we have seen enough to believe we can add significant incremental value in a number of ways. We believe that our strong tenant relationships will help us increase occupancy rates, as there are many tenants with whom we have done a substantial amount of business who do not have a single store in the Charter Oak portfolio. Adding the Tanger brand name and incorporating our marketing programs should drive traffic and sales to our newly acquired outlet centers. In fact, eight of the nine properties are located in high volume resort areas where we believe our marketing expertise will add tremendous value. Tweaking what is already a very good tenant mix will be a high priority for our leasing team. We expect the end result of our hard work will be an increase in the average occu- pancy rate, an increase in the average sales per square foot and, correspond- ingly, an increase in the productivity and value of these centers. With approxi- mately 46%, or 1.5 million square feet of leasable area expiring by December 31, 2005, our ownership and management can add significant value to our investment by renewing or retenanting this space at higher rents.  Increasing the assets of our company will add additional value, but the proper financing of the assets is another key component to value creation. Our strate- gy has always been to finance our long-term assets with the proper mix of long-term debt and equity. During 2003, that philosophy was brought to the forefront as we financed virtually one hundred percent of the equity required by us to purchase our one-third share of the joint venture acquiring the Charter Oak portfolio with the $101.2 million net proceeds from the issuance of 2,645,000 additional common shares. Certainly, we could have financed part or even a majority of our investment with incremental debt and significantly increased our FFO per share in the short-term. However, as we focused on financing this acquisition from a long-term prospective, we believed this was a perfect opportunity to make an investment, finance it with all equity, and still have it be accretive to our FFO. Chances to do that come few and far between. As a result, we improved numerous financial ratios for our company, increased our common equity base (the number of Tanger shares in the market place) and increased our float (the number of Tanger shares that trade each day), all factors that we believe have been beneficial to the way our shares have traded since the equity offering in December 2003. Also, the increase in our total shares and units outstanding as of December 31, 2003 to approxi- mately 16 million and our total equity market value to over $650 million has allowed certain larger institutional investors to invest in our company that may not have been able to do so previously.  The Charter Oak portfolio acquisition was a significant accomplishment in 2003, but there were many other posi- tive results during the year. Same-space tenant sales increased 2.3% for the year ended December 31, 2003 as com- pared to the prior year. Reported 2003 same-space tenant sales in the Charter Oak portfolio equated to $290 per square foot, compared to the original Tanger portfolio’s average same-space sales during 2003 of $307 per square foot, resulting in an overall average of $301 per square foot for the year. These continued strong tenant sales have contributed to our total occupancy cost to tenants for 2003 remaining at an industry low of 7.4% of tenant sales. This low tenant occupancy cost tells us $ 43 ’03 ’02 ’01 OPERATING INCOME (in thousands of dollars) ’00 ’99 $ 39 $ 37 $ 37 $ 39 TANGER FACTORY OUTLET CENTERS, INC. | 11 Commerce, GA Howell, MI