## 1. ORGANIZATION OF THE COMPANY 

Tanger Factory Outlet Centers, Inc., a fully-integrated, self-administered, self-managed real estate invest- ment trust (“REIT”), develops, owns and operates factory outlet centers. Recognized as one of the largest owners and operators of factory outlet centers in the United States, we have ownership interests in or management responsibilities for 40 centers in 23 states totaling approximately 9.3 million feet of gross leasable area at the end of 2003. We provide all development, leasing and management services for our centers. Unless the context indicates otherwise, the term “Company” refers to Tanger Factory Outlet Centers, Inc. and subsidiaries and the term “Operating Partnership” refers to Tanger Properties Limited Partnership and subsidiaries. The terms “we”, “our” and “us” refer to the Company or the Company and the Operating Partnership together, as the text requires. 

Our factory outlet centers and other assets are held by, and all of our operations are conducted by, Tanger Properties Limited Partnership. The majority of the units of partnership interest issued by the Operating Partnership (the “Units”) are held by two wholly-owned subsidiaries, the Tanger GP Trust and the Tanger LP Trust. The Tanger GP Trust controls the Operating Partnership as its sole general partner. The Tanger LP Trust holds a limited partnership interest. All of the remaining Units are owned by the Tanger Family through the Tanger Family Limited Partnership (“TFLP”). TFLP holds a limited partnership interest in and is the minor- ity owner of the Operating Partnership. Stanley K. Tanger, the Company’s Chairman of the Board and Chief Executive Officer, is the sole general partner of TFLP. 

As of December 31, 2003, our wholly-owned subsidiaries owned 12,960,643 Units and TFLP owned 3,033,305 Units. TFLP’s Units are exchangeable, subject to certain limitations to preserve our status as a REIT, on a one-for-one basis for our common shares. 

## 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 

Principles of Consolidation - The consolidated financial statements include our accounts, our wholly- owned subsidiaries, as well as the Operating Partnership and its subsidiaries. Intercompany balances and transactions have been eliminated in consolidation. Investments in real estate joint ventures that represent non-controlling ownership interests are accounted for using the equity method of accounting. We are considered the primary beneficiary of our joint venture, COROC Holdings, LLC (“COROC”), under the pro- visions of Financial Accountings Standards Board Interpretation No. 46 (“FIN 46”). Therefore, the results of operations and financial position of COROC are included in our Consolidated Financial Statements. 

In January of 2003, the FASB issued FIN 46 which clarifies the application of existing accounting pro- nouncements to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without addi- tional subordinated financial support from other parties. The provisions of FIN 46 are effective immediate- ly for all variable interests in variable interest entities created after January 31, 2003 and we will apply its provisions to any variable interests in variable interest entities existing as of January 31, 2003 as of March 31, 2004 and thereafter. Certain of the disclosure requirements apply to all financial statements issued after January 31, 2003, regardless of when the variable interest entity was established. We have evalu- ated Deer Park, which was created after January 31, 2003 (Note 5) and have determined that under the current facts and circumstances we will not be required to consolidate this entity under the provisions of FIN 46. We are in the process of evaluating TWMB Associates, LLC (“TWMB”), a joint venture in which we have a 50% ownership interest with Rosen-Warren Myrtle Beach LLC (“Rosen-Warren”) as our ven- ture partner, which was created prior to January 31, 2003 (Note 5) in order to determine whether the enti- ty is a variable interest entity and whether we are considered to be the primary beneficiary or whether we hold a significant variable interest. TWMB is a joint venture arrangement where it is possible that we may be required to consolidate or disclose additional information about our 50% interest in TWMB in the future. Our maximum exposure to loss as a result of our involvement in this joint venture, $41.9 million, is equal to our investment in the joint venture, $5.7 million, and our obligation under our joint and several guaran- tee of TWMB’s debt, $36.2 million. 

