the servicer, in order to improve and maintain servicing functions. No determination has been made that an Event of Servicer Termination, as that term is defined in the Pooling and Servicing Agreements, has occurred, and it is anticipated that any necessary improvements will be effected.
Item 2.

Item 4. Submission of Matters to a Vote of Security Holders.
None.
(b) Reports on Form 8-K
None.
PART II
Item 5.

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
Not Applicable.
Item 6.

Item 6. Selected Financial Data.
Not Applicable.
Item 7.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Not Applicable.
Item 8.

Item 8. Financial Statements and Supplemental Data.
Not Applicable.
Item 9.

Item 9. Change in and Disagreements an Accounting and Financial Disclosure.
Not Applicable.
PART III
Item 10.

Item 10. Directors and Officers of the Registrant
Not Applicable.
Item 11.

Item 11. Executive Compensation
Not Applicable.
Item 12.

Item 12. Security Ownership of Certain Beneficial Owners and Management
None.
Item 13.

Item 13. Certain Relationships and Related Transactions
Not Applicable.
PART IV
Item 14.

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
1. Financial Statements - None.
2. All schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission have been omitted since either (1) the information required is disclosed in the financial statements and the notes thereto; (2) the schedules are not required under the related instructions; or (3) the schedules are inapplicable.
3. Trustee's Reports.
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.
NAFCO AUTO TRUST-1
By: NYLIFE SFD Holding Inc.
By: /s/ Kevin M. Micucci --------------------------- Name: Kevin M. Micucci Title:President and Director of NYLIFE SFD Holding Inc. Date: March 31, 1997
NAFCO AUTO TRUST-2
By: NYLIFE SFD Holding Inc.
By: /s/Kevin M. Micucci ------------------- Name: Kevin M. Micucci Title: President and Director of NYLIFE SFD Holding Inc. Date: March 31, 1997
NAFCO AUTO TRUST-3
By: NYLIFE SFD Holding Inc.
By: /s/Kevin M. Micucci ------------------- Name: Kevin M. Micucci Title: President and Director of NYLIFE SFD Holding Inc. Date: March 31, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant by the appropriate officers and directors of the Master Administrator and in the capacities and on the dates indicated.
INDEX TO EXHIBITS
Exhibit No. Description
99.1 Trust - 1 Master Administrator Report dated November 20, 1996 for the Due Period beginning August 1, 1996 and ending October 31, 1996, (ii) Servicer Report for the period beginning November 1, 1996 through November 30, 1996, (iii) Servicer Report for the period beginning December 1, 1996 through December 31, 1996.
99.2 Trust - 2 Master Administrator Report dated November 20, 1996 for the Due Period beginning October 1, 1996 and ending October 31, 1996, (ii) Master Administrator Report dated December 20, 1996 for the Due Period beginning November 1, 1996 through November 30, 1996, (iii) Master Administrator Report dated January 21, 1997 for the Due Period beginning December 1, 1996 through December 31, 1996.
99.3 Trust - 3 Master Administrator Report dated November 20, 1996 for the Due Period beginning October 1, 1996 and ending October 31, 1996, (ii) Master Administrator Report dated December 20, 1996 for the Due Period beginning November 1, 1996 through November 30, 1996, (iii) Master Administrator Report dated January 21, 1997 for the Due Period beginning December 1, 1996 through December 31, 1996.