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3333 Holding Corporation and Subsidiary and Centex Development
Company, L.P. and Subsidiaries

3333 HOLDING CORPORATION AND SUBSIDIARY
AND CENTEX DEVELOPMENT COMPANY, L.P. AND SUBSIDIARIES

In this Report, we refer to 3333 Holding Corporation and its subsidiary as Holding and to Centex Development Company, L.P. and its subsidiaries as the Partnership. Whenever we refer to Holding, we are also referring to its subsidiary, 3333 Development Corporation, or Development, a Nevada corporation which is the sole general partner of the Partnership, unless the context otherwise requires. Because the Partnership is a separate reporting entity under the Securities Exchange Act of 1934, or the Exchange Act, the information required by Form 10-K is separately included even though the Partnership may be deemed a subsidiary of Holding under the rules and regulations of the Securities and Exchange Commission promulgated pursuant to the Exchange Act. We have included information relating to both Holding and the Partnership in this Report as a single disclosure where applicable or appropriate. We have set forth all other information separately. You should consider information provided with respect to the Partnership as if it is also provided with respect to Holding to the extent appropriate.

On November 18, 2003, Centex Corporation, a Nevada corporation (“Centex”), 3333 Holding Corporation, a Nevada corporation (“Holding”) and Centex Development Company, L.P., a Delaware limited partnership (the “Partnership”), disclosed that Centex will seek stockholder approval to terminate the Nominee Agreement dated November 30, 1987, as amended (the “Nominee Agreement”), pursuant to which the beneficial interest in the Holding common stock and the warrants to purchase Class B Units of limited partnership interest in the Partnership trade in tandem with the Centex common stock. Holding is seeking stockholder approval of a series of transactions by which Holding and the partnership will become subsidiaries of Centex (the “Transaction”), which would constitute approval of the Agreements and Plans of Merger for both the Holding Merger (as defined below) and the Partnership Merger (as defined below).

Centex and Holding also announced that in connection with the Transaction, Centex and its wholly-owned subsidiary, 3333 Acquisition Corporation, entered into an Agreement and Plan of Merger with Holding on November 17, 2003 pursuant to which 3333 Acquisition Corporation will merge with and into Holding, with Holding being the surviving entity and a subsidiary of Centex (the “Holding Merger”). Pursuant to the Holding Merger, the Holding common stock will be cancelled and payment will be made to the holders of the beneficial interests in the Holding common stock of an amount equal to $.01 per share of Centex common stock.

Centex and the Partnership also announced that Centex and an indirect, wholly-owned partnership subsidiary, Centex Development Acquisition, L.P., entered into an Agreement and Plan of Merger with the Partnership on November 17, 2003 pursuant to which Centex Development Acquisition, L.P. will merge with and into the Partnership, with the Partnership being the surviving entity and an indirect subsidiary of Centex (the “Partnership Merger”). Pursuant to the Partnership Merger, the warrants to purchase Class B Units of limited partnership interests in the Partnership owned by Centex Stockholders will be cancelled and payment will be made to the holders of the beneficial interests in the warrants (other than those held by Centex) of an amount equal to $.01 per share of Centex common stock.

without a distribution of the beneficial interests in the Holding common stock or the warrants to purchase Class B Units of limited partnership interest in the Partnership.

In connection with the proposed transactions referred to above, Centex and Holding will file a proxy statement that will incorporate by reference the combined financial statements of Holding and the Partnership. As a result of incorporation of the combined financial statements, this Current Report on Form 8-K is filed to restate the combined financial statements included in the Joint Annual Report on Form 10-K for the fiscal year ended March 31, 2003 to reflect subsequent property sales through September 30, 2003, as discontinued operations pursuant to Statement of Financial Accounting Standards No. 144 — “Accounting for the Impairment or Disposal of Long-Lived Assets”. All prior period amounts were restated, as appropriate, to reflect the reclassification of such discontinued operations.

Financial Highlights (Unaudited)
(Dollars in thousands, except per share/unit data)



		For the Years Ended March 31,

		2003		2002		2001			2000			1999

Revenues from Continuing Operations
3333 Holding Corporation and Subsidiary		$	350	$	1,611	$	1,001		$	607		$	1,103
Centex Development Company, L.P. and Subsidiaries		$	441,978	$	373,544	$	333,670		$	374,552		$	27,989
Combined Revenues from Continuing Operations		$	442,103	$	375,029	$	333,671		$	374,552		$	28,379
Net Earnings (Loss) from Continuing Operations
3333 Holding Corporation and Subsidiary		$	99	$	1,337	$	(746	)	$	(1,127	)	$	(1,385	)
Centex Development Company, L.P. and Subsidiaries		$	17,349	$	13,756	$	5,077		$	1,009		$	1,725
Combined Net Earnings (Loss) from Continuing Operations		$	17,448	$	15,093	$	4,331		$	(118	)	$	340
Net Earnings (Loss)
3333 Holding Corporation and Subsidiary		$	99	$	1,337	$	(746	)	$	(1,127	)	$	(1,385	)
Centex Development Company, L.P. and Subsidiaries		$	29,263	$	15,645	$	5,362		$	1,583		$	1,815
Combined Net Earnings		$	29,362	$	16,982	$	4,616		$	456		$	430
Total Assets
3333 Holding Corporation and Subsidiary		$	3,231	$	3,042	$	3,253		$	3,023		$	2,522
Centex Development Company, L.P. and Subsidiaries		$	642,933	$	670,953	$	488,281		$	515,188		$	113,233
Combined Assets		$	640,684	$	668,436	$	484,650		$	511,618		$	112,176
Total Debt
3333 Holding Corporation and Subsidiary		$	—	$	—	$	—		$	—		$	582
Centex Development Company, L.P. and Subsidiaries		$	221,492	$	289,126	$	187,301		$	323,740		$	41,896
Combined Debt		$	221,492	$	289,126	$	187,301		$	323,740		$	42,478
Net Earnings (Loss) from Continuing Operations
	Per Share/Unit
3333 Holding Corporation and Subsidiary (shares)		$	99	$	1,337	$	(746	)	$	(1,127	)	$	(1,385	)
Centex Development Company, L.P. and Subsidiaries (units)		$	72.11	$	61.47	$	72.28		$	15.99		$	31.72
Net Earnings (Loss) Per Share/Unit
3333 Holding Corporation and Subsidiary		$	99	$	1,337	$	(746	)	$	(1,127	)	$	(1,385	)
Centex Development Company, L.P. and Subsidiaries		$	121.63	$	69.91	$	76.34		$	25.08		$	33.38
Average Shares/Units Outstanding
3333 Holding Corporation and Subsidiary (shares)			1,000		1,000		1,000			1,000			1,000
Centex Development Company, L.P. and Subsidiaries (units)			240,591	$	223,788		70,235			63,116			54,377

Note that prior period amounts have been restated, where appropriate, to reflect the impact of reclassification of operating components currently classified as discontinued operations.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

On a combined basis, our revenues from continuing operations were $442.1 million for the year ended March 31, 2003, a 17.9% increase over our revenues from continuing operations of $375.0 million for the same period last year. The revenue increase is primarily related to Corporate-Other’s sale of residential lots to Centex Homes and an increase in International Home Building’s unit closings, average unit sales price and revenues from the sale of certain land positions. However, the revenue increase was offset by a decline in Commercial Development’s and Multi-Family Communities’ sales revenues, although the decline was attributable to an accounting change as discussed below. Revenues from residential lot sales and land sales can vary significantly from period to period.

Our operating earnings from continuing operations for the year ended March 31, 2003 were $21.6 million compared to $16.9 million for the same period last year. Our net earnings from continuing operations for the year ended March 31, 2003 were $17.4 million compared to $15.1 million for the same period last year. The increase in operating earnings and net earnings from continuing operations for the year ended March 31, 2003 is primarily related to an increase in International Home Building’s unit closings, average unit sales price and earnings from the sale of certain land positions, offset by a decline in Multi-Family Communities’ earnings from property sales.

Our net earnings from discontinued operations for the year ended March 31, 2003 were $11.9 million. In accordance with Statement of Financial Accounting Standards No. 144, or SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” effective for us beginning April 1, 2002, we now report assets as discontinued operations if such assets are held for sale (as defined by SFAS 144) or if such assets are sold in the current period. We sold ten such properties and classified eight other properties as assets held for sale during the year ended March 31, 2003. Land assets, and any other assets sold prior to adoption of SFAS 144, are reported in continuing operations.

We continued to take advantage of the strong investor demand for quality properties, selling a number of matured assets and land positions during the year. It is not currently anticipated that any significant capital will be allocated to new business development. Instead, our focus going forward will be on completing and leasing up our existing portfolio and continuing to take advantage of strong investor demand. The International Home Building segment will remain a focus as we continue to build on momentum in this segment.

Any reference herein to we, us or our includes 3333 Holding Corporation and subsidiary and Centex Development Company, L.P. and subsidiaries.

The following summarizes International Home Building’s results for the year ended March 31, 2003 compared to the same period last year (dollars in thousands, except per unit data):



	For the Years Ended March 31,

	2003						2002

				% of Revenues						% of Revenues
Revenues — Home Building	$	352,007			93.7	%	$	283,295			97.6	%
Revenues — Land Sales & Other		23,617			6.3	%		7,111			2.4	%
Cost of Sales — Home Building		(303,063	)		(80.7	%)		(245,065	)		(84.4	%)
Cost of Sales — Land Sales		(16,259	)		(4.3	%)		(5,945	)		(2.0	%)
General & Administrative Expenses		(33,372	)		(8.9	%)		(25,135	)		(8.7	%)

Operating Earnings		22,930			6.1	%		14,261			4.9	%
Interest		(2,538	)		(0.7	%)		(1,947	)		(0.7	%)

Earnings Before Income Taxes	$	20,392			5.4	%	$	12,314			4.2	%

				% Change						% Change
Units Closed		1,492			7.6	%		1,387			11.6	%
Unit Sales Price	$	235,930			15.5	%	$	204,251			0.3	%
Operating Earnings Per Unit	$	15,369			4.8	%	$	10,358			65.8	%
Backlog Units		425			90.6	%		223			65.2	%

International Home Building’s revenues for the year ended March 31, 2003 increased by $85.2 million from revenues for the same period last year. This increase is comprised of $43.9 million from an increase in the average unit sales price, $24.8 million from an increase in the number of units closed and $16.5 million from increased sales of certain land positions. Home sales totaled 1,492 units during the year ended March 31, 2003 compared to 1,387 units during the same period in the preceding year, representing a 7.6% increase.

International Home Building’s gross homebuilding margins increased for the year ended March 31, 2003 to 13.9% from 13.5% in the same period last year. This improvement in gross margins was primarily due to sales price increases, offset by increases in labor costs resulting from a shortage of skilled labor.

International Home Building’s general and administrative expenses, as a percentage of revenues, increased to 8.9% for the year ended March 31, 2003 compared to 8.7% for the same period last year, primarily due to personnel additions and an increase in incentive compensation resulting from improved performance.

International Home Building’s financial statements are affected by fluctuations in exchange rates. International Home Building, whose functional currency is the British pound sterling, translates its financial statements into U.S. dollars. Income statement accounts are translated using the average exchange rate for the period, except for significant, non-recurring transactions that are translated at the rate in effect as of the date of the transaction. For the years ended March 31, 2003 and 2002, respectively, the average exchange rate used for translation was 1.55 and 1.43, representing an increase of 7.9%.

The backlog of homes sold but not closed at March 31, 2003 was 425 units, 90.6% more than the 223 units at the same point in the preceding year. We define backlog units as units that have been sold, as indicated by a signed contract, but not closed.

The following summarizes Commercial Development’s results for the year ended March 31, 2003 compared to the same period last year (dollars and square feet in thousands):



	For the Years Ended March 31,

	2003			2002

Sales Revenues	$	16,439		$	20,597
Rental Income & Other Revenues		7,378			7,270
Cost of Sales		(8,334	)		(16,750	)
Selling, General & Administrative Expense		(6,871	)		(5,291	)
Interest		(2,282	)		(2,258	)

Operating Earnings Before Depreciation		6,330			3,568
Depreciation		(1,087	)		(942	)

Operating Earnings		5,243			2,626
Earnings from Discontinued Operations		10,171			1,889

Earnings Before Income Taxes	$	15,414		$	4,515

Operating Square Footage at March 31		2,106			2,586

Commercial Development’s operations during the year ended March 31, 2003 included:

•

sale of five pad sites at the Vista Ridge retail project in Lewisville, Texas;

•

completion of shell construction for a 228,000 square foot industrial project in Grand Prairie, Texas;

•

completion of shell construction for a 58,000 square foot retail center in Lewisville, Texas; and

•

sale of approximately 246 acres of undeveloped land in The Colony and Lewisville, Texas.

Commercial Development’s discontinued operations during the year ended March 31, 2003 included:

•

completion and sale of a 40,000 square foot office project in Lewisville, Texas;

•

completion and sale of two industrial buildings totaling 93,000 square feet in Camarillo, California;

•

sale of six acres of undeveloped land and three buildings with a combined 134,000 square feet of office/industrial space in Pinellas Park, Florida;

•

exchange of a majority interest in a limited liability company owning a 123,000 square foot industrial building in Charlotte, North Carolina for a joint venture partner’s minority interests in various limited liability companies owning industrial buildings in Charlotte, North Carolina and Gardner, Massachusetts;

•

sale of two office buildings totaling 219,000 square feet in Plantation, Florida;

•

completion and sale of a 45,000 square foot industrial project in Oxnard, California; and

•

operation of eight industrial and office buildings in Massachusetts, Michigan and North Carolina.

Sales revenues and cost of sales for fiscal 2003 reflect the sale of the five pad sites and 246 acres of land referred to above. Sales revenues and cost of sales for fiscal 2002 reflect the sale of two industrial projects and approximately two acres of land. Rental income and other revenues; selling, general and administrative expenses; interest expense and depreciation increased compared to the same period in the preceding year as a result of the increase in the average square footage of the operating portfolio. Fiscal 2003 results also include an impairment charge of approximately $1.0 million recorded in discontinued operations.

The following summarizes the results of Multi-Family Communities for the year ended March 31, 2003 compared to the same period last year (dollars in thousands):

During the year ended March 31, 2003, Multi-Family Communities’ revenues from continuing operations consisted of development and related fees on various development projects, an earn-out payment related to the prior sale of a 382-unit rental apartment complex in St. Petersburg, Florida and revenues from the sale of five acres of the Upper Landing project in Saint Paul, Minnesota. During the year ended March 31, 2002, Multi-Family Communities closed on the sale of a 400-unit apartment complex in Grand Prairie, Texas, a 382-unit apartment complex in St. Petersburg, Florida and the sale of 12 acres of land in Lewisville, Texas to Centex Homes.

Multi-Family Communities’ discontinued operations during the year ended March 31, 2003 consisted of the sale of a 323-unit rental apartment project in Lewisville, Texas.

As of March 31, 2003, Multi-Family Communities owns 661 rental apartment units under construction in Florida and Texas and is developing an additional 734 rental apartment units in Texas for unaffiliated owners. Multi-Family Communities is also redeveloping a 21-acre site in downtown Saint Paul, Minnesota into a mixed-use project containing “for sale” and “for rent” housing units and related retail. As of March 31, 2003, ten acres has been utilized for project infrastructure and five acres had been sold to Centex Homes and third-party developers.

Effective April 1, 2003, the operations of Multi-Family Communities were restructured. The responsibilities for day-to-day operations, including the completion, leasing and sale of the projects discussed above, have been assumed by personnel within the Corporate-Other segment. The future operations of remaining projects will be reflected in the Corporate-Other segment. Fiscal year 2003 results include a $574 thousand restructuring charge.

The following summarizes the results of Corporate-Other for the year ended March 31, 2003, compared to the same period last year (dollars in thousands):

Our Corporate-Other segment acquires and disposes of land and other assets that are not identified with another specific business segment. Fiscal 2003 revenues consist primarily of sales revenues, fees and other revenues derived from sales of residential lots to Centex Homes. Fiscal 2002 revenues included $1.8 million from sales of residential lots to Centex Homes and fees related to agreements to sell residential lots to Centex Homes, $0.5 million from the sale of commercial land in Allen, Texas, $0.4 million from the sale of a residential lot in Dallas, Texas and $0.1 million from miscellaneous sources.

Selling, general and administrative expenses increased compared to the same period in the preceding year due to the addition of internal legal and marketing personnel and increased real estate taxes related to residential lots. Interest expense increased primarily as a result of debt incurred to finance the purchase of these residential lots.

On a combined basis, revenues from continuing operations for the Partnership and Holding for fiscal year 2002 totaled $375.0 million compared to $333.7 million for the prior fiscal year. The Partnership and Holding had combined net earnings for fiscal 2002 of $17.0 million compared to combined net earnings of $4.6 million in fiscal 2001.

The following summarizes International Home Building’s results for the two-year period ended March 31, 2002 (dollars in thousands):

In connection with the purchase of this segment by the Partnership, the seller received $219.0 million in non-interest-bearing promissory notes due April 1, 2001 and retained preferred non-voting shares in Fairclough that entitled the seller to receive the net after-tax earnings of Fairclough until March 31, 2001. During fiscal 2001, Fairclough generated after-tax earnings totaling $7.8 million. The Partnership has accounted for the non-interest-bearing debt and nominal residual value preferred shares as if they were a single debt instrument. Accordingly, the Partnership recorded distributions attributable to the preferred shares as interest expense in the accompanying financial statements. After taxes, International Home Building generated earnings of $10.5 million and $0.2 million for fiscal 2002 and 2001, respectively.

International Home Building’s revenues for the fiscal year ended March 31, 2002 increased by $37.9 million from revenues for the same period last year. The increase is primarily attributable to an increase in unit completions.

Home sales totaled 1,387 units during the fiscal year ended March 31, 2002 compared to 1,243 units during the same period in the preceding year, representing a 12% increase. The backlog of homes sold but not closed at March 31, 2002 was 223 units, 65% more than the 135 units at the same point in the preceding year. We define backlog units as units that have been sold, as indicated by a signed contract, but not closed.

The events of September 11, 2001 had an adverse impact on Fairclough’s operations, particularly in its Southern Home Counties division, a high-end home market around London that has a significant expatriate community. Fairclough responded to a decline in sales rates by increasing marketing efforts, purchase incentives and price discounting.

The following summarizes Commercial Development’s results for the two-year period ended March 31, 2002 (dollars and square footage in thousands):



	For the Years Ended March 31,

	2002			2001

Sales Revenues	$	20,597		$	22,144
Rental and Other Income		7,270			5,298
Cost of Sales		(16,750	)		(18,398	)
Selling, General & Administrative Expenses		(5,291	)		(4,458	)
Interest Expense		(2,258	)		(1,924	)

Operating Earnings before Depreciation		3,568			2,662
Depreciation		(942	)		(794	)

Operating Earnings		2,626			1,868
Earnings from Discontinued Operations		1,889			285

Earnings Before Income Taxes	$	4,515		$	2,153


Operating Square Footage at March 31		2,586			1,541

•

completion of six projects totaling 1,037,000 square feet of industrial, medical and office space located in Arizona, California, Michigan, Mississippi and North Carolina;

•

initiation of construction on six projects totaling 542,000 square feet of industrial, office and retail space located in California and Texas;

•

acquisition of a 113,000 square foot existing industrial project in Ventura County, California, together with 16 acres of adjacent undeveloped land;

•

sale of a 132,500 square foot industrial project and an 86,000 square foot industrial project in Ventura County, California;

•

sale of a partnership interest in a partnership owning 0.6 acres of land in Dallas, Texas;

•

sale of a joint venture interest in a medical office building in Rowlett, Texas.

•

completion of eight buildings totaling 856,000 square feet of office and industrial space located in Florida, California, Texas and North Carolina;

•

initiation of construction on six new projects totaling 929,000 square feet of office and industrial space in Michigan, California and North Carolina;

•

acquisition of a 134,500 square foot existing industrial building in Charlotte, North Carolina;

•

sale of five industrial buildings totaling 485,000 square feet in Ventura County, California and

Sales Revenues and Cost of Sales for fiscal 2002 reflect the sale of two industrial projects and the sale of approximately two acres of land. Sales Revenues and Cost of Sales for fiscal 2001 reflect the sale of an industrial project in California and the sale of land in Texas and California. Rental and Other Income increased in fiscal 2002 as a result of an increase in the number of operating properties. Selling, general and administrative expenses, interest expense and depreciation also increased for fiscal 2002 as a result of an increase in the number of operating properties.

The following summarizes the results of Multi-Family Communities, which was formerly known as Multi-Family Development, for the two-year period ended March 31, 2002 (dollars in thousands):

During fiscal 2002, Multi-Family Communities closed on the sale of a 400-unit apartment complex located in Grand Prairie, Texas, a 382-unit apartment complex in St. Petersburg, Florida and the sale of 12 acres of land in Lewisville, Texas to Centex Homes.

Revenues for fiscal 2001 resulted from the sale of a 172-apartment community in College Station, Texas, that Multi-Family Communities owned in a joint venture with an unaffiliated developer, and the receipt of an earn-out payment related to the fiscal 2000 sale of a 304-unit apartment community in The Colony, Texas.

The following summarizes the results of Corporate-Other, which was formerly known as Land Sales and Other, for the two-year period ended March 31, 2002 (dollars in thousands):

The Partnership’s Corporate-Other segment acquires and disposes of land and other assets of the Partnership not identified with another specific business segment. Fiscal 2002 revenues included $1.8 million from sales of residential lots to Centex Homes and fees related to agreements to sell residential lots to Centex Homes, $0.5 million from the sale of commercial land in Allen, Texas, $0.4 million from the sale of a residential lot in Dallas, Texas and $0.1 million from miscellaneous sources. Fiscal 2001 revenues from the sale of real estate totaled $21.1 million, which resulted from the sale of the Domestic Homebuilding operations to Centex Homes at book value, which approximated market value.

We finance land acquisition and development activities primarily from financial institution borrowings, equity contributions from third-party investors in project-specific joint ventures, seller financing, issuance of Class C limited partnership units to Centex affiliates and cash flow from operations, which is comprised largely of proceeds from the sale of real estate and operating projects.

We typically finance properties under development through short-term variable and fixed-rate secured construction loans, and to a limited extent depending on the timing of the project construction, cash flow from operations. Construction loans totaled $74.0 million at March 31, 2003. Under the terms of various construction loan agreements, we are required to maintain certain minimum liquidity and net worth levels. At March 31, 2003, we were in compliance with these covenants.

Permanent commercial project loans outstanding at March 31, 2003 totaled $46.2 million compared to $76.6 million at March 31, 2002. The project loans are collateralized by completed commercial properties and have original terms ranging from ten to twenty-two years with fixed interest rates ranging from 7.20% to 8.72%. These loans are non-recourse to the Partnership and its subsidiaries.

Seller-financed land loans of $57.1 million were obtained during fiscal 2002. Outstanding balances on seller-financed loans at March 31, 2003 totaled $32.1 million, with terms of up to three years and fixed interest rates ranging from 8.00% to 9.50%. These loans are non-recourse to the Partnership and its subsidiaries.

The International Home Building segment has secured a revolving bank credit facility of 100 million in British pounds sterling. This facility expires in April 2006, and may be extended for up to two years with lender approval. Advances under this facility totaled £44.0 million, or $69.3 million, at March 31, 2003.

Under the terms of this facility, the International Home Building segment is required to maintain certain leverage and interest coverage ratios and a minimum tangible net worth. At March 31, 2003, the International Home Building segment was in compliance with all of these covenants.

We believe that the revenues, earnings and liquidity from the sale of single-family homes, land sales, the sale and permanent financing of development projects and issuance of Class C units will be sufficient to provide the necessary funding for our current and future needs.

The following is a summary of certain off-balance-sheet arrangements and other obligations and their possible effects on our liquidity and capital resources.

We conduct certain operations through our participation in joint ventures in which we hold less than a majority interest. These non-consolidated joint ventures had total debt outstanding of approximately $35.8 million as of March 31, 2003 and $16.1 million as of March 31, 2002. Our liability for the obligations of these non-consolidated joint ventures is limited to approximately $7.5 million as of March 31, 2003.

At March 31, 2003, we had outstanding performance bonds and bank guarantees of $28.0 million that relate to projects undertaken by International Home Building and development obligations of International Home Building.

To obtain construction financing for commercial and multi-family projects being developed by our subsidiaries, we are often required to guarantee, for the benefit of the construction lender, the completion of the project. In some instances, we have also executed recourse payment guarantees. At March 31, 2003, our subsidiaries had outstanding letters of credit of $3.9 million that primarily relate to development obligations of Multi-Family Communities.

We expect that our subsidiaries will satisfy their loan and other contractual obligations in the ordinary course of business and in accordance with applicable contractual terms. As that occurs, our liability exposure will be decreased and, eventually, we will not have any continuing obligations with respect to these projects.

Some of our critical accounting policies require the use of judgment in their application or require estimates of inherently uncertain matters. Although our accounting policies are in compliance with generally accepted accounting principles, a change in the facts and circumstances of the underlying transactions could significantly change the application of the accounting policies and the resulting financial statement impact. Listed below are those policies that we believe are critical and require the use of complex judgment in their application.

We adopted the provisions of Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” or SFAS No. 142, effective April 1, 2001. Upon the adoption of SFAS No. 142, goodwill is no longer subject to amortization. Rather, goodwill is subject to an assessment, at least annually, for impairment by applying a fair value based test. If the carrying amount exceeds the fair value, an impairment exists. We continually evaluate whether events and circumstances have occurred that indicate that the remaining balance of goodwill may not be recoverable. In evaluating impairment, we estimate the sum of the expected future cash flows derived from such goodwill. Such evaluations for impairment are significantly impacted by estimates of future revenues, costs and expenses and other factors. If the goodwill is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the goodwill exceeds the fair value of the future cash flows.

We account for long-lived assets in accordance with the provisions of Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” or SFAS No. 144. SFAS No. 144 requires that long-lived assets and certain identifiable intangibles, which includes our inventories, real estate investments and property and equipment, be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets is measured by comparing the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. These evaluations for impairment are significantly impacted by estimates of revenues, costs and expenses and other factors. If these assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.

In August 2001, the Financial Accounting Standards Board issued SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. The statement was effective for us beginning April 1, 2002.

Due to the adoption of SFAS 144, we now report assets identified subsequent to March 31, 2002 as held for sale (as defined by SFAS 144), if any, and any such assets sold in the current period, as discontinued operations. All results of these discontinued operations, less applicable income taxes, are included as discontinued operations in the statements of operations. Prior periods are restated for comparative purposes. Land assets, and any other assets sold prior to adoption of SFAS 144, are reported in continuing operations.

In November 2002, the Financial Accounting Standards Board issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” or FIN 45, which requires certain guarantees to be recorded at fair value. FIN 45 also requires a guarantor to make certain disclosures about guarantees, including product warranties, even when the likelihood of making any payments under the guarantee is remote. The disclosure requirements of FIN 45 are effective for financial statements of interim or annual periods ending after December 15, 2002. The initial recognition and measurement provisions are applicable only for guarantees issued or modified after December 31, 2002. The implementation of FIN 45 did not have a material impact on our results of operations or financial position.

In January 2003, the Financial Accounting Standards Board issued Interpretation No. 46, “Consolidation of Variable Interest Entities,” or FIN 46, which clarifies the application of Accounting Research Bulletin No. 51, “Consolidated Financial Statements,” to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties.

Certain disclosure requirements of FIN 46 are effective for financial statements of interim or annual periods issued after January 31, 2003. FIN 46 applies immediately to variable interest entities created, or in which an enterprise obtains an interest, after January 31, 2003. For certain variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003, FIN 46 applies to interim or annual periods ending after March 15, 2004. As discussed in Note (B), “Organization,” of our Notes to Condensed Combining Financial Statements, Centex indirectly holds 100% of the Partnership’s Class A and Class C Units. The manner in which Centex reports its interest in the Partnership may be affected by this interpretation. Centex and the Companies are in the process of assessing the impact FIN 46 will have on their respective financial statements.

The Business, Management’s Discussion and Analysis of Financial Condition and Results of Operations and other sections of this Report contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the context of the statement and generally arise when we are discussing our beliefs, estimates or expectations. These statements are not guarantees of future performance and involve a number of risks and uncertainties. Actual results and outcomes may differ materially from what is expressed or forecasted in these forward-looking statements. In addition to the specific uncertainties discussed elsewhere in this Report, the following risks and uncertainties may affect the actual performance and results of operations of the Companies:

•

Our homebuilding, commercial, multi-family and land sales operations are somewhat cyclical and sensitive to changes in economic conditions, including levels of employment, consumer confidence and income, availability of financing, interest rate levels and changes in the economic condition of the local markets in which we operate.

•

Our homebuilding, commercial, multi-family and land sales operations are also subject to other risks and uncertainties, including seasonal variations, adverse weather conditions, the availability of adequate land in desirable locations, the cost and availability of labor and construction materials, labor disputes, the general demand for housing and new construction and the resale market for existing homes.

•

All of our businesses operate in very competitive environments, which are characterized by competition from a number of other homebuilders, developers and landowners in each of the markets in which we operate.

•

We are subject to various federal, state and local statutes, rules and regulations that could affect our businesses, including those concerning zoning, construction, protecting the environment and health. In addition, our businesses could be affected by changes in federal income tax policy, federal mortgage loan financing programs and by other changes in regulation or policy.

Other risks and uncertainties may also affect the outcome of the actual performance and results of operations of the Partnership and Holding.

The Partnership has utilized both short-term and long-term debt in its financing strategy. The Partnership’s financial position is exposed to fluctuations in variable interest rates for loans obtained by its subsidiaries and joint ventures.

For fixed-rate debt, changes in interest rates do not affect the Partnership’s earnings or cash flows. Conversely, for variable-rate debt, changes in interest rates do affect the Partnership’s future earnings and cash flows. At March 31, 2003, the Partnership, through its subsidiaries and joint ventures, had $46.2 million in fixed-rate permanent debt with a weighted-average interest rate of 8.10%. The permanent debt has monthly principal and interest debt service and has maturities ranging from 2009 to 2023. In addition, the Partnership, through its subsidiaries and joint ventures, had $47.8 million in other fixed-rate debt at March 31, 2003 with maturities ranging from fiscal 2004 to fiscal 2006. Also at March 31, 2003, the Partnership, through its subsidiaries and joint ventures, had $127.5 million in variable-rate loans. If interest rates increased 100 basis points, the annual effect to the Partnership’s financial position and cash flows would be less than $1.0 million based on the balances outstanding at March 31, 2003. We cannot determine future fluctuations in interest rates. Accordingly, actual results from interest rate fluctuation could differ from the estimate presented above.

Fairclough has entered into an interest rate swap agreement on a portion of its variable rate debt, which, in effect, fixes the interest rate on approximately 80% of its debt outstanding at March 31, 2003. In addition, Fairclough has issued promissory notes and incurred bank debt payable in British pounds sterling. As of March 31, 2003, the Partnership had not utilized any forward or option contracts on foreign currencies or commodities, or other types of derivative financial instruments, to mitigate any of the associated foreign currency exchange rate risk.

Pursuant to leases signed over the last several years, a single tenant leases 1,029,000 square feet, or approximately 49%, of the Partnership’s current commercial projects. Fiscal 2003 revenues from this tenant were approximately 30% of total rental revenues from commercial projects.

Various Centex affiliates lease, pursuant to leases signed over the last several years, an aggregate of 157,000 square feet, or approximately 7%, of the Partnership’s current commercial projects. Various Centex affiliates also leased space in two commercial projects that were sold during fiscal 2003. Fiscal 2003 revenues from these Centex affiliates were approximately 24% of total rental revenues from commercial projects, and approximately 70% of total rental revenues from continuing operations.

3333 Holding Corporation and Subsidiary and Centex Development
Company, L.P. and Subsidiaries

3333 Holding Corporation and Subsidiary
and Centex Development Company, L.P. and Subsidiaries
Combining Balance Sheets
(Dollars in thousands)



					March 31,

					2003			2002			2003			2002			2003			2002

											Centex Development						3333 Holding
											Company, L.P. and						Corporation and
					Combined						Subsidiaries						Subsidiary

Assets
	Cash and Cash Equivalents				$	5,113		$	22,538		$	5,105		$	22,529		$	8		$	9
	Receivables-
		Affiliates				—			—			4,289			4,368			—			—
		Centex Corporation and Subsidiaries				7,793			—			7,793			—			—			—
		Notes				5,885			—			5,885			—			—			—
		Other				17,041			7,157			16,780			7,086			261			71
	Inventories-
			Housing Projects			349,489			317,186			349,489			317,186			—			—
			Land Held for Development and Sale			47,319			88,138			47,319			88,138			—			—
			Commercial and Multi-Family Projects Under Development			49,993			28,318			49,993			28,318			—			—
	Investments-
			Commercial Properties, net			49,790			34,718			49,790			34,718			—			—
			Real Estate Joint Ventures			3,973			5,353			3,973			5,353			—			—
			Affiliate			—			—			—			—			1,191			1,191
	Assets Held for Sale					55,496			118,622			55,496			118,622			—			—
	Property and Equipment, net					2,308			3,212			2,308			3,212			—			—
	Other Assets-
			Goodwill, net			30,698			27,799			30,698			27,799			—			—
			Deferred Charges and Other			15,786			15,395			14,015			13,624			1,771			1,771

					$	640,684		$	668,436		$	642,933		$	670,953		$	3,231		$	3,042

Liabilities, Stockholders’ Equity and Partners’ Capital
	Accounts Payable and Accrued Liabilities-
			Affiliates		$	—		$	—		$	—		$	—		$	4,289		$	4,368
			Centex Corporation and Subsidiaries			—			7,061			—			7,061			—			—
			Other			128,129			105,442			127,967			105,449			211			42
	Liabilities Related to Assets Held for Sale					46,208			95,837			46,208			95,837			—			—
	Notes Payable					177,499			197,949			177,499			197,949			—			—
	Stockholders’ Equity and Partners’
			Capital-Stock and Stock/Class B Unit Warrants			501			501			500			500			1			1
			Capital in Excess of Par Value			800			800			—			—			800			800
			Retained Earnings (Deficit)			(2,070	)		(2,169	)		—			—			(2,070	)		(2,169	)
			Partners’ Capital			273,180			264,994			274,322			266,136			—			—
			Accumulated Other Comprehensive Income (Loss):
				Foreign Currency Translation Adjustments		16,903			(2,367	)		17,291			(2,367	)		—			—
				Unrealized Gain (Loss) on Hedging Instruments		(466	)		388			(854	)		388			—			—

	Total Stockholders’ Equity and Partners’ Capital					288,848			262,147			291,259			264,657			(1,269	)		(1,368	)

					$	640,684		$	668,436		$	642,933		$	670,953		$	3,231		$	3,042

Transactions between Centex Development Company, L.P. and Subsidiaries and 3333 Holding Corporation and Subsidiary have been eliminated.

3333 Holding Corporation and Subsidiary
and Centex Development Company, L.P. and Subsidiaries
Combining Statements of Operations
(Dollars in thousands, except per share/unit data)



		For the Years Ended March 31,

		2003		2002		2001			2003		2002		2001			2003		2002		2001

																3333 Holding
									Centex Development Company							Corporation and
		Combined							L.P. and Subsidiaries							Subsidiary

Revenues
	Real Estate Sales	$	427,964	$	364,162	$	328,362		$	427,964	$	364,162	$	328,362		$	—	$	—	$	—
	Interest and Other Income		14,139		10,867		5,309			14,014		9,382		5,308			350		1,611		1,001

			442,103		375,029		333,671			441,978		373,544		333,670			350		1,611		1,001

Costs and Expenses
	Cost of Real Estate Sold		365,241		315,835		285,612			365,241		315,835		285,612			—		—		—
	Selling, General and Administrative Expenses		46,118		35,786		30,686			46,092		35,638		29,977			251		274		1,709
	Interest		7,184		5,046		9,726			7,184		5,046		9,726			—		—		—
	Depreciation and Amortization		1,920		1,512		3,558			1,920		1,512		3,520			—		—		38

			420,463		358,179		329,582			420,437		358,031		328,835			251		274		1,747

Earnings (Loss) from Continuing Operations Before Income Taxes			21,640		16,850		4,089			21,541		15,513		4,835			99		1,337		(746	)
	Income Taxes		4,192		1,757		(242	)		4,192		1,757		(242	)		—		—		—

Net Earnings (Loss) from Continuing Operations			17,448		15,093		4,331			17,349		13,756		5,077			99		1,337		(746	)
Discontinued Operations:
Earnings from Discontinued Operations (Including Gain on Sale of $11,754 for the year ended March 31, 2003)			11,914		1,889		285			11,914		1,889		285			—		—		—

Net Earnings		$	29,362	$	16,982	$	4,616		$	29,263	$	15,645	$	5,362		$	99	$	1,337	$	(746	)

Net Earnings Allocable to Limited Partner									$	29,263	$	15,645	$	5,362

Earnings from Continuing Operations Per Unit/Share									$	72.11	$	61.47	$	72.28		$	99	$	1,337	$	(746	)
Earnings from Discontinued Operations Per Unit/Share										49.52		8.44		4.06			—		—		—

Net Earnings (Loss) Per Unit/Share									$	121.63	$	69.91	$	76.34		$	99	$	1,337	$	(746	)

Weighted-Average Units/ Shares Outstanding										240,591		223,788		70,235			1,000		1,000		1,000

Transactions between Centex Development Company, L.P. and Subsidiaries and 3333 Holding Corporation and Subsidiary have been eliminated.

3333 Holding Corporation and Subsidiary
and Centex Development Company, L.P. and Subsidiaries
Combining Statements of Cash Flows
(Dollars in thousands)



			March 31

			2003			2002			2001

			Combined

Cash Flows — Operating Activities
	Net Earnings (Loss)		$	29,362		$	16,982		$	4,616
	Adjustments-
		Depreciation		4,531			3,414			4,089
		Amortization		932			691			751
		Deferred Tax Provision (Benefit)		1,257			(1,262	)		—
		Equity in Earnings from Joint Ventures		(539	)		(161	)		(394	)
	Decrease in Restricted Cash			—			—			1,915
	(Increase) Decrease in Receivables			(16,893	)		2,716			133
	(Increase) Decrease in Notes Receivable			(5,885	)		14			3,117
	Decrease (Increase) in Inventories			31,345			(103,403	)		(36,126	)
	Decrease (Increase) in Commercial Properties			29,892			(51,780	)		(24,143	)
	(Increase) Decrease in Other Assets			(7	)		(8,108	)		(7,895	)
	Increase (Decrease) in Payables and Accruals			2,960			35,483			(25,571	)

				76,955			(105,414	)		(79,508	)

Cash Flows — Investing Activities
	Decrease (Increase) in Advances to Joint Ventures and Investment in Affiliate			1,919			(2,493	)		290
	Disposals (Additions) of Property and Equipment, net			525			(236	)		(633	)

				2,444			(2,729	)		(343	)

Cash Flows — Financing Activities
	(Decrease) Increase in Notes Payable-
		Centex Corporation and Subsidiaries		—			—			—
		Other		(76,840	)		101,676			(114,318	)
	Issuance of Class C Units			—			26,378			142,268
	Preference Payments			(21,077	)		—			—

				(97,917	)		128,054			27,950

	Effect of Exchange Rate Changes on Cash			1,093			(407	)		(1,464	)

Net (Decrease) Increase in Cash				(17,425	)		19,504			(53,365	)
Cash and Cash Equivalents at Beginning of Year				22,538			3,034			56,399

Cash and Cash Equivalents at End of Year			$	5,113		$	22,538		$	3,034

Transactions between Centex Development Company, L.P. and Subsidiaries and 3333 Holding Corporation and Subsidiary have been eliminated.

3333 Holding Corporation and Subsidiary
and Centex Development Company, L.P. and Subsidiaries
Combining Statements of Cash Flows
(Dollars in thousands)



March 31,									March 31,

2003			2002			2001			2003			2002			2001

Centex Development									3333 Holding
Company, L.P. and									Corporation and
Subsidiaries									Subsidiary

$	29,263		$	15,645		$	5,362		$	99		$	1,337		$	(746	)
	4,531			3,414			4,051			—			—			38
	932			691			751			—			—			—
	1,257			(1,262	)		—			—			—			—
	(539	)		(161	)		(394	)		—			—			—
	—			—			1,915			—			—			—
	(16,703	)		2,787			128			(190	)		(71	)		5
	(5,885	)		14			3,117			—			—			—
	31,345			(105,299	)		(35,767	)		—			1,896			(359	)
	29,892			(51,780	)		(24,143	)		—			—			—
	(7	)		(6,437	)		(7,970	)		—			(1,671	)		75
	2,870			37,031			(26,547	)		90			(1,548	)		976

	76,956			(105,357	)		(79,497	)		(1	)		(57	)		(11	)

	1,919			(2,493	)		290			—			—			—
	525			(297	)		(633	)		—			61			—

	2,444			(2,790	)		(343	)		—			61			—

	—			—			—			—			—			—
	(76,840	)		101,676			(114,318	)		—			—			—
	—			26,378			142,268			—			—			—
	(21,077	)		—			—			—			—			—

	(97,917	)		128,054			27,950			—			—			—

	1,093			(407	)		(1,464	)		—			—			—

	(17,424	)		19,500			(53,354	)		(1	)		4			(11	)
	22,529			3,029			56,383			9			5			16

$	5,105		$	22,529		$	3,029		$	8		$	9		$	5

3333 Holding Corporation and Subsidiary
and Centex Development Company, L.P. and Subsidiaries
Combining Statements of Stockholders’ Equity and Partners’ Capital
(Dollars in thousands)


			Centex Development Company, L.P.										3333 Holding
			and Subsidiaries										Corporation and Subsidiary

						Class B		General		Limited					Capital In		Retained
						Unit		Partners'		Partners'			Stock		Excess of		Earnings
			Combined			Warrants		Capital		Capital			Warrants		Par Value		(Deficit)

Balance at March 31, 2000			$	69,185		$	500	$	1,142	$	70,644		$	1	$	800	$	(2,760	)
	Issuance of Class C Units			146,112			—		—		146,112			—		—		—
	Net Earnings			4,616			—		—		5,362			—		—		(746	)
	Other Comprehensive Loss			(4,100	)		—		—		(4,100	)		—		—		—

	Comprehensive Income			516

Balance at March 31, 2001				215,813			500		1,142		218,018			1		800		(3,506	)
	Issuance of Class C Units			27,135			—		—		27,135			—		—		—
	Net Earnings			16,982			—		—		15,645			—		—		1,337
	Other Comprehensive Income			2,217			—		—		2,217			—		—		—

		Comprehensive Income		19,199

Balance at March 31, 2002				262,147			500		1,142		263,015			1		800		(2,169	)
	Preference Payments			(21,077	)		—		—		(21,077	)		—		—		—
	Net Earnings			29,362			—		—		29,263			—		—		99
	Other Comprehensive Income			18,416			—		—		18,416			—		—		—

	Comprehensive Income			47,778

Balance at March 31, 2003			$	288,848		$	500	$	1,142	$	289,617		$	1	$	800	$	(2,070	)

Transactions between Centex Development Company, L.P. and Subsidiaries and 3333 Holding Corporation and Subsidiary have been eliminated.

3333 Holding Corporation and Subsidiary
and Centex Development Company, L.P. and Subsidiaries
Notes to Combining Financial Statements
(Dollars in thousands, except per share/unit data)

The accompanying combining financial statements include the accounts of 3333 Holding Corporation (“Holding”) and subsidiary and Centex Development Company, L.P. (the “Partnership”) and subsidiaries (collectively, the “Companies”) as of March 31, 2003 and 2002 and results of operations for each of fiscal 2003, 2002 and 2001 after elimination of all significant intercompany balances and transactions. The financial statements of the Partnership and subsidiaries are included in the combined statements since Development, as general partner of the Partnership, is able to exercise effective control over the Partnership. See Note (Q), “Subsequent Events.”

The Partnership is a master limited partnership formed by Centex Corporation and subsidiaries (“Centex”) in March 1987 to broaden the range of business activities that may be conducted for the benefit of Centex’s stockholders to include general real estate development. Centex believed that this expansion would improve stockholder value through longer-term real estate investments, real estate developments and the benefits of the partnership form of business.

The Partnership is authorized to issue three classes of limited partnership interest. Centex Corporation indirectly holds 100% of the Partnership’s Class A and Class C limited partnership units (“Class A Units” and “Class C Units,” respectively), which are collectively convertible into 20% of the Partnership’s Class B limited partnership units (“Class B Units”). The Partnership may issue additional Class C Units in connection with the acquisition of real property and other assets. No Class B Units have been issued. However, the stockholders of Centex hold warrants to purchase approximately 80% of the Class B Units. The warrants are held through a nominee arrangement and trade in tandem with the common stock of Centex.

As holder of the Class A and Class C Units, Centex is entitled to a cumulative preferred return of 9% per annum on the average outstanding balance of its capital contributions to the Partnership, adjusted for cash and other distributions representing a return of capital. As of March 31, 2003, these adjusted capital contributions, or Unrecovered Capital, were $241.1 million. Preference payments in arrears totaled $42.0 million after a preference payment of $21.1 million on March 31, 2003.

The Partnership is managed by its general partner, 3333 Development Corporation, a wholly-owned subsidiary of Holding. The common stock of Holding is held by the stockholders of Centex through a nominee arrangement and trades in tandem with the common stock of Centex. The stockholders of Centex elect the four-person board of directors of Holding, three of whom are independent outside directors who are not directors, affiliates or employees of Centex. Thus, through Holding, the stockholders of Centex control the general partner of the Partnership. The general partner, through its independent board and the independent board of Holding, including its non-executive Chairman, oversees the Partnership’s activities, including the acquisition, development, maintenance, operation and sale of properties. Consent of the limited partners for the activities of the Partnership is not required, and the limited partners cannot remove the general partner. As a result, Centex accounts for its limited partnership interest in the Partnership using the equity method of accounting for investments.

Supplementary condensed combined financial statements of Centex and subsidiaries, Holding and subsidiary, and the Partnership and subsidiaries are set forth below. For additional information on Centex and subsidiaries, you should refer to the separate financial statements and related footnotes included elsewhere in this Report.

Supplementary Condensed Combined Balance Sheets of Centex and Subsidiaries, Holding and Subsidiary and Partnership and Subsidiaries



		March 31,

		2003		2002

Assets
	Cash and Cash Equivalents	$	474,891	$	241,407
	Restricted Cash		172,321		106,270
	Receivables		5,633,905		4,064,240
	Inventories		3,982,880		3,142,332
	Investments in Joint Ventures and Other		106,250		99,962
	Assets Held for Sale and Discontinued Operations		165,860		247,113
	Property and Equipment, net		683,473		701,419
	Other Assets		750,585		781,940

		$	11,970,165	$	9,384,683

Liabilities and Stockholders’ Equity
	Accounts Payable and Accrued Liabilities	$	1,794,261	$	1,514,685
	Liabilities Related to Assets Held for Sale and Discontinued Operations		65,643		126,401
	Short-term Debt		1,027,182		525,800
	Long-term Debt		6,255,016		4,945,353
	Minority Stockholders’ Interest		170,217		155,671
	Stockholders’ Equity		2,657,846		2,116,773

		$	11,970,165	$	9,384,683

Supplementary Condensed Combined Statements of Earnings of Centex and Subsidiaries, Holding and Subsidiary and Partnership and Subsidiaries



	For the Years Ended March 31,

	2003		2002			2001

Revenues	$	9,304,091	$	7,949,576		$	6,911,502
Costs and Expenses		8,558,195		7,362,316			6,454,296
Earnings from Unconsolidated Entities		45,889		31,761			5,059

Earnings Before Income Taxes		791,785		619,021			462,265
Income Taxes		244,754		238,432			163,374

Net Earnings From Continuing Operations		547,031		380,589			298,891
Earnings (Loss) From Discontinued Operations		8,888		1,637			(16,914	)

Net Earnings		555,919		382,226			281,977
Other Comprehensive Income (Loss)		6,965		(7,859	)		(3,849	)

Comprehensive Income	$	562,884	$	374,367		$	278,128

Revenues from homebuilding projects are recognized as homes are sold and title passes. Real estate sales are recognized when a buyer has made an adequate cash down payment, all significant risks and rewards of ownership have been relinquished and title has transferred to the buyer. Sales revenues related to contractually obligated improvements are deferred until such improvements have been completed. The Partnership recognizes revenues from rentals to tenants under operating leases ratably over the lease terms. Rental revenues are included in Interest and Other Income in the Combining Statements of Operations.

Earnings (loss) per share/unit is based on the weighted-average number of outstanding shares of Holding common stock of 1,000 and on the weighted-average number of outstanding Class A and Class C Units of 240,591; 223,788 and 70,235 for fiscal 2003, 2002, and 2001 respectively.

The Partnership considers all highly liquid investments purchased with an original maturity of three months or less to be cash and cash equivalents.

Accounts receivable primarily consist of accrued rents due from tenants, closed unfunded home sales receivables and accrued reimbursements for costs incurred at a multi-family project. See Note (K), “Commitments and Contingencies,” for further discussion of this project. Non-cancelable minimum rentals (in thousands) from operating leases during the next five fiscal years are: 2004, $12,082; 2005, $12,034; 2006, $11,449; 2007, $11,258; 2008, $11,105; and $61,020 thereafter.

Notes receivable at March 31, 2003 are due within one year. The weighted-average interest rate at March 31, 2003 was 5.25%.

Projects under development and held for sale are stated at the lower of cost (including development costs and, where appropriate, capitalized interest and real estate taxes) or fair value less costs to sell. Capitalized costs are included in cost of sales in the combining statements of operations as related revenues are recognized. Interest costs relieved from inventories are included in cost of sales. The Companies review recoverability of their inventories on an individual basis in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” An impairment charge of approximately $1.0 million is included in Earnings from Discontinued Operations in fiscal year 2003 to reflect the difference between cost and fair value for a commercial project.

Commercial real estate properties are carried at cost, net of accumulated depreciation. Betterments, major renovations and certain costs directly related to the acquisition, improvement and leasing of real estate are capitalized. Expenditures for maintenance and repairs are charged to operations as incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, as follows:

The cost of commercial real estate properties and accumulated depreciation are summarized below:

Deferred charges and other are primarily composed of loan fees, lease commissions, prepaid expenses, deposits and investments.

Property and equipment are stated at cost. Major renewals and improvements are capitalized and depreciated. Repairs and maintenance are expensed as incurred. Depreciation is provided on a straight-line basis over the estimated useful lives of depreciable assets ranging from three to ten years. Costs and accumulated depreciation applicable to assets retired or sold are eliminated from the accounts and any resulting gains or losses are recognized at such time.

Goodwill represents the excess of purchase price over the net assets of businesses acquired. In accordance with Statement of Financial Accounting Standards No. 142 (“SFAS No. 142”), goodwill and certain identifiable intangible assets are no longer amortized over their expected lives. Instead, these assets are tested for impairment annually at the reporting unit level using a two-step impairment assessment. See further discussion of goodwill at Note (J), “Goodwill.”

Advertising costs are expensed as incurred. The advertising costs for fiscal 2003, 2002 and 2001 were $5.4 million, $4.3 million and $3.7 million, respectively.

The Partnership’s International Home Building operation, whose functional currency is not the U.S. dollar, translates its financial statements into U.S. dollars. Assets and liabilities are translated at the exchange rate in effect as of the financial statement date. Income statement accounts are translated using the average exchange rate for the period. Income statement accounts that represent significant, non-recurring transactions are translated at the rate in effect as of the date of the transaction. Gains and losses resulting from the translation are included in accumulated other comprehensive income as a separate component of partners’ capital.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Certain prior year balances have been reclassified to be consistent with the fiscal 2003 presentation.

In August 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 144 (“SFAS 144”), “Accounting for the Impairment or Disposal of Long-Lived Assets,” which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. The statement was effective for the Companies beginning April 1, 2002.

Due to the adoption of SFAS 144, the Companies now report assets identified subsequent to March 31, 2002 as held for sale (as defined by SFAS 144), if any, and any such assets sold in the current period, as discontinued operations. All results of these discontinued operations, less applicable income taxes, are included as discontinued operations in the statements of operations. Prior periods are restated for comparative purposes. Land assets, and any other assets sold prior to adoption of SFAS 144, are reported in continuing operations.

FIN 45 are effective for financial statements of interim or annual periods ending after December 15, 2002. The initial recognition and measurement provisions are applicable only for guarantees issued or modified after December 31, 2002. The implementation of FIN 45 did not have a material impact on our results of operations or financial position.

In January 2003, the Financial Accounting Standards Board issued Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”), which clarifies the application of Accounting Research Bulletin No. 51, “Consolidated Financial Statements,” to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. Certain disclosure requirements of FIN 46 are effective for financial statements of interim or annual periods issued after January 31, 2003. FIN 46 applies immediately to variable interest entities created, or in which an enterprise obtains an interest, after January 31, 2003. For certain variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003, FIN 46 applies to interim or annual periods ending after March 15, 2004. As discussed above in Note (B), “Organization,” Centex indirectly holds 100% of the Partnership’s Class A and Class C Units. The manner in which Centex reports its interest in the Partnership may be affected by this interpretation. Centex and the Companies are in the process of assessing the impact FIN 46 will have on their respective financial statements.

On April 15, 1999, Centex Development Company UK Limited (“CDCUK”), a company incorporated in England and Wales and a wholly-owned subsidiary of the Partnership, closed its acquisition of all of the voting shares of Fairclough Homes Group Limited, a British home builder (“Fairclough”). The purchase price at closing (approximately $219 million) was paid by the delivery of two-year non-interest-bearing promissory notes. A major portion of the promissory notes was secured by a letter of credit obtained by the Partnership from a United Kingdom bank. Additionally, the seller of the voting shares retained non-voting preference shares in Fairclough that entitled it to receive substantially all of the net after-tax earnings of Fairclough until March 31, 2001. During that time period CDCUK also retained the rights to participate in Fairclough’s earnings in excess of certain specified levels. During the period between April 15, 1999 and March 31, 2001, Fairclough’s operations were carried out subject to certain guidelines that were negotiated with the seller in connection with its ownership of the preference shares.

Because the non-voting preference shares retained by the seller had the characteristics of debt, the preference obligation was reported as interest expense in the financial statements. Subsequent to March 31, 2001, CDCUK redeemed the preference shares for nominal value.

As of March 31, 2001, the non-interest-bearing promissory notes were repaid in full (less the holdback described below) from a combination of bank borrowings, equity contributions to CDCUK from the Partnership, and a loan to CDCUK from the Partnership. CDCUK retained a $6.9 million holdback relative to CDCUK exercising its right of offset for asserted breaches of representations and warranties by the seller under the share purchase agreement. In fiscal 2002, $1.2 million of this holdback was paid to the seller and $5.7 million was dedicated to fund repair costs and claims arising out of a project completed prior to CDCUK’s acquisition of Fairclough.

The purchase of Fairclough has been accounted for using the purchase method of accounting, pursuant to which the total cost of the acquisition has been allocated to the tangible and intangible assets acquired and liabilities assumed based upon their estimated fair values.

Property and equipment cost by major category and accumulated depreciation are summarized below:

The Partnership conducts certain operations through its participation in joint ventures in which the Partnership holds less than a majority interest. These non-consolidated joint ventures had total debt outstanding of approximately $35.8 million as of March 31, 2003 and $16.1 million as of March 31, 2002. The Partnership’s liability for the obligations of these non-consolidated joint ventures is limited to approximately $7.5 million as of March 31, 2003.

Non-recourse debt totaled $78.2 million at March 31, 2003. As projects are sold, a portion of the proceeds is restricted for repayment of the note that was secured by the project sold. In addition, the Partnership, through wholly-owned single asset entities, had construction debt outstanding at March 31, 2003 totaling $74.0 million. The Partnership itself has also issued completion and payment guarantees for up to 100% of the construction loan amounts. The note balances and rates in effect, including those classified in Liabilities Related to Assets Held for Sale, were as follows:



			March 31,

			2003		2002

Non-Recourse Debt
	Mortgage Notes ⁽²⁾	7.20% to 8.72%	$	46,153	$	76,592
	Land Notes ⁽³⁾	8.00% to 9.50%		32,076		62,370

				78,229		138,962

Limited-Recourse
	Construction Notes ⁽⁵⁾	LIBOR ⁽¹⁾ + 2.00% - 2.35% to 7.08%		50,506		40,868

Full-Recourse Debt
	Construction Notes ⁽⁶⁾	LIBOR ⁽¹⁾ + 1.75% - 2.00%		23,461		15,167
	Other ⁽⁴⁾	LIBOR ⁽¹⁾ + 1.00%		69,296		94,129

				92,757		109,296

			$	221,492	$	289,126

(1)

The 30-day LIBOR rate at March 31, 2003 and 2002 was 1.31% and 1.88%, respectively.

(2)

Secured by assets with an aggregate book value of $53.8 million at March 31, 2003.

(3)

Secured by assets with an aggregate book value of $35.3 million at March 31, 2003.

(4)

As of March 31, 2003, the Partnership has drawn £44.0 million of the £100.0 million availability.

(5)

Secured by assets with an aggregate book value of $63.6 million at March 31, 2003.

(6)

Secured by assets with an aggregate book value of $33.7 million at March 31, 2003.

Maturities of debt (in thousands) during the next five fiscal years are: 2004, $29,929; 2005, $35,193; 2006, $25,175; 2007, $69,296; 2008, $-; and $61,899 thereafter.

A summary of comprehensive income for the three-year period ended March 31, 2003 is presented below:

The Partnership is exposed to the risk of interest rate fluctuations on its debt obligations. As part of its strategy to manage the obligations that are subject to changes in interest rates, the Partnership has entered into an interest rate swap agreement, designated as a cash flow hedge, on a portion of its debt. The swap agreement is recorded at its fair value in Other Assets or Accrued Liabilities in the condensed combining balance sheets. To the extent the hedging relationship is effective, fluctuations in the fair value of the derivative are deferred as a component of Accumulated Other Comprehensive Income. Fluctuations in the fair value of the ineffective portion of the derivative would be reflected in the current period earnings. During fiscal 2003, there was no hedge ineffectiveness related to this derivative.

This swap expires in March 2004. Amounts to be received or paid as a result of the swap agreement are recognized as adjustments to interest incurred on the related debt instrument. As of March 31, 2003, the Accumulated Other Comprehensive Loss was $666 thousand ($466 thousand net of tax). If the cash flow hedge is terminated, the net gain or loss remains in Accumulated Other Comprehensive Income, and is reclassified into earnings in the same periods during which the cash flows on the hedged item affect earnings.

Holding and the Partnership adopted Statement of Financial Accounting Standards No. 142 “Goodwill and Other Intangible Assets” (“SFAS No. 142”) effective April 1, 2001. SFAS No. 142 provides guidance on accounting for intangible assets and eliminates the amortization of goodwill and certain identifiable intangible assets. Under the provisions of SFAS No. 142, intangible assets, including goodwill, that are not subject to amortization will be tested for impairment annually at the reporting unit level using a two-step impairment assessment. Impairment testing must be performed more frequently if events or changes in circumstances indicate that the asset might be impaired. Holding and the Partnership tested for potential impairment, both upon adoption of SFAS No. 142 and annually as of January 1, 2002, by determining whether the carrying amount of a reporting unit exceeds its fair value. Holding and the Partnership had no impairment of goodwill in fiscal 2003. Identifiable intangible assets, other than goodwill, are immaterial. The Partnership’s International Home Building segment carries all of the Partnership’s goodwill, which arose from the April 15, 1999 acquisition of all of the voting shares of Fairclough. The carrying amount of goodwill was $30.7 million and $27.8 million at March 31, 2003 and 2002, respectively. The increase in fiscal 2003 reflects the impact of foreign currency translation adjustments.

For fiscal 2001, net earnings excluding goodwill amortization and earnings per unit excluding such amortization expense are as follows:

As of March 31, 2003, the Partnership had remaining commitments of approximately $10.2 million on construction contracts.

To obtain construction financing for projects being developed by its subsidiaries, the Partnership is often required to guarantee, for the benefit of the construction lender, the completion of the project. In some instances, the Partnership has also executed recourse payment guarantees. At March 31, 2003, our subsidiaries had outstanding letters of credit of $3.9 million that primarily relate to development obligations of Multi-Family Communities.

Subsidiaries of the Partnership have also obtained demand notes or letters of credit from Centex for up to 10% of the construction loan commitment amount. These demand notes or letters of credit have been pledged or endorsed to the lenders as additional collateral on the construction loans and may be called only in the event of an uncured default by the Partnership. This additional collateral totals approximately $1.1 million as of March 31, 2003.

A subsidiary of the Partnership has agreed to develop a mixed-use project in Saint Paul, Minnesota consisting of various types of residential housing and ancillary retail space. The subsidiary has performed a significant portion of the infrastructure work and has sold several of the development sites to reputable home builders (including a 1.5 acre site to Centex Homes) pursuant to contracts that obligate the purchasers to fulfill certain of the seller’s development obligations at the project. The subsidiary of the Partnership (as the seller) retains the right to repurchase the site if the purchaser fails to commence the performance of such obligations. Ultimately, the Partnership’s subsidiary remains responsible for the development of the project.

The subsidiary anticipates that the costs expended for infrastructure work will be reimbursed from the proceeds of a bond offering by a special taxing district established to aid in the development of the project. These costs will be reimbursed over time as improvements at the project generate property taxes sufficient to fund debt service on the bonds. A receivable of approximately $13.9 million is included in Other Receivables in the accompanying Combining Balance Sheets. The subsidiary has deferred recognition of this income as of March 31, 2003 as improvements to the project that will generate property taxes have just begun.

In the normal course of its business, the Partnership issues certain representations, warranties and guarantees related to its home sales, land sales and building sales that may be affected by the Financial Accounting Standards Board’s recent issuance of FIN 45. Based on historical evidence, the Partnership does not believe that any of these representations, warranties or guarantees would result in a material effect

on our consolidated financial condition or operations. See further discussion on our warranty liability below. See further discussion of FIN 45 in Note (C), “Significant Accounting Policies.”

International Home Building offers a ten-year limited warranty for most homes constructed and sold in the United Kingdom. The warranty covers defects in materials or workmanship in various components of the home for the first two years and designated structural elements of the home in the third through tenth years. International Home Building estimates the costs that may be incurred under its warranty program for which it will be responsible and records a liability at the time each home is closed. Factors that affect International Home Building’s warranty liability include the number of homes closed, historical and anticipated rates of warranty claims and cost per claim. International Home Building periodically assesses the adequacy of its recorded warranty liability and adjusts the amounts as necessary.

Changes in International Home Building’s contractual warranty liability during the period are as follows:

Benefits are provided to eligible employees of the Partnership and certain subsidiaries under various profit sharing plans. The aggregate cost of these plans to the Partnership was $1.2 million in fiscal 2003, $1.0 million in fiscal 2002 and $0.8 million in fiscal 2001. The employees’ rights to employer contributions to these plans vest over a period of up to seven years.

The Companies operate in four principal business segments: International Home Building, Commercial Development, Multi-Family Communities and Corporate-Other. All of the segments, except for International Home Building, operate in the United States. International Home Building’s accounting policies are the same as those described in the summary of significant accounting policies. Segment information is presented after the elimination of all inter-segment transactions and balances.

International Home Building acquires and develops residential properties and constructs single and multi-family housing units in the United Kingdom. Commercial Development develops office, industrial, retail and mixed-use projects, for sale and for investment. Multi-Family Communities develops multi-family projects, which it markets for sale during the development period. Corporate-Other is involved in the acquisition and disposition of land and other assets of the Partnership not identified with another specific business segment.



	For the Year Ended March 31, 2003
	(Dollars in thousands)

	Int'l Home			Commercial			Multi-Family			Corporate-
	Building			Development			Communities			Other			Total

Revenues	$	375,624		$	23,817		$	6,171		$	36,491		$	442,103
Cost of Sales		(319,322	)		(8,334	)		(4,703	)		(32,882	)		(365,241	)
Selling, General & Administrative Expenses		(33,372	)		(7,958	)		(2,982	)		(3,726	)		(48,038	)
Interest Expense		(2,538	)		(2,282	)		—			(2,364	)		(7,184	)

Earnings (Loss) from Continuing Operations Before Income Taxes		20,392			5,243			(1,514	)		(2,481	)		21,640
Earnings from Discontinued Operations Before Income Tax		—			10,171			1,743			—			11,914

Earnings (Loss) Before Income Tax	$	20,392		$	15,414		$	229		$	(2,481	)	$	33,554

Identifiable Assets	$	396,428		$	126,855		$	65,389		$	52,012		$	640,684
Capital Expenditures	$	295		$	—		$	—		$	—		$	295

Depreciation & Amortization	$	782		$	1,087		$	28		$	23		$	1,920
Revenues from Discontinued Operations	$	—		$	87,359		$	25,200		$	—		$	112,559

Effective April 1, 2003, the operations of Multi-Family Communities were restructured. Due to the risks associated with an extended development time frame and significant capital requirements, these operations have been restructured to focus on leasing and disposition of current projects rather than new development.

The responsibilities for day-to-day operations, including the completion, leasing and sale of remaining projects have been assumed by personnel within the Corporate-Other segment. The future operations of remaining projects will be reflected in the Corporate-Other segment. A restructuring charge of approximately $0.6 million is included in Multi-Family Communities’ selling, general and administrative expenses for the year ended March 31, 2003.



	For the Year Ended March 31, 2002
	(Dollars in thousands)

	Int'l Home			Commercial			Multi-Family			Corporate-
	Building			Development			Communities			Other			Total

Revenues	$	290,406		$	27,867		$	53,944		$	2,812		$	375,029
Cost of Sales		(251,010	)		(16,750	)		(46,866	)		(1,209	)		(315,835	)
Selling, General & Administrative Expenses		(25,135	)		(6,233	)		(3,917	)		(2,013	)		(37,298	)
Interest Expense		(1,947	)		(2,258	)		(6	)		(835	)		(5,046	)

Earnings (Loss) from Continuing Operations Before Income Tax		12,314			2,626			3,155			(1,245	)		16,850
Earnings from Discontinued Operations Before Income Tax		—			1,889			—			—			1,889

Earnings (Loss) Before Income Tax	$	12,314		$	4,515		$	3,155		$	(1,245	)	$	18,739

Identifiable Assets	$	382,903		$	179,270		$	28,725		$	77,538		$	668,436
Capital Expenditures	$	185		$	—		$	24		$	27		$	236

Depreciation & Amortization	$	540		$	942		$	28		$	2		$	1,512
Revenues from Discontinued Operations	$	—		$	11,601		$	—		$	—		$	11,601



	For the Year Ended March 31, 2001
	(Dollars in thousands)

				Domestic
	Int'l Home			Home			Commercial			Multi-Family			Corporate-
	Building			Building			Development			Communities			Other			Total

Revenues	$	252,487		$	30,304		$	27,442		$	1,664		$	21,774		$	333,671
Cost of Sales		(222,634	)		(24,002	)		(18,398	)		—			(20,578	)		(285,612	)
Selling, General & Administrative Expenses		(22,085	)		(3,461	)		(5,252	)		(2,399	)		(1,047	)		(34,244	)
Interest Expense		(7,802	)		—			(1,924	)		—			—			(9,726	)

Earnings (Loss) from Continuing Operations Before Income Tax		(34	)		2,841			1,868			(735	)		149			4,089
Earnings from Discontinued Operations Before Income Tax		—			—			285			—			—			285

Earnings (Loss) Before Income Tax	$	(34	)	$	2,841		$	2,153		$	(735	)	$	149		$	4,374

Identifiable Assets	$	295,885		$	—		$	127,109		$	50,783		$	10,873		$	484,650
Capital Expenditures	$	629		$	4		$	—		$	—		$	—		$	633

Depreciation & Amortization	$	2,678		$	45		$	794		$	41		$	—		$	3,558
Revenues from Discontinued Operations	$	—		$	—		$	5,646		$	—		$	—		$	5,646

In March 2001, the Partnership sold its Domestic Home Building segment to Centex Homes for total consideration of $21.1 million representing book value, which also approximated market value. The financial results from the sale of this segment are included in Corporate-Other. Domestic Home Building accounted for 8.9% of revenues and 65.0% of operating earnings in fiscal 2001.

Statement of Financial Accounting Standards No. 107, “Disclosures about Fair Value of Financial Instruments,” requires companies to disclose the estimated fair value of their financial instrument assets and liabilities. The estimated fair values shown below have been determined using current quoted market prices where available and, where necessary, estimates based on present value methodology suitable for each category of financial instruments. Considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange. All assets and liabilities that are not considered financial instruments have been valued using historical cost accounting.

The consolidated carrying values of Cash and Cash Equivalents, Other Receivables, Accounts Payable and Accrued Liabilities and other variable-rate debt approximate their fair values. The carrying values and estimated fair values of other financial liabilities were as follows:

(1)

Fair values are based on a present value discounted cash flow with the discount rate approximating current market for similar instruments.

The partnership agreement governing the Partnership (the “Partnership Agreement”) contemplates the issuance of three classes of limited partnership units: Class A Units, Class B Units and Class C Units. Under the Partnership Agreement, holders of Class C Units are entitled to substantially the same rights as holders of Class A Units in connection with matters in common, such as voting, allocations and distributions. During fiscal 2002, 27,135 Class C Units were issued in exchange for cash and other assets with a fair market value of $27.1 million. At March 31, 2003, there were 32,260 Class A Units and 208,330 Class C Units outstanding.

No Class B Units are issued and outstanding. However, warrants to purchase approximately 80% of the Class B Units were issued to Centex stockholders and are held by a nominee on their behalf. These warrants will detach and trade separately from Centex common stock on the earlier of Payout (as defined below) or November 30, 2007, the scheduled detachment date.

The Partnership Agreement provides that the holders of the Class A Units and Class C Units are entitled to a cumulative preferred return of 9% per annum on the average outstanding balance of their Unrecovered Capital. Preference payments in arrears at March 31, 2003 amounted to $42.0 million, and Unrecovered Capital for the holders of Class A Units and Class C Units at March 31, 2003 totaled $32.8 million, and $208.3 million, respectively.

As provided in the Partnership Agreement, prior to Payout (as defined below), net income of the Partnership is to be allocated to the partners in the following order of priority:

[i]

To the holders of Class A Units and Class C Units to the extent of the cumulative preferred return.

[ii]

To the partners to the extent and in the same ratio that cumulative net losses were allocated.

[iii]

To the partners in accordance with their percentage interests. Currently, this would be a combined 20% to the holders of Class A Units and Class C Units and 80% to the general partner.

After Payout, the percentage interests will change to a combined 99% to the limited partners and 1% to the general partner. Thereafter, all loss allocations and allocations of net income will be made to the partners in accordance with their modified percentage interests.

Distributions of cash or other property are to be made at the discretion of the general partner and are to be distributed in the following order of priority:

[i]

Prior to the time at which the Class A and Class C limited partners have received aggregate distributions equal to their original capital contribution (“Payout”), distributions of cash or other property shall be made as follows:

[a]

To the Class A and Class C limited partners with respect to their cumulative preferred return, then

[b]

To the partners in an amount equal to the maximum marginal corporate tax rate times the amount of taxable income allocated to the partners then

[c]

To the Class A and Class C limited partners until their Unrecovered Capital is reduced to zero.

[ii]

After Payout, distributions of cash will be made to the partners in accordance with their modified percentage interests.

In November 1987, Centex acquired from the Partnership 100 warrants to purchase Class B Units in the Partnership at an exercise price of $500 per Class B Unit, and Centex acquired from Holding 100 warrants to purchase shares of Holding common stock at an exercise price of $800 per share. These warrants are subject to future adjustment to provide the holders of options to purchase Centex common stock with the opportunity to acquire Class B Units and shares of Holding. These warrants will generally become exercisable upon the detachment of the tandem-traded securities from Centex common stock.

The Partnership has a services agreement with Holding whereby Holding provides certain executive and managerial services and tax, accounting and other similar services to the Partnership. The agreement was amended and restated effective April 1, 2001 to decrease the quarterly fee to $50 thousand. Effective October 1, 2001, the quarterly fee was further decreased to $12.5 thousand. In addition to the $50 thousand in service fees paid during fiscal 2003, the Partnership paid $0.1 million and $1.0 million to Holding during fiscal 2003 and 2001, respectively.

Holding has a services agreement with Centex Service Company (“Centex Service”), a wholly-owned subsidiary of Centex, whereby Centex Service provides certain tax, accounting, administrative and other similar services for Holding. In conjunction with the employment by the Partnership of employees previously employed by Centex Service, the agreement was amended and restated effective April 1, 2001 to decrease the quarterly fee to $50 thousand. Effective October 1, 2001, the quarterly fee was further decreased to $12.5 thousand to reflect employment by the Partnership of certain additional employees previously employed by Centex Service. Fees of $50 thousand, $125 thousand and $1.0 million in fiscal 2003, 2002 and 2001 paid by Holding to Centex Service under this agreement are reflected as administrative expenses in the accompanying combining financial statements.

Partnership revenues include sales to Centex Homes of $34.5 million, $1.7 million and $21.1 million (from the sale of the Partnership’s Domestic Home Building operation) during fiscal 2003, 2002 and 2001, respectively.

During fiscal 2003, Centex Homes purchased a 1.5 acre site in Saint Paul, Minnesota from a subsidiary of the Partnership for cash consideration of $1.6 million. During fiscal 2002, Centex Homes purchased a 12-acre site in Lewisville, Texas, from subsidiaries of Holding and the Partnership for cash consideration of $1.25 million. Centex Homes will pay additional consideration to the subsidiaries in the form of a participation in profits above certain gross margin threshold levels on townhome sales.

At March 31, 2003 and March 31, 2002, Centex Homes had $7.2 million and $9.1 million deposited with the Partnership as option deposits for the purchase of land. Centex Homes also entered into agreements to reimburse the Partnership for certain costs and fees incurred by the Partnership in the purchase and ownership of these tracts of land. During the year ended March 31, 2003, Centex Homes paid $3.5 million to the Partnership in fees and reimbursements pursuant to these agreements and $32.9 million for the purchase of residential lots. Centex Homes expects to pay an additional $31.6 million to the Partnership to complete the purchase of these tracts of land over the next three years.

The Partnership has entered into a management agreement with Centex Homes whereby the Partnership provides certain services to Centex Homes for the operation, management, development and sale of its commercial real estate portfolio. The management agreement, which was entered into effective April 1, 2001, provides for the reimbursement of a portion of the expenditures incurred by the Partnership (including overhead expenses) with respect to the properties. The management agreement further provides for the payment of additional amounts to the Partnership based upon its performance of services under the management agreement. Collectively, such payments amounted to approximately $3.5 million and $4.2 million during fiscal 2003 and 2002, respectively.

The Partnership has entered into a management agreement with Centex Homes whereby Centex Homes provides management and oversight services for the Partnership’s investment in Fairclough. The Partnership pays Centex Homes an annual fee of $10 thousand and reimburses Centex Homes for its direct expenses associated with its management and oversight.

Centex performs cash management services for the Partnership. Excess funds generated by the Partnership are transferred to Centex on a daily basis, and funds required by the Partnership are advanced by Centex to the Partnership as necessary. Advances to or from Centex bear interest at the one-month LIBOR rate plus 25 basis points, computed on the daily outstanding borrowings or advances.

During fiscal 2003 and 2002, in connection with third-party construction and permanent loans made to the Partnership’s operating subsidiaries and in connection with the acquisition and sale of properties, the Partnership paid an aggregate of $244 thousand and $412 thousand, respectively, in title insurance premiums and escrow fees to Centex title insurance subsidiaries.

In the last two years, Construction Services has executed contracts with the Partnership for the construction of two industrial facilities. At March 31, 2003, all contracts were completed. At March 31, 2002, the total value of such contracts was $15.0 million, of which $5.3 million was unpaid. During the year ended March 31, 2003, the Partnership paid $5.3 million to Construction Services pursuant to these contracts.

During fiscal 2003, the Partnership paid $65 thousand to a Centex affiliate for marketing services provided to the Partnership by an employee of such affiliate.

A subsidiary of the Partnership has leased approximately 157,450 square feet, or 72% of leasable space, in the Citymark office building in Dallas, Texas to Centex Service and other Centex affiliates.

Under the Partnership Agreement, Class C Units may be issued in exchange for assets acquired and capital received from a limited partner or from an entity that is to be admitted as a limited partner. Centex Homes is currently the sole limited partner of the Partnership.

The Partnership Agreement provides that the holders of Class A Units and Class C Units are entitled to a cumulative preferred return of 9% per annum on the average outstanding balance of their Unrecovered Capital. As noted above, Centex Homes is currently the sole limited partner of the Partnership and the sole holder of all outstanding Class A Units and Class C Units. At March 31, 2003, unpaid preference accruals totaled $42.0 million, and Unrecovered Capital for Class A Units and Class C Units totaled $32.8 million and $208.3 million, respectively. The Partnership made a preference payment of $21.1 million on March 31, 2003.

The components of the total provision (benefit) for income taxes at March 31 are as follows:

The effective tax rate differs from the federal statutory rate of 35% in fiscal 2003, 2002 and 2001 due to the following items:



		For the Years Ended March 31,

		2003			2002			2001

Financial Income Before Taxes		$	33,554		$	18,739		$	4,374

Income Taxes at Statutory Rate		$	11,744		$	6,559		$	1,531
(Decreases) Increases in Tax Resulting from -
	Benefit of Pass-through Status of Partnership		(6,820	)		(5,918	)		(1,765	)
	Preferred Share Distributions		—			1,609			2,731
	Goodwill Amortization		—			—			613
	Tax Allocation Agreement Payments		—			—			(3,600	)
	Other		(732	)		(493	)		248

Provision (Benefit) for Income Taxes		$	4,192		$	1,757		$	(242	)

Effective Tax Rate			12.49	%		9.38	%		(5.53	%)

The Company’s deferred tax assets and liabilities as of March 31 are as follows:



		March 31,

		2003			2002

Deferred Tax Assets
	Accrued Interest	$	1,738		$	1,738
	Other		—			215
	Swap Agreement Market Adjustments		200			—
	Net Operating Loss Carryforwards		682			717

Total Deferred Tax Assets			2,620			2,670
	Valuation Allowance		(682	)		(717	)

Net Deferred Tax Assets			1,938			1,953


Deferred Tax Liabilities
	Other		(664	)		—
	Interest Expensed as Incurred		(1,069	)		(691	)
	Swap Agreement Market Adjustments		—			(166	)

Total Deferred Tax Liabilities			(1,733	)		(857	)

Net Deferred Tax Assets		$	205		$	1,096

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

At March 31, 2003, Holding had net operating loss carryforwards of $1.9 million. If unused, the loss carryforwards will expire in fiscal years 2019 through 2020. Holding has recorded a valuation allowance, valuing the deferred tax asset at zero.

Holding joins with its subsidiaries in filing consolidated income tax returns. The taxable income of the Partnership has been allocated to the holders of the Class A and Class C Units. Accordingly, no tax provision for the Partnership earnings is shown in the combining financial statements other than a payment of $3.6 million from Centex in fiscal 2001 under the terms of a Tax Liability Allocation Agreement.

As of March 31, 2003, the Partnership has not provided for withholding or U.S. Federal Income Taxes on the accumulated undistributed earnings of its foreign subsidiaries as they are considered by management to be permanently reinvested. Determination of the deferred income tax liability on these unremitted earnings is not practicable as such liability, if any, may be allocated to the holders of the Class A and Class C Units, and is dependent on circumstances existing when remittance occurs.

On November 18, 2003, Centex, Holding and the Partnership, disclosed that Centex will seek stockholder approval to terminate the Nominee Agreement dated November 30, 1987, as amended (the “Nominee Agreement”), pursuant to which the beneficial interest in the Holding common stock and the warrants to purchase Class B Units of limited partnership interest in the Partnership trade in tandem with the Centex common stock. Holding is seeking stockholder approval of a series of transactions by which Holding and the Partnership will become subsidiaries of Centex (the “Transaction”), which would constitute approval of the Agreements and Plans of Merger for both the Holding Merger (as defined below) and the Partnership Merger (as defined below).

Holding, with Holding being the surviving entity and a subsidiary of Centex (the “Holding Merger”). Pursuant to the Holding Merger, the Holding common stock will be cancelled and payment will be made to the holders of the beneficial interests in the Holding common stock of an amount equal to $.01 per share of Centex common stock.

Centex, Holding and the Partnership also announced that in connection with the Transaction, they and the Nominee entered into an Amendment to Nominee Agreement on November 17, 2003, which will allow them, subject to the affirmative vote of the stockholders of Centex and completion of the Holding Merger and Partnership Merger, to terminate the Nominee Agreement on the closing of the Transaction without a distribution of the beneficial interests in the Holding common stock or the warrants to purchase Class B Units of limited partnership interest in the Partnership.

For the period from April 1, 2003 through September 30, 2003, the Partnership sold or identified certain properties that will be sold. Pursuant to Statement of Financial Accounting Standards No. 144 — “Accounting for the Impairment or Disposal of Long-Lived Assets”, operations of such properties are required to be reported as discontinued operations. Accordingly, Holding and the Partnership have amended their combined financial statements as of March 31, 2003 previously filed in a Joint Annual Report on Form 10-K and all prior periods presented to reflect the reclassification of such discontinued operations.

We have audited the accompanying combining balance sheets of 3333 Holding Corporation and subsidiary and Centex Development Company, L.P. and subsidiaries as of March 31, 2003 and 2002, and the related combining statements of operations, cash flows, and stockholders’ equity and partners’ capital for each of the three years in the period ended March 31, 2003. These financial statements are the responsibility of the Companies’ management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used, and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the individual and combined financial positions of 3333 Holding Corporation and subsidiary and Centex Development Company, L.P. and subsidiaries as of March 31, 2003 and 2002, and the individual and combined results of their operations and their cash flows for each of the three years in the period ended March 31, 2003, in conformity with accounting principles generally accepted in the United States.

Quarterly Results (Unaudited)
(Dollars in thousands, except per share/unit data)



		For the Years Ended March 31,

		2003			2002		2003			2002		2003		2002

							Centex Development					3333 Holding
							Company, L.P. and					Corporation and
		Combined					Subsidiaries					Subsidiary

First Quarter
	Revenues from Continuing Operations	$	85,563		$	81,412	$	85,538		$	80,802	$	88	$	660
	Earnings (Loss) Before Taxes	$	(773	)	$	3,366	$	(785	)	$	2,790	$	12	$	576
	Net Earnings (Loss)	$	(303	)	$	3,075	$	(315	)	$	2,499	$	12	$	576
	Earnings (Loss) Per Unit/Share						$	(1.31	)	$	11.70	$	12	$	576
	Average Units Outstanding							240,591			213,504		—		—
	Average Shares Outstanding							—			—		1,000		1,000

Second Quarter
	Revenues from Continuing Operations	$	101,650		$	83,634	$	101,625		$	83,634	$	87	$	50
	Earnings (Loss) Before Taxes	$	4,386		$	3,800	$	4,354		$	3,837	$	32	$	(37	)
	Net Earnings (Loss)	$	3,607		$	3,382	$	3,575		$	3,419	$	32	$	(37	)
	Earnings (Loss) Per Unit/Share						$	14.86		$	15.63	$	32	$	(37	)
	Average Units Outstanding							240,591			218,785		—		—
	Average Shares Outstanding							—			—		1,000		1,000

Third Quarter
	Revenues from Continuing Operations	$	103,772		$	92,777	$	103,747		$	91,952	$	87	$	838
	Earnings Before Taxes	$	14,303		$	5,774	$	14,288		$	4,988	$	15	$	786
	Net Earnings	$	13,116		$	5,538	$	13,101		$	4,778	$	15	$	760
	Earnings Per Unit/Share						$	54.45		$	20.84	$	15	$	760
	Average Units Outstanding							240,591			229,277		—		—
	Average Shares Outstanding							—			—		1,000		1,000

Fourth Quarter
	Revenues from Continuing Operations	$	151,118		$	117,206	$	151,068		$	117,156	$	88	$	63
	Earnings Before Taxes	$	15,638		$	5,799	$	15,598		$	5,787	$	40	$	12
	Net Earnings	$	12,942		$	4,987	$	12,902		$	4,949	$	40	$	38
	Earnings Per Unit/Share						$	53.63		$	21.18	$	40	$	38
	Average Units Outstanding							240,591			233,689		—		—
	Average Shares Outstanding							—			—		1,000		1,000

Note that prior period amounts have been restated, where appropriate, to reflect the impact of reclassification of operating components currently classified as discontinued operations.

As discussed in Note (Q) - Subsequent Events, Subsequent Property Dispositions, through September 30, 2003 the Partnership sold or identified certain properties that will be sold. The following selected quarterly data for the quarter ended June 30, 2003 has been restated to reflect the reclassification of such property sales as discontinued operations.


	Page

Introductory Statement		2

Recent Developments		2

Selected Financial Data		4

Management’s Discussion and Analysis of Financial Condition And Results of Operations		5

Financial Statements and Supplementary Data		18



	For the Years Ended March 31,

	2003					2002

	(000's)		Weighted			(000's)		Weighted
	Rentable		Average			Rentable		Average
	Sq. Ft.		Occupancy			Sq. Ft.		Occupancy

Operating Properties

Industrial		1,704		79.4	%		2,024		92.4	%
Office/Medical		344		80.2	%		562		88.3	%
Retail		58		83.2	%		—		—

		2,106		79.6	%		2,586		91.5	%



	For the Years Ended March 31,

	2002					2001

	(000's)		Weighted			(000's)		Weighted
	Rentable		Average			Rentable		Average
	Sq. Ft.		Occupancy			Sq. Ft.		Occupancy

Operating Properties

Industrial		2,024		92.4	%		1,046		94.3	%
Office/Medical		562		88.3	%		495		95.7	%

		2,586		91.5	%		1,541		94.7	%


	(000's)		(000's)
	Rentable		Rentable
	Sq. Ft.		Sq. Ft.

Projects Under Development

Industrial		308		677
Office/Medical		40		55
Retail		194		—

		542		732


Buildings and Improvements		5 to 39 years
Tenant Improvements		Terms of leases


	Page

Combining Balance Sheets		19

Combining Statements of Operations		20

Combining Statements of Cash Flows		21

Combining Statements of Stockholders’ Equity and Partners’ Capital		23

Notes to Combining Financial Statements		24

Report of Independent Auditors		43

Quarterly Results		44



		March 31,

		2001

Reported Net Earnings Allocable to Limited Partner		$	5,362
Goodwill Amortization			1,750

Adjusted Net Earnings		$	7,112

Net Earnings (Loss) Per Unit:
	Reported Net Earnings	$	76.34
	Goodwill Amortization		24.92

	Adjusted Net Earnings	$	101.26


Balance as of March 31, 2002	$	2,279
Warranties Issued		5,323
Settlements Made		(4,212	)

Balance as of March 31, 2003	$	3,390