VORNADO REALTY TRUST 3 Mike (1) and I are more than satisfied with Vornado’ finan- cial performance in 2003. In a soft office market (our Company is about 60% office), we benefited greatly from the fact that our office investments are concentrated almost entirely in New York and Washington, DC, the two strongest office markets in the country (and this did not happen by chance) (2) . We also benefited from the fact that our office rents are still below market (see page 5 of  the financial section of this Annual Report for full leasing details) and, as a stool gains strength from its multiple legs, we also benefited from 2003’s strong financial per- formance of our retail business and Mart business. (1) Michael Fascitelli, Vornado’ President and my partner in running Vornado. (2) As long-term Vornado watchers know we chose our markets very carefully, investing only in high- demand, tight-supply, densely urban markets that have a histor y of spiking rents and values. Further, we greatly prefer to invest at a discount to replacement cost and in properties with embedded rents that are well below market rents. ($ IN MILLIONS, EXCEPT PER SHARE DATA) 2003 2002 Funds from Operations, as Reported 518.2 439.8 Adjustments for certain items that effect comparability: Alexander's stock appreciation rights compensation expense 14.9 — Write-off of Series D-1 preferred unit offering costs 2.2 — Gain on early extinguishment of debt of a partially-owned entity (Newkirk MLP) (1.6) — Primestone loss on settlement of guarantees in 2003 and  foreclosure and impairment losses in 2002 1.4 35.8 Gain on sale of condominiums (0.3) (2.2) Amortization of officer's employment arrangement — 27.5 Write-off of 20 Times Square pre-development costs — 6.9 Gain on sale of marketable securities, air rights, and transfer of mortgages — (16.1) Minority interest's share of above adjustments (3.1) (10.7) Funds from Operations, Adjusted for Comparability  531.7 481.0 Funds from Operations, Adjusted for Comparability per share $ 4.56 $ 4.28