Distributions On February 5, 2004, our Board of Directors approved an increase in the annual distribution rate to $2.60 per share.  Dividends during 2003 aggregated $2.40 per share and dividends during 2002 aggregated $2.175 per share. We are required  to pay a minimum level of dividends to maintain our status as a REIT. Our dividends and limited partner distributions  typically exceed our net income generated in any given year primarily because of depreciation, which is a “non-cash” expense.  Our future dividends and the distributions of the Operating Partnership will be determined by the Board of Directors based  on actual results of operations, cash available for dividends and limited partner distributions, and what may be required to  maintain our status as a REIT.  Industry practice is to evaluate real estate properties in part based on funds from operations (“FFO”). We consider  FFO to be a key measure of our operating performance that is not specifically defined by accounting principles generally  accepted in the United States (“GAAP”). We believe that FFO is helpful to investors because it is a widely recognized  measure of the performance of REITs and provides a relevant basis for comparison among REITs. We also use this measure  internally to measure the operating performance of our Portfolio.  As defined by the National Association of Real Estate Investment Trusts (“NAREIT”), FFO is consolidated net income  computed in accordance with GAAP: ● excluding real estate related depreciation and amortization, ● excluding gains and losses from extraordinary items and cumulative effects of accounting changes,  ● excluding gains and losses from the sales of real estate, ● plus the allocable portion of FFO of unconsolidated joint ventures based upon economic ownership interest, and ● all determined on a consistent basis in accordance with GAAP. We have adopted NAREIT’s clarification of the definition of FFO that requires us to include the effects of nonrecurring  items not classified as extraordinary, cumulative effect of accounting change or resulting from the sale of depreciable real  estate. However, you should understand that FFO: ● does not represent cash flow from operations as defined by GAAP, ● should not be considered as an alternative to net income determined in accordance with GAAP as a measure  of operating performance, and ● is not an alternative to cash flows as a measure of liquidity. The following schedule sets forth total FFO before allocation to the limited partners of the Operating Partnership and  FFO allocable to Simon Property. This schedule also reconciles net income, which we believe is the most directly comparable  GAAP financial measure, to FFO for the periods presented. 40 simon property group, inc. Management’s Discussion & Analysis of Financial Condition and Results of Operations  Non-GAAP Financial Measure – Funds from Operations 