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Below is a calculation of FFO for the years ended December 31, 2003, 2002 and 2001 as well as other data for those respective periods (in thousands): 

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(1) For the year ended December 31, 2002 includes $728 in gains on sales of outparcels of land. 

(2) Assumes the partnership units of the Operating Partnership held by the minority interest, preferred shares of the Company and share and unit option- sare converted to common shares of the Company. 

## NEW ACCOUNTING PRONOUNCEMENTS 

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity” (“FAS 150”), effective at the beginning of the first interim peri- od beginning after June 15, 2003. The FASB initiated its liabilities and equity project in response to con- cerns regarding the current balance sheet classifications of certain financial instruments. The standard specifies that instruments within its scope, which include mandatorily redeemable financial instruments, obligations to repurchase the issuer’s equity shares by transferring assets, and certain obligations to issue a variable number of shares, represent obligations of the issuer and, therefore, the issuer must classify them as liabilities. We adopted this statement effective July 1, 2003, and it had no impact on our results of operations or financial position. 

## ECONOMIC CONDITIONS AND OUTLOOK 

The majority of our leases contain provisions designed to mitigate the impact of inflation. Such provisions include clauses for the escalation of base rent and clauses enabling us to receive percentage rentals based on tenants’ gross sales (above predetermined levels, which we believe often are lower than tradi- tional retail industry standards) which generally increase as prices rise. Most of the leases require the ten- ant to pay their share of property operating expenses, including common area maintenance, real estate taxes, insurance and advertising and promotion, thereby reducing exposure to increases in costs and operating expenses resulting from inflation. 

While factory outlet stores continue to be a profitable and fundamental distribution channel for brand name manufacturers, some retail formats are more successful than others. As typical in the retail industry, cer- tain tenants have closed, or will close, certain stores by terminating their lease prior to its natural expira- tion or as a result of filing for protection under bankruptcy laws. 

