VORNADO REALTY TRUST 38 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company carries comprehensive liability and all risk property insurance ((i) fire, (ii) flood, (iii) extended coverage, (iv) “acts of terrorism” as defined in the Terrorism Risk Insurance Act of 2002 which expires in 2004 with a possible extension through 2005 and (v) rental loss insurance) with respect to its assets. Below is a summary of the all risk property insurance and terror- ism risk insurance for each of the Company’s business segments: Coverage Per Occurrence Sub-Limits for All Risk (1) Acts of Terrorism New York Office $1,000,000,000 $ 300,000,000 CESCR Office $1,000,000,000 $ 300,000,000 Retail $ 500,000,000 $ 500,000,000 Merchandise Mart $1,000,000,000 $ 300,000,000 Temperature Controlled Logistics $ 225,000,000 $ 225,000,000 (1) Limited as to terrorism insurance by the sub-limit shown in the adjacent column. In addition to the coverage above, the Company carries lesser amounts of coverage for terrorist acts not covered by the Terrorism Risk Insurance Act of 2002. The Company’s debt instruments, consisting of mortgage loans secur ed by its properties (which are generally non-recourse to the Company), its senior unsecured notes due 2007 and 2010 and its r evolving credit agreement, contain customary covenants requiring the Company to maintain insurance. Although the Company believes that it has adequate insurance cov- erage under these agreements, the Company may not be able to obtain an equivalent amount of coverage at reasonable costs in the future. Further if lenders insist on greater coverage than the Company is able to obtain, it could adversely affect the Company’s ability to finance and/or refinance its properties and expand its portfolio. In conjunction with the closing of Alexander’s Lexington Avenue construction loan on July 3, 2002, the Company agreed to guarantee to the construction lender, the lien free, timely completion of the construction of the project and funding of all project costs in excess of a stated budget, as defined in the loan agreement, if not funded by Alexander’s. The Company has an effective shelf registration under which the Company can offer an aggregate of approximately $822,990,000 of equity securities and Vornado Realty L.P. can offer an aggregate of $1,800,262,000 of debt securities. Cash and cash equivalents wer $320,542,000 at December 31, 2003, as compared to $208,200,000 at December 31, 2002, an increase of $112,342,000. Cash Flows for the Year Ended December 31, 2003 Cash flow provided by operating activities of $528,951,000 was primarily comprised of (i) income of $460,703,000, (ii)  adjustments for non-cash items of $99,985,000, partially offset by (iii) the net change in operating assets and liabilities of $31,737,000. The adjustments for non-cash items wer comprised of (i) depreciation and amortization of $219,911,000  (ii) minority interest of $178,675,000, partially offset by (iii) gains on sale of real estate of $161,789,000, (iv) gains on  dispositions of wholly-owned and partially-owned assets other than r eal estate of $2,343,000, (v) the effect of straight-lining  of rental income of $41,947,000, (vi) equity in net income of partially-owned entities and income applicable to Alexander’s  of $83,475,000 and (vii) amortization of below market leases, net of $9,047,000. Net cash used in investing activities of $130,292,000 was primarily comprised of (i) capital expenditures of $120,593,000, (ii) devel- opment and redevelopment expenditures of $123,436,000, (iii) investment in notes and mortgages receivable of $230,375,000,  (iv) investments in partially-owned entities of $15,331,000, (v) acquisitions of real estate and other of $216,361,000, (vi) cash restricted, primarily mortgage escrows of $101,292,000, (vii) purchases of marketable securities of $17,356,000 partially offset by, (viii) pro- ceeds from the sale of real estate of $299,852,000 (ix) distributions fr om partially-owned entities of $154,643,000, (x) repayments on notes receivable of $29,421,000 and (xi) proceeds from the sale of marketable securities of $7,952,000. Net cash used in financing activities of $286,317,000 was primarily comprised of (i) dividends paid on common shares of $327,877,000, (ii) dividends paid on preferred shares of $20,815,000, (iii) distributions to minority partners of $158,066,000, 