Item 1. Business.
(a) General Development of Business
AMERICAN INCOME PARTNERS IV-B LIMITED PARTNERSHIP (the "Partnership") was organized as a limited partnership under the Massachusetts Uniform Limited Partnership Act (the "Uniform Act") on September 29, 1988 for the purpose of acquiring and leasing to third parties a diversified portfolio of capital equipment. Partners' capital initially consisted of contributions of $1,000 from the Managing General Partner (AFG Leasing IV Incorporated) and $100 from the Initial Limited Partner (AFG Assignor Corporation). The common stock of the Managing General Partner is owned by AF/AIP Programs Limited Partnership, of which American Finance Group ("AFG"), a Massachusetts partnership, and a wholly-owned affiliate, are the 99% limited partners and AFG Programs, Inc., a Massachusetts corporation wholly-owned by Geoffrey A. MacDonald, is the 1% general partner. On December 29, 1988, the Partnership issued 873,935 units, representing assignments of limited partnership interests (the "Units"), to 1,331 investors. Unitholders and Limited Partners (other than the Initial Limited Partner) are collectively referred to as Recognized Owners. Subsequent to the Partnership's Closing, the Partnership had four General Partners: AFG Leasing IV Incorporated, a Massachusetts corporation, Daniel J. Roggemann, Martin F. Laughlin, and Geoffrey A. MacDonald (collectively, the "General Partners"). Pursuant to Section 7.6 of the Amended and Restated Agreement and Certificate of Limited Partnership (the "Restated Agreement, as amended"), the General Partners agreed to the withdrawal of Messrs. Laughlin and Roggemann as Individual General Partners. The General Partners are not required to make any other capital contributions except as may be required under the Uniform Act and Section 6.1(b) of the Restated Agreement, as amended.
(b) Financial Information About Industry Segments
The Partnership is engaged in only one industry segment: the business of acquiring capital equipment and leasing the equipment to creditworthy lessees on a full payout or operating lease basis. Full payout leases are those in which aggregate noncancellable rents exceed the Purchase Price of the leased equipment. Operating leases are those in which the aggregate noncancellable rental payments are less than the Purchase Price of the leased equipment. Industry segment data is not applicable.
(c) Narrative Description of Business
The Partnership was organized to acquire a diversified portfolio of capital equipment subject to various full payout and operating leases and to lease the equipment to third parties as income-producing investments. More specifically, the Partnership's primary investment objectives are to acquire and lease equipment which will:
1. Generate quarterly cash distributions;
2. Preserve and protect invested capital; and
3. Maintain substantial residual value for ultimate sale.
The Partnership has the additional objective of providing certain federal income tax benefits.
The Closing Date of the Offering of Units of the Partnership was December 29, 1988. The initial purchase of equipment and the associated lease commitments occurred on December 30, 1988. The acquisition of the equipment and its associated leases is described in Note 3 to the financial statements included in Item 14, herein. The Partnership will terminate no later than December 31, 1999.
The Partnership has no employees; however, it entered into a Management Agreement with AF/AIP Programs Limited Partnership. At the same time, AF/AIP Programs Limited Partnership entered into an identical Management Agreement with AFG (the "Manager") (collectively, the "Management Agreement"). The Manager's role, among other things, is to (i) evaluate, select, negotiate, and consummate the acquisition of equipment, (ii) manage the leasing, re-leasing, financing, and refinancing of equipment, and (iii) arrange the resale of equipment. The Manager is compensated for such services as described in the Restated Agreement, as amended, Item 13 herein, and in Note 4 to the financial statements included in Item 14, herein.
The Partnership's investment in equipment is, and will continue to be, subject to various risks, including physical deterioration, technological obsolescence and defaults by lessees. A principal business risk of owning and leasing equipment is the possibility that aggregate lease revenues and equipment sale proceeds will be insufficient to provide an acceptable rate of return on invested capital after payment of all debt service costs and operating expenses. Consequently, the success of the Partnership is largely dependent upon the ability of the Managing General Partner and its Affiliates to forecast technological advances, the ability of the lessees to fulfill their lease obligations and the quality and marketability of the equipment at the time of sale.
In addition, the leasing industry is very competitive. Although all funds available for acquisitions have been invested in equipment, subject to noncancellable lease agreements, the Partnership will encounter considerable competition when equipment is re-leased or sold at the expiration of primary lease terms. The Partnership will compete with lease programs offered directly by manufacturers and other equipment leasing companies, including limited partnerships and trusts organized and managed similarly to the Partnership and including other AFG sponsored partnerships and trusts, which may seek to re-lease or sell equipment within their own portfolios to the same customers as the Partnership. Many competitors have greater financial resources and more experience than the Partnership, the General Partners and the Manager.
Generally, the Partnership is prohibited from reinvesting the proceeds generated by refinancing or selling equipment. Accordingly, it is anticipated that the Partnership will begin to liquidate its portfolio of equipment at the expiration of the initial and renewal lease terms and to distribute the net liquidation proceeds. As an alternative to sale, the Partnership may enter re-lease agreements when considered advantageous by the Managing General Partner and the Manager. In accordance with the Partnership's stated investment objectives and policies, the Managing General Partner also is considering winding-up the Partnership's operations, including the liquidation of its entire portfolio.
Revenue from major individual lessees which accounted for 10% or more of lease revenue during the years ended December 31, 1995, 1994 and 1993 is incorporated herein by reference to Note 2 to the financial statements in the 1995 Annual Report. Refer to Item 14(a)(3) for lease agreements filed with the Securities and Exchange Commission.
Default by a lessee under a lease may cause equipment to be returned to the Partnership at a time when the Managing General Partner or the Manager is unable to arrange for the re-lease or sale of such equipment. This could result in the loss of a material portion of anticipated revenues and significantly weaken the Partnership's ability to repay related debt.
AFG is a successor to the business of American Finance Group, Inc., a Massachusetts corporation engaged since its inception in 1980 in various aspects of the equipment leasing business. In 1990, certain members of AFG's management, principally Geoffrey A. MacDonald, Chief Executive Officer and co-founder of AFG, established AFG Holdings (Massachusetts) Limited Partnership ("Holdings Massachusetts") to acquire ownership and control of AFG. Holdings Massachusetts effected this event by acquiring all of the equity interests of AFG's two partners, AFG Holdings Illinois Limited Partnership ("Holdings Illinois") and AFG Corporation. Holdings Massachusetts incurred significant indebtedness to finance this acquisition, a significant portion of which was scheduled to mature in 1995.
On December 16, 1994, the senior lender to Holdings Massachusetts (the "Senior Lender") assumed control of its security interests in Holdings Illinois and AFG Corporation and sold all such interests to GDE Acquisitions Limited Partnership, a Massachusetts limited partnership owned and controlled entirely by Gary D. Engle, President and a member of the Executive Committee of AFG. As a result of this transaction, GDE Acquisitions Limited Partnership acquired all of the assets, rights and obligations of AFG from the Senior Lender and assumed control of AFG. Geoffrey A. MacDonald remains as Chief Executive Officer of AFG and member of its Executive Committee.
(d) Financial Information About Foreign and Domestic Operations and Export Sales
Not applicable.
Item 2.

Item 2. Properties.
Incorporated herein by reference to Note 3 to the financial statements in the 1995 Annual Report.
Item 3.

Item 3. Legal Proceedings.
Incorporated herein by reference to Note 7 to the financial statements in the 1995 Annual Report.
Item 4.

Item 4. Submission of Matters to a Vote of Security Holders.
None.
PART II
Item 5.

Item 5. Market for the Partnership's Securities and Related Security Holder Matters.
(a) Market Information
There is no public market for the resale of the Units and it is not anticipated that a public market for resale of the Units will develop.
(b) Approximate Number of Security Holders
At December 31, 1995, there were 1,200 recordholders of Units in the Partnership.
(c) Dividend History and Restrictions
Pursuant to Article VI of the Restated Agreement, as amended, the Partnership's Distributable Cash From Operations and Distributable Cash From Sales or Refinancings are determined and distributed to the Partners quarterly. Each quarter's distribution may vary in amount. Distributions may be made to the Managing General Partner prior to the end of the fiscal quarter; however, the amount of such distribution reflects only amounts to which the Managing General Partner is entitled at the time such distribution is made. Currently, there are no restrictions that materially limit the Partnership's ability to distribute Distributable Cash From Operations and Distributable Cash From Sales or Refinancings or that the Partnership believes are likely to materially limit the future distribution of Distributable Cash From Operations and Distributable Cash From Sales or Refinancings. The Partnership expects to continue to distribute all Distributable Cash From Operations and Distributable Cash From Sales or Refinancings on a quarterly basis.
Distributions payable at December 31, 1995 and 1994 were $275,863 and $441,381, respectively.
"Distributable Cash From Operations" means the net cash provided by the Partnership's normal operations after general expenses and current liabilities of the Partnership are paid, reduced by any reserves for working capital and contingent liabilities to be funded from such cash, to the extent deemed reasonable by the Managing General Partner, and increased by any portion of such reserves deemed by the Managing General Partner not to be required for Partnership operations and reduced by all accrued and unpaid Equipment Management Fees and, after Payout, further reduced by all accrued and unpaid Subordinated Remarketing Fees. Distributable Cash From Operations does not include any Distributable Cash From Sales or Refinancings.
"Distributable Cash From Sales or Refinancings" means Cash From Sales or Refinancings as reduced by (i)(a) amounts realized from any loss or destruction of equipment which the Managing General Partner determines shall be reinvested in similar equipment for the remainder of the original lease term of the lost or destroyed equipment, or in isolated instances, in other equipment, if the Managing General Partner determines that investment of such proceeds will significantly improve the diversity of the Partnership's equipment portfolio, and subject in either case to satisfaction of all existing indebtedness secured by such equipment to the extent deemed necessary or appropriate by the Managing General Partner, or (b) the proceeds from the sale of an interest in equipment pursuant to any agreement governing a joint venture which the Managing General Partner determines will be invested in additional equipment or interests in equipment and which ultimately are so reinvested and (ii) any accrued and unpaid Equipment Management Fees and, after Payout, any accrued and unpaid Subordinated Remarketing Fees.
"Cash From Sales or Refinancings" means cash received by the Partnership from sale or refinancing transactions, as reduced by (i)(a) all debts and liabilities of the Partnership required to be paid as a result of sale or refinancing transactions, whether or not then due and payable (including any liabilities on an item of equipment sold which are not assumed by the buyer and any remarketing fees required to be paid to persons not affiliated with the General Partners, but not including any Subordinated Remarketing Fees whether or not then due and payable) and (b) any reserves for working capital and contingent liabilities funded from such cash to the extent deemed reasonable by the Managing General Partner and (ii) increased by any portion of such reserves deemed by the Managing General Partner not to be required for Partnership operations. In the event the Partnership accepts a note in connection with any sale or refinancing transaction, all payments subsequently received in cash by the Partnership with respect to such note shall be included in Cash From Sales or Refinancings, regardless of the treatment of such payments by the Partnership for tax or accounting purposes. If the Partnership receives purchase money obligations in payment for equipment sold, which are secured by liens on such equipment, the amount of such obligations shall not be included in Cash From Sales or Refinancings until the obligations are fully satisfied.
Each distribution of Distributable Cash From Operations and Distributable Cash From Sales or Refinancings of the Partnership shall be made 99% to the Recognized Owners and 1% to the General Partners until Payout and 85% to the Recognized Owners and 15% to the General Partners after Payout.
"Payout" is defined as the first time when the aggregate amount of all distributions to the Recognized Owners of Distributable Cash From Operations and Distributable Cash From Sales or Refinancings equals the aggregate amount of the Recognized Owners' original capital contributions plus a cumulative annual return of 10.5% (compounded quarterly and calculated beginning with the last day of the month of the Partnership's Closing Date) on their aggregate unreturned capital contributions. For purposes of this definition, capital contributions shall be deemed to have been returned only to the extent that distributions of cash to the Recognized Owners exceed the amount required to satisfy the cumulative annual return of 10.5% (compounded quarterly) on the Recognized Owners' aggregate unreturned capital contributions, such calculation to be based on the aggregate unreturned capital contributions outstanding on the first day of each fiscal quarter.
Distributable Cash From Operations and Distributable Cash From Sales or Refinancings ("Distributions") are distributed within 45 days after the completion of each quarter, beginning with the first full quarter following the Partnership's Closing Date. Each Distribution is described in a statement sent to the Recognized Owners.
Item 6.

Item 6. Selected Financial Data.
Incorporated herein by reference to the section entitled "Selected Financial Data" in the 1995 Annual Report.
Item 7.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Incorporated herein by reference to the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the 1995 Annual Report.
Item 8.

Item 8. Financial Statements and Supplementary Data.
Incorporated herein by reference to the financial statements and supplementary data included in the 1995 Annual Report.
Item 9.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
PART III
Item 10.

Item 10. Directors and Executive Officers of the Partnership.
(a-b) Identification of Directors and Executive Officers
The Partnership has no Directors or Officers. As indicated in Item 1 of this report, AFG Leasing IV Incorporated is the Managing General Partner of the Partnership. Under the Restated Agreement, as amended, the Managing General Partner is responsible for the operation of the Partnership's properties and the Recognized Owners have no right to participate in the control of such operations. The names, titles and ages of the Directors and Executive Officers of the Managing General Partner as of March 15, 1996 are as follows:
(f) Involvement in Certain Legal Proceedings
None.
(g) Promoters and Control Persons
See Item 10 (a-b) above.
Item 11.

Item 11. Executive Compensation.
(a) Cash Compensation
Currently, the Partnership has no employees. However, under the terms of the Restated Agreement, as amended, the Partnership is obligated to pay all costs of personnel employed full or part-time by the Partnership, including officers or employees of the Managing General Partner or its Affiliates. There is no plan at the present time to make any officers or employees of the Managing General Partner or its Affiliates employees of the Partnership. The Partnership has not paid and does not propose to pay any options, warrants or rights to the officers or employees of the Managing General Partner or its Affiliates.
(b) Compensation Pursuant to Plans
None.
(c) Other Compensation
Although the Partnership has no employees, as discussed in Item 11(a), pursuant to section 10.4 of the Restated Agreement, as amended, the Partnership incurs a monthly charge for personnel costs of the Manager for persons engaged in providing administrative services to the Partnership. A description of the remuneration paid by the Partnership to the Manager for such services is included in Item 13, herein and in Note 4 to the financial statements included in Item 14, herein.
(d) Compensation of Directors
None.
(e) Termination of Employment and Change of Control Arrangement
There exists no remuneration plan or arrangement with the Individual General Partners or the Managing General Partner or its Affiliates which results or may result from their resignation, retirement or any other termination.
Item 12.

Item 12. Security Ownership of Certain Beneficial Owners and Management.
By virtue of its organization as a limited partnership, the Partnership has no outstanding securities possessing traditional voting rights. However, as provided in Section 11.2(a) of the Restated Agreement, as amended (subject to Sections 11.2(b) and 11.3), a majority interest of the Recognized Owners have voting rights with respect to:
1. Amendment of the Restated Agreement;
2. Termination of the Partnership;
3. Removal of the General Partners; and
4. Approval or disapproval of the sale of all, or substantially all, of the assets of the Partnership (except in the orderly liquidation of the Partnership upon its termination and dissolution).
The ownership and organization of AFG is described in Item 1 of this report.
Item 13.

Item 13. Certain Relationships and Related Transactions.
The Managing General Partner of the Partnership is AFG Leasing IV Incorporated, an affiliate of AFG.
(a) Transactions with Management and Others
All operating expenses incurred by the Partnership are paid by AFG on behalf of the Partnership and AFG is reimbursed at its actual cost for such expenditures. Fees and other costs incurred during the years ended December 31, 1995, 1994 and 1993 which were paid or accrued by the Partnership to AFG or its Affiliates, are as follows:
As provided under the terms of the Management Agreement, AFG is compensated for its services to the Partnership. Such services include all aspects of acquisition, management and sale of equipment. For acquisition services, AFG is compensated by an amount equal to 4.75% of Equipment Base Price paid by the Partnership. For management services, AFG is compensated by an amount equal to the lesser of (i) 5% of gross lease rental revenue earned by the Partnership or (ii) fees which the Managing General Partner reasonably believes to be competitive for similar services for similar equipment. Both of these fees are subject to certain limitations defined in the Management Agreement. Compensation to AFG for services connected to the sale of equipment is calculated as the lesser of (i) 3% of gross sale proceeds or (ii) one-half of reasonable brokerage fees otherwise payable under arm's length circumstances. Payment of the remarketing fee is subordinated to Payout and is subject to certain limitations defined in the Management Agreement.
Administrative charges represent amounts owed to AFG, pursuant to Section 10.4 of the Restated Agreement, as amended, for persons employed by AFG who are engaged in providing administrative services to the Partnership. Reimbursable operating expenses due to third parties represent costs paid by AFG on behalf of the Partnership which are reimbursed to AFG.
All equipment was purchased from AFG, one of its affiliates, including other equipment leasing programs sponsored by AFG, or from third-party sellers. The Partnership's Purchase Price was determined by the method described in Note 2, Equipment on Lease.
All rents and proceeds from the sale of equipment are paid directly to either AFG or to a lender. AFG temporarily deposits collected funds in a separate interest-bearing escrow account prior to remittance to the Partnership. At December 31, 1995, the Partnership was owed $119,651 by AFG for such funds and the interest thereon. These funds were remitted to the Partnership in January 1996.
On August 18, 1995, Atlantic Acquisition Limited Partnership ("AALP"), a newly formed Massachusetts limited partnership owned and controlled by certain principals of AFG, commenced a voluntary cash Tender Offer (the "Offer") for up to approximately 45% of the outstanding units of limited partner interest in this Partnership and 20 affiliated partnerships sponsored and managed by AFG. The Offer was subsequently amended and supplemented in order to provide additional disclosure to unitholders; increase the offer price; reduce the number of units sought to approximately 35% of the outstanding units; and extend the expiration date of the Offer to October 20, 1995. Following commencement of the Offer, certain legal actions were initiated by interested persons against AALP, each of the general partners (4 in total) of the 21 affected programs, and various other affiliates and related parties. One action, a class action brought in the United States District Court for the District of Massachusetts (the "Court") on behalf of the unitholders (Recognized Owners), sought to enjoin the Offer and obtain unspecified monetary damages. A settlement of this litigation was approved by the Court on November 15, 1995. A second class action, brought in the Superior Court of the Commonwealth of Massachusetts (the "Superior Court") seeking to enjoin the Offer, obtain unspecified monetary damages, and intervene in the first class action, was dismissed by the Superior Court. The Plaintiffs have filed an appeal in this matter. The Recognized Owners of the Partnership tendered approximately 77,141 units or 8.83% of the total outstanding units of the Partnership to AALP. The operations of the Partnership are not expected to be adversely affected by these proceedings or settlements.
(b) Certain Business Relationships
None.
(c) Indebtedness of Management to the Partnership
None.
(d) Transactions with Promoters
See Item 13(a) above.
Exhibit Number
99 (b) Lease agreement with Kristian Gerhard Jebsen Skipsrederi A/S was filed in the Registrant's Annual Report on Form 10-K for the year ended December 31, 1992 as Exhibit 28(b) and is incorporated herein by reference.
99 (c) Lease agreement with Northwest Airlines, Inc. was filed in the Registrant's Annual Report on Form 10-K for the year ended December 31, 1992 as Exhibit 28(c) and is incorporated herein by reference.
99 (d) Lease agreement with Bally's Health and Tennis Corporation was filed in the Registrant's Annual Report on Form 10-K for the year ended December 31, 1993 as Exhibit 28(d) and is incorporated herein by reference.
99 (e) Lease agreement with Building Materials Corporation of America was filed in the Registrant's Annual Report on Form 10-K for the year ended December 31, 1994 as Exhibit 99(e) and is incorporated herein by reference.
(b) Reports on Form 8-K
None.
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K) of American Income Partners IV-B Limited Partnership of our report dated March 12, 1996, included in the 1995 Annual Report to the Partners of American Income Partners IV-B Limited Partnership.
ERNST & YOUNG LLP
Boston, Massachusetts March 12, 1996
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT.
No annual report has been sent to the Recognized Owners. A report will be furnished to the Recognized Owners subsequent to the date hereof.
No proxy statement has been or will be sent to the Recognized Owners.


Item 1. BUSINESS
Main Place Funding Corporation (MPFC) was incorporated on June 24, 1994 in the state of Delaware. MPFC is a wholly owned, limited-purpose, finance subsidiary of NationsBank of Texas, N.A. (Parent), which is an indirect, wholly owned subsidiary of NationsBank Corporation (Corporation), a multi-bank holding company organized in 1968 under the laws of North Carolina. MPFC's sole purpose is to issue and sell mortgage-backed bonds and subordinated indebtedness and to acquire, own, hold and pledge the related mortgage notes and other assets serving as collateral in connection therewith. Its operations commenced on September 20, 1994 (Inception). For information regarding issuances of mortgage-backed bonds and subordinated indebtedness, see Note 4 to the Financial Statements at page.
Item 2.

Item 2. PROPERTIES
MPFC does not own or lease any physical property.
Item 3.

Item 3. LEGAL PROCEEDINGS
MPFC has no legal actions or proceedings pending.
Item 4.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Omitted in accordance with General Instruction J to Form 10-K.
PART II
Item 5.

Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
All of MPFC's outstanding Common Stock, its sole class of common equity on the date hereof, is owned by the Parent. Accordingly, there is no public trading market for MPFC's Common Stock. During 1995, MPFC paid cash dividends of $27.7 million to the Parent. MPFC paid no cash dividends during 1994.
Item 6.

Item 6. SELECTED FINANCIAL DATA
Omitted in accordance with General Instruction J to Form 10-K.
Item 7.

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Net income for the year ended December 31, 1995 was $31.2 million. Net income for the period from Inception through December 31, 1994 was $3.5 million.
MPFC's net income reflects the impact of several factors such as the levels and the average interest rates of the mortgage loan portfolio and issuances of mortgage-backed bonds and subordinated notes, including securities market conditions and the volatility of interest rates.
The average yield on the mortgage loan portfolio for the year ended December 31, 1995 was 7.34 percent. The average yield on the mortgage loan portfolio for the period from Inception through December 31, 1994 was 7.32 percent. Changes in such average yield are primarily related to the mix between fixed- and adjustable-rate loans, the repricing terms of adjustable-rate loans, the impact of the general level of interest rates, the levels of prepayments of mortgage loans and normal scheduled amortization of the portfolio as a whole. For the year ended December 31, 1995, the average interest rates on the outstanding mortgage-backed bonds and subordinated notes were 6.27 percent and 7.90 percent, respectively.
Item 8.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements required by this Item are listed in the Index to Financial Statements on page.
Item 9.

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There were no changes in or disagreements with accountants on accounting and financial disclosure.
PART III
Item 10.

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Omitted in accordance with General Instruction J to Form 10-K.
Item 11.

Item 11. EXECUTIVE COMPENSATION
Omitted in accordance with General Instruction J to Form 10-K.
Item 12.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Omitted in accordance with General Instruction J to Form 10-K.
Item 13.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Omitted in accordance with General Instruction J to Form 10-K.
PART IV
Item 14.

Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
a. The financial statements required by this Item are listed in the Index to Financial Statements on page.
b. The following report on Form 8-K has been filed by the registrant during the quarter ended December 31, 1995:
Current Report on Form 8-K dated October 31, 1995 and filed November 13, 1995, Item 7.
c. The exhibits filed as part of this report and exhibits incorporated herein by reference to other documents are listed in the Index to Exhibits to this Annual Report on Form 10-K.
d. All schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Main Place Funding Corporation ---------------------------------
Date: March 25, 1996 /s/ Joe L. Price --------------------------------- Joe L. Price Senior Vice President--Accounting
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ John E. Mack President, Treasurer March 25, 1996 - ----------------------------- John E. Mack and Director (Principal Executive and Financial Officer)
/s/ Joe L. Price Senior Vice President - March 25, 1996 - ----------------------------- Joe L. Price Accounting (Principal Accounting Officer)
/s/ F. William Vandiver, Jr. Chairman and Director March 25, 1996 - ----------------------------- F. William Vandiver, Jr.
/s/ James H. Luther Vice President and March 25, 1996 - ----------------------------- James H. Luther Director
/s/ William L. Maxwell Director March 25, 1996 - ----------------------------- William L. Maxwell
MAIN PLACE FUNDING CORPORATION
Page ----
Report of Independent Accountants.......................................
Financial Statements:
Balance Sheet on December 31, 1995 and 1994........................
Statement of Income for the Year Ended December 31, 1995 and for the Period from Inception through December 31, 1994....................
Statement of Cash Flows for the Year Ended December 31, 1995 and for the Period from Inception through December 31, 1994................
Statement of Changes in Shareholder's Equity for the Year Ended December 31, 1995 and for the Period from Inception through December 31, 1994..................................................
Notes to Financial Statements...........................................
Report of Independent Accountants
To the Board of Directors and Shareholder of Main Place Funding Corporation
In our opinion, the accompanying balance sheet and related statements of income, of changes in shareholder's equity and of cash flows present fairly, in all material respects, the financial position of Main Place Funding Corporation at December 31, 1995 and 1994, and results of its operations and its cash flows for the year ended December 31, 1995 and for the period from inception through December 31, 1994 in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
Charlotte, North Carolina March 20, 1996
Main Place Funding Corporation Notes to Financial Statements
Note 1 - Accounting Policies
Basis of Presentation
Main Place Funding Corporation (MPFC) was incorporated on June 24, 1994. It is a wholly owned, limited-purpose, finance subsidiary of NationsBank of Texas, N.A. (Parent), which is an indirect, wholly owned subsidiary of NationsBank Corporation (Corporation). MPFC's sole purpose is to issue and sell mortgage-backed bonds and subordinated indebtedness and to acquire, own, hold and pledge the related mortgage notes and other assets serving as collateral in connection therewith. Its operations commenced on September 20, 1994 (Inception).
The accompanying financial statements have been prepared in accordance with generally accepted accounting principles.
The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts and disclosures. Significant estimates made by management are discussed in these footnotes as applicable.
Cash and Cash Equivalents
Cash and cash equivalents includes cash items in the process of collection and amounts due from affiliated banks.
Loans
Loans are reported at their outstanding principal balances, net of any charge- offs and unamortized premiums or discounts. Discounts and premiums are amortized to income using methods that approximate the interest method.
Nonperforming Loans
Loans that are past due 120 days or more as to principal or interest, or where reasonable doubt exists as to timely collection, are generally classified as nonperforming loans unless well secured and in the process of collection. Generally, loans which are past due 180 days or more as to principal or interest are classified as nonperforming regardless of collateral or collection status.
Interest collections on nonperforming loans for which the ultimate collectibility of principal and interest is uncertain are applied as reductions in book value. Otherwise, such collections are credited to income when received.
Allowance for Credit Losses
The allowance for credit losses is available to absorb losses inherent in the credit extension process. Credit exposures deemed to be uncollectible are charged against the allowance for credit losses. Recoveries of previously charged-off amounts are credited to the allowance for credit losses.
MPFC's process for determining an appropriate allowance for credit losses includes management judgment and use of estimates. The adequacy of the allowance for credit losses is reviewed regularly by management. Additions to the allowance for credit losses are made by charges to the provision for credit losses. On a quarterly basis, a comprehensive review of the adequacy of the allowance for credit losses is performed. This assessment is made in the context of historical losses, as well as existing economic conditions.
Other Real Estate Owned
Loans are classified as other real estate owned when MPFC forecloses on a property or when physical possession of the collateral is taken regardless of whether foreclosure proceedings have taken place. Other real estate owned is carried at the lower of (1) the recorded amount of the loan for which the foreclosed property previously served as collateral or (2) the fair value of the property minus estimated costs to sell. Prior to foreclosure, the recorded amount of the loan is reduced, if necessary, to the fair value, minus estimated costs to sell, of the real estate to be acquired by charging the allowance for credit losses.
Subsequent to foreclosure, gains or losses on the sale of and losses on the periodic revaluation of other real estate owned are credited or charged to expense. Net costs of maintaining and operating foreclosed properties are expensed as incurred.
Income Taxes
There are two components of income tax provision: current and deferred.
Current income tax provisions approximate taxes to be paid or refunded for the applicable period.
Balance sheet amounts of deferred taxes are recognized on the temporary differences between the bases of assets and liabilities as measured by tax laws and their bases as reported in the financial statements. Deferred tax expense or benefit is then recognized for the change in deferred tax liabilities or assets between periods.
Recognition of deferred tax balance sheet amounts is based on management's belief that it is more likely than not that the tax benefit associated with certain temporary differences, tax operating loss carryforwards and tax credits will be realized.
MPFC's operating results are included in the consolidated federal income tax return of the Corporation. The method of allocating federal income tax expense is determined under a tax allocation agreement. This agreement specifies that income tax expense will be computed for all subsidiaries on a separate company method, taking into account tax planning strategies and the tax position of the consolidated group.
Note 2 - Mortgage Loans
On December 31, 1995, nonperforming loans totaled $188 thousand. There were no nonperforming loans on December 31, 1994.
Other real estate owned amounted to $763 thousand on December 31, 1995. There was no other real estate owned on December 31, 1994.
Note 3 - Affiliate Transactions
In conjunction with establishing MPFC, the Parent contributed $1.6 billion of mortgage loans to MPFC, net of an allowance for credit losses of $11.0 million. During 1995, additional mortgage loans totaling $3.4 billion, net of an allowance for credit losses of $6.9 million, were contributed by the Parent to MPFC.
On February 1, 1996, the Parent contributed an additional $501 million of mortgage loans to MPFC.
MPFC has entered into an agreement with NationsBanc Mortgage Corporation, a subsidiary of the Parent, for the servicing and administration of its mortgage portfolio. Servicing expense for the year ended December 31, 1995 approximated $7.7 million.
MPFC maintains its cash and cash equivalent accounts primarily with the Parent.
Note 4 - Long-Term Debt
In September 1994, the Securities and Exchange Commission declared effective MPFC's shelf registration statement (Registration Statement) to issue up to $4 billion of Mortgage-Backed Bonds (Bonds). The Bonds, which are issuable in series pursuant to separate indentures, will be generally subject to the following terms. The Bonds, collateralized primarily by 1 to 4 family mortgage loans, will be obligations solely of MPFC. The Bonds will not be prepayable at the option of MPFC, but will be subject to redemption in whole or in part under certain circumstances. Under the terms of an indenture relating to a series of Bonds, MPFC must maintain a minimum amount of eligible collateral, which is determined on a discounted basis and may consist of mortgage loans, certain U.S. agency mortgage pass-through certificates, U.S. government securities and cash held by a trustee (the Trustee). The types, characteristics and permitted amounts of eligible collateral are subject to change from time to time without the consent of the bondholders if such changes would not adversely affect the ratings assigned to the Bonds. In the event such collateral requirements are not met with respect to any series, MPFC must provide additional or substitute mortgage loans or other acceptable collateral with respect to such series to meet the required amount of eligible collateral and/or repurchase Bonds in an amount sufficient to meet collateral requirements. If sufficient eligible collateral is not supplied and/or sufficient Bonds are not repurchased, MPFC must redeem a portion of the outstanding Bonds of such series such that the existing amount of eligible collateral meets the collateral requirements of the indenture relating to the Bonds of such series that remain outstanding after the redemption.
On July 18, 1995, MPFC issued $1.5 billion of Mortgage-Backed Bonds, Series 1995-1, due 1998 (Series 1995-1 Bonds), bearing interest at the one-month London interbank offered rate (LIBOR) plus 21 basis points with a maximum interest rate of 12 percent. The proceeds from the issuance of the Series 1995-1 Bonds were used to return to the Parent approximately $982 million of capital and to repay a portion of the October 1994 subordinated note discussed below. On October 31, 1995, MPFC issued $1.5 billion of Mortgage-Backed Bonds, Series 1995-2, due 2000 (Series 1995-2 Bonds), bearing interest at the three-month LIBOR plus 17 basis points. The proceeds from the issuance of the Series 1995- 2 Bonds were used to return to the Parent approximately $1.5 billion of capital. On December 31, 1995, all of the Series 1995-1 and 1995-2 Bonds were outstanding with interest rates of 5.96 percent and 6.1075 percent, respectively, based on the rate in effect on December 31, 1995, and were collateralized by mortgage loans with a book value of approximately $2.2 billion and $2.3 billion, respectively. On January 5, 1996, the discounted value of the eligible collateral for the Series 1995-1 and 1995-2 Bonds, as computed by the Trustee, was approximately $1.6 billion and $1.8 billion, respectively, and exceeded the amount required by the terms of the related indentures by approximately $98 million and $261 million, respectively.
On October 2, 1994, MPFC borrowed $1.3 billion under a subordinated note from the Parent. On November 30, 1995, MPFC borrowed $925 million under an additional subordinated note from the Parent, which note subsequently was increased to $934 million. The proceeds from the notes were used to return capital to the Parent. The subordinated notes bear interest at 8.0% and 6.5%, respectively, which is payable quarterly in arrears. The notes mature on September 25, 1999 and September 25, 2000, respectively, and are subordinated to all of MPFC's senior debt, including the Bonds. MPFC may repay amounts, from time to time, owed under the subordinated notes from funds which are not subject to the lien of any indenture relating to any senior debt. On December 31, 1995, $594 million and $726 million, respectively, was owed on the subordinated notes.
Interest expense on the subordinated notes for the year ended December 31, 1995 and for the period from Inception through December 31, 1994 was $87.8 million and $25.7 million, respectively. Interest expense on the Series 1995-1 and Series 1995-2 Bonds for the year ended December 31, 1995 was $59.0 million.
As of March 25, 1996, MPFC had $1 billion of remaining shelf capacity under the Registration Statement.
Note 5 - Income Taxes
Current income tax expense is determined as if MPFC filed a separate tax return and the amount so determined is payable to or receivable from the Corporation. Current federal taxes payable to the Corporation of $18.7 million and $1.9 million are included in the balance sheet on December 31, 1995 and 1994, respectively.
Deferred income tax expense or benefit is determined by the change in the deferred tax asset or liability between periods. The deferred tax asset or liability balance at the end of any period is determined by the tax effect of MPFC's cumulative temporary differences to the extent recognized by the Corporation. Deferred tax assets of $6.2 million and $3.8 million on December 31, 1995 and 1994, respectively, represent amounts established in conjunction with the loan contributions from the Parent, as discussed more fully in Note 3, and are included in the balance sheet. The most significant component of MPFC's deferred tax asset is the loan loss reserve.
Current income tax expense was $16.8 million for the year ended December 31, 1995. For the period from Inception through December 31, 1994, current income tax expense was $1.9 million.
Note 6 - Fair Values of Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosures About Fair Value of Financial Instruments," requires the disclosure of the estimated fair values of financial instruments. The fair value of an instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Quoted market prices, if available, are utilized as estimates of the fair values of financial instruments. Fair values of items for which no quoted market price is available have been derived based on management's assumptions with respect to future economic conditions, the amount and timing of future cash flows and estimated discount rates. The estimation methods for individual classifications of financial instruments are more fully described below. Different assumptions could significantly affect these estimates. Accordingly, the net realizable values could be materially different from the estimates presented below.
In addition, the estimates are only indicative of individual instruments' values and should not be considered an indication of the fair value of MPFC.
Short-Term Financial Instruments
The carrying value of short-term financial instruments, including cash and cash equivalents and amounts due from the Trustee, approximates the fair value. These financial instruments generally expose MPFC to limited credit risk and have no stated maturities or maturities of less than 30 days.
Mortgage Loans
Fair values were estimated for the mortgage loans based on credit quality and maturity. The fair value of fixed-rate loans was estimated by discounting estimated future cash flows using the December 31 origination rate for similar loans. Contractual cash flows were adjusted for prepayments using published industry data. For variable-rate loans, the carrying amount was considered to approximate fair value. Where credit deterioration has occurred, cash flows for fixed- and variable-rate loans have been reduced to incorporate estimated losses. Where quoted market prices were available, such market prices were utilized as estimates of fair value.
Long-Term Debt
The fair value of the subordinated notes was estimated by using the December 31 market rates on similar debt. The book value was considered to approximate fair value for the Series 1995-1 and Series 1995-2 Bonds.