MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS At December 31, 2003, approximately 31% of our outstanding long-term debt represented unsecured borrowings and approximately 33% of the gross book value of our real estate portfolio was unencum- bered. The average interest rate, including loan cost amortization, on average debt outstanding for the years ended December 31, 2003 and 2002 was 7.6% and 8.1%, respectively. We intend to retain the ability to raise additional capital, including public debt or equity, to pursue attrac- tive investment opportunities that may arise and to otherwise act in a manner that we believe to be in our shareholders’ best interests. Prior to the 2002 and 2003 common share offerings, we had estab- lished a shelf registration to allow us to issue up to $400 million in either all debt or all equity or any com- bination thereof. In September 2002, we completed a public offering of 1,000,000 common shares at a price of $29.25 per share, receiving net proceeds of approximately $28.0 million. We used the net proceeds, together with other available funds, to acquire one outlet center in Howell, Michigan, to reduce the outstanding balance on our lines of credit and for general corporate purposes. In December 2003, we completed a public offering of 2,300,000 common shares at a price of $40.50 per share, receiving net proceeds of approximately $88.0 million. The net proceeds were used together with other available funds to finance our portion of the equity required to acquire the Charter Oak portfolio of out- let shopping centers and for general corporate purposes. In addition in January 2004, the underwriters of the December 2003 offering exercised in full their over-allotment option to purchase an additional 345,000 common shares at the offering price of $40.50 per share. We received net proceeds of approximately $13.2 million from the exercise of the over-allotment. To generate capital to reinvest into other attractive investment opportunities, we may also consider the use of additional operational and developmental joint ventures, selling certain properties that do not meet our long-term investment crite- ria as well as outparcels on existing properties.  We maintain unsecured, revolving lines of credit that provide for unsecured borrowings up to $100 mil- lion at December 31, 2003, an increase of $15 million in capacity from December 31, 2002. During 2003, we extended the maturity of all lines of credit to June 30, 2005. Based on cash provided by oper- ations, existing credit facilities, ongoing negotiations with certain financial institutions and our ability to sell debt or equity subject to market conditions, we believe that we have access to the necessary financing to fund the planned capital expenditures during 2004. We anticipate that adequate cash will be available to fund our operating and administrative expenses, reg- ular debt service obligations, and the payment of dividends in accordance with Real Estate Investment Trust (“REIT”) requirements in both the short and long term. Although we receive most of our rental pay- ments on a monthly basis, distributions to shareholders are made quarterly and interest payments on the senior, unsecured notes are made semi-annually. Amounts accumulated for such payments will be used in the interim to reduce the outstanding borrowings under the existing lines of credit or invested in short- term money market or other suitable instruments.  The following table details our contractual obligations over the next five years and thereafter as of December 31, 2003 (in thousands): Contractual Obligations and Commercial Commitments Contractual Obligations 2004 2005 2006 2007 2008 Thereafter Debt $ 53,530 $ 49,253 $ 59,410 $ 6,344 $ 274,430 $ 85,500 Operating leases 2,941 2,855 2,768 2,675 2,402 87,556 $ 56,471 $ 52,108 $ 62,178 $ 9,019 $ 276,832 $ 173,056 TANGER FACTORY OUTLET CENTERS, INC. | 29