CONSOLIDATED STATEMENTS OF CASH FLOWS CAMDEN PROPERTY TRUST year ended december 31, in thousands 2004  2003 2002 Cash flow from operating activities Net income  41,341 $ 29,430  $ 74,612 Adjustments to reconcile net income to net cash provided by operating activities Income from discontinued operations  (3,912)  (2,730) (4,560) Depreciation  103,528  102,040 97,305 Amortization of deferred fi nancing costs  2,697  2,634 2,165 Equity in income of joint ventures  (356)  (3,200) (366) Gain on sale of discontinued operations  (8,368)  - (29,199) Gain on sale of land  (2,625)  (2,590) (359) Impairment loss on land held for sale 1,143 - - Original issuance costs of redeemed perpetual preferred units 745 - - Income allocated to common units, including discontinued operations 4,260 2,237 1,807 Accretion of discount on unsecured notes payable 609 684 529 Amortization of share-based compensation 3,381 2,881 2,537 Net increase (decrease) in restricted cash 2,746 (2,439) 1,387 Net change in operating accounts 8,044 5,564 27,943 Net cash provided by operating activities of continuing operations 153,233 134,511 173,801 Net cash provided by operating activities of discontinued operations 6,804 6,299 11,007 Net cash provided by operating activities 160,037 140,810 184,808 Cash flow from investing activities Increase in real estate assets  (107,640)  (100,914) (401,403) Net proceeds from sale of discontinued operations 23,179 - 51,810 Net proceeds from sales of properties, land and townhomes 20,703 26,264 76,007 Increase in notes receivable - other  (12,451)  (27,613) (17,614) Decrease in notes receivable - other 9,320 3,811 - Distributions from joint ventures 1,748 8,917 2,053 Increase in investments in third-party development properties  -  - (10,386) Decrease in investments in third-party development properties - - 80,369 Increase in non-real estate assets and other  (3,789)  (2,412) (1,602) Net cash used in investing activities  (68,930)  (91,947) (220,766) Cash flow from fi nancing activities Net increase (decrease) in unsecured line of credit and short-term borrowings  9,000  (49,000) (61,000) Proceeds from the issuance of notes payable 349,709 198,848 365,528 Repayment of notes payable  (292,590)  (67,871) (85,088) Distributions to shareholders and minority interests  (123,841)  (121,075) (123,412) Redemption of perpetual preferred units  (35,500) - - Repurchase of common shares and units  (181)  - (62,675) Net increase in accounts receivable - affi liates  (1,607)  (18,053) (634) Repayment of notes receivable - affi liates - 1,800 - Increase in notes receivable - affi liates  (1,350) - - Common share options exercised 8,025 11,159 7,206 Payment of deferred fi nancing costs  (4,825)  (2,569) (7,531) Other 949 850 790 Net cash (used in) provided by fi nancing activities  (92,211)  (45,911) 33,184 Net (decrease) increase in cash and cash equivalents  (1,104)  2,952 (2,774) Cash and cash equivalents, beginning of year 3,357 405 3,179 Cash and cash equivalents, end of year $ 2,253 $ 3,357 $ 405 Supplemental information Cash paid for interest, net of interest capitalized $ 80,929 $ 75,419 $ 70,912 Interest capitalized 9,332 15,068 10,923 Supplemental schedule of noncash investing and fi nancing activities Value of shares issued under benefit plans, net $ 5,764 $ 2,454 $ 9,893 Conversion of operating partnership units to common shares - 317 810 Note receivable issued upon sale of real estate asset - 9,017 - Contribution of real estate asset to joint venture - 1,364 - See notes to consolidated fi nancial statements transforming camden 71