NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table illustrates the effect on net income and earnings per share if the fair value based method had been applied to all outstanding awards for the years ended December 31, 2003, 2002 and 2001 (in thousands except per share data) 2003 2002 2001 Net income $ 12,849 $ 11,007 $ 7,112 Add: Share-based employee compensation expense included in net income, net of minority interest of $22  80 — — Less: Total share based employee compensation expense determined under fair value based method for all awards, net of minority interest of ($22), ($44) and ($66), respectively (80) (127) (175) Pro forma net income $ 12,849 $ 10,880 $ 6,937 Earnings per share Basic – as reported $ 1.20 $ 1.11 $ .67 Basic – pro forma 1.20 1.09 .65 Diluted – as reported $ 1.17 $ 1.08 $ .67 Diluted – pro forma 1.17 1.06 .65 We may issue up to 2,250,000 shares under The Share Option Plan and The Unit Option Plan. We have granted 1,519,200 options, net of options forfeited, through December 31, 2003. Under both plans, the option exercise price is determined by the Share and Unit Option Committee of the Board of Directors. Non-qualified share and Unit options granted expire 10 years from the date of grant and 20% of the options become exercisable in each of the first five years commencing one year from the date of grant. Options outstanding at December 31, 2003 have exercise prices between $18.625 and $31.25, with a weighted average exercise price of $25.44 and a weighted average remaining contractual life of 4.32 years. A summary of the status of our two plans at December 31, 2003, 2002 and 2001 and changes during the years then ended is presented in the table and narrative below: 2003 2002 2001 Wtd Avg Wtd Avg Wtd Avg Shares Ex Price Shares Ex Price Shares Ex Price Outstanding at beginning of year 1,318,700 $ 23.89 1,455,830 $ 23.72 1,475,270 $ 23.68 Granted — — — — — — Exercised (890,540) 23.15 (127,620) 21.89 (10,800) 18.63 Forfeited (600) 18.63 (9,510) 25.45 (8,640) 23.66 Outstanding at end of year 427,560 $ 25.44 1,318,700 $ 23.89 1,455,830 $ 23.72 Exercisable at end of year 293,060 $ 28.03 1,048,880 $ 24.45 1,047,890 $ 24.25 Weighted average fair value of options granted $— $— $— TANGER FACTORY OUTLET CENTERS, INC. | 57