Management’s Discussion & Analysis of Financial Condition and Results of Operations  You should read the following discussion in conjunction with the financial statements and notes thereto that are  included in this Annual Report to Shareholders. Certain statements made in this section or elsewhere in this report may be  deemed “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Although  we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give  no assurance that our expectations will be attained, and it is possible that our actual results may differ materially from those  indicated by these forward-looking statements due to a variety of risks and uncertainties. Those risks and uncertainties  incidental to the ownership and operation of commercial real estate include, but are not limited to: national, international,  regional and local economic climates, competitive market forces, changes in market rental rates, trends in the retail industry,  the inability to collect rent due to the bankruptcy or insolvency of tenants or otherwise, risks associated with acquisitions, the  impact of terrorist activities, environmental liabilities, maintenance of REIT status, the availability of financing, and changes in  market rates of interest and fluctuations in exchange rates of foreign currencies. We undertake no duty or obligation to update  or revise these forward-looking statements, whether as a result of new information, future developments, or otherwise.  Overview Simon Property Group, Inc. (“Simon Property”) is a Delaware corporation that operates as a self-administered and  self-managed real estate investment trust (“REIT”). A REIT is a company that owns and, in most cases, operates income- producing real estate such as regional malls, community shopping centers, offices, apartments, and hotels. To qualify as a  REIT, a company must distribute at least 90 percent of its taxable income to its shareholders annually. Taxes are paid by  shareholders on the dividends received and any capital gains. Most states also follow this federal treatment and do not require  REITs to pay state income tax. Simon Property Group, L.P. (the “Operating Partnership”) is a majority-owned partnership  subsidiary of Simon Property that owns all but one of our real estate properties. In this discussion, the terms “we”, “us” and  “our” refer to Simon Property, the Operating Partnership, and their subsidiaries. We are engaged primarily in the ownership, operation, leasing, management, acquisition, expansion and development  of real estate properties. Our real estate properties consist primarily of regional malls and community shopping centers.  As of December 31, 2003, we owned or held an interest in 246 income-producing properties in North America, which  consisted of 175 regional malls, 67 community shopping centers, and four office and mixed-use properties in 37 states and  Canada (collectively, the “Properties”, and individually, a “Property”). Mixed-use properties are properties that include a  combination of retail space, office space, and/or hotel components. In addition, we also own interests in three parcels of land  held for future development (together with the Properties, the “Portfolio”). Finally, we have ownership interests in 47 assets  in Europe (France, Italy, Poland and Portugal). Operating Philosophy We seek growth in our earnings, funds from operations (“FFO”), and cash flow through:  ● focusing on our core business of regional malls ● acquiring individual properties or portfolios of properties, focusing on quality retail real estate. As part of our  acquisition strategy, we review and evaluate a limited number of acquisition opportunities. ● pursuing new development as well as strategic expansion and renovation activity to enhance existing assets’  profitability and market share when we believe the investment of our capital meets our risk-reward criteria.  We seek to selectively develop new properties in major metropolitan areas that exhibit strong population and  economic growth. To support this growth, our capital strategy is three-fold: ● to provide the capital necessary to fund growth, ● to maintain sufficient flexibility to access capital in many forms both public and private, and ● to manage our overall financial structure in a fashion that preserves our investment grade ratings. We own and operate long-term properties which generate revenues primarily from long-term leases; therefore, as part  of our financing strategy we believe that our properties should be financed primarily with long-term fixed rate debt. As a  result, we manage our effective amount of floating rate debt to be approximately 15-20% of total outstanding indebtedness  and enter into interest rate swap agreements. We believe this strategy is the most appropriate for the long term health of  our company. Our $1.25 billion credit facility (“Credit Facility”) provides a source of liquidity and flexibility in our capital  strategy as our cash needs vary from time to time.  25 2003 annual report