NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ing results of newly designated real estate assets held for sale and for assets sold are included in discon- tinued operations in our results of operations. Derivatives - We selectively enter into interest rate protection agreements to mitigate changes in interest rates on our variable rate borrowings. The notional amounts of such agreements are used to measure the interest to be paid or received and do not represent the amount of exposure to loss. None of these agree- ments are used for speculative or trading purposes.  We recognize all derivatives as either assets or liabilities in the consolidated balance sheets and measure those instruments at their fair value in accordance with Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities” as amended by FAS 137 and FAS 138, (collectively, “FAS 133”). FAS 133 also requires us to measure the effectiveness, as defined by FAS 133, of all derivatives. We formally document our derivative transactions, including identifying the hedge instru- ments and hedged items, as well as our risk management objectives and strategies for entering into the hedge transaction. At inception and on a quarterly basis thereafter, we assess the effectiveness of deriva- tives used to hedge transactions. If a derivative is deemed effective, we record the change in fair value in other comprehensive income. If after assessment it is determined that a portion of the derivative is ineffec- tive, then that portion of the derivative’s change in fair value will be immediately recognized in earnings. Income Taxes - We operate in a manner intended to enable us to qualify as a REIT under the Internal Revenue Code (the “Code”). A REIT which distributes at least 90% of its taxable income to its sharehold- ers each year and which meets certain other conditions is not taxed on that portion of its taxable income which is distributed to its shareholders. We intend to continue to qualify as a REIT and to distribute sub- stantially all of our taxable income to our shareholders. Accordingly, no provision has been made for Federal income taxes. We paid preferred dividends per share of $13.21, $22.05 and $21.96, in 2003, 2002 and 2001, respectively, all of which are treated as ordinary income except for the 2002 dividend of which $.02 was treated as a long-term capital gain. For income tax purposes, distributions paid to com- mon shareholders consist of ordinary income, capital gains, return of capital or a combination thereof. For the year ended December 31, 2002, we elected to distribute all of our taxable capital gains. Dividends per share were taxable as follows:  The following reconciles net income available to common shareholders to taxable income available to common shareholders for the years ended December 31, 2003, 2002 and 2001: 44 | 2003 ANNUAL REPORT 2003 2002 2001 Net income available to common shareholders $ 12,043 $ 9,236 $ 5,341 Book/tax difference on Depreciation and amortization (474) (1,092) (667) Loss on sale or disposal of real estate (2,470) (1,580) (1,116) Share and unit option compensation (6,689) (407) (29) Other differences (31) (542) (147) Taxable income available to common shareholders $ 2,379 $ 5,615 $ 3,382 Common dividends per share 2003 2002 2001 Ordinary income $ .541 $ .734 $ .536 Return of capital 1.917 1.690 1.902 Long-term capital gain — .024 — $ 2.458 $ 2.448 $ 2.438