VORNADO REALTY TRUST 2 To Our Shareholders Vornado’s  Funds From Operations for the year ended December 31, 2003 was $518.2 million, $4.44 per diluted share, compared to $439.8 million, $3.91 per diluted share, for the year ended December 31, 2002. Net Income applicable to common shares for the year ended December 31, 2003 was $439.9 million, $3.80 per diluted shar e, versus $209.7 million, $1.91 per diluted share, for the pr evious year. Here are the financial results by segment: % of 2003 ($ IN MILLIONS, EXCEPT PER SHARE DATA) Adjusted EBITDA 2003 2002 Same Store EBITDA: New York Office 31% 331.2 320.9 3.3% CESCR 28% 292.3 289.7 (1.7%) Total Office 59% 623.5 610.6 1.0% Retail 13% 138.9 113.9 4.5% Merchandise Mart 11% 117.9 108.1 4.1% Temperature Controlled Logistics 7% 78.0 69.8 4.8% Newkirk Joint Venture 7% 76.9 69.6 3.9% Alexander's 3% 23.0 39.4 4.0% Hotel Pennsylvania 1% 4.6 7.6 (39.5%) Other (1%) (9.1) (57.2) EBITDA before minority interest and gains on sale of real estate 100% 1,053.7 961.8 Funds from Operations 518.2 439.8 Funds from Operations per share $4.44 $3.91 Internally, at budget meetings and such, Joe Macnow uses as an earnings metric Funds from Operations Adjusted for Comparability . This metric allows us to focus on the core business by eliminating certain one-time items. One-timers are inevitable, can be either good or bad, but I admit we sometimes have a few too many of them. The following chart reconciles Funds from Operations as Reported to Funds from Operations Adjusted for Comparability: This letter and this Annual Report contain forward-looking statements as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are not guarantees of performance. The Company’s future results, financial condition and business may differ materially from those expressed in these forward look- ing statements. These forward looking statements are subject to numerous assumptions, risks and uncer- tainties. Many of the factors that will determine these items are beyond our ability to control or predict. For further discussion of these factors, see “Forward Looking Statements” and “Item 1. Business-Risk Factors” in the Company’s annual report on Form 10-K for the year ended  December 31, 2003.