NOTE 1. ORGANIZATION Simon Property Group, Inc. (“Simon Property”) is a Delaware corporation that operates as a self-administered and  self-managed real estate investment trust (“REIT”). Simon Property Group, L.P. (the “Operating Partnership”) is a majority- owned partnership subsidiary of Simon Property that owns all but one of our real estate properties. In these notes, the terms  “we”, “us” and “our” refer to Simon Property, the Operating Partnership, and their subsidiaries. We are engaged primarily in the ownership, operation, leasing, management, acquisition, expansion and development  of real estate properties. Our real estate properties consist primarily of regional malls and community shopping centers.  As of December 31, 2003, we owned or held an interest in 246 income-producing properties in North America, which  consisted of 175 regional malls, 67 community shopping centers, and four office and mixed-use properties in 37 states and  Canada (collectively, the “Properties”, and individually, a “Property”). Mixed-use properties are properties that include a  combination of retail space, office space, and/or hotel components. In addition, we also own interests in three parcels of land  held for future development (together with the Properties, the “Portfolio”). Finally, we have ownership interests in 47 assets  in Europe (France, Italy, Poland and Portugal). We generate the majority of our revenues from leases with retail tenants including: We also generate revenues due to our size and tenant relationships from: M.S. Management Associates, Inc. (the “Management Company”) is a wholly-owned subsidiary that provides leasing,  management, and development services to most of the Properties. In addition, insurance subsidiaries of the Management  Company insure the self-insured retention portion of our general liability program and the deductible associated with our  workers’ compensation programs. In addition, they provide reinsurance for the primary layer of general liability coverage  to our third party maintenance providers while performing services under contract with us. Third party providers provide  coverage above the insurance subsidiaries’ limits.  We are subject to risks incidental to the ownership and operation of commercial real estate. These risks include,  among others, the risks normally associated with changes in the general economic climate, trends in the retail industry,  creditworthiness of tenants, competition for tenants and customers, changes in tax laws, interest rate and foreign currency  levels, the availability of financing, and potential liability under environmental and other laws. Our regional malls and  community shopping centers rely heavily upon anchor tenants like most retail properties. Three retailers’ anchor stores  occupied 337 of the approximately 958 anchor stores in the Properties as of December 31, 2003. An affiliate of one of these  retailers is a limited partner in the Operating Partnership.  On December 31, 2002, we continued to simplify our organizational structure by merging SPG Realty Consultants,  Inc. (“SPG Realty”) into Simon Property, ending our “paired share” REIT structure resulting from our combination with  Corporate Property Investors, Inc. All of the outstanding stock of SPG Realty was previously held in trust for the benefit  of the holders of common stock of Simon Property. As a result of the merger, our stockholders who were previously the  beneficial owners of the SPG Realty stock are now, by virtue of their ownership of our common stock, the owners of the  assets and operations formerly owned or conducted by SPG Realty. Note 2 describes the basis of presentation of the merger  in the accompanying financial statements. Structural Simplification  ● Base minimum rents and cart and kiosk rentals, ● Overage and percentage rents based on tenants’ sales volume, and  ● Recoveries of substantially all of our recoverable expenditures, which consist of property operating, real estate  tax, repairs and maintenance, and advertising and promotional expenditures. ● Pursuing mall marketing initiatives, including the sale of gift cards,  ● Forming consumer focused strategic corporate alliances, and  ● Offering property operating services to our tenants and others resulting from our relationships with vendors. simon property group, inc. 50 Notes to Financial Statements Dollars in thousands, except share and per share amounts and where indicated as in millions or billions