Management’s Discussion & Analysis of Financial Condition and Results of Operations  We believe the total Portfolio data provides you with information helpful in evaluating not only the quality and  growth potential of the Portfolio, but also the effectiveness of our management. Occupancy Levels and Average Base Rents.  Occupancy and average base rent is based on mall and freestanding GLA  owned by us (“Owned GLA”) at mall and freestanding stores in the regional malls and all tenants at community shopping  centers. We believe the continued stability in regional mall occupancy is primarily the result of the overall quality of our  Portfolio. The result of the stability in occupancy is a direct or indirect increase in nearly every category of revenue. Our  portfolio has maintained stable occupancy and increased average base rents, in the current economic climate. Comparable Sales per Square Foot.  Sales volume includes total reported retail sales at Owned GLA in the regional  malls and all reporting tenants at community shopping centers. Retail sales at Owned GLA affect revenue and profitability  levels because sales determine the amount of minimum rent that can be charged, the percentage rent realized, and the  recoverable expenses (common area maintenance, real estate taxes, etc.) that tenants can afford to pay.  Our significant accounting policies are described in detail in Note 3 of the Notes to Financial Statements. The following  briefly describes those accounting policies we believe are most critical to understanding our business: Significant Accounting Policies ● We review investment properties for impairment on a Property-by-Property basis whenever events or changes  in circumstances indicate that the carrying value of investment properties held for use may not be recoverable.  These circumstances include, but are not limited to, declines in cash flows, occupancy and comparable sales  per square foot at the Property. We recognize an impairment of investment property when we estimate that  simon property group, inc. 28 2003 % Change  2002  % Change  2001  % Change Regional Malls Occupancy Consolidated   92.2%   92.3%   91.2%  Unconsolidated   92.7%   93.5%   93.3%  Total Portfolio  92.4%   92.7%   91.9%  Average Base Rent per Square Foot Consolidated  $ 31.28  5.5%  $ 29.66  4.5%  $ 28.39  4.2% Unconsolidated  $ 33.73  3.8%  $ 32.50  5.3%  $ 30.87  1.8% Total Portfolio $ 32.26  5.1%  $ 30.70  4.8%  $ 29.28  3.4% Comparable Sales Per Square Foot Consolidated  $ 388  3.8%  $ 374  1.6%  $ 368  (0.7%) Unconsolidated  $ 427  0.5%  $ 425  2.4%  $ 415  0.3% Total Portfolio $ 402  2.9%  $ 391  2.0%  $ 383  (0.2%) Community Shopping Centers Occupancy Consolidated   87.1%   84.9%   89.8%  Unconsolidated   96.3%   91.2%   90.4%  Total Portfolio  90.2%   86.9%   89.3%  Average Base Rent per Square Foot Consolidated  $ 11.01  7.5%  $ 10.24  4.6%  $ 9.79  6.6% Unconsolidated  $ 9.77  (0.9%)  $ 9.86  (0.6%)  $ 9.92  1.6% Total Portfolio $ 10.59  4.6%  $ 10.12  2.5%  $ 9.87  5.4% Comparable Sales Per Square Foot Consolidated  $ 210  6.6%  $ 197  2.0%  $ 193  6.8% Unconsolidated  $ 206  1.6%  $ 203  (6.6%)  $ 217  6.0% Total Portfolio $ 209  4.8%  $ 199  (1.1%)  $ 201  6.7%