Market Risk Our exposure to market risk due to changes in interest rates primarily relates to our long-term debt obligations. We  manage our exposure to interest rate risk by a combination of interest rate protection agreements to effectively fix or cap a  portion of our variable rate debt, or in the case of a fair value hedge, effectively convert fixed rate debt to variable rate debt.  In addition, we manage this exposure by refinancing fixed rate debt at times when rates and terms are appropriate.  We are also exposed to foreign currency risk on financings of foreign operations. Our intent is to offset gains and losses  that occur on the underlying exposures, with gains and losses on the derivative contracts hedging these exposures. We do not  enter into either interest rate protection or foreign currency rate protection agreements for speculative purposes.  Our future earnings, cash flows and fair values relating to financial instruments are dependent upon prevalent market  rates of interest, primarily LIBOR. Based upon consolidated indebtedness and interest rates at December 31, 2003, a 0.50%  increase in the market rates of interest would decrease future earnings and cash flows by approximately $8.8 million, and  would decrease the fair value of debt by approximately $196.2 million. A 0.50% decrease in the market rates of interest  would increase future earnings and cash flows by approximately $8.8 million, and would increase the fair value of debt by  approximately $203.1 million. Bankruptcy filings by retailers are normal in the course of our operations. We are continually releasing vacant spaces  resulting from tenant terminations. Pressures that affect consumer confidence, job growth, energy costs and income gains can  affect retail sales growth, and a continuing soft economic cycle may impact our ability to retenant property vacancies resulting  from store closings or bankruptcies. We lost approximately 566,000 square feet of mall shop tenants in 2003. Our 2003  experience was less than historical levels and we expect to lose a greater amount of square feet to bankruptcies in 2004.  The geographical diversity of our Portfolio mitigates some of the risk of an economic downturn. In addition, the  diversity of our tenant mix also is important because no single retailer represents either more than 2.0% of total GLA or  more than 4.6% of our annualized base minimum rent. Bankruptcies and store closings may, in some circumstances, create  Retail Climate and Tenant Bankruptcies 41 2003 annual report For the Year Ended December 31, 2003  2002  2001 (in thousands) Funds from Operations $ 1,041,105 $ 936,356 $ 786,635 Increase in FFO from prior period 11.2%  19.0% 0.6% Reconciliation: Net Income $ 368,715 $ 422,588 $ 199,149 Plus: Limited Partners’ interest in the Operating Partnership, Preferred distributions of the Operating Partnership, and preferred dividends of subsidiary  113,000 139,067 81,611 Cumulative effect of accounting change  –  – 1,700 Depreciation and amortization from consolidated properties and discontinued operations  499,737  478,379 452,428 Our share of depreciation and amortization and other items from unconsolidated affiliates  147,629 150,217 138,814 Gain on sales of real estate and discontinued operations  (17,248  )  (162,011 )  (2,610 ) Less: Management Company gain on sale of real estate, net  – (8,400 )  – Minority interest portion of depreciation and amortization  (3,546 ) (7,943 )  (7,012 ) Preferred distributions and dividends (Including those of subsidiaries)  (67,182 ) (75,541 )  (77,445 ) Funds From Operations $ 1,041,105 $ 936,356 $ 786,635 FFO allocable to Simon Property  $  787,467 $ 691,004 $ 571,974