<PAGE>

                                                                    EXHIBIT 13.1

Selected Financial Data

     The following tables set forth selected combined and separate financial
data for the Companies. The financial data should be read in conjunction with
the combined financial statements and notes thereto and with Management's
Discussion and Analysis of Financial Condition and Results of Operations.

     Other data management believes is important in understanding trends in the
Companies' business is also included in the tables.

Simon Property Group, Inc. and SPG Realty Consultants, Inc. Combined:
---------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                    As of or for the Year Ended December 3l,
                                               ----------------------------------------------------------------------------------
                                                  1999(1)           1998(1)           1997(1)           1996(2)           1995
                                               -----------       -----------       -----------        ----------       ----------
<S>                                           <C>               <C>               <C>               <C>               <C>
                                                                    (in thousands, except per share data)
                                                                    -------------------------------------
OPERATING DATA:
  Total revenue                                $ 1,892,703       $ 1,405,559       $ 1,054,167        $  747,704       $  553,657
  Income before unusual and
    extraordinary items                            316,100           236,230           203,133           134,663          101,505

  Net income available to common
    shareholders                               $   167,314       $   133,598       $   107,989        $   72,561       $   57,781


BASIC EARNINGS PER PAIRED SHARE:
  Income before extraordinary items            $      1.00       $      1.02       $      1.08        $     1.02       $     1.08
  Extraordinary items                                (0.03)             0.04                --             (0.03)           (0.04)
                                               -----------       -----------       -----------        ----------       ----------
  Net income                                   $      0.97       $      1.06       $      1.08        $     0.99       $     1.04
                                               ===========       ===========       ===========        ==========       ==========
  Weighted average Paired Shares
    outstanding                                    172,089           126,522            99,920            73,586           55,312

DILUTED EARNINGS PER PAIRED SHARE:
  Income before extraordinary items            $      1.00       $      1.02       $      1.08        $     1.01       $     1.08
  Extraordinary items                                (0.03)             0.04                --             (0.03)           (0.04)
                                               -----------       -----------       -----------        ----------       ----------
  Net income                                   $      0.97       $      1.06       $      1.08        $     0.98       $     1.04
                                               ===========       ===========       ===========        ==========       ==========

 Diluted weighted average Paired Shares
  outstanding                                      172,226           126,879           100,304            73,721           55,422


Distributions per Paired Share (3)             $      2.02       $      2.02       $      2.01        $     1.63       $     1.97

BALANCE SHEET DATA:
  Cash and cash equivalents                    $   157,632       $   129,195       $   109,699        $   64,309       $   62,721
  Total assets                                  14,223,243        13,277,000         7,662,667         5,895,910        2,556,436
  Mortgages and other notes payable              8,768,951         7,973,372         5,077,990         3,681,984        1,980,759
  Shareholders' equity                         $ 3,253,658       $ 3,409,209       $ 1,556,862        $1,304,891       $  232,946

OTHER DATA:
  Cash flow provided by (used in):
    Operating activities                       $   627,056       $   529,415       $   370,907        $  236,464       $  194,336
    Investing activities                          (612,876)       (2,102,032)       (1,243,804)         (199,742)        (222,679)
    Financing activities                            14,257         1,592,113           918,287           (35,134)         (14,075)
  Ratio of Earnings to Fixed Charges and
    Preferred Dividends (4)                           1.36x             1.44x             1.54x             1.55x            1.66x
                                               ===========       ===========       ===========        ==========       ==========
  Funds from Operations (FFO) of Simon
    Group (5)                                  $   734,513       $   544,481       $   415,128        $  281,495       $  197,909
                                               ===========       ===========       ===========        ==========       ==========
  FFO allocable to the Companies               $   534,285       $   361,326       $   258,049        $  172,468       $  118,376
                                               ===========       ===========       ===========        ==========       ==========
</TABLE>

                                       1
<PAGE>

Simon Property Group, Inc.:
---------------------------
<TABLE>
<CAPTION>
                                                                       As of or for the Year Ended December 3l,
                                               -------------------------------------------------------------------------------------
                                                     1999(1)           1998(1)           1997(1)           1996(2)          1995
                                               -----------------  ----------------  ----------------  ----------------  ------------
                                                                        (in thousands, except per share data)
                                                                        -------------------------------------
<S>                                               <C>               <C>               <C>               <C>              <C>
OPERATING DATA:
 Total revenue                                    $ 1,894,971       $ 1,405,072        $1,054,167       $  747,704       $  553,657
 Income before unusual and extraordinary items        315,499           235,790           203,133          134,663          101,505
 Net income available to common shareholders      $   165,944       $   133,286        $  107,989       $   72,561       $   57,781

BASIC EARNINGS PER COMMON  SHARE:
 Income before extraordinary items                $      0.99       $      1.01        $     1.08       $     1.02       $     1.08
 Extraordinary items                                    (0.03)             0.04                --            (0.03)           (0.04)
                                               ---------------   --------------     -------------    -------------    -------------
 Net income                                       $      0.96       $      1.05        $     1.08       $     0.99       $     1.04
                                               ===============   ==============     =============    =============    =============
 Weighted average shares outstanding                  172,089           126,522            99,920           73,586           55,312
DILUTED EARNINGS PER COMMON SHARE:
 Income before extraordinary items                $      0.99       $      1.01        $     1.08       $     1.01       $     1.08
 Extraordinary items                                    (0.03)             0.04                --            (0.03)           (0.04)
                                               --------------    --------------     -------------    -------------    -------------
 Net income                                       $      0.96       $      1.05        $     1.08       $     0.98       $     1.04
                                               ==============    ==============     =============    =============    =============
 Diluted weighted average shares outstanding          172,226           126,879           100,304           73,721           55,422

Distributions per common share (3)                $      2.02       $      2.02        $     2.01       $     1.63       $     1.97

BALANCE SHEET DATA:
 Cash and cash equivalents                        $   154,924       $   127,626        $  109,699       $   64,309       $   62,721
 Total assets                                      14,199,318        13,269,129         7,662,667        5,895,910        2,556,436
 Mortgages and other notes payable                  8,768,841         7,990,288         5,077,990        3,681,984        1,980,759
 Shareholders' equity                               3,237,545         3,394,142         1,556,862        1,304,891          232,946

------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

SPG Realty Consultants, Inc.:
-----------------------------
<TABLE>
<CAPTION>
                                                                As of or for the Year Ended December 3l,
                                                ------------------------------------------------------------------------------------
                                                      1999 (1)      1998 (1)            1997             1996             1995
                                                ----------------  ---------------  --------------  ----------------  ---------------
                                                                          (in thousands, except per share data)
                                                                          -------------------------------------
<S>                                                    <C>          <C>          <C>        <C>         <C>
OPERATING DATA:
 Total revenue                                    $  2,277          $  4,582           $ 6,214          $ 9,805          $10,423
 Net income (loss)                                   1,370            (4,431)            1,177             (920)              (6)

BASIC EARNINGS PER COMMON  SHARE:
 Net income (loss)                                $   0.80          $  (5.17)          $  2.07          $ (1.88)         $ (0.01)
 Weighted average shares outstanding                 1,721               857               569              490              471
DILUTED EARNINGS PER COMMON SHARE:
 Net income (loss)                                $   0.80          $  (5.17)          $  2.07          $ (1.88)         $ (0.01)
 Diluted weighted average shares outstanding         1,722               857               569              490              471

Distributions per common share (3)                $     --          $   0.39           $  0.40          $ 0.425          $ 0.625

BALANCE SHEET DATA:
 Cash and cash equivalents                        $  2,708          $  1,569           $ 4,147          $ 4,797          $ 2,759
 Total assets                                       35,029            46,601            46,063           31,054           30,929
 Mortgages and other notes payable                   9,958            21,556            36,818           21,988           22,208
 Shareholders' equity                               16,113            15,067             4,316            5,039            4,320

Notes
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1)  Notes 3, 4 and 5 to the accompanying financial statements describe the NED
     Acquisition and the CPI Merger, which occurred August 27, 1999 and
     September 24, 1998, respectively, and other 1999,1998 and 1997 real estate
     acquisitions and development. Note 2 to the accompanying financial
     statements describes the basis of presentation.
(2)  Beginning August 9, 1996, results include the DRC Merger.
(3)  Represents distributions declared per period, which, in 1996, includes a
     distribution of $0.1515 per share declared on August 9, 1996, in connection
     with the DRC Merger, designated to align the time periods of distributions
     of the merged companies. SRC's distributions were declared prior to the CPI
     Merger.
(4)  In 1999, includes a $12,000 unusual loss (see Note 13 to the accompanying
     financial statements) and a total of $12,290 of asset write-downs.
     Excluding these items, the ratio would have been 1.39x in 1999.
(5)  Please refer to Management's Discussion and Analysis of Financial Condition
     and Results of Operations for a definition of Funds from Operations.

                                       2
<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations

SIMON PROPERTY GROUP, INC. AND SPG REALTY CONSULTANTS, INC. COMBINED

     The following discussion should be read in conjunction with the Selected
Financial Data, and all of the financial statements and notes thereto included
elsewhere herein. Certain statements made in this report may constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of Simon Group (see below) to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such factors include, among others,
the following: general economic and business conditions, which will, among other
things, affect demand for retail space or retail goods, availability and
creditworthiness of prospective tenants, lease rents and the terms and
availability of financing; adverse changes in the real estate markets including,
among other things, competition with other companies and technology; risks of
real estate development and acquisition; governmental actions and initiatives;
substantial indebtedness; conflicts of interests; maintenance of REIT status;
and environmental/safety requirements.

     Overview

     Simon Property Group, Inc. ("SPG"), a Delaware corporation, is a self-
administered and self-managed real estate investment trust ("REIT"). Each share
of common stock of SPG is paired ("Paired Shares") with 1/100th of a share of
common stock of SPG Realty Consultants, Inc. ("SRC" and together with SPG, the
"Companies"). Simon Property Group, L.P. (the "SPG Operating Partnership"),
formerly known as Simon DeBartolo Group, L.P., is the primary subsidiary of SPG.
Units of ownership interest ("Units") in the SPG Operating Partnership are
paired ("Paired Units") with a Unit in SPG Realty Consultants, L.P. (the "SRC
Operating Partnership" and together with the SPG Operating Partnership, the
"Operating Partnerships"). The SRC Operating Partnership is the primary
subsidiary of SRC. The Companies together with the Operating Partnerships are
hereafter referred to as "Simon Group", which prior to the CPI Merger (see
below) refers to Simon DeBartolo Group, Inc. and the SPG Operating Partnership.

     Simon Group is engaged primarily in the ownership, operation, management,
leasing, acquisition, expansion and development of real estate properties,
primarily regional malls and community shopping centers. As of December 31,
1999, Simon Group owned or held an interest in 259 income-producing properties
in the United States, which consisted of 168 regional malls, 78 community
shopping centers, four specialty retail centers, five office and mixed-use
properties and four value-oriented super-regional malls in 36 states (the
"Properties"), five additional retail real estate properties operating in Europe
and two properties currently under construction (the "Portfolio" or the
"Portfolio Properties"). At December 31, 1999 and 1998, the Companies' direct
and indirect ownership interests in the Operating Partnerships was 72.4% and
71.6%, respectively. The SPG Operating Partnership also holds substantially all
of the economic interest in M.S. Management Associates, Inc. (the "Management
Company"). See Note 8 to the attached financial statements for a description of
the activities of the Management Company.

     Operating results of Simon Group for the two years ended December 31, 1999
and 1998, and their comparability to the respective prior periods, have been
significantly impacted by a number of Property acquisitions and openings
beginning in 1997. The greatest impact on results of operations has come from
the September 24, 1998 acquisition, through merger, of Corporate Property
Investors, Inc. ("CPI") and Corporate Realty Consultants, Inc. (the "CPI
Merger") (see Note 4 to the financial statements), and the acquisition of
Shopping Center Associates (the "SCA Acquisition"), which included a series of
transactions from September 29, 1997 to June 1, 1998 (see Note 5 to the
financial statements). In addition, Simon Group acquired ownership interests in,
or commenced operations of, a number of other Properties throughout the
comparative periods and, as a result, increased the number of Properties it
accounts for using the consolidated method of accounting and sold interests in
several Properties throughout the comparative periods (together, the "Property
Transactions"). Please refer to "Liquidity and Capital Resources" for additional
information on such 1999 activity and refer to Note 5 to the financial
statements for information about acquisitions, dispositions and development
activity prior to 1999.

                                       3
<PAGE>

Results of Operations

Year Ended December 31, 1999 vs. Year Ended December 31, 1998

     Operating income increased $212.0 million or 33.0% in 1999 as compared to
1998. This increase is primarily the result of the CPI Merger ($143.1 million)
and the Property Transactions ($23.0 million). Excluding these transactions,
operating income increased approximately $45.9 million, primarily resulting from
an approximately $15.1 million increase in consolidated revenues realized from
marketing initiatives throughout the Portfolio from Simon Group's strategic
marketing division, Simon Brand Ventures ("SBV"); a $39.1 million increase in
minimum rents; a $6.3 million increase in gains from sales of peripheral
properties; a $4.7 million increase in interest income and a $4.3 million
increase in lease settlement income, partially offset by a $14.1 million
increase in depreciation and amortization and an $8.6 million decrease in fee
income. The increase in minimum rent primarily results from increased occupancy
levels, the replacement of expiring tenant leases with renewal leases at higher
minimum base rents, and a $7.9 million increase in rents from tenants operating
under license agreements. The increase in depreciation and amortization is
primarily due to an increase in depreciable real estate realized through
renovation and expansion activities.

     Interest expense increased $159.7 million, or 38.0% in 1999 as compared to
1998. This increase is primarily a result of the CPI Merger ($125.0 million) and
the Property Transactions ($18.0 million). The remaining increase includes
incremental interest resulting from the SPG Operating Partnership's 1998
issuance of $1,075 million of public notes, the proceeds of which were used
primarily to pay down the Credit Facility (see Liquidity and Capital Resources)
($4.5 million), and incremental interest on borrowings under the Credit Facility
to complete the NED Acquisition, and acquire ownership interests in the IBM
Properties and Mall of America ($6.3 million) (see Liquidity and Capital
Resources and Notes 3 & 5 to the financial statements).

     The $3.4 million income tax benefit in 1999 represents SRC's pro rata share
of the SRC Operating Partnership's current year losses and the realization of
tax carryforward benefits for which a valuation allowance was previously
provided.

     Income from unconsolidated entities increased $27.3 million in 1999,
resulting from an increase in the Operating Partnerships' share of income from
partnerships and joint ventures ($28.4 million), partially offset by a decrease
in its share of the income from the Management Company ($1.1 million). The
increase in the Operating Partnerships' share of income from partnerships and
joint ventures is primarily the result of the joint venture interests acquired
in the CPI Merger ($17.2 million), the IBM Properties ($3.2 million) and the NED
Acquisition ($3.1 million). The decrease in Management Company income is
primarily the result of losses associated with interests in two parcels of land
held by the Management Company ($7.3 million), partially offset by increases in
SBV revenues ($2.9 million), construction services revenues ($1.3 million) and
increased earnings from a subsidiary captive insurance company ($1.1 million).

     As discussed further in Note 13 to the financial statements, the $12.0
million unusual item in 1999 is the estimated result of damages arising from the
litigation surrounding the 1996 acquisition through merger of DeBartolo Realty
Corporation (the "DRC Merger"). The actual amount of damages has not yet been
determined by the courts.

     The $6.7 million extraordinary loss and $7.1 million extraordinary gain in
1999 and 1998, respectively, are the net results from refinancings, early
extinguishments and/or forgiveness of debt.

     Income before allocation to limited partners was $297.4 million during
1999, an increase of $54.0 million over 1998, primarily for the reasons
discussed above. Income before allocation to limited partners was allocated to
the Companies based on SPG's direct ownership of Ocean County Mall and certain
net lease assets, and the Companies' preferred Unit preferences and weighted
average ownership interests in the Operating Partnerships during the period. In
addition, SRC recognizes an income tax provision (benefit) on its pro rata share
of the earnings (losses) of the SRC Operating Partnership.

     Preferred distributions of the SPG Operating Partnership represent
distributions on preferred Units issued in connection with the NED Acquisition
(See Note 3 to the financial statements). Preferred dividends of subsidiary
represent distributions on preferred stock of SPG Properties, Inc., a 99.999%
owned subsidiary of SPG.

                                       4
<PAGE>

Year Ended December 31, 1998 vs. Year Ended December 31, 1997

     Operating income increased $165.2 million or 34.6% in 1998 as compared to
1997. This increase is primarily the result of the CPI Merger ($62.5 million),
the SCA Acquisition ($55.1 million), the Property Transactions ($18.5 million)
and approximately $12.9 million from SBV. Excluding these transactions,
operating income increased approximately $16.2 million, primarily due to a $20.2
million increase in minimum rent, and increases in gains from sales of
peripheral properties ($3.4 million) and interest income ($2.8 million),
partially offset by a $6.3 million increase in depreciation and amortization and
a $4.3 million increase in recoverable expenses over tenant reimbursements. The
increase in minimum rents results from increased occupancy levels, the
replacement of expiring tenant leases with renewal leases at higher minimum base
rents, and a $4.3 million increase in rents from tenants operating under license
agreements. The increase in depreciation and amortization is primarily due to an
increase in depreciable real estate realized through renovation and expansion
activities.

     Interest expense increased $132.1 million, or 45.9% in 1998 as compared to
1997. This increase is primarily a result of the CPI Merger ($45.5 million), the
SCA Acquisition ($59.1 million) and the Property Transactions ($15.0 million)
and incremental interest ($12.7 million) on borrowings under the Credit Facility
to acquire the IBM Properties.

     The $7.3 million loss on the sale of an asset in 1998 is the result of the
June 30, 1998 sale of Southtown Mall for $3.3 million.

     Income from unconsolidated entities increased $9.4 million in 1998,
resulting from an increase in the Operating Partnerships' share of income from
partnerships and joint ventures ($14.0 million), partially offset by a decrease
in the Operating Partnerships' share of income from M.S. Management Associates
Inc. (the "Management Company") ($4.6 million). The increase in the Operating
Partnerships' share of income from partnerships and joint ventures is primarily
the result of the addition of the IBM Properties ($14.5 million) and the CPI
Merger ($7.2 million), partially offset by the increase in the amortization of
the excess of the Operating Partnerships' investment over their share of the
equity in the underlying net assets of unconsolidated joint-venture Properties
($8.7 million). The decrease in income from the Management Company includes a
$6.0 million decrease in development fee income.

     The $7.1 million gain from extraordinary items in 1998 is primarily the
result of debt forgiveness, partially offset by prepayment penalties and write-
offs of mortgage costs associated with early extinguishments of debt.

     Income before allocation to limited partners was $243.4 million in 1998, as
compared to $203.2 million in 1997, reflecting an increase of $40.2 million, for
the reasons discussed above, and was allocated to the Companies based on the
Companies' direct ownership of Ocean County Mall and certain net lease assets,
and the Companies' preferred Unit preference and weighted average ownership
interest in the Operating Partnerships during the year.

       Preferred dividends of subsidiary represent distributions on preferred
stock of SPG Properties, Inc., a 99.999% owned subsidiary of SPG.

     Liquidity and Capital Resources

     As of December 31, 1999, Simon Group's balance of unrestricted cash and
cash equivalents was $157.6 million, including $72.4 million related to Simon
Group's gift certificate program, which management does not consider available
for general working capital purposes. Simon Group has a $1.25 billion unsecured
revolving credit facility (the "Credit Facility") which had available credit of
$461 million at December 31, 1999. The Credit Facility bears interest at LIBOR
plus 65 basis points and has an initial maturity of August 2002, with an
additional one-year extension available at Simon Group's option. SPG and the SPG
Operating Partnership also have access to public equity and debt markets.

     Management anticipates that cash generated from operating performance will
provide the necessary funds on a short- and long-term basis for its operating
expenses, interest expense on outstanding indebtedness, recurring capital
expenditures, and distributions to shareholders in accordance with REIT
requirements. Sources of capital for nonrecurring capital expenditures, such as
major building renovations and expansions, as well as for scheduled principal
payments, including balloon payments, on outstanding indebtedness are expected
to be obtained from: (i) excess cash generated from operating performance; (ii)
working capital reserves; (iii) additional debt financing; and (iv) additional
equity raised in the public markets.

     Sensitivity Analysis. The Operating Partnerships' combined future earnings,
cash flows and fair values relating to financial instruments are primarily
dependent upon prevalent market rates of interest, primarily LIBOR. Based upon
consolidated indebtedness and interest rates at December 31, 1999, a 0.25%
increase in the market rates of interest would decrease future earnings and cash
flows by approximately $5.8 million, and would decrease the fair value of debt
by approximately $170 million. A 0.25% decrease in the market rates of interest
would increase future earnings and cash flows by approximately $5.8 million, and
would increase the fair value of debt by approximately $180 million.

                                       5
<PAGE>

     Financing and Debt

     At December 31, 1999, Simon Group had combined consolidated debt of $8,769
million, of which $6,275 million was fixed-rate debt, bearing interest at a
weighted average rate of 7.3% and $2,494 million was variable-rate debt bearing
interest at a weighted average rate of 6.6%. As of December 31, 1999, Simon
Group had interest rate protection agreements related to $438 million of
combined consolidated variable-rate debt. Simon Group's interest rate protection
agreements did not materially impact interest expense or weighted average
borrowing rates in 1999.

     Simon Group's share of total scheduled principal payments of mortgage and
other indebtedness, including unconsolidated joint venture indebtedness over the
next five years is $6,017 million, with $4,459 million thereafter. Simon Group's
ratio of consolidated debt-to-market capitalization was 58.1% and 51.2% at
December 31, 1999 and 1998, respectively. The increase is primarily the result
of a decrease in the price of the Paired Shares in 1999.

The following summarizes significant financing and refinancing transactions
completed in 1999:

     Financings Related to the NED Acquisition. Simon Group's approximately $894
million share of the cost of the NED Acquisition (see below) included the
assumption of approximately $530.0 million of mortgage indebtedness; $177.1
million in cash; the issuance of 1,269,446 Paired Units valued at approximately
$36.4 million; the issuance of 2,584,227 7% Convertible Preferred Units in the
SPG Operating Partnership valued at approximately $72.8 million; and 2,584,227
8% Redeemable Preferred Units in the SPG Operating Partnership valued at
approximately $78.0 million. Simon Group's share of the cash portion of the
purchase price was financed primarily using the Credit Facility.

     Secured Indebtedness. During 1999, Simon Group refinanced approximately
$295 million of mortgage indebtedness on five of the Properties. Simon Group's
share of the refinanced debt is approximately $270 million. The weighted average
maturity of the indebtedness increased from approximately 2.0 years to 7.4
years, while the weighted average interest rates decreased from approximately
8.0% to 7.7%.

     Credit Facility. During 1999, Simon Group obtained a three-year extension
on the Credit Facility to August 25, 2002, with an additional one-year automatic
extension available at the option of the SPG Operating Partnership. The maximum
and average amounts outstanding during 1999 under the Credit Facility were $785
million and $487 million, respectively.

     Unsecured Notes. On February 4, 1999, the SPG Operating Partnership
completed the sale of $600 million of senior unsecured notes. The notes include
two $300 million tranches. The first tranche bears interest at 6.75% and matures
on February 4, 2004 and the second tranche bears interest at 7.125% and matures
on February 4, 2009. The SPG Operating Partnership used the net proceeds of
approximately $594 million to retire the $450 million initial tranche of the
$1.4 billion unsecured bridge loan, which financed the majority of the cash
portion of the CPI Merger (the "Merger Facility") and to pay $142 million on the
outstanding balance of the Credit Facility. Following this offering, the SPG
Operating Partnership had $250 million remaining on its debt shelf registration,
under which debt securities may be issued.

     In addition to these transactions, Simon Group has also received
commitments from various lending institutions totaling $550 million to payoff
the second $450 million tranche of the Merger Facility, which becomes due March
24, 2000 and bears interest at LIBOR plus 65 basis points. The new facility will
mature March 2001 and also bears interest at LIBOR plus 65 basis points.

     Acquisitions and Disposals

     The NED Acquisition. During 1999, Simon Group acquired ownership interests
in 14 regional malls from New England Development Company (the "NED
Acquisition"). Simon Group acquired one of the properties directly and formed a
joint venture with three partners ("Mayflower"), of which Simon Group owns
49.1%, to acquire interests in the remaining properties. Simon Group assumed
management responsibilities for the portfolio, which includes approximately 10.7
million square feet of GLA.

     Other Acquisitions. During 1999, in addition to the NED Acquisition, Simon
Group acquired the remaining interests in four Properties, and 50% of the
economic benefits of Mall of America for a combined price of approximately $318
million. The purchase price included the assumption of a $134 million pro rata
share of mortgage indebtedness with a weighted average rate and maturity of 6.8%
and 4.4 years, respectively; the issuance of 1,000,000 shares of 8% Redeemable
Preferred Stock in SPG for $24 million and $160 million in cash funded primarily
from the Credit Facility.

     See Note 5 to the financial statements for 1998 and 1997 acquisition
activity.

                                       6
<PAGE>

     Management continues to review and evaluate a limited number of individual
property and portfolio acquisition opportunities. Management believes, however,
that due to the rapid consolidation of the regional mall business, coupled with
the current status of the capital markets, that acquisition activity in the near
term will be a less significant component of the Company's growth strategy.
Management believes that funds on hand, and amounts available under the Credit
Facility, together with the ability to issue shares of common stock and/or
Units, provide the means to finance certain acquisitions. No assurance can be
given that Simon Group will not be required to, or will not elect to, even if
not required to, obtain funds from outside sources, including through the sale
of debt or equity securities, to finance significant acquisitions, if any.

     Disposals. During 1999, Simon Group sold an office building, an interest in
a hotel, and two community centers for a total of $59 million, resulting in a
net loss of $7 million. The SRC Operating Partnership, which owned the office
building, used its $11.8 million portion of the net proceeds primarily to repay
the remaining $10.6 million mortgage payable to the SPG Operating Partnership.
The net proceeds from these sales were used primarily to reduce the outstanding
balance on the Credit Facility.

     In addition to the Property sales described above, as a continuing part of
Simon Group's long-term strategic plan, management continues to pursue the sale
of its remaining non-retail holdings and a number of retail assets that are no
longer aligned with Simon Group's strategic criteria. These include interests in
one regional mall and one community center sold in the first quarter of 2000 and
one regional mall and four community centers, which are under contract for sale.
Management expects the sale prices of its non-core assets, if sold, will not
differ materially from the carrying value of the related assets.

     Development Activity

     New Developments. Development activities are an ongoing part of Simon
Group's business. During 1999, Simon Group opened six new Properties aggregating
approximately 4.9 million square feet of GLA. In total, Simon Group invested
approximately $400 million on new developments in 1999. With fewer new
developments currently under construction, Simon Group expects 2000 development
costs to be approximately $130 million.

     Strategic Expansions and Renovations. A key objective of Simon Group is to
increase the profitability and market share of the Properties through the
completion of strategic renovations and expansions. During 1999, Simon Group
invested approximately $277 million on redevelopment projects and completed four
major redevelopment projects, which added approximately 1.4 million square feet
of GLA to the Portfolio. Simon Group has a number of renovation and/or expansion
projects currently under construction, or in preconstruction development and
expects to invest approximately $270 million on redevelopment in 2000.

     International Expansion. The SPG Operating Partnership and the Management
Company have a 25% ownership interest in European Retail Enterprises, B.V.
("ERE") and Groupe BEG, S.A. ("BEG"), respectively, which are accounted for
using the equity method of accounting. BEG and ERE are fully integrated European
retail real estate developers, lessors and managers. Simon Group's total
investment in ERE and BEG at December 31, 1999 was approximately $41 million,
with commitments for an additional $22 million, subject to certain performance
and other criteria, including Simon Group's approval of development projects.
The agreements with BEG and ERE are structured to allow Simon Group to acquire
an additional 25% ownership interest over time. As of December 31, 1999, BEG and
ERE had three Properties open in Poland and two in France.

                                       7
<PAGE>

     Other

     On September 30, 1999, Simon Group entered into a five year contract with
Enron Energy Services for Enron to supply or manage all of the energy commodity
requirements throughout the Portfolio. The contract includes electricity,
natural gas and maintenance of energy conversion assets and electrical systems
including lighting. This alliance is designed to reduce operating costs for
Simon Group's tenants, as well as deliver incremental profit to Simon Group.

     Also during the third quarter of 1999, Simon Group launched a new program
designed to take advantage of new retail opportunities of the digital age.
Elements of the strategy include digitizing the existing assets of the
Properties by implementing internet web sites for each of the Properties,
creating products that leverage the digitalization of consumers and Simon
merchants through an enhanced broadband network called TenantConnect.net and
incubating concepts that leverage the physical and virtual worlds through a
venture creation subsidiary called clixnmortar.com, a subsidiary of the SRC
Operating Partnership. As these programs are still in the development stage,
management does not expect their revenues to be a significant component of
combined revenues in 2000.

     Capital Expenditures on Consolidated Properties

<TABLE>
<CAPTION>
                                                          1999            1998            1997
                                                          ----           -----            -----
<S>                                                       <C>            <C>              <C>
       New Developments                                   $ 226          $  22            $  80
       Renovations and Expansions                           248            250              197
       Tenant Allowances                                     65             46               38
       Recoverable Capital Expenditures                      27             19               13
       Other                                                 --             12                4
                                                          -----          -----            -----
       Total                                              $ 566          $ 349            $ 332
                                                          =====          =====            =====
</TABLE>

     Distributions

     SPG declared distributions on its common stock in 1999 aggregating $2.02
per share. On January 20, 2000, SPG declared a distribution of $0.5050 per
Paired Share payable on February 18, 2000, to shareholders of record on
February 4, 2000. The current combined annual distribution rate is $2.02 per
Paired Share. Future distributions will be determined based on actual results of
operations and cash available for distribution.

     Investing and Financing Activities

     Cash used in investing activities during 1999 includes acquisitions of $339
million, capital expenditures of $505 million, investments in unconsolidated
joint ventures of $83 million consisting primarily of development funding, $47
million of investments in and advances to the Management Company and a $3
million investment in piiq.com. Capital expenditures includes development costs
of $86 million, renovation and expansion costs of approximately $324 million and
tenant costs, and other operational capital expenditures of approximately $95
million. Acquisitions, including transaction costs, includes $183 million for
the NED Acquisition and $156 million for the remaining interests in four
existing Properties. These uses of cash are partially offset by distributions
from unconsolidated entities of $222 million; net proceeds of $59 million from
the sales of Simon Group's interests in a hotel and related land, an office
building, and two community centers; and cash of $83 million from the
consolidations of Simon Group's gift certificate program and four Properties.
Distributions from unconsolidated entities includes approximately $116 million
resulting from financing activities, with the remainder resulting primarily from
those entities' operating activities.

     Cash provided by financing activities during 1999 was $14 million and
included net equity distributions of $560 million offset by net borrowings of
$574 million.

                                       8
<PAGE>

     Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA")

     Management believes that there are several important factors that
contribute to the ability of Simon Group to increase rent and improve
profitability of its shopping centers, including aggregate tenant sales volume,
sales per square foot, occupancy levels and tenant costs. Each of these factors
has a significant effect on EBITDA. Management believes that EBITDA is an
effective measure of shopping center operating performance because: (i) it is
industry practice to evaluate real estate properties based on operating income
before interest, taxes, depreciation and amortization, which is generally
equivalent to EBITDA; and (ii) EBITDA is unaffected by the debt and equity
structure of the property owner. EBITDA: (i) does not represent cash flow from
operations as defined by generally accepted accounting principles; (ii) should
not be considered as an alternative to net income as a measure of operating
performance; (iii) is not indicative of cash flows from operating, investing and
financing activities; and (iv) is not an alternative to cash flows as a measure
of liquidity.

     Total EBITDA for the Properties increased from $940 million in 1997 to
$1,843 million in 1999, representing a compound annual growth rate of 40.0%.
This growth is primarily the result of merger, acquisition and development
activity during the comparative periods ($775 million). The remaining growth in
total EBITDA ($128 million) reflects increased rental rates, increased tenant
sales, improved occupancy levels and effective control of operating costs and
the addition of GLA to the Portfolio through expansions. During this period, the
operating profit margin increased from 64.4% to 65.3%. This improvement is also
primarily attributable to aggressive leasing of new and existing space and
effective control of operating costs.

     The following summarizes total EBITDA for the Portfolio Properties and the
operating profit margin of such properties, which is equal to total EBITDA
expressed as a percentage of total revenue:

<TABLE>
<CAPTION>
                                                                                  1999             1998            1997
                                                                               ----------       ----------       --------
                                                                                              (in thousands)
<S>                                                                            <C>              <C>              <C>
     EBITDA of consolidated Properties                                         $1,236,421       $  910,654       $677,930
     EBITDA of unconsolidated Properties                                          606,710          451,049        262,098
                                                                               ----------       ----------       --------
     Total EBITDA of Portfolio Properties                                      $1,843,131       $1,361,703       $940,028
                                                                               ==========       ==========       ========
     EBITDA after minority interest (1)                                        $1,455,272       $1,068,233       $746,842
                                                                               ==========       ==========       ========
     Increase in total EBITDA from prior period                                      35.4%            44.9%          52.8%
     Increase in EBITDA after minority interest from prior period                    36.2%            43.0%          50.2%
     Operating profit margin of the Portfolio Properties                             65.3%            64.8%          64.4%
</TABLE>

     (1)  EBITDA after minority interest represents Simon Group's allocable
          portion of earnings before interest, taxes, depreciation and
          amortization for all Properties based on its economic ownership in
          each Property.

     Funds from Operations ("FFO")
     -----------------------------

     FFO is an important and widely used measure of the operating performance of
REITs, which provides a relevant basis for comparison among REITs. FFO, as
defined by NAREIT, means consolidated net income without giving effect to real
estate related depreciation and amortization, gains or losses from extraordinary
and unusual items and gains or losses on sales of real estate, plus the
allocable portion, based on economic ownership interest, of funds from
operations of unconsolidated joint ventures, all determined on a consistent
basis in accordance with generally accepted accounting principles. Effective
January 1, 2000, Simon Group adopted NAREIT's clarification in the definition of
FFO, which requires the inclusion of the effects of nonrecurring items not
classified as extraordinary or resulting from the sales of depreciable real
estate. Simon Group's method of calculating FFO may be different from the
methods used by other REITs. FFO: (i) does not represent cash flow from
operations as defined by generally accepted accounting principles; (ii) should
not be considered as an alternative to net income as a measure of operating
performance; and (iii) is not an alternative to cash flows as a measure of
liquidity.

                                       9
<PAGE>

     The following summarizes FFO of Simon Group and the Companies and
reconciles combined income before unusual and extraordinary items to FFO of
Simon Group for the periods presented:

<TABLE>
<CAPTION>
                                                                               For the Year Ended December 31,
                                                                         ------------------------------------------
                                                                           1999            1998              1997
                                                                         --------        --------          --------
                                                                                     (in thousands)
<S>                                                                      <C>             <C>               <C>
  FFO of Simon Group                                                     $734,513        $544,481          $415,128
                                                                         ========        ========          ========
  Increase in FFO from prior period                                          34.9%           31.2%             47.5%
                                                                         ========        ========          ========
  Reconciliation:
    Income before unusual and extraordinary items                        $316,100        $236,230          $203,133
    Plus:
      Depreciation and amortization from combined
        consolidated properties                                           381,265         267,423           200,084

      Simon Group's share of depreciation and amortization
        and extraordinary and other items from unconsolidated             104,537          82,323            46,760
        affiliates (1)

      Loss (gain) on sale of real estate                                    7,062           7,283               (20)
      Less:
      Minority interest portion of depreciation and
        amortization and extraordinary items                               (5,128)         (7,307)           (5,581)

      Preferred distributions (Including those of subsidiaries)           (69,323)        (41,471)          (29,248)
                                                                         --------        --------          --------
    FFO of Simon Group                                                   $734,513        $544,481          $415,128
                                                                         ========        ========          ========
    FFO allocable to the Companies                                       $534,285        $361,326          $258,049
                                                                         ========        ========          ========
</TABLE>

(1)  Includes $12.3 million of asset write-downs recognized in 1999.

     Portfolio Data

     Operating statistics give effect to the NED Acquisition for 1999 only and
the CPI Merger for 1998 and 1999 only. The value-oriented super-regional mall
category consists of Arizona Mills, Grapevine Mills, Concord Mills and Ontario
Mills. Operating statistics do not include those properties located outside of
the United States.

     Aggregate Tenant Sales Volume and Sales per Square Foot. Sales Volume
includes total reported retail sales at mall and freestanding GLA owned by the
Operating Partnerships ("Owned GLA") in the regional malls and all reporting
tenants at community shopping centers. The $9,248 million increase from 1996 to
1999 includes $6,759 million from the CPI Merger, the NED Acquisition, the SCA
Acquisition, and the IBM Properties. Excluding these Properties, 1999 sales were
$10,410 million, which is a compound annual growth rate of 9.5% since 1996.
Retail sales at Owned GLA affect revenue and profitability levels because they
determine the amount of minimum rent that can be charged, the percentage rent
realized, and the recoverable expenses (common area maintenance, real estate
taxes, etc.) the tenants can afford to pay.

     The following illustrates the total reported sales of tenants at Owned GLA:

<TABLE>
<CAPTION>
                                                                        Annual
                                              Total Tenant            Percentage
             Year Ended December 31,       Sales (in millions)         Increase
             -----------------------       -------------------        ----------
             <S>                           <C>                        <C>
                      1999                       $17,169                  17.7%
                      1998                        14,587                  52.9
                      1997                         9,539                  20.4
                      1996                         7,921                   3.6
</TABLE>

     Regional mall sales per square foot increased 7.0% in 1999 to $367 as
compared to $343 in 1998. In addition, sales per square foot at regional malls
of reporting tenants operating for at least two consecutive years ("Comparable
Sales") increased from $346 to $377, or 9.0%, from 1998 to 1999. Simon Group
believes its strong sales growth in 1999 is the result of its continued
aggressive retenanting efforts and the redevelopment of many of the Properties.
Sales per square foot and Comparable Sales at the community shopping centers
increased in 1999 by $7 or 3.8% and $10 or 5.6%, respectively.

     Tenant Occupancy Costs. Tenant occupancy costs as a percentage of sales
remained at 12.3% in 1999 and 1998 in the regional mall portfolio. A tenant's
ability to pay rent is affected by the percentage of its sales represented by
occupancy costs, which consist of rent

                                      10
<PAGE>

and expense recoveries. As sales levels increase, if expenses subject to
recovery are controlled, the tenant can pay higher rent. Management believes
Simon Group is one of the lowest-cost providers of retail space, which has
permitted the rents in both regional malls and community shopping centers to
increase without raising a tenant's total occupancy cost beyond its ability to
pay. Management believes continuing efforts to increase sales while controlling
property operating expenses will continue the trend of increasing rents at the
Properties.

     Occupancy Levels and Average Base Rents. Occupancy and average base rent is
based on Owned GLA at mall and freestanding stores in the regional malls and all
tenants at value-oriented regional malls and community shopping centers.
Management believes the continued growth in regional mall occupancy is a result
of a significant increase in the overall quality of Simon Group's Portfolio. The
result of the increase in occupancy is a direct or indirect increase in nearly
every category of revenue. Owned GLA increased 12.5 million square feet from
December 31, 1998, to December 31, 1999, primarily as a result of the NED
Acquisition, the purchase of an interest in Mall of America and the 1999
Property openings.

<TABLE>
<CAPTION>
                                                       Occupancy Levels
                                        -----------------------------------------------
                                                        Value-Oriented        Community
                                        Regional           Regional           Shopping
                  December 31,           Malls              Malls              Centers
                  ------------           -----              -----              -------

<S>                                     <C>             <C>
                      1999               90.6%              95.1%                88.6%
                      1998               90.0               98.2                 91.4
                      1997               87.3               93.8                 91.3
                      1996               84.7                N/A                 91.6
</TABLE>

<TABLE>
<CAPTION>
                                                          Average Base Rent per Square Foot
                               ------------------------------------------------------------------------------------
                                                                                               Community
                                                     %        Value-Oriented         %         Shopping         %
Year Ended December 31,        Regional Malls     Change      Regional Malls      Change        Centers      Change
-----------------------        --------------     ------     ---------------      ------       ---------     ------
<S>                            <C>                <C>          <C>                <C>          <C>           <C>
        1999                       $27.33          6.3%           $16.34           (0.4)%         $8.36        8.9%
        1998                        25.70          8.7             16.40             1.2           7.68        3.2
        1997                        23.65         14.4             16.20             N/A           7.44       (2.7)
        1996                        20.68          7.8               N/A             N/A           7.65        4.9
</TABLE>

     Year 2000 Project

     Simon Group undertook a project (the "Y2K Project") to identify and correct
problems arising from the inability of information technology hardware and
software systems to process dates after December 31, 1999. Simon Group's Y2K
Project focused first upon Simon Group's key information technology systems (the
"IT Component") and secondly upon the information systems of key tenants and key
third party service providers as well as imbedded systems within common areas of
substantially all of the Properties (the "Non-IT Component"). Among other
things, the Y2K Project assessed year 2000 readiness of all critical items and
developed and implemented replacement and contingency plans based upon the
information collected.

     Simon Group experienced no disruptions in its key information technology
systems or in the operation of its Properties as a result of any year 2000
occurrence, nor is Simon Group aware that any of its key tenants or key
suppliers experienced any year 2000 issues which, in turn, have had any material
adverse impact upon Simon Group's results of operations.

     Simon Group is also aware that other dates may cause similar problems for
information technology hardware and software systems to process dates
thereafter. Simon Group believes that its Y2K Project addressed those issues in
Simon Group's IT Component and Non-IT Component, but has put in place
contingency plans substantially similar to those designed for the Y2K Project to
address information technology issues that may arise on those future dates.

     To date, Simon Group has expended $2.0 million on the Y2K Project and
anticipates expending an additional $180 thousand to complete the implementation
of any contingency and replacement plans in connection with its Y2K Project.
These cost estimates do not include costs expended by Simon Group following the
DRC Merger for software, hardware and related costs necessary to upgrade its
primary operating, financial accounting and billing systems, which allowed those
systems to, among other things, become year 2000 ready.

                                      11
<PAGE>

     Inflation

     Inflation has remained relatively low during the past four years and has
had a minimal impact on the operating performance of the Properties.
Nonetheless, substantially all of the tenants' leases contain provisions
designed to lessen the impact of inflation. Such provisions include clauses
enabling Simon Group to receive percentage rentals based on tenants' gross
sales, which generally increase as prices rise, and/or escalation clauses, which
generally increase rental rates during the terms of the leases. In addition,
many of the leases are for terms of less than ten years, which may enable Simon
Group to replace existing leases with new leases at higher base and/or
percentage rentals if rents of the existing leases are below the then-existing
market rate. Substantially all of the leases, other than those for anchors,
require the tenants to pay a proportionate share of operating expenses,
including common area maintenance, real estate taxes and insurance, thereby
reducing Simon Group's exposure to increases in costs and operating expenses
resulting from inflation.

     However, inflation may have a negative impact on some of Simon Group's
other operating items. Interest and general and administrative expenses may be
adversely affected by inflation as these specified costs could increase at a
rate higher than rents. Also, for tenant leases with stated rent increases,
inflation may have a negative effect as the stated rent increases in these
leases could be lower than the increase in inflation at any given time.

     Seasonality

     The shopping center industry is seasonal in nature, particularly in the
fourth quarter during the holiday season, when tenant occupancy and retail sales
are typically at their highest levels. In addition, shopping malls achieve most
of their temporary tenant rents during the holiday season. As a result of the
above, earnings are generally highest in the fourth quarter of each year.

     New Accounting Pronouncements

     On June 15, 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities ("SFAS 133"). SFAS 133 establishes accounting
and reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. SFAS
133 requires that changes in the derivative's fair value be recognized currently
in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income statement, and requires
that a company formally document, designate, and assess the effectiveness of
transactions that receive hedge accounting.

     SFAS 133 will be effective for Simon Group beginning with the 2001 fiscal
year and may not be applied retroactively. Management is currently evaluating
the impact of SFAS 133, which it believes could increase volatility in earnings
and other comprehensive income.

     On December 3, 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB 101"), which addressed certain revenue
recognition policies, including the accounting for overage rent by a landlord.
SAB 101 requires overage rent to be recognized as revenue only when each
tenant's sales exceeds their sales threshold. Simon Group currently recognizes
overage rent based on reported and estimated sales through the end of the
period, less the applicable prorated base sales amount. Simon Group will adopt
SAB 101 effective January 1, 2000. Management is currently evaluating the impact
of SAB 101 and expects to record a loss from the cumulative effect of a change
in accounting principle of approximately $13 million in the first quarter of
2000. In addition, SAB 101 will impact the timing in which overage rent is
recognized throughout the year, but will not have a material impact on the total
overage rent recognized in each full year.

                                      12
<PAGE>

                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Board of Directors of
Simon Property Group, Inc. and SPG Realty Consultants, Inc.:

We have audited the accompanying combined balance sheets of Simon Property
Group, Inc. and subsidiaries and its paired share affiliate, SPG Realty
Consultants, Inc. and subsidiaries (see Note 2), as of December 31, 1999 and
1998, and the related combined statements of operations, shareholders' equity
and cash flows for each of the three years in the period ended December 31,
1999. We have audited the accompanying consolidated balance sheets of Simon
Property Group, Inc. (a Delaware corporation) and subsidiaries as of December
31, 1999 and 1998, and the related statements of operations, shareholders'
equity and cash flows for each of the three years in the period ended December
31, 1999. We have also audited the accompanying consolidated balance sheets of
SPG Realty Consultants, Inc. (a Delaware corporation) and subsidiaries as of
December 31, 1999 and 1998, and the related statements of operations,
shareholders' equity and cash flows for the two years in the period ended
December 31, 1999. These financial statements are the responsibility of the
Companies' management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of Simon Property Group,
Inc. and subsidiaries and its paired share affiliate, SPG Realty Consultants,
Inc. and subsidiaries, as of December 31, 1999 and 1998, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1999, the consolidated financial position of Simon Property
Group, Inc. and subsidiaries as of December 31, 1999 and 1998, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1999, and the consolidated financial position of SPG
Realty Consultants, Inc. and subsidiaries as of December 31, 1999, and the
results of their operations and their cash flows for the two years in the period
ended December 31, 1999, in conformity with accounting principles generally
accepted in the United States.



                                         ARTHUR ANDERSEN LLP


Indianapolis, Indiana
February 16, 2000.

                                      13
<PAGE>

Balance Sheets

Simon Property Group, Inc. and SPG Realty Consultants, Inc. Combined

(Dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                                                   December 31,      December 31,
                                                                                                       1999              1998
                                                                                                   -----------        -----------
<S>                                                                                                <C>                <C>
ASSETS:
     Investment properties, at cost                                                                $12,802,052        $11,850,014
       Less -- accumulated depreciation                                                              1,098,881            722,371
                                                                                                   -----------        -----------
                                                                                                    11,703,171         11,127,643
     Cash and cash equivalents                                                                         157,632            129,195
     Tenant receivables and accrued revenue, net                                                       289,152            218,581
     Notes and advances receivable from Management Company and affiliate                               162,082            115,378
     Investment in partnerships and joint ventures, at equity                                        1,522,024          1,306,753
     Investment in Management Company and affiliates                                                     6,833             10,037
     Other investment                                                                                   44,902             50,176
     Goodwill, net                                                                                      39,556             58,134
     Deferred costs and other assets, net                                                              262,958            228,965
     Minority interest, net                                                                             34,933             32,138
                                                                                                   -----------        -----------
                                                                                                   $14,223,243        $13,277,000
                                                                                                   ===========        ===========
LIABILITIES:
     Mortgages and other indebtedness                                                              $ 8,768,951        $ 7,973,372
     Accounts payable and accrued expenses                                                             479,783            415,186
     Cash distributions and losses in partnerships and joint ventures, at equity                        32,995             29,139
     Other liabilities                                                                                 213,909             95,131
                                                                                                   -----------        -----------
       Total liabilities                                                                             9,495,638          8,512,828
                                                                                                   ===========        ===========
COMMITMENTS AND CONTINGENCIES (Note 13)

LIMITED PARTNERS' INTEREST IN THE OPERATING PARTNERSHIPS                                               984,465          1,015,634

LIMITED PARTNERS' PREFERRED INTEREST IN THE
    SPG OPERATING PARTNERSHIP                                                                          149,885                 --

PREFERRED STOCK OF SUBSIDIARY                                                                          339,597            339,329

SHAREHOLDERS' EQUITY:

     CAPITAL STOCK OF SIMON PROPERTY GROUP, INC.:

       All series of preferred stock (Note 11)                                                         542,838            717,916

       Common stock, $.0001 par value, 400,000,000 shares authorized, and 169,961,255
          and 163,571,031 issued and outstanding, respectively                                              17                 16

       Class B common stock, $.0001 par value, 12,000,000 shares authorized, 3,200,000
         issued and outstanding                                                                              1                  1

        Class C common stock, $.0001 par value, 4,000 shares authorized, issued and outstanding             --                 --

     CAPITAL STOCK OF SPG REALTY CONSULTANTS, INC.:

       Common stock, $.0001 par value, 7,500,000 shares authorized, 1,731,653
         and 1,667,750 issued and outstanding, respectively                                                 --                 --

     Capital in excess of par value                                                                  3,298,025          3,083,213
     Accumulated deficit                                                                              (551,251)          (372,313)
     Unrealized gain (loss) on long-term investment                                                     (5,852)               126
     Unamortized restricted stock award                                                                (22,139)           (19,750)
     Less common stock held in treasury at cost, 310,955 and 0 shares, respectively                     (7,981)                --
                                                                                                   -----------        -----------
       Total shareholders' equity                                                                    3,253,658          3,409,209
                                                                                                   -----------        -----------
                                                                                                   $14,223,243        $13,277,000
                                                                                                   ===========        ===========
</TABLE>

   The accompanying notes are an integral part of these statements.

                                      14
<PAGE>

Statements of Operations
Simon Property Group, Inc. and SPG Realty Consultants, Inc. Combined

(Dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                       For the Year Ended December 31,
                                                                     -----------------------------------
                                                                     1999           1998            1997
                                                                     ----           ----            ----
<S>                                                               <C>            <C>             <C>
REVENUE:
  Minimum rent                                                    $1,146,659     $  850,708      $  641,352
  Overage rent                                                        60,976         49,689          38,810
  Tenant reimbursements                                              583,777        429,470         322,416
  Other income                                                       101,291         75,692          51,589
                                                                  ----------     ----------      ----------
    Total revenue                                                  1,892,703      1,405,559       1,054,167
                                                                  ----------     ----------      ----------

EXPENSES:
  Property operating                                                 294,699        226,426         176,846
  Depreciation and amortization                                      382,176        268,442         200,900
  Real estate taxes                                                  187,627        133,698          98,830
  Repairs and maintenance                                             70,760         53,296          43,000
  Advertising and promotion                                           65,843         50,754          32,891
  Provision for credit losses                                          8,541          6,614           5,992
  Other                                                               28,812         24,117          18,678
                                                                  ----------     ----------      ----------
    Total operating expenses                                       1,038,458        763,347         577,137
                                                                  ----------     ----------      ----------

OPERATING INCOME                                                     854,245        642,212         477,030

INTEREST EXPENSE                                                     579,593        419,918         287,823
                                                                  ----------     ----------      ----------

INCOME BEFORE MINORITY INTEREST                                      274,652        222,294         189,207

MINORITY INTEREST                                                    (10,719)        (7,335)         (5,270)
GAIN (LOSS) ON SALES OF ASSETS, NET                                   (7,062)        (7,283)             20
INCOME TAX BENEFIT OF SRC                                              3,374              -               -
                                                                  ----------     ----------      ----------
INCOME BEFORE UNCONSOLIDATED ENTITIES                                260,245        207,676         183,957

INCOME FROM UNCONSOLIDATED ENTITIES                                   55,855         28,554          19,176
                                                                  ----------     ----------      ----------
INCOME BEFORE UNUSUAL AND EXTRAORDINARY ITEMS                        316,100        236,230         203,133

UNUSUAL ITEM (Note 13)                                               (12,000)             -               -
EXTRAORDINARY ITEMS - DEBT RELATED TRANSACTIONS                       (6,705)         7,146              58
                                                                  ----------     ----------      ----------
INCOME BEFORE ALLOCATION TO LIMITED PARTNERS                         297,395        243,376         203,191

LESS:
  LIMITED PARTNERS' INTEREST IN THE OPERATING PARTNERSHIPS            60,758         68,307          65,954
  PREFERRED DISTRIBUTIONS OF THE SPG OPERATING PARTNERSHIP             2,917              -               -
  PREFERRED DIVIDENDS OF SUBSIDIARY                                   29,335          7,816               -
                                                                  ----------     ----------      ----------

NET INCOME                                                           204,385        167,253         137,237

PREFERRED DIVIDENDS                                                  (37,071)       (33,655)        (29,248)
                                                                  ----------     ----------      ----------

NET INCOME AVAILABLE TO COMMON SHAREHOLDERS                       $  167,314     $  133,598      $  107,989
                                                                  ==========     ==========      ==========

BASIC EARNINGS PER COMMON PAIRED SHARE:
    Income before extraordinary items                             $     1.00     $     1.02      $     1.08
    Extraordinary items                                                (0.03)          0.04               -
                                                                  ----------     ----------      ----------
    Net income                                                    $     0.97     $     1.06      $     1.08
                                                                  ==========     ==========      ==========

DILUTED EARNINGS PER COMMON PAIRED SHARE:
    Income before extraordinary items                             $     1.00     $     1.02      $     1.08
    Extraordinary items                                                (0.03)          0.04               -
                                                                  ----------     ----------      ----------
    Net income                                                    $     0.97     $     1.06      $     1.08
                                                                  ==========     ==========      ==========
</TABLE>

       The accompanying notes are an integral part of these statements.

                                      15
<PAGE>


Statements of Shareholders' Equity
Simon Property Group, Inc. and SPG Realty Consultants, Inc. Combined

(Dollars in thousands)

<TABLE>
<CAPTION>
                                                                                        Unrealized
                                                                                        Gain
                                                   SPG           SPG        SRC         (Loss) on       Capital
                                                   Preferred     Common     Common      Long-Term       in Excess of
                                                   Stock         Stock      Stock       Investment      Par Value
                                                   ---------     ------     ------      ----------      ------------
<S>                                                <C>           <C>        <C>         <C>             <C>
Balance at December 31, 1996                         292,912         10         --              --        1,189,919

Common stock issued to the public
 (5,858,887 shares)                                                   1                                     190,026

Common stock issued in connection
 with acquisitions (2,193,037 shares)                                                                        70,000

Stock options exercised (369,902 shares)                                                                      8,625

Other common stock issued
 (82,484 shares)                                                                                              2,268

Stock incentive program (448,753 shares)                                                                     14,016

Amortization of stock incentive

Series C Preferred stock issued
 (3,000,000 shares)                                  146,072

Conversion of Series A Preferred stock
 into 3,809,523 shares of common stock               (99,923)                                                99,923

Transfer out of limited partners' interest
  in the Operating Partnership                                                                              (82,869)

Unrealized gain on long-term investment                                                      2,420

Net income

Distributions

                                                   ---------     ------     ------      ----------      -----------
Balance at December 31, 1997                         339,061         11         --           2,420        1,491,908

Common stock issued to the public
 (2,957,335 shares)                                                   1                                      91,398

CPI Merger (Notes 4 and 11)
 SPG Preferred                                       717,916
 SPG Common (53,078,564 shares)                                       5                                   1,758,733
 SRC Net Assets                                                                                              14,755

Preferred stock of Subsidiary                       (339,061)

Common stock issued in connection
 with acquisitions (519,889 shares)                                                                          17,176

Stock incentive program (495,131 shares)                                                                     15,983

Other common stock issued (81,111 shares)                                                                     2,182

Amortization of stock incentive

Transfer out of limited partners' interest
    in the Operating Partnerships                                                                          (308,922)

Distributions

                                                   ---------     ------     ------      ----------      -----------
Subtotal                                             717,916         17         --           2,420        3,083,213
                                                   ---------     ------     ------      ----------      -----------
 Comprehensive Income:

Unrealized loss on long-term investment                                                     (2,294)
Net income
                                                   ---------     ------     ------      ----------      -----------
 Total Comprehensive Income:                              --         --         --          (2,294)              --
                                                   ---------     ------     ------      ----------      -----------

Balance at December 31, 1998                         717,916         17         --             126        3,083,213

Preferred stock conversion (5,926,440 shares)       (199,320)         1                                     199,319

Common stock issued as dividend (153,890 shares)                                                              4,030

Preferred stock issued in acquisition                 24,242

Stock incentive program (537,861 shares)                                                                     13,635

Amortization of stock incentive

Shares purchased by subsidiary (310,955 shares)

Stock options exercised (82,988 shares)                                                                       2,138

Transfer out of limited partners' interest
    in the Operating Partnerships                                                                            (4,310)

Distributions

                                                   ---------     ------     ------      ----------      -----------
Subtotal                                             542,838         18         --             126        3,298,025
                                                   ---------     ------     ------      ----------      -----------
 Comprehensive Income:

Unrealized loss on long-term investment                                                     (5,978)              --

Net income
                                                   ---------     ------     ------      ----------      -----------
 Total Comprehensive Income:                              --         --         --          (5,978)              --
                                                   ---------     ------     ------      ----------      -----------
Balance at December 31, 1999                       $ 542,838     $   18     $   --      $   (5,852)     $ 3,298,025
                                                   =========     ======     ======      ==========      ===========
</TABLE>

<TABLE>
<CAPTION>
                                                                   Unamortized            Common           Total
                                                   Accumulated   Restricted Stock     Stock Held in     Shareholders'
                                                     Deficit          Award              Treasury          Equity
                                                   -----------   ----------------     -------------     -------------
<S>                                                <C>           <C>                  <C>               <C>
Balance at December 31, 1996                         (172,596)       (5,354)                    --        1,304,891

Common stock issued to the public
 (5,858,887 shares)                                                                                         190,027

Common stock issued in connection
 with acquisitions (2,193,037 shares)                                                                        70,000

Stock options exercised (369,902 shares)                                                                      8,625

Other common stock issued
 (82,484 shares)                                                                                              2,268

Stock incentive program (448,753 shares)                            (13,262)                                    754

Amortization of stock incentive                                       5,386                                   5,386

Series C Preferred stock issued
 (3,000,000 shares)                                                                                         146,072

Conversion of Series A Preferred stock
 into 3,809,523 shares of common stock                                                                           --

Transfer out of limited partners' interest
  in the Operating Partnership                                                                              (82,869)

Unrealized gain on long-term investment                                                                       2,420

Net income                                            137,237                                               137,237

Distributions                                        (227,949)                                             (227,949)
                                                    ---------      --------                -------       ----------
Balance at December 31, 1997                         (263,308)      (13,230)                    --        1,556,862

Common stock issued to the public
 (2,957,335 shares)                                                                                          91,399

CPI Merger (Notes 4 and 11)
 SPG Preferred                                                                                              717,916
 SPG Common (53,078,564 shares)                                                                           1,758,738
 SRC Net Assets                                                                                              14,755

Preferred stock of Subsidiary                                                                              (339,061)

Common stock issued in connection
 with acquisitions (519,889 shares)                                                                          17,176

Stock incentive program (495,131 shares)                            (15,983)                                     --

Other common stock issued (81,111 shares)                                                                     2,182

Amortization of stock incentive                                       9,463                                   9,463

Transfer out of limited partners' interest
    in the Operating Partnerships                                                                          (308,922)

Distributions                                        (276,258)                                             (276,258)
                                                    ---------      --------                -------       ----------
Subtotal                                             (539,566)      (19,750)                    --        3,244,250
                                                    ---------      --------                -------       ----------
 Comprehensive Income:

Unrealized loss on long-term investment                                                                      (2,294)
Net income                                            167,253                                               167,253
                                                    ---------      --------                -------       ----------
 Total Comprehensive Income:                          167,253            --                     --          164,959
                                                    ---------      --------                -------       ----------

Balance at December 31, 1998                         (372,313)      (19,750)                    --        3,409,209

Preferred stock conversion (5,926,440 shares)                                                                    --

Common stock issued as dividend (153,890 shares)                                                              4,030

Preferred stock issued in acquisition                                                                        24,242

Stock incentive program (537,861 shares)                            (12,990)                                    645

Amortization of stock incentive                                      10,601                                  10,601

Shares purchased by subsidiary (310,955 shares)                                             (7,981)          (7,981)

Stock options exercised (82,988 shares)                                                                       2,138

Transfer out of limited partners' interest
  in the Operating Partnerships                                                                              (4,310)

Distributions                                        (383,323)                                             (383,323)
                                                    ---------      --------                -------       ----------
Subtotal                                             (755,636)      (22,139)                (7,981)       3,055,251
                                                    ---------      --------                -------       ----------
  Comprehensive Income:

Unrealized loss on long-term investment                                                                      (5,978)

Net income                                            204,385                                               204,385
                                                    ---------      --------                -------       ----------
 Total Comprehensive Income:                          204,385            --                     --          198,407
                                                    ---------      --------                -------       ----------
Balance at December 31, 1999                        $(551,251)     $(22,139)               $(7,981)      $3,253,658
                                                    =========      ========               ========       ==========
</TABLE>

       The accompanying notes are an integral part of these statements.

                                      16
<PAGE>

Statements of Cash Flows
 Simon Property Group, Inc. and SPG Realty Consultants, Inc. Combined

 (Dollars in thousands)
<TABLE>
<CAPTION>

                                                                             For the Year Ended December 31,
                                                                      ----------------------------------------------
                                                                          1999             1998            1997
                                                                      -------------    -------------   -------------
<S>                                                                    <C>              <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                           $  204,385       $  167,253      $  137,237
  Adjustments to reconcile net income to net cash provided
      by operating activities--
      Depreciation and amortization                                       394,004          278,812         208,539
      Extraordinary items                                                   6,705           (7,146)            (58)
      Loss (gain) on sales of assets, net                                   7,062            7,283             (20)
      Limited partners' interest in Operating Partnerships                 60,758           68,307          65,954
      Preferred dividends of Subsidiary                                    29,335            7,816              --
      Preferred distributions of the SPG Operating Partnership              2,917               --              --
      Straight-line rent                                                  (17,995)          (9,345)         (9,769)
      Minority interest                                                    10,719            7,335           5,270
      Equity in income of unconsolidated entities                         (55,855)         (28,554)        (19,176)
      Income tax benefit of SRC                                            (3,374)              --              --
  Changes in assets and liabilities--
      Tenant receivables and accrued revenue                              (36,960)         (13,205)        (23,284)
      Deferred costs and other assets                                     (23,090)          (7,846)        (30,203)
      Accounts payable, accrued expenses and other liabilities             48,445           58,705          36,417
                                                                      -------------    -------------   -------------
      Net cash provided by operating activities                           627,056          529,415         370,907
                                                                      -------------    -------------   -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Acquisitions                                                           (339,065)      (1,942,724)       (980,427)
  Capital expenditures                                                   (504,561)        (349,708)       (305,178)
  Cash from mergers, acquisitions and consolidation of
    joint ventures, net                                                    83,169           18,162          19,744
  Change in restricted cash                                                    --            7,686          (2,443)
  Net proceeds from sale of assets                                         58,703           46,087             599
  Investments in unconsolidated entities                                  (83,125)         (55,523)        (47,204)
  Distributions from unconsolidated entities                              221,707          195,557         144,862
  Investments in and advances to Management Company and affiliate         (46,704)         (21,569)        (18,357)
  Other investing activities                                               (3,000)              --         (55,400)
                                                                      -------------    -------------   -------------
      Net cash used in investing activities                              (612,876)      (2,102,032)     (1,243,804)
                                                                      -------------    -------------   -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from sales of common and preferred stock, net                    2,069          114,570         344,438
  Minority interest distributions, net                                    (13,925)         (19,694)           (219)
  Preferred dividends of Subsidiary                                       (29,335)          (7,816)             --
  Preferred distributions of the SPG Operating Partnership                 (2,913)              --              --
  Preferred dividends and distributions to shareholders                  (385,878)        (272,797)       (227,949)
  Distributions to limited partners                                      (129,941)        (136,551)       (122,442)
  Mortgage and other note proceeds, net of transaction costs            2,168,069        3,782,314       2,976,222
  Mortgage and other note principal payments                           (1,593,889)      (1,867,913)     (2,030,763)
  Other refinancing transaction                                                --               --         (21,000)
                                                                      -------------    -------------   -------------
      Net cash provided by financing activities                            14,257        1,592,113         918,287
                                                                      -------------    -------------   -------------
INCREASE IN CASH AND CASH EQUIVALENTS                                      28,437           19,496          45,390

CASH AND CASH EQUIVALENTS, beginning of period                            129,195          109,699          64,309
                                                                      -------------    -------------   -------------
CASH AND CASH EQUIVALENTS, end of period                               $  157,632       $  129,195      $  109,699
                                                                      =============    =============   =============

</TABLE>
       The accompanying notes are an integral part of these statements.

                                      17
<PAGE>

Balance Sheets

 Simon Property Group, Inc. Consolidated

(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
                                                                                                  December 31,     December 31,
                                                                                                      1999             1998
                                                                                                ---------------   ---------------
<S>                                                                                              <C>               <C>
ASSETS:
     Investment properties, at cost                                                              $  12,794,484     $  11,816,325
       Less -- accumulated depreciation                                                              1,097,629           710,012
                                                                                                ---------------   ---------------
                                                                                                    11,696,855        11,106,313
     Cash and cash equivalents                                                                         154,924           127,626
     Tenant receivables and accrued revenue, net                                                       288,506           217,798
     Notes and advances receivable from Management Company and affiliates                              162,082           115,378
     Mortgage note receivable from the SRC Operating Partnership  (Interest at 6%, due 2013)                --            20,565
     Note receivable from the SRC Operating Partnership (Interest at 8%, due 2009)                       9,848                --
     Investment in partnerships and joint ventures, at equity                                        1,512,671         1,303,251
     Investment in Management Company and affiliate                                                      6,833            10,037
     Other investment                                                                                   41,902            50,176
     Goodwill, net                                                                                      39,556            58,134
     Deferred costs and other assets, net                                                              250,210           227,713
     Minority interest, net                                                                             35,931            32,138
                                                                                                ---------------   ---------------
                                                                                                 $  14,199,318     $  13,269,129
                                                                                                ===============   ===============
LIABILITIES:
     Mortgages and other indebtedness                                                            $   8,768,841     $   7,972,381
     Note payable to the SRC Operating Partnership (Interest at 8%, due 2008)                               --            17,907
     Accounts payable and accrued expenses                                                             478,633           411,259
     Cash distributions and losses in partnerships and joint ventures, at equity                        32,995            29,139
     Other liabilities                                                                                 213,506            95,326
                                                                                                ---------------   ---------------
          Total liabilities                                                                          9,493,975         8,526,012
                                                                                                ---------------   ---------------
COMMITMENTS AND CONTINGENCIES (Note 13)

LIMITED PARTNERS' INTEREST IN THE SPG OPERATING PARTNERSHIP                                            978,316         1,009,646

LIMITED PARTNERS' PREFERRED INTEREST IN THE
    SPG OPERATING PARTNERSHIP                                                                          149,885                --

PREFERRED STOCK OF SUBSIDIARY                                                                          339,597           339,329

SHAREHOLDERS' EQUITY:

     All series of preferred stock (Note 11)                                                           542,838           717,916

     Common stock, $.0001 par value, 400,000,000 shares authorized, and 169,961,255
        and 163,571,031 issued and outstanding, respectively                                                17                16

     Class B common stock, $.0001 par value, 12,000,000 shares authorized, 3,200,000
       issued and outstanding                                                                                1                 1

      Class C common stock, $.0001 par value, 4,000 shares authorized, issued and outstanding               --                --

     Capital in excess of par value                                                                  3,283,566         3,068,458
     Accumulated deficit                                                                              (552,933)         (372,625)
     Unrealized gain (loss) on long-term investment                                                     (5,852)              126
     Unamortized restricted stock award                                                                (22,139)          (19,750)
     Less common stock held in treasury at cost, 310,955 and 0 shares, respectively                     (7,953)               --
                                                                                                ---------------   ---------------
          Total shareholders' equity                                                                 3,237,545         3,394,142
                                                                                                ---------------   ---------------
                                                                                                 $  14,199,318     $  13,269,129
                                                                                                ===============   ===============

</TABLE>
       The accompanying notes are an integral part of these statements.

                                      18
<PAGE>

Statements of Operations
 Simon Property Group, Inc. Consolidated

(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>

                                                                                 For the Year Ended December 31,
                                                                      ----------------------------------------------------
                                                                             1999              1998                1997
                                                                      --------------      -------------      -------------
<S>                                                                    <C>                 <C>                <C>
REVENUE:
  Minimum rent                                                         $  1,146,098        $   850,351        $   641,352
  Overage rent                                                               60,976             49,689             38,810
  Tenant reimbursements                                                     583,780            429,350            322,416
  Other income                                                              104,117             75,682             51,589
                                                                      --------------      -------------      -------------
    Total revenue                                                         1,894,971          1,405,072          1,054,167
                                                                      --------------      -------------      --------------
EXPENSES:
  Property operating                                                        294,347            226,426            176,846
  Depreciation and amortization                                             381,823            267,876            200,900
  Real estate taxes                                                         187,506            133,580             98,830
  Repairs and maintenance                                                    70,752             53,308             43,000
  Advertising and promotion                                                  65,843             50,754             32,891
  Provision for credit losses                                                 8,522              6,610              5,992
  Other                                                                      27,811             23,973             18,678
                                                                      --------------      -------------      -------------
    Total operating expenses                                              1,036,604            762,527            577,137
                                                                      --------------      -------------      -------------

OPERATING INCOME                                                            858,367            642,545            477,030

INTEREST EXPENSE                                                            579,848            420,282            287,823
                                                                      --------------      -------------      -------------

INCOME BEFORE MINORITY INTEREST                                             278,519            222,263            189,207

MINORITY INTEREST                                                           (10,719)            (7,335)            (5,270)
GAIN (LOSS) ON SALES OF ASSETS, NET                                          (1,942)            (7,283)                20
                                                                      --------------      -------------      -------------
INCOME BEFORE UNCONSOLIDATED ENTITIES                                       265,858            207,645            183,957

INCOME FROM UNCONSOLIDATED ENTITIES                                          49,641             28,145             19,176
                                                                      --------------      -------------      -------------
INCOME BEFORE UNUSUAL AND EXTRAORDINARY ITEMS                               315,499            235,790            203,133

UNUSUAL ITEM (Note 13)                                                      (12,000)                --                 --
EXTRAORDINARY ITEMS - DEBT RELATED TRANSACTIONS                              (6,705)             7,146                 58
                                                                      --------------      -------------      -------------
INCOME BEFORE ALLOCATION TO LIMITED PARTNERS                                296,794            242,936            203,191

LESS:
  LIMITED PARTNERS' INTEREST IN THE SPG OPERATING PARTNERSHIP                61,527             68,179             65,954
  PREFERRED DISTRIBUTIONS OF THE SPG OPERATING PARTNERSHIP                    2,917                 --                 --
  PREFERRED DIVIDENDS OF SUBSIDIARY                                          29,335              7,816                 --
                                                                      --------------      -------------      -------------

NET INCOME                                                                  203,015            166,941            137,237

PREFERRED DIVIDENDS                                                         (37,071)           (33,655)           (29,248)
                                                                      --------------      -------------      -------------

NET INCOME AVAILABLE TO COMMON SHAREHOLDERS                            $    165,944        $   133,286        $   107,989
                                                                      ==============      =============      =============

BASIC EARNINGS PER COMMON SHARE:
    Income before extraordinary items                                  $       0.99        $      1.01        $      1.08
    Extraordinary items                                                       (0.03)              0.04                 --
                                                                      --------------      -------------      -------------
    Net income                                                         $       0.96        $      1.05        $      1.08
                                                                      ==============      =============      =============

DILUTED EARNINGS PER COMMON SHARE:
    Income before extraordinary items                                  $       0.99        $      1.01        $      1.08
    Extraordinary items                                                       (0.03)              0.04                 --
                                                                      --------------      -------------      -------------
    Net income                                                         $       0.96        $      1.05        $      1.08
                                                                      ==============      =============      =============
</TABLE>

       The accompanying notes are an integral part of these statements.

                                      19
<PAGE>

Statements of Shareholders' Equity

Simon Property Group, Inc. Consolidated

(Dollars in thousands)
<TABLE>
<CAPTION>
                                                                                     Unrealized Gain on
                                                                      All Classes of       Long-Term     Capital in Excess
                                                 Preferred Stock        Common Stock      Investment       of Par Value
                                                 ---------------      -------------- ------------------  -----------------
<S>                                            <C>                    <C>             <C>                 <C>
Balance at December 31, 1996                              292,912                 10                  -          1,189,919

Common stock issued to the public
 (5,858,887 shares)                                                                1                               190,026

Common stock issued in connection
 with acquisitions (2,193,037 shares)                                                                               70,000

Stock options exercised (369,902 shares)                                                                             8,625

Other common stock issued
 (82,484 shares)                                                                                                     2,268

Stock incentive program (448,753 shares)                                                                            14,016

Amortization of stock incentive

Series C Preferred stock issued
  (3,000,000 shares)                                      146,072

Conversion of Series A Preferred stock
 into 3,809,523 shares of common stock                    (99,923)                                                  99,923

Transfer out of limited partners' interest
    in the Operating Partnership                                                                                   (82,869)

Unrealized gain on long-term investment                                                           2,420

Net income

Distributions
                                                      -----------        -----------        -----------        -----------
Balance at December 31, 1997                              339,061                 11              2,420          1,491,908

Common stock issued to the public
 (2,957,335 shares)                                                                1                                91,398

CPI Merger (Notes 4 and 11)
 SPG Preferred                                            717,916
 SPG Common (53,078,564 shares)                                                    5                             1,758,733

Preferred stock of Subsidiary                            (339,061)

Common stock issued in connection
 with acquisitions (519,889 shares)                                                                                 17,176

Stock incentive program (495,131 shares)                                                                            15,983

Other common stock issued
 (81,111 shares)                                                                                                     2,182

Amortization of stock incentive

Transfer out of limited partners' interest
    in the SPG Operating Partnership                                                                              (308,922)

Distributions
                                                      -----------        -----------        -----------        -----------
Subtotal                                                  717,916                 17              2,420          3,068,458
                                                      -----------        -----------        -----------        -----------
 Comprehensive Income:

Unrealized loss on long-term investment                                                          (2,294)

Net income
                                                      -----------        -----------        -----------        -----------
 Total Comprehensive Income:                                    -                  -             (2,294)                 -
                                                      -----------        -----------        -----------        -----------
Balance at December 31, 1998                              717,916                 17                126          3,068,458

Preferred stock conversion (5,926,440 shares)            (199,320)                 1                               198,786

Common stock issued as dividend (153,890 shares)                                                                     4,016

Preferred stock issued in acquisition                      24,242

Stock incentive program (537,861 shares)                                                                            13,587

Amortization of stock incentive

Shares purchased by subsidiary (310,955 shares)

Stock options exercised (82,988 shares)                                                                              2,131

Transfer out of limited partners' interest
    in the SPG Operating Partnership                                                                                (3,412)

Distributions
                                                      -----------        -----------        -----------        -----------
Subtotal                                                  542,838                 18                126          3,283,566
                                                      -----------        -----------        -----------        -----------
 Comprehensive Income:

Unrealized loss on long-term investment                                                          (5,978)

Net income
                                                      -----------        -----------        -----------        -----------
 Total Comprehensive Income:                                    -                  -              5,978                  -
                                                      -----------        -----------        -----------        -----------
Balance at December 31, 1999                            $ 542,838                $18            $(5,852)        $3,283,566
                                                      ===========        ===========        ===========        ===========
</TABLE>
<TABLE>
<CAPTION>
                                                                      Unamortized       Common Stock             Total
                                                      Accumulated   Restricted Stock       Held in            Shareholders'
                                                          Deficit        Award            Treasury               Equity
                                                      -----------   ----------------    ------------         -------------
<S>                                                   <C>           <C>                 <C>                   <C>

Balance at December 31, 1996                             (172,596)            (5,354)              -             1,304,891

Common stock issued to the public                                                                                  190,027
 (5,858,887 shares)

Common stock issued in connection
 with acquisitions (2,193,037 shares)                                                                               70,000

Stock options exercised (369,902 shares)                                                                             8,625

Other common stock issued
 (82,484 shares)                                                                                                     2,268

Stock incentive program (448,753 shares)                                     (13,262)                                  754

Amortization of stock incentive                                                5,386                                 5,386

Series C Preferred stock issued
  (3,000,000 shares)                                                                                               146,072

Conversion of Series A Preferred stock
 into 3,809,523 shares of common stock                                                                                   -

Transfer out of limited partners' interest
    in the Operating Partnership                                                                                   (82,869)

Unrealized gain on long-term investment                                                                              2,420

Net income                                                137,237                                                  137,237

Distributions                                            (227,949)                                                (227,949)
                                                      -----------        -----------        -----------        -----------
Balance at December 31, 1997                             (263,308)           (13,230)              -             1,556,862

Common stock issued to the public
 (2,957,335 shares)                                                                                                 91,399

CPI Merger (Notes 4 and 11)
 SPG Preferred                                                                                                     717,916
 SPG Common (53,078,564 shares)                                                                                  1,758,738

Preferred stock of Subsidiary                                                                                     (339,061)

Common stock issued in connection
 with acquisitions (519,889 shares)                                                                                 17,176

Stock incentive program (495,131 shares)                                     (15,983)                                    -

Other common stock issued
 (81,111 shares)                                                                                                     2,182

Amortization of stock incentive                                                9,463                                 9,463

Transfer out of limited partners' interest
    in the SPG Operating Partnership                                                                              (308,922)

Distributions                                            (276,258)                                                (276,258)
                                                      -----------        -----------        -----------        -----------
Subtotal                                                 (539,566)           (19,750)              -             3,229,495
                                                      -----------        -----------        -----------        -----------
 Comprehensive Income:

Unrealized loss on long-term investment                                                                             (2,294)

Net income                                                166,941                                                  166,941
                                                      -----------        -----------        -----------        -----------
 Total Comprehensive Income:                              166,941                  -               -               164,647
                                                      -----------        -----------        -----------        -----------
Balance at December 31, 1998                             (372,625)           (19,750)              -             3,394,142

Preferred stock conversion (5,926,440 shares)                                                                         (533)

Common stock issued as dividend (153,890 shares)                                                                     4,016

Preferred stock issued in acquisition                                                                               24,242

Stock incentive program (537,861 shares)                                     (12,990)                                  597

Amortization of stock incentive                                               10,601                                10,601

Shares purchased by subsidiary (310,955 shares)                                                  (7,953)            (7,953)

Stock options exercised (82,988 shares)                                                                              2,131

Transfer out of limited partners' interest
    in the SPG Operating Partnership                                                                                (3,412)

Distributions                                            (383,323)                                                (383,323)
                                                      -----------        -----------        -----------        -----------
Subtotal                                                 (755,948)           (22,139)            (7,953)         3,040,508
                                                      -----------        -----------        -----------        -----------
 Comprehensive Income:

Unrealized loss on long-term investment                                                                             (5,978)

Net income                                                203,015                                                  203,015
                                                      -----------        -----------        -----------        -----------
 Total Comprehensive Income:                              203,015                  -                  -            197,037
                                                      -----------        -----------        -----------        -----------
Balance at December 31, 1999                            $(552,933)         $(22,139)            $(7,953)        $3,237,545
                                                      ===========        ===========        ===========         ==========
</TABLE>

       The accompanying notes are an integral part of these statements.

                                      20
<PAGE>


Statements of Cash Flows

Simon Property Group, Inc. Consolidated

(Dollars in thousands)

<TABLE>
<CAPTION>

                                                                          For the Year Ended December 31,
                                                                     -----------------------------------------
                                                                        1999           1998           1997
                                                                     ----------     ----------     -----------
<S>                                                                  <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                         $  203,015     $  166,941     $   137,237
    Adjustments to reconcile net income to net cash provided
      by operating activities--
        Depreciation and amortization                                   393,650        278,246         208,539
        Extraordinary items                                               6,705         (7,146)            (58)
        Loss (gain) on sales of assets, net                               1,942          7,283             (20)
        Limited partners' interest in Operating Partnership              61,527         68,179          65,954
        Preferred dividends of Subsidiary                                29,335          7,816              --
        Preferred distributions of the SPG Operating Partnership          2,917             --              --
        Straight-line rent                                              (17,998)        (9,334)         (9,769)
        Minority interest                                                10,719          7,335           5,270
        Equity in income of unconsolidated entities                     (49,641)       (28,145)        (19,176)
    Changes in assets and liabilities--
        Tenant receivables and accrued revenue                          (36,994)       (13,438)        (23,284)
        Deferred costs and other assets                                 (23,524)        (7,289)        (30,203)
        Accounts payable, accrued expenses and other liabilities         48,123         76,915          36,417
                                                                     ----------     ----------     -----------
        Net cash provided by operating activities                       629,776        547,363         370,907
                                                                     ----------     ----------     -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
    Acquisitions                                                       (339,065)    (1,942,724)       (980,427)
    Capital expenditures                                               (491,357)      (345,619)       (305,178)
    Cash from mergers, acquisitions and consolidation of
      joint ventures, net                                                83,169         16,616          19,744
    Change in restricted cash                                                --          7,686          (2,443)
    Proceeds from sale of assets                                         46,750         46,087             599
    Investments in unconsolidated entities                              (83,124)       (55,523)        (47,204)
    Distributions from unconsolidated entities                          221,509        195,497         144,862
    Investments in and advances to Management Company and affiliate     (46,704)       (21,569)        (18,357)
    Mortgage loan payoff from the SRC Operating Partnership              20,565             --              --
    Loan to the SRC Operating Partnership                                (9,848)            --              --
    Other investing activities                                               --             --         (55,400)
                                                                     ----------     ----------     -----------
        Net cash used in investing activities                          (598,105)    (2,099,549)     (1,243,804)
                                                                     ----------     ----------     -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from sales of common and preferred stock, net                1,463         92,570         344,438
    Minority interest distributions, net                                (14,923)       (19,694)           (219)
    Preferred dividends of Subsidiary                                   (29,335)        (7,816)             --
    Preferred distributions of the SPG Operating Partnership             (2,913)            --              --
    Preferred dividends and distributions to shareholders              (385,878)      (272,797)       (227,949)
    Distributions to limited partners                                  (129,941)      (136,551)       (122,442)
    Note payoff to the SRC Operating Partnership                        (17,907)            --              --
    Mortgage and other note proceeds, net of transaction costs        2,168,069      3,782,314       2,976,222
    Mortgage and other note principal payments                       (1,593,008)    (1,867,913)     (2,030,763)
    Other refinancing transaction                                           --              --         (21,000)
                                                                     ----------     ----------     -----------
        Net cash provided by (used in) financing activities              (4,373)     1,570,113         918,287
                                                                     ----------     ----------     -----------
INCREASE IN CASH AND CASH EQUIVALENTS                                    27,298         17,927          45,390

CASH AND CASH EQUIVALENTS, beginning of period                          127,626        109,699          64,309
                                                                     ----------     ----------     -----------
CASH AND CASH EQUIVALENTS, end of period                             $  154,924     $  127,626     $   109,699
                                                                     ==========     ==========     ===========
</TABLE>

       The accompanying notes are an integral part of these statements.

                                      21
<PAGE>

Balance Sheets

SPG Realty Consultants, Inc. Consolidated

(Dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                                             December 31,
                                                                                         --------------------
                                                                                           1999        1998
                                                                                         --------    --------
<S>                                                                                      <C>         <C>
ASSETS:
     Investment properties, at cost                                                      $  7,568    $ 33,689
       Less -- accumulated depreciation                                                     1,252      12,359
                                                                                         --------    --------
                                                                                            6,316      21,330
     Cash and cash equivalents                                                              2,708       1,569
     Note receivable from the SPG Operating Partnership (Interest at 8%, due 2008)             --      17,907
     Accounts receivable                                                                      646         783
     Investments in joint ventures, at equity                                               9,353       3,502
     Other investment                                                                       3,000          --
     Other (including $0 and $385 from related parties)                                    13,006       1,510
                                                                                         --------    --------
                                                                                         $ 35,029    $ 46,601
                                                                                         ========    ========
LIABILITIES:
     Mortgages and other indebtedness                                                    $    110    $    991
     Mortgage payable to the SPG Operating Partnership (Interest at 6%, due 2013)              --      20,565
     Note payable to the SPG Operating Partnership (Interest at 8%, due 2009)               9,848          --
     Other liabilities (including $0 and $289 to the SPG Operating Partnership)             1,811       3,990
     Minority interest                                                                        998          --
                                                                                         --------    --------
          Total liabilities                                                                12,767      25,546
                                                                                         --------    --------
COMMITMENTS AND CONTINGENCIES (Note 13)

LIMITED PARTNERS' INTEREST IN THE SRC OPERATING PARTNERSHIP                                 6,149       5,988

SHAREHOLDERS' EQUITY:

     Common stock, $.0001 par value, 7,500,000 shares authorized, 1,731,653
       and 1,667,750 issued and outstanding, respectively                                      --          --

     Capital in excess of par value                                                        29,565      29,861
     Accumulated deficit                                                                  (13,424)    (14,794)
     Less common stock held in treasury at cost, 3,110 and 0 shares, respectively             (28)         --
                                                                                         --------    --------
          Total shareholders' equity                                                       16,113      15,067
                                                                                         --------    --------
                                                                                         $ 35,029    $ 46,601
                                                                                         ========    ========
</TABLE>

       The accompanying notes are an integral part of these statements.

                                      22
<PAGE>

Statements of Operations
 SPG Realty Consultants, Inc. Consolidated

(In thousands, except per share amounts)
<TABLE>
<CAPTION>
                                                                                      For the Year Ended December 31,
                                                                             ------------------------------------------------
                                                                                1999               1998              1997
                                                                             -----------        -----------       -----------
<S>                                                                           <C>                 <C>               <C>
REVENUE:
  Minimum rent (including $427, $1,525 and $1,227 from SPG/CPI)                $   1,052          $   2,822         $   3,108
  Tenant reimbursements (including $212, $725 and $679 from SPG/CPI)                 210                916               968
  Management fee income (including $0, $0 and $1,710 from SPG/CPI)                    --                 --             1,732
  Other income (none from SPG/CPI)                                                 1,015                844               406
                                                                              ----------         ----------       -----------
    Total revenue                                                                  2,277              4,582             6,214
                                                                              -----------        ----------       -----------
EXPENSES:
  Property operating (including $0, $113 and $0 to SPG/CPI)                          733              2,317             2,501
  Depreciation and amortization                                                      353              1,305               889
  Management fees (including $0, $0 and $1,400 to SPG/CPI)                            --                 --             1,576
  Administrative and other (including $131, $450 and $700 to SPG/CPI)              1,271                848               845
  Merger-related costs                                                                --              4,093                --
                                                                             -----------         ----------       -----------
    Total operating expenses                                                       2,357              8,563             5,811
                                                                             -----------         ----------       -----------
OPERATING INCOME (LOSS)                                                              (80)            (3,981)              403

INTEREST EXPENSE (including $3,720, $1,234 and $1,234 to SPG/CPI)                  3,787              1,279             1,365
LOSS ON SALE OF ASSETS, NET                                                       (5,120)                --                --
GAIN ON SALE OF PARTNERSHIP INTERESTS TO CPI                                          --                 --             1,259
INCOME TAX BENEFIT (EXPENSE)                                                       3,374                190              (670)
                                                                             -----------         ----------       -----------
LOSS BEFORE UNCONSOLIDATED ENTITIES                                               (5,613)            (5,070)             (373)

INCOME FROM UNCONSOLIDATED ENTITIES                                                6,214                767             1,550
                                                                             -----------         ----------       -----------
INCOME (LOSS) BEFORE ALLOCATION TO LIMITED PARTNERS                                  601             (4,303)            1,177

LESS--LIMITED PARTNERS' INTEREST IN
  THE SRC OPERATING PARTNERSHIP                                                     (769)               128                --
                                                                             -----------         ----------       -----------

NET INCOME (LOSS)                                                              $   1,370          $  (4,431)        $   1,177

NET INCOME (LOSS) DERIVED FROM:
  Pre-CPI Merger period (Note 4)                                               $      --          $  (4,743)        $   1,177
  Post-CPI Merger period (Note 4)                                                  1,370                312                --
                                                                             -----------         ----------       -----------
                                                                               $   1,370          $  (4,431)        $   1,177
                                                                             ===========         ==========       ===========

BASIC AND DILUTED EARNINGS PER COMMON SHARE:
    Income (loss) before extraordinary items                                   $    0.80          $   (5.17)        $    2.07
    Extraordinary items                                                               --                 --                --
                                                                             -----------         ----------       -----------
    Net income (loss)                                                          $    0.80          $   (5.17)        $    2.07
                                                                             ============        ==========       ===========

BASIC WEIGHTED AVERAGE SHARES OUTSTANDING                                          1,721                857               569
                                                                             ===========         ==========       ===========
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING                                        1,722                857               569
                                                                             ===========         ==========       ===========
</TABLE>
       The accompanying notes are an integral part of these statements.

                                      23
<PAGE>

 Statements of Shareholders' Equity
 SPG Realty Consultants, Inc. Consolidated

 (Dollars in thousands)
<TABLE>
<CAPTION>
                                                                                                      Common Stock         Total
                                                                 Capital in Excess    Accumulated       Held in        Shareholders'
                                                  Common Stock     of Par Value         Deficit         Treasury          Equity
                                                  ------------   -----------------    ------------    ------------     ------------
<S>                                                <C>           <C>                   <C>             <C>             <C>
Balance at December 31, 1996                       $    --            $  14,425         $  (9,386)      $    --         $  5,039

Acquisition and retirement of Common stock              --                 (805)                                            (805)

Net income                                                                                  1,177                          1,177

Distributions                                                                              (1,095)                        (1,095)
                                                  ------------       ------------     ------------    ------------    ------------
Balance at December 31, 1997                            --               13,620            (9,304)           --            4,316

Common stock issued (1,109,019 shares)                                   14,102                                           14,102

Adjustment of limited partners' interest
 in the SRC Operating Partnership                                         2,139                                            2,139

Distributions                                           --                   --            (1,059)                        (1,059)
                                                  ------------       ------------     ------------    ------------    ------------
Subtotal                                                --               29,861           (10,363)           --           19,498
                                                  ------------       ------------     ------------    ------------    ------------
 Comprehensive Income:

Net loss                                                                                   (4,431)                        (4,431)
                                                  ------------       ------------     ------------    ------------    ------------
 Total Comprehensive Income:                            --                   --            (4,431)           --           (4,431)
                                                  ------------       ------------     ------------    ------------    ------------
Balance at December 31, 1998                            --                29,861          (14,794)           --           15,067

Common stock issued (67,013 shares)                     --                   602                                             602

Shares purchased by subsidiary (3,110 shares)                                                               (28)             (28)

Adjustment of limited partners' interest
 in the SRC Operating Partnership                                           (898)                                           (898)
                                                  ------------       ------------     ------------    ------------    ------------
Subtotal                                                --                29,565          (14,794)          (28)          14,743
                                                  ------------       ------------     ------------    ------------    ------------
 Comprehensive Income:

Net income                                                                                  1,370                          1,370
                                                  ------------       ------------     ------------    ------------    ------------
 Total Comprehensive Income:                            --                   --             1,370            --            1,370
                                                  ------------       ------------     ------------    ------------    ------------
Balance at December 31, 1999                       $    --             $  29,565       $  (13,424)      $   (28)       $  16,113
                                                  ============       ============     ============    ============    ============
</TABLE>
       The accompanying notes are an integral part of these statements.

                                      24
<PAGE>

Statements of Cash Flows

SPG Realty Consultants, Inc. Consolidated

(Dollars in thousands)

<TABLE>
<CAPTION>
                                                                                    For the Year Ended December 31,
                                                                               --------------------------------------
                                                                                 1999           1998           1997
                                                                               --------       --------       --------
<S>                                                                            <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)                                                            $  1,370       $ (4,431)      $  1,177
  Adjustments to reconcile net income (loss) to net cash
    provided by (used in) operating activities--
      Depreciation and amortization                                                 353          1,305            889
      (Gain) loss on sales of assets, net                                         5,120             --         (1.259)
      Limited partners' interest in SRC Operating Partnership                      (769)           128             --
      Straight-line rent                                                              2            (12)            --
      Equity in income of unconsolidated entities                                (6,214)          (767)        (1,550)
      Income tax (benefit) expense                                               (3,374)          (190)           670
  Changes in assets and liabilities--
      Accounts receivable and other assets (including $11, $100 and
        $125 from related parties)                                                  468           (103)          (336)
      Other liabilities (including $104, $(366) and $305 to SPG/CPI)                327         (1,526)           902
                                                                               --------       --------       --------
      Net cash provided by (used in) operating activities                        (2,717)        (5,596)           493
                                                                               --------       --------       --------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures                                                          (13,204)          (128)          (428)
  Net proceeds from sales of assets (Including $2,363
    from CPI in 1997)                                                            11,953             --          2,363
  Investments in unconsolidated entities                                             --         (3,921)       (16,732)
  Distributions from unconsolidated entities                                        198         19,193          1,827
  Note receivable from the SPG Operating Partnership                                 --        (17,907)            --
  Payoff of note from the SPG Operating Partnership                              17,907             --             --
  Other investment                                                               (3,000)            --             --
                                                                               --------       --------       --------
      Net cash provided by (used in) investing activities                        13,854         (2,763)       (12,970)
                                                                               --------       --------       --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from sales of common stock, net                                          602         14,102             --
  Contributions from limited partners                                                --          8,000             --
  Minority interst contributions                                                    998             --             --
  Acquisition and retirement of common stock                                         --             --           (805)
  Distributions to shareholders                                                      --         (1,059)        (1,095)
  Mortgage and other note proceeds, net of transaction costs
    (Including $9,848 from the SPG Operating Partnership in 1999)                 9,848          3,485         13,966
  Mortgage and other note principal payments
    (Including $21,446 to the SPG Operating Partnership in 1999)                (21,446)       (18,747)          (239)
                                                                               --------       --------       --------
       Net cash provided by (used in) financing activities                       (9,998)         5,781         11,827
                                                                               --------       --------       --------

CHANGE IN CASH AND CASH EQUIVALENTS                                               1,139         (2,578)          (650)

CASH AND CASH EQUIVALENTS, beginning of period                                    1,569          4,147          4,797
                                                                               --------       --------       --------
CASH AND CASH EQUIVALENTS, end of period                                       $  2,708       $  1,569       $  4,147
                                                                               ========       ========       ========
</TABLE>

       The accompanying notes are an integral part of these statements.

                                      25
<PAGE>

                        SIMON PROPERTY GROUP, INC. AND
                         SPG REALTY CONSULTANTS, INC.

                         NOTES TO FINANCIAL STATEMENTS

   (Dollars in thousands, except per share amounts and where indicated as in
                                   billions)


1. Organization

     Simon Property Group, Inc. ("SPG"), a Delaware corporation, is a self-
administered and self-managed real estate investment trust ("REIT") under the
Internal Revenue Code of 1986, as amended (the "Code"). Each share of common
stock of SPG is paired ("Paired Shares") with a beneficial interest in 1/100th
of a share of common stock of SPG Realty Consultants, Inc., also a Delaware
corporation ("SRC" and together with SPG, the "Companies").

     Simon Property Group, L.P. (the "SPG Operating Partnership"), formerly
known as Simon DeBartolo Group, L.P. ("SDG, LP"), is the primary subsidiary of
SPG. Units of ownership interest ("Units") in the SPG Operating Partnership are
paired with a Unit in SPG Realty Consultants, L.P. ("Paired Units") (the "SRC
Operating Partnership" and together with the SPG Operating Partnership, the
"Operating Partnerships"). The SRC Operating Partnership is the primary
subsidiary of SRC. The Companies together with the Operating Partnerships are
hereafter referred to as "Simon Group".

     SPG, primarily through the SPG Operating Partnership, is engaged in the
ownership, operation, management, leasing, acquisition, expansion and
development of real estate properties, primarily regional malls and community
shopping centers. As of December 31, 1999, SPG and the SPG Operating Partnership
owned or held an interest in 259 income-producing properties, which consisted of
168 regional malls, 78 community shopping centers, four specialty retail
centers, five office and mixed-use properties and four value-oriented super-
regional malls in 36 states (the "Properties") and five additional retail real
estate properties operating in Europe. SPG and the SPG Operating Partnership
also owned an interest in two properties currently under construction and 11
parcels of land held for future development, which together with the Properties
are hereafter referred to as the "Portfolio Properties". At December 31, 1999
and 1998, the Companies' direct and indirect ownership interests in the
Operating Partnerships were 72.4% and 71.6%, respectively. The SPG Operating
Partnership also holds substantially all of the economic interest in M.S.
Management Associates, Inc. (the "Management Company"). See Note 8 for a
description of the activities of the Management Company.

     SRC, primarily through the SRC Operating Partnership, engages primarily in
activities that capitalize on the resources, customer base and operating
activities of SPG, which could not be engaged in by SPG without potentially
impacting its status as a REIT. These activities include a program launched in
1999 designed to take advantage of new retail opportunities of the digital age.
Elements of the strategy include digitizing the existing assets of the
Properties by implementing internet web sites for each of the Properties,
creating products that leverage the digitalization of consumers and Simon
merchants through an enhanced broadband network called TenantConnect.net and
incubating concepts that leverage the physical and virtual worlds through a
subsidiary venture creation subsidiary called clixnmortar.com. The SRC Operating
Partnership's investment in the program is approximately $12,700, which is
included in other assets in SRC's balance sheet as of December 31, 1999.
Minority interest on the SRC balance sheet as of December 31, 1999 represents an
8.3% outside ownership interest in clixnmortar.com.

     SRC has noncontrolling interests in two joint ventures which each own land
held for sale, which are located adjacent to Properties. SRC also has an 18.5%
ownership interest in piiq.com, an aggregator of internet retailers. This $3,000
investment is accounted for on the cost basis of accounting and is included in
other investment in SRC's December 31, 1999 balance sheet. In addition,
effective January 1, 2000, SRC formed Simon Brand Ventures, LLC, to continue and
expand upon the mall marketing initiatives program established in 1997 by Simon
Group to take advantage of Simon Group's size and tenant relationships,
primarily through strategic corporate alliances.

     Simon Group is subject to risks incidental to the ownership and operation
of commercial real estate. These include, among others, the risks normally
associated with changes in the general economic climate, trends in the retail
industry, creditworthiness of tenants, competition for tenants and customers,
changes in tax laws, interest rate levels, the availability of financing, and
potential liability under environmental and other laws. Like most retail
properties, Simon Group's regional malls and community shopping centers rely
heavily upon anchor tenants. As of December 31, 1999, 337 of the approximately

                                      26
<PAGE>

981 anchor stores in the Properties were occupied by three retailers. An
affiliate of one of these retailers is a limited partner in the Operating
Partnerships.

2. Basis of Presentation

     The accompanying combined financial statements include SPG, SRC and their
subsidiaries. The accompanying consolidated financial statements of SPG and SRC
include SPG and its subsidiaries and SRC and its subsidiaries, respectively. All
significant intercompany amounts have been eliminated. SPG's financial
statements and the combined financial statements reflect the CPI Merger (see
Note 4) as of the close of business on September 24, 1998. Operating results
prior to the completion of the CPI Merger represent the operating results of
Simon DeBartolo Group, Inc. and its subsidiaries ("SDG"), the predecessor to SPG
for financial reporting purposes. Accordingly, the term Simon Group, prior to
the CPI Merger, refers to SDG and the SPG Operating Partnership. The separate
statements of SRC include the historical results of Corporate Realty
Consultants, Inc. ("CRC"), the predecessor to SRC, for all periods prior to the
CPI Merger. SRC, unlike CPI (see Note 4), was not subject to purchase accounting
treatment.

     The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles, which requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and revenues and expenses during the reported period.
Actual results could differ from these estimates.

     Properties which are wholly-owned or owned less than 100% and are
controlled by Simon Group are accounted for using the consolidated method of
accounting. Control is demonstrated by the ability of the general partner to
manage day-to-day operations, refinance debt and sell the assets of the
partnership without the consent of the limited partner and the inability of the
limited partner to replace the general partner. The deficit minority interest
balance in the accompanying balance sheets represents outside partners'
interests in the net equity of certain Properties. Deficit minority interests
were recorded when a partnership agreement provided for the settlement of
deficit capital accounts before distributing the proceeds from the sale of
partnership assets and/or from the intent (legal or otherwise) and ability of
the partner to fund additional capital contributions. Investments in
partnerships and joint ventures which represent noncontrolling ownership
interests ("Joint Venture Properties") and the investment in the Management
Company (see Note 8) are accounted for using the equity method of accounting.
These investments are recorded initially at cost and subsequently adjusted for
net equity in income (loss), which is allocated in accordance with the
provisions of the applicable partnership or joint venture agreement, and cash
contributions and distributions. The allocation provisions in the partnership or
joint venture agreements are not always consistent with the ownership interests
held by each general or limited partner or joint venturer, primarily due to
partner preferences.

     Net operating results of the Operating Partnerships are allocated after
preferred distributions (see Note 11), based on their respective partners'
ownership interests. The Companies' weighted average direct and indirect
ownership interest in the Operating Partnerships during 1999, 1998 and 1997 were
72.3%, 66.2% and 62.1%, respectively.

3. NED Acquisition

     During 1999, Simon Group acquired ownership interests in 14 regional malls
from New England Development Company (the "NED Acquisition"). Simon Group
acquired one of the Properties directly and formed a joint venture with three
partners ("Mayflower"), of which Simon Group owns 49.1%, to acquire interests in
the remaining Properties. The total cost of the NED Acquisition is approximately
$1.8 billion, of which Simon Group's share is approximately $894 million. Simon
Group assumed management responsibilities for the portfolio, which includes
approximately 10.7 million square feet of GLA. Simon Group's share of the cost
of the NED Acquisition included the assumption of approximately $530,000 of
mortgage indebtedness; $177,050 in cash; the issuance of 1,269,446 Paired Units
valued at approximately $36,400; the issuance of 2,584,227 7% Convertible
Preferred Units in the SPG Operating Partnership valued at approximately
$72,800; and 2,584,227 8% Redeemable Preferred Units in the SPG Operating
Partnership valued at approximately $78,000. Simon Group's share of the cash
portion of the purchase price was financed primarily using the Credit Facility
(See Note 9).

4. CPI Merger

     For financial reporting purposes, as of the close of business on
September 24, 1998, the CPI Merger was consummated pursuant to the Agreement and
Plan of Merger dated February 18, 1998, among Simon DeBartolo Group, Inc.,
Corporate Property Investors, Inc. ("CPI"), and Corporate Realty Consultants,
Inc. The CPI Merger included the addition of

                                      27
<PAGE>

23 regional malls, one community center, two office buildings and one regional
mall and one community center under construction.

     As part of the merger consideration, immediately prior to the consummation
of the CPI Merger, the holders of CPI common stock were paid a merger dividend
consisting of (i) $90 in cash, (ii) 1.0818 additional shares of CPI common stock
and (iii) 0.19 shares of 6.50% Series B convertible preferred stock of CPI per
share of CPI common stock. Immediately prior to the CPI Merger, there were
25,496,476 shares of CPI common stock outstanding. The cash portion of the
merger consideration was financed with borrowings of $1.4 billion on the Merger
Facility and $237,000 on the Credit Facility (See Note 9). The remaining merger
consideration was liabilities assumed of approximately $2.3 billion. The
aggregate value associated with the completion of the CPI Merger was
approximately $5.9 billion, including transaction costs and liabilities assumed,
in accordance with the purchase method of accounting. The value of the
consideration paid by SDG has been allocated to the estimated fair value of the
CPI assets acquired and liabilities assumed and resulted in goodwill of $41,021,
as adjusted. Goodwill is amortized over the estimated life of the properties of
35 years.

     In connection with the CPI Merger, CPI was renamed "Simon Property Group,
Inc." CPI's paired-share affiliate, Corporate Realty Consultants, Inc., was
renamed "SPG Realty Consultants, Inc." In addition SDG and SDG, LP were renamed
"SPG Properties, Inc.", and "Simon Property Group, L.P.", respectively.

     Upon completion of the CPI Merger, SPG transferred substantially all of the
CPI assets acquired (other than one regional mall, Ocean County Mall, and
certain net leased properties valued at approximately $153,100) to the SPG
Operating Partnership or one or more subsidiaries of the SPG Operating
Partnership in exchange for 47,790,550 Units and 5,053,580 preferred Units in
the SPG Operating Partnership. The preferred Units carry the same rights and
equal the number of preferred shares issued and outstanding as a direct result
of the CPI Merger. Likewise, the net assets of SRC, with a carrying value of
approximately $14,755, were transferred to the SRC Operating Partnership in
exchange for Units.

     SDG, LP contributed $14,000 cash to CRC and $8,000 cash to the SRC
Operating Partnership on behalf of the SDG common stockholders and the limited
partners of SDG, LP to obtain the beneficial interests in common stock of CRC,
which were paired with the shares of common stock issued by SPG, and to obtain
Units in the SRC Operating Partnership so that the limited partners of the SPG
Operating Partnership would hold the same proportionate interest in the SRC
Operating Partnership that they hold in the SPG Operating Partnership. The cash
contributed to CRC and the SRC Operating Partnership in exchange for an
ownership interest therein have been appropriately accounted for as capital
infusion or equity transactions. The assets and liabilities of CRC are reflected
at historical cost.

5. Other Real Estate Acquisitions, Disposals and Developments

          Acquisitions

     During 1999, in addition to the NED Acquisition, Simon Group acquired the
remaining interests in four Properties, and a noncontrolling 27.5% ownership
interest in the 2.8 million square-foot Mall of America for a combined price of
approximately $317,850, including the assumption of $134,300 of mortgage
indebtedness, 1,000,000 shares of 8% Redeemable Preferred Stock in SPG issued at
$24,242, and the remainder in cash, financed primarily through the Credit
Facility and working capital. Simon Group is entitled to 50% of the economic
benefits of Mall of America, due to a preference.

     On February 27, 1998, Simon Group acquired a noncontrolling 50% joint
venture interest in a portfolio of twelve regional malls and two community
centers (the "IBM Properties") comprising approximately 10.7 million square feet
of GLA. Simon Group's $487,250 share of the purchase price included the
assumption of indebtedness of $242,500. Simon Group also assumed leasing and
management responsibilities for six of the regional malls and one community
center. Simon Group funded its share of the cash portion of the purchase price
using borrowings from an interim $300,000 unsecured revolving credit facility,
which was subsequently retired using borrowings from the Credit Facility.

     During 1998, in addition to the CPI Merger and the acquisition of the IBM
Properties, Simon Group acquired 100% of one Property, a 90% interest in another
Property and additional interests in a total of six Properties for approximately
$199,200, including the assumption of $62,100 of indebtedness and 2,864,088
Units valued at approximately $93,500, with the remainder in cash financed
primarily through the Credit Facility and working capital. These transactions
resulted in the addition of approximately 1.1 million square feet of GLA to the
portfolio.

                                      28
<PAGE>

     During 1997, Simon Group completed its cash tender offer for all of the
outstanding shares of beneficial interests of The Retail Property Trust ("RPT"),
a private REIT and the acquisition of RPT's operating partnership, Shopping
Center Associates ("SCA"), which owned or had interests in twelve regional malls
and one community center (the "SCA Properties"). In a series of subsequent
transactions, Simon Group acquired the remaining ownership interest in three of
the SCA Properties and sold its interest in four of the SCA Properties. The
Property sales, which generated net cash proceeds of $43,050, were accounted for
as an adjustment to the allocation of the purchase price. At the completion of
these transactions (the "SCA Acquisition"), Simon Group owns 100% of eight of
the nine SCA Properties, and a noncontrolling 50% ownership interest in the
remaining Property. The total cost for the SCA Acquisition of approximately $1.3
billion included shares of common stock of SPG valued at approximately $50,000,
Units in the SPG Operating Partnership valued at approximately $25,300, the
assumption of $398,500 of consolidated indebtedness. Simon Group's pro rata
share of joint venture indebtedness of $76,750, with the remainder comprised
primarily of cash financed using Simon Group's Credit Facility. On September 15,
1998, RPT transferred its ownership interest in SCA to the SPG Operating
Partnership in exchange for 27,195,109 Units in the SPG Operating Partnership.

     Also in 1997, Simon Group acquired ownership interests in four regional
malls and one community center for an aggregate purchase price of approximately
$322,000. The purchase price included Units in the SPG Operating Partnership
valued at $1,100, common stock of SPG valued at approximately $20,000 and the
assumption of $64,772 of mortgage indebtedness, with the remainder paid in cash
primarily using proceeds from the Credit Facility, sales of equity securities
and working capital.

          Disposals

     During 1999, 1998 and 1997, Simon Group sold ownership interests in four,
five and one property, respectively, at a combined sale price of $58,700,
$120,000 and $1,100, respectively. These sales generated net combined
consolidated gains (losses) of ($7,062), ($7,283) and $20 in 1999, 1998 and
1997, respectively. Simon Group is continuing to pursue the sale of its
remaining non-retail holdings, along with a number of retail assets that are no
longer aligned with Simon Group's strategic criteria. If these assets are sold,
management expects the sale prices will not differ materially from the carrying
value of the related assets.

          Development Activity

     Development of new retail assets is an ongoing part of Simon Group's
strategy. Simon Group's share of development costs in 1999 was approximately
$400,000. Six Properties opened in 1999 aggregating approximately 4.9 million
square feet of GLA. During 1998, Simon Group opened two new community center
Properties at a cost of approximately $102,000, with approximately 577,000
square feet of GLA, and Simon Group opened four new Properties in 1997 at a cost
of approximately $230,000 with approximately 3,600,000 square feet of GLA.
Construction also continues on two other new projects at an aggregate
construction cost of approximately $340,000, of which approximately $140,000 is
Simon Group's share. These developments are funded primarily with borrowings
from the Credit Facility, construction loans and working capital.

     In addition, Simon Group strives to increase profitability and market share
of the existing Properties through the completion of strategic renovations and
expansions. During 1999, 1998 and 1997, Simon Group invested approximately
$277,000, $337,000 and $229,000, respectively on renovation and expansion of the
Properties. These projects were also funded primarily with borrowings from the
Credit Facility, construction loans and working capital.

          Pro Forma

     The following unaudited pro forma summary financial information excludes
any extraordinary items and combines the consolidated results of operations of
SPG and SRC as if the CPI Merger had occurred on January 1, 1998, and was
carried forward through December 31, 1998. Preparation of the pro forma summary
information was based upon assumptions deemed appropriate by management. The pro
forma summary information is not necessarily indicative of the results which
actually would have occurred if the CPI Merger had been consummated on
January 1, 1998, nor does it purport to represent the results of operations for
future periods.

                                      29
<PAGE>

<TABLE>
<CAPTION>
                                                                                        Year Ended
                                                                                       December 31,
                                                                                           1998
                                                                                       ------------
<S>                                                                                    <C>
Revenue                                                                                $  1,715,693
                                                                                       ============
Net income before allocation to Limited Partners (1)                                        272,025
                                                                                       ============
Net income available to holders of common stock                                             144,598
                                                                                       ============
Basic net income per Paired Share (1)                                                  $       0.87
                                                                                       ============
Diluted net income per Paired Share                                                    $       0.87
                                                                                       ============
Basic weighted average number of equivalent Paired Shares                               165,349,561
                                                                                       ============
Diluted weighted average number of equivalent Paired Shares                             165,706,710
                                                                                       ============
</TABLE>

(1) Includes net gains on the sales of assets of $37,973, or $0.17 on a basic
    earnings per share basis.

6. Summary of Significant Accounting Policies

          Investment Properties

     Investment Properties are recorded at cost (predecessor cost for Properties
acquired from certain of the SPG Operating Partnership's unitholders).
Investment Properties for financial reporting purposes are reviewed for
impairment on a Property-by-Property basis whenever events or changes in
circumstances indicate that the carrying value of investment Properties may not
be recoverable. Impairment of investment Properties is recognized when estimated
undiscounted operating income is less than the carrying value of the Property.
To the extent an impairment has occurred, the excess of carrying value of the
Property over its estimated fair value is charged to income.

     Investment Properties include costs of acquisitions, development and
predevelopment, construction, tenant allowances and improvements, interest and
real estate taxes incurred during construction, certain capitalized improvements
and replacements, and certain allocated overhead. Depreciation on buildings and
improvements is provided utilizing the straight-line method over an estimated
original useful life, which is generally 35 years or the term of the applicable
tenant's lease in the case of tenant inducements. Depreciation on tenant
allowances and improvements is provided utilizing the straight-line method over
the term of the related lease.

     Certain improvements and replacements are capitalized when they extend the
useful life, increase capacity, or improve the efficiency of the asset. All
other repair and maintenance items are expensed as incurred.

          Capitalized Software Costs

     Simon Group capitalizes the cost of internally developed software once
management has determined that the software will result in probable future
economic benefits. Capitalized costs include external direct costs related to
software development and implementation and payroll-related costs of certain
employees working solely on these aspects of the project. Capitalized software
costs will be amortized on a straight line basis over three years beginning when
the system is ready and available for its intended use.

          Capitalized Interest

     Interest is capitalized on projects during periods of construction.
Interest capitalized during 1999, 1998 and 1997 was $19,641, $10,567 and
$11,589, respectively.

          Segment Disclosure

     Simon Group's interests in its regional malls, community centers and other
assets represents one segment as they have similar economic and environmental
conditions, business processes, types of customers (i.e. tenants) and services
provided, and because resource allocation and other operating decisions are
based on an evaluation of the entire portfolio.

                                      30
<PAGE>

          Long-term Investment

     Investments in securities classified as available for sale are reflected in
other investments in the balance sheets at market value with the changes in
market value reflected as comprehensive income in shareholders' equity.

          Deferred Costs

     Deferred costs consist primarily of financing fees incurred to obtain long-
term financing, costs of interest rate protection agreements, and internal and
external leasing commissions and related costs. Deferred financing costs,
including interest rate protection agreements, are amortized on a straight-line
basis over the terms of the respective loans or agreements. Deferred leasing
costs are amortized on a straight-line basis over the terms of the related
leases. Deferred costs of $149,863 and $127,454 are net of accumulated
amortization of $121,477 and $116,239 in 1999 and 1998, respectively.

     Interest expense in the accompanying Consolidated Statements of Operations
includes amortization of deferred financing costs of $17,535, $11,835, and
$8,338, for 1999, 1998 and 1997, respectively, and has been reduced by
amortization of debt premiums and discounts of $5,707, $1,465 and $699 for 1999,
1998 and 1997, respectively.

          Revenue Recognition

     Simon Group, as a lessor, has retained substantially all of the risks and
benefits of ownership of the investment Properties and accounts for its leases
as operating leases. Minimum rents are accrued on a straight-line basis over the
terms of their respective leases. Certain tenants are also required to pay
overage rents based on sales over a stated base amount during the lease year.
Through December 31, 1999, overage rents were recognized as revenues based on
reported and estimated sales for each tenant through December 31, less the
applicable prorated base sales amount. Differences between estimated and actual
amounts are recognized in the subsequent year. As described in Note 15, Simon
Group's accounting for overage rent will be modified effective January 1, 2000.

     Reimbursements from tenants for real estate taxes and other recoverable
operating expenses are recognized as revenue in the period the applicable
expenditures are incurred.

          Allowance for Credit Losses

     A provision for credit losses is recorded based on management's judgment of
tenant creditworthiness. The activity in the allowance for credit losses during
1999, 1998 and 1997 was as follows:

<TABLE>
<CAPTION>
                                      Balance at        Provision for       Accounts        Balance at
                                     Beginning of          Credit           Written           End of
          Year Ended                     Year              Losses             Off              Year
                                     ------------       -------------       --------        ----------
<S>                                  <C>                <C>                 <C>             <C>
          December 31, l999             $14,491            $8,541           $(8,565)          $14,467
                                        =======            ======           =======           =======
          December 31, l998             $13,804            $6,614           $(5,927)          $14,491
                                        =======            ======           =======           =======
          December 31, l997             $ 7,918            $5,992           $  (106)          $13,804
                                        =======            ======           =======           =======
</TABLE>

          Income Taxes

     SPG. SPG and certain of its subsidiaries are taxed as REITs under Sections
856 through 860 of the Code and applicable Treasury regulations relating to REIT
qualification, which requires REITs to distribute at least 95% of their taxable
income to shareholders and meet certain other asset and income tests as well as
other requirements. Management intends to continue to adhere to these
requirements and maintain the REIT status of SPG and its REIT subsidiaries. As
REITs, these entities will generally not be liable for federal corporate income
taxes. Thus, no provision for federal income taxes for the REITs has been
included in the accompanying financial statements. If any of these entities fail
to qualify as a REIT in any taxable year, it will be subject to federal income
taxes on its taxable income at regular corporate tax rates. State income taxes
were not significant in any of the periods presented.

                                      31

<PAGE>

     SRC. SRC, a C Corporation, is subject to income taxes on its earnings. SRC
follows the liability method of accounting for income taxes in accordance with
SFAS No. 109, Accounting For Income Taxes. The provision (benefit) for income
taxes reflected in the separate financial statements of SRC was ($3,374), ($190)
and $670 for 1999, 1998 and 1997, respectively. Deferred tax assets and
liabilities consist primarily of tax credits, net operating loss carryforwards
and asset basis differences. The net deferred tax asset (liability), net of
necessary valuation allowances, at December 31, 1999 and 1998 was $0 and
($3,374), respectively, and is included in other liabilities in the accompanying
balance sheets. A valuation allowance is provided for loss and credit
carryforwards that management currently evaluates as not likely to be realized.
The valuation allowance related to SRC's tax accounts is adjusted as necessary
based on management's expectation of SRC's ability to utilize its tax benefit
carryforwards. In 1998, SRC generated losses for which a valuation allowance was
provided. In 1999, the income tax benefit represents SRC's pro rata share of the
SRC Operating Partnership's current year losses and the realization of tax
carryforward benefits for which a valuation allowance was previously provided.

          Per Share Data

     In accordance with SFAS No. 128 Earnings Per Share, basic earnings per
share is based on the weighted average number of shares of common stock
outstanding during the period and diluted earnings per share is based on the
weighted average number of shares of common stock outstanding combined with the
incremental weighted average shares that would have been outstanding if all
dilutive potential common shares would have been converted into shares at the
earliest date possible. The weighted average number of Paired Shares used in the
computation for 1999, 1998 and 1997 was 172,088,590; 126,522,228; and
99,920,280, respectively. The diluted weighted average number of equivalent
Paired Shares used in the computation for 1999, 1998 and 1997 was 172,225,592;
126,879,377 and 100,304,344, respectively.

     Combined basic and diluted earnings per Paired Share is presented in the
financial statements based upon the weighted average number of Paired Shares
outstanding of the Companies, giving effect to the CPI Merger as of the close of
business on September 24, 1998. Management believes this presentation provides
the shareholders with the most meaningful presentation of earnings for a single
interest in the combined entities.

     Neither series of convertible preferred stock issued and outstanding during
the comparative periods had a dilutive effect on earnings per share, nor did any
of the convertible preferred Units of the SPG Operating Partnership outstanding,
which are convertible into Paired Shares on or after August 27, 2004 if certain
conditions are met. Paired Units held by limited partners in the Operating
Partnerships may be exchanged for Paired Shares, on a one-for-one basis in
certain circumstances. If exchanged, the paired Units would not have a dilutive
effect. The increase in weighted average shares outstanding under the diluted
method over the basic method in every period presented for the Companies is due
entirely to the effect of outstanding stock options. Basic earnings and diluted
earnings were the same for all periods presented.

     Simon Group accrues distributions when they are declared. SPG declared
distributions in 1999 and 1998 aggregating $2.02 per share of common stock, of
which $1.06 and $0.97 represented a return of capital measured using generally
accepted accounting principles. On a federal income tax basis, 10% of SPG's 1999
distribution represented a capital gain and 38% represented a return of capital.
In 1998, 1% of SPG's 1998 distribution represented a capital gain and 48%
represented a return of capital.

          Statements of Cash Flows

     For purposes of the Statements of Cash Flows, all highly liquid investments
purchased with an original maturity of 90 days or less are considered cash and
cash equivalents. Cash equivalents are carried at cost, which approximates
market value. Cash equivalents generally consist of commercial paper, bankers
acceptances, Eurodollars, repurchase agreements and Dutch auction securities.

  Cash paid for interest, net of any amounts capitalized, during 1999, 1998 and
1997 was $566,191, $397,560 and $270,912, respectively.

          Noncash Transactions

     Accrued and unpaid distributions were $876 and $3,428 at December 31, 1999
and 1998, respectively. Please refer to Notes 3, 4, 5 and 11 for additional
discussion of noncash transactions.

                                       32
<PAGE>

          Reclassifications

     Certain reclassifications have been made to the prior year financial
statements to conform to the current year presentation. These reclassifications
have no impact on net operating results previously reported.

7. Investment Properties

     Investment properties consist of the following:

<TABLE>
<CAPTION>
                                                                          December 31,
                                                           -----------------------------------------
                                                                   1999                   1998
                                                           ------------------     ------------------

<S>                                                          <C>                    <C>
Land                                                              $ 2,137,579            $ 2,094,881
Buildings and improvements                                         10,590,207              9,695,842
                                                           ------------------     ------------------

Total land, buildings and improvements                             12,727,786             11,790,723

Furniture, fixtures and equipment                                      74,266                 59,291
                                                           ------------------     ------------------

Investment properties at cost                                      12,802,052             11,850,014
Less--accumulated depreciation                                      1,098,881                722,371
                                                           ------------------     ------------------

Investment properties at cost, net                                $11,703,171            $11,127,643
                                                           ==================     ==================
</TABLE>

     Investment properties includes $201,349 and $184,875 of construction in
progress at December 31, 1999 and 1998, respectively.

8. Investments in Unconsolidated Entities

       Joint Venture Properties

     From January 1, 1997 through December 31, 1999, the number of Properties
Simon Group accounted for using the equity method of accounting has increased
from 30 to 69. Please refer to Notes 3, 4 and 5.

                                       33
<PAGE>

     Summary financial information of the Joint Venture Properties and a summary
of Simon Group's investment in and share of income from such Properties follows.

<TABLE>
<CAPTION>
                                                                                      December 31,
                                                                        ---------------------------------------
BALANCE SHEETS                                                                 1999                  1998
                                                                        -----------------     -----------------
<S>                                                                       <C>                   <C>
Assets:
Investment properties at cost, net                                             $6,487,200            $4,290,795
Cash and cash equivalents                                                         171,372               173,778
Tenant receivables                                                                160,477               140,579
Other assets                                                                      161,702               103,481
                                                                        -----------------     -----------------
          Total assets                                                         $6,980,751            $4,708,633
                                                                        =================     =================

Liabilities and Partners' Equity:
Mortgages and other notes payable                                              $4,484,598            $2,861,589
Accounts payable, accrued expenses and other liabilities                          291,457               227,677
                                                                        -----------------     -----------------
          Total liabilities                                                     4,776,055             3,089,266
  Partners' equity                                                              2,204,696             1,619,367
                                                                        -----------------     -----------------
          Total liabilities and partners' equity                               $6,980,751            $4,708,633
                                                                        =================     =================
Simon Group's Share of:
Total assets                                                                   $2,843,025            $1,910,021
                                                                        =================     =================
Partners' equity                                                               $  896,572            $  568,998
Add: Excess Investment                                                            592,457               708,616
                                                                        -----------------     -----------------
Simon Group's net Investment in Joint Ventures                                 $1,489,029            $1,277,614
                                                                        =================     =================
</TABLE>

<TABLE>
<CAPTION>
                                                                          For the Year Ended December 31,
                                                            ---------------------------------------------------------
STATEMENTS OF OPERATIONS                                           1999                 1998                 1997
                                                            ---------------      ---------------      ---------------
<S>                                                           <C>                  <C>                  <C>
Revenue:
  Minimum rent                                                     $570,902             $442,530             $256,100
  Overage rent                                                       25,957               18,465               10,510
  Tenant reimbursements                                             276,207              204,936              120,380
  Other income                                                       57,695               31,045               19,364
                                                            ---------------      ---------------      ---------------
          Total revenue                                             930,761              696,976              406,354

Operating Expenses:
  Operating expenses and other                                      324,051              245,927              144,256
  Depreciation and amortization                                     170,339              129,681               85,423
                                                            ---------------      ---------------      ---------------
          Total operating expenses                                  494,390              375,608              229,679
                                                            ---------------      ---------------      ---------------

Operating Income                                                    436,371              321,368              176,675
Interest Expense                                                    235,826              176,669               96,675
Extraordinary Items- Debt Extinguishments                               (66)             (11,058)              (1,925)
                                                            ---------------      ---------------      ---------------
Net Income                                                         $200,479             $133,641             $ 78,075
                                                            ===============      ===============      ===============
Third-Party Investors' Share of Net Income                          122,087               88,314               55,507
                                                            ---------------      ---------------      ---------------
Simon Group's Share of Net Income                                  $ 78,392             $ 45,327             $ 22,568
Amortization of Excess Investment                                    27,252               22,625               13,878
                                                            ---------------      ---------------      ---------------
Income from Unconsolidated Entities                                $ 51,140             $ 22,702             $  8,690
                                                            ===============      ===============      ===============
</TABLE>

     As of December 31, 1999 and 1998, the unamortized excess of Simon Group's
investment over its share of the equity in the underlying net assets of the
partnerships and joint ventures acquired ("Excess Investment") was $592,457 and
$708,616, respectively, which is amortized over the life of the related
Properties. Amortization included in income from unconsolidated entities for the
years ended December 31, 1999, 1998 and 1997 was $27,252, $22,625 and $13,878,
respectively. Included in the 1999 amortization is a $5,000 writedown on a joint
venture investment.

     At December 31, 1999, SRC's investment in unconsolidated joint ventures,
which is included in the summary financial information above, represents
noncontrolling interests in two joint ventures that each own land held for sale,
which

                                       34
<PAGE>

are adjacent to two of the Properties. Included in 1999 total assets, total
revenue and net income above was $18,505, $12,539 and $11,902, respectively,
related to these SRC joint venture investments. During 1998, SRC also had a
joint venture interest in a partnership which provided management and advisory
services to a hotel. This investment was sold in 1999 for $28,500, which
resulted in a $35 gain. Included in 1998 total assets, total revenue and net
income above was $5,367, $481 and $481, respectively, related to SRC's joint
venture investments.

          The Management Company

     Simon Group holds 80% of the outstanding common stock, 5% of the
outstanding voting common stock, and all of the 8% cumulative preferred stock of
the Management Company. The remaining 20% of the outstanding common stock of the
Management Company (representing 95% of the voting common stock) is owned
directly by Melvin Simon, Herbert Simon and David Simon. Because Simon Group
exercises significant influence over the financial and operating policies of the
Management Company, it is reflected in the accompanying statements using the
equity method of accounting. The Management Company, including its consolidated
subsidiaries, provides management, leasing, development, project management,
accounting, legal, marketing and management information systems services and
property damage and general liability insurance coverage to certain Portfolio
Properties. Simon Group incurred costs of $75,697, $58,748 and $45,509 on
consolidated Properties, related to services provided by the Management Company
and its affiliates in 1999, 1998 and 1997, respectively. The Management Company
also provides certain of such services to Melvin Simon & Associates, Inc.
("MSA"), and certain other nonowned properties for a fee. Fees for services
provided by the Management Company to MSA were $3,853, $3,301 and $3,073 for the
years ended December 31, 1999, 1998 and 1997, respectively.

     The SPG Operating Partnership manages substantially all wholly-owned
Properties and 40 Properties owned as joint venture interests, and, accordingly,
it reimburses a subsidiary of the Management Company for costs incurred relating
to the management of such Properties. Substantially all employees of Simon Group
(other than direct field personnel) are employed by such Management Company
subsidiary. The Management Company records costs net of amounts reimbursed by
the SPG Operating Partnership. Common costs are allocated using assumptions that
management believes are reasonable. The SPG Operating Partnership's share of
allocated common costs was $55,051, $42,546 and $35,341 for 1999, 1998 and 1997,
respectively. As of December 31, 1999 and 1998, amounts due from the Management
Company for unpaid interest receivable and unpaid accrued preferred dividends
were not material to the combined financial statements or to those of SPG.
Amounts due to the Management Company under cost-sharing arrangements and
management contracts are included in notes and advances receivable from
Management Company and affiliates.

     Included in operating income of the Management Company for 1999 is a $7,290
loss resulting from interests in two parcels of land held for sale by the
Management Company, which were written down to their respective estimated fair
market values.

     Summarized consolidated financial information of the Management Company and
a summary of Simon Group's investment in and share of income from the Management
Company follows.

<TABLE>
<CAPTION>
                                                                                                 December 31,
                                                                                    -------------------------------------
BALANCE SHEET DATA:                                                                        1999                 1998
                                                                                    ----------------     ----------------

<S>                                                                                   <C>                  <C>
Total assets                                                                                $184,501             $198,952
Notes payable to Simon Group at 11%, due 2008, and advances                                  162,082              115,378
Shareholders' equity                                                                          21,740                7,279

Simon Group's Share of:
  Total assets                                                                              $172,935             $184,273
                                                                                    ================     ================
  Shareholders' equity                                                                      $ 23,889             $ 10,037
                                                                                    ================     ================
</TABLE>

<TABLE>
<CAPTION>
                                                                               For the Year Ended December 31,
                                                                 ----------------------------------------------------------
OPERATING DATA:                                                         1999                 1998                 1997
                                                                 ----------------     ----------------     ----------------
<S>                                                                <C>                  <C>                  <C>

Total revenue                                                            $115,761             $100,349              $85,542
Operating Income                                                            5,573                8,067               13,766
Net Income Available for Common Shareholders                             $  4,173             $  6,667              $12,366
                                                                 ================     ================     ================
Simon Group's Share of Net Income after intercompany profit
 elimination                                                             $  4,715             $  5,852              $10,486
                                                                 ================     ================     ================
</TABLE>

                                       35
<PAGE>

          European Investment

     The SPG Operating Partnership and the Management Company have a 25%
ownership interest in European Retail Enterprises, B.V. ("ERE") and Groupe BEG,
S.A. ("BEG"), respectively, which are accounted for using the equity method of
accounting. BEG and ERE are fully integrated European retail real estate
developers, lessors and managers. Simon Group's total investment in ERE and BEG
at December 31, 1999 was approximately $41,000, with commitments for an
additional $22,000, subject to certain performance and other criteria, including
Simon Group's approval of development projects. The agreements with BEG and ERE
are structured to allow Simon Group to acquire an additional 25% ownership
interest over time. As of December 31, 1999, BEG and ERE had three properties
open in Poland and two in France.

     The financial statements of Simon Group's European operations are measured
utilizing the Euro and translated into U.S. dollars in accordance with SFAS No.
52, Foreign Currency Translation. Accordingly, results of operations are
translated at the weighted average exchange rate for the period. The translation
adjustment resulting form the conversion of BEG and ERE's balance sheets were
not significant for the years ended December 31, 1999 and 1998.

9. Indebtedness

     Simon Group's mortgages and other notes payable consist of the following:

<TABLE>
<CAPTION>
                                                                                                     December 31,
                                                                                        ------------------------------------
                                                                                               1999                1998
                                                                                        ----------------    ----------------
<S>                                                                                       <C>                 <C>
Fixed-Rate Debt
---------------

Mortgages and other notes, including $28 and $1,917 net premiums, respectively.
 Weighted average interest and maturity of 7.4% and 6.1 years.                                $2,304,435          $2,291,893

Unsecured notes, including ($275) and $7,992 net (discounts) premiums, respectively.
 Weighted average interest and maturity of 7.2% and 7.1 years.                                 3,489,725           2,896,563

6 3/4% Putable Asset Trust Securities, including $913 and $1,111 premiums,
 respectively, due November 2003.                                                                100,913             101,111

7% Mandatory Par Put Remarketed Securities, including $5,214 and $5,273 premiums,
 respectively, due June 2028 and subject to redemption June 2008.                                205,214             205,273

Commercial mortgage pass-through certificates. Five classes bearing interest at
 weighted average rates and maturities of 7.3% and 8.0 years.                                    175,000             175,000
                                                                                        ----------------    ----------------
Total fixed-rate debt                                                                          6,275,287           5,669,840

Variable-Rate Debt
------------------

Mortgages and other notes, including $884 and $1,275 premiums, respectively. Weighted
 average interest and maturity of 7.0% and 3.1 years.                                         $  558,664          $  352,532

Credit Facility (see below)                                                                      785,000             368,000

Merger Facility (see below)                                                                      950,000           1,400,000

Commercial mortgage pass-through certificates, interest at 6.2%, due December 2007.               50,000              50,000

Unsecured term loans, interest at 6.6%, due February 2002.                                       150,000             133,000
                                                                                        ----------------    ----------------
Total variable-rate debt                                                                       2,493,664           2,303,532
                                                                                        ----------------    ----------------
Total mortgages and other notes payable, net                                                  $8,768,951          $7,973,372
                                                                                        ================    ================
</TABLE>

     General. Certain of the Properties are cross-defaulted and cross-
collateralized as part of a group of properties. Under certain of the cross-
default provisions, a default under any mortgage included in the cross-defaulted
package may constitute a default under all such mortgages and may lead to
acceleration of the indebtedness due on each Property within the collateral
package. Certain indebtedness is subject to financial performance covenants
relating to leverage ratios, annual real property appraisal requirements, debt
service coverage ratios, minimum net worth ratios, debt-to-market
capitalization, and minimum
                                       36
<PAGE>

equity values. Debt premiums and discounts are amortized over the terms of the
related debt instruments. Certain mortgages and notes payable may be prepaid but
are generally subject to a prepayment of a yield-maintenance premium.

     Mortgages and Other Notes. Certain of the Properties are pledged as
collateral to secure the related mortgage notes. The fixed and variable mortgage
notes are nonrecourse; however certain notes have partial guarantees by
affiliates of approximately $643,667. The fixed-rate mortgages generally require
monthly payments of principal and/or interest. Variable-rate mortgages are
typically based on LIBOR.

     Unsecured Notes. Certain of Simon Group's unsecured notes totaling $825,000
with weighted average interests and maturities of 8.0% and 8.1 years,
respectively, are structurally senior in right of payment to holders of other
Simon Group unsecured notes to the extent of the assets and related cash flows
of certain Properties. Certain of the unsecured notes are guaranteed by the SPG
Operating Partnership.

      On February 4, 1999, the SPG Operating Partnership completed the sale of
$600,000 of senior unsecured notes. These notes include two $300,000 tranches.
The first tranche bears interest at 6.75% and matures on February 4, 2004 and
the second tranche bears interest at 7.125% and matures on February 4, 2009. The
SPG Operating Partnership used the net proceeds of approximately $594,000 to
retire the $450,000 initial tranche of the Merger Facility (see below) and to
pay $142,000 on the outstanding balance of the Credit Facility (see below).

     Credit Facility. The Credit Facility is a $1,250,000 unsecured revolving
credit facility. During 1999, Simon Group obtained a three-year extension on the
Credit Facility to August of 2002, with an additional one-year extension
available at Simon Group's option. The Credit Facility bears interest at LIBOR
plus 65 basis points, with an additional 15 basis point facility fee on the
entire $1,250,000. The maximum and average amounts outstanding during 1999 under
the Credit Facility were $785,000 and $487,255, respectively. The Credit
Facility is primarily used for funding acquisition, renovation and expansion and
predevelopment opportunities. At December 31, 1999, the Credit Facility had an
effective interest rate of 6.47%, with $460,519 available after outstanding
borrowings and letters of credit. The Credit Facility contains financial
covenants relating to a capitalization value, minimum EBITDA and unencumbered
EBITDA ratios and minimum equity values.

     The Merger Facility. In conjunction with the CPI Merger, the SPG Operating
Partnership and SPG, as co-borrowers, closed a $1,400,000 medium term unsecured
bridge loan (the "Merger Facility"). The Merger Facility bears interest at a
base rate of LIBOR plus 65 basis points and $450,000 of the remaining balance
will mature on March 24, 2000, with the remaining $500,000 due on September 24,
2000. The Merger Facility is subject to covenants and conditions substantially
identical to those of the Credit Facility. Financing costs of $9,707, which were
incurred to obtain the Merger Facility, are amortized over 18 months.

          Debt Maturity and Other

     As of December 31, 1999, scheduled principal repayments on indebtedness
were as follows:

<TABLE>
<S>                 <C>                                        <C>
                    2000                                          $1,161,725
                    2001                                             268,474
                    2002                                           1,563,601
                    2003                                           1,135,047
                    2004                                           1,083,039
                    Thereafter                                     3,550,301
                                                             ---------------
                    Total principal maturities                     8,762,187
                    Net unamortized debt premiums                      6,764
                                                             ---------------
                    Total mortgages and other notes payable       $8,768,951
                                                             ===============
</TABLE>

     The Joint Venture Properties have $4,484,598 and $2,861,589 of mortgages
and other notes payable at December 31, 1999 and 1998, respectively. Simon
Group's share of this debt was $1,876,158 and $1,227,044 at December 31, 1999
and 1998, respectively. This debt, including premiums of $22,521 in 1999,
becomes due in installments over various terms extending through 2010, with
interest rates ranging from 6.26% to 9.98% (weighted average rate of 7.37% at
December 31, 1999). The debt, excluding the $22,521of premiums, matures $502,705
in 2000; $226,374 in 2001; $268,646 in 2002; $844,459 in 2003; $406,161 in 2004
and $2,213,732 thereafter.

                                       37
<PAGE>

          Interest Rate Protection Agreements

     Simon Group has entered into interest rate protection agreements, in the
form of "cap" or "swap" arrangements, with respect to certain of its variable-
rate mortgages and other notes payable. Swap arrangements, which effectively fix
Simon Group's interest rate on the respective borrowings, have been entered into
for $248,000 principal amount of consolidated debt. Cap arrangements, which
effectively limit the amount by which variable interest rates may rise, have
been entered into for $190,000 principal amount of consolidated debt and cap
LIBOR at rates ranging from 8.7% to 16.77% through the related debt's maturity.
Costs of the caps ($1,338) are amortized over the life of the agreements. The
unamortized balance of the cap arrangements was $187 and $429 as of December 31,
1999 and 1998, respectively. Simon Group's hedging activity as a result of
interest swaps and caps resulted in net interest (expense) savings of ($1,880),
$263 and $1,586 for the years ended December 31, 1999, 1998 and 1997,
respectively. This did not materially impact Simon Group's weighted average
borrowing rate.

          Fair Value of Financial Instruments

     The carrying value of variable-rate mortgages and other loans represents
their fair values. The fair value of combined fixed-rate mortgages and other
notes payable, was approximately $5,649,467 and $6,100,000 at December 31, 1999
and 1998, respectively. The fair value of the combined interest rate protection
agreements at December 31, 1999 and 1998, was $6,600 and ($7,213), respectively.
At December 31, 1999 and 1998, the estimated discount rates were 8.06% and
6.70%, respectively.

10. Rentals under Operating Leases

     Simon Group receives rental income from the leasing of retail and mixed-use
space under operating leases. Future minimum rentals to be received under
noncancelable operating leases for each of the next five years and thereafter,
excluding tenant reimbursements of operating expenses and percentage rent based
on tenant sales volume, as of December 31, 1999, are as follows:

<TABLE>
<S>                    <C>                                 <C>

                       2000                                  $  959,563
                       2001                                     899,615
                       2002                                     839,027
                       2003                                     759,301
                       2004                                     662,415
                       Thereafter                             2,417,495
                                                         --------------

                                                             $6,537,416
                                                         ==============
</TABLE>

     Approximately 1.8% of future minimum rents to be received are attributable
to leases with an affiliate of a limited partner in the SPG Operating
Partnership.

11. Capital Stock

     SPG is authorized to issue up to 750,000,000 shares, par value $0.0001 per
share, of capital stock. The authorized shares of capital stock consist of
400,000,000 shares of common stock, 12,000,000 shares of Class B common stock,
4,000 shares of Class C common stock, 100,000,000 shares of preferred stock, and
237,996,000 shares of excess common stock. Each share of common stock of SPG is
paired with 1/100th of a share of common stock of SRC.

     SRC is authorized to issue up to 7,500,000 shares, par value $0.0001 per
share, of common stock. SRC's historical shares and per share amounts have been
adjusted to give effect to the change in SRC's par value of common stock from
$0.10 per share to $0.0001 per share and to the CPI Merger exchange ratio of
2.0818 and to change the pairing of SRC's stock from 1/10th to 1/100th.

     The Board of Directors is authorized to reclassify the excess common stock
into one or more additional classes and series of capital stock to establish the
number of shares in each class or series and to fix the preferences, conversion
and other rights, voting powers, restrictions, limitations as to dividends, and
qualifications and terms and conditions of redemption of such class or series,
without any further vote or action by the shareholders. The issuance of
additional classes or series of capital stock may have the effect of delaying,
deferring or preventing a change in control of SPG without further action of the

                                       38
<PAGE>

shareholders. The ability of the Board of Directors to issue additional classes
or series of capital stock, while providing flexibility in connection with
possible acquisitions and other corporate purposes, could have the effect of
making it more difficult for a third party to acquire, or of discouraging a
third party from acquiring, a majority of the outstanding voting stock of the
Companies.

     The holders of common stock of SPG are entitled to one vote for each share
held of record on all matters submitted to a vote of shareholders, other than
for the election of directors. The holders of Class B common stock are entitled
to elect four of the thirteen members of the board. The holder of the Class C
common stock is entitled to elect two of the thirteen members of the board. The
Class B and Class C shares can be converted into shares of common stock at the
option of the holders. Shares of Class B common stock convert automatically into
an equal number of shares of common stock upon the sale or transfer thereof to a
person not affiliated with Melvin, Herbert or David Simon. Shares of Class C
common stock convert automatically into an equal number of shares of common
stock upon the sale or transfer thereof to a person not affiliated with the
members of the DeBartolo family or entities controlled by them. The Companies
have reserved 3,200,000 and 4,000 shares of common stock for the possible
conversion of the outstanding Class B and Class C shares, respectively.

          Common Stock Issuances

     During 1998, SPG issued 2,957,335 shares of its common stock in offerings
generating combined net proceeds of approximately $91,399. The net proceeds were
contributed to the SPG Operating Partnership in exchange for a like number of
Units. The SPG Operating Partnership used the net proceeds for general working
capital purposes.

     On November 11, 1997, SPG issued 3,809,523 shares of its common stock upon
the conversion of all of the outstanding shares of SPG's 8.125% Series A
Preferred Stock, $.0001 par value per share.

     On September 19, 1997, SPG issued 4,500,000 shares of its common stock in a
public offering. SPG contributed the net proceeds of approximately $146,800 to
the SPG Operating Partnership in exchange for an equal number of Units. The SPG
Operating Partnership used the net proceeds to retire a portion of the
outstanding balance on the Credit Facility.

          Preferred Stock

     The following table summarizes each of the series of preferred stock of
Simon Property Group, Inc.:

<TABLE>
<CAPTION>
                                                                                   As of December 31,
                                                                         ------------------------------------
                                                                                1999                1998
                                                                         ----------------    ----------------
<S>                                                                        <C>                 <C>
Series A 6.5% Convertible Preferred Stock, 209,249 shares authorized,
  53,271 and 209,249 issued and outstanding, respectively                        $ 68,073            $267,393


Series B 6.5% Convertible Preferred Stock, 5,000,000 shares authorized,
  4,844,331 issued and outstanding                                                450,523             450,523


Series C 7.00% Cumulative Convertible Preferred Stock, 2,700,000 shares
  authorized, none issued or outstanding                                               --                  --


Series D 8.00% Cumulative Redeemable Preferred Stock, 2,700,000 shares
  authorized, none issued or outstanding                                               --                  --

Series E 8.00% Cumulative Redeemable Preferred Stock, 1,000,000 shares
  authorized, 1,000,000 and 0 issued and outstanding, respectively                 24,242                  --
                                                                         ----------------    ----------------
                                                                                 $542,838            $717,916
                                                                         ================    ================
</TABLE>

     Series A Convertible Preferred Stock. During 1999, 155,978 shares of SPG's
Series A Convertible Preferred Stock were converted into 5,926,440 Paired
Shares. In addition, another 153,890 Paired Shares were issued to the holders of
the converted shares in lieu of the cash dividends allocable to those preferred
shares. Each share of Series A Convertible Preferred Stock has a liquidation
preference of $1,000 and is convertible into 37.995 Paired Shares, subject to
adjustment under certain circumstances. The Series A Convertible Preferred Stock
is not redeemable, except as needed to maintain or bring the direct or indirect
ownership of the capital stock of SPG into conformity with REIT requirements.

     Series B Convertible Preferred Stock. Each share of the Series B
Convertible Preferred Stock has a liquidation preference of $100 and is
convertible into 2.586 Paired Shares, subject to adjustment under circumstances
identical to those of

                                       39
<PAGE>

the Series A Preferred Stock. SPG may redeem the Series B Preferred Stock on or
after September 24, 2003 at a price beginning at 105% of the liquidation
preference plus accrued dividends and declining to 100% of the liquidation
preference plus accrued dividends any time on or after September 24, 2008.

     Series C Cumulative Convertible Preferred Stock and Series D Cumulative
Redeemable Preferred Stock. In connection with the NED Acquisition, on August
27, 1999, SPG authorized these two new series of preferred stock to be available
for issuance upon conversion by the holders or redemption by the SPG Operating
Partnership of the 7.00% Preferred Units or the 8.00% Preferred Units, described
below. Each of these new series of preferred stock has terms which are
substantially identical to the respective series of Preferred Units.

     Series E Cumulative Redeemable Preferred Stock. As part of the
consideration for the purchase of ownership in Mall of America, SPG issued the
Series E Cumulative Redeemable Preferred Stock for $24,242. The Series E
Cumulative Redeemable Preferred Stock is redeemable beginning August 27, 2004 at
the liquidation value of $25 per share.

          Preferred Stock of Subsidiary

     In connection with the CPI Merger, SPG Properties, Inc., formerly Simon
DeBartolo Group, Inc., became a subsidiary of SPG. Accordingly, the 11,000,000
shares of Series B and Series C cumulative redeemable preferred stock described
below have been reflected outside of equity as Preferred Stock of Subsidiary as
of the date of the CPI Merger.

     SPG Properties, Inc. has outstanding 3,000,000 shares of its 7.89% Series C
Cumulative Step-Up Premium Rate/SM/ Preferred Stock (the "Series C Preferred
Shares") with a liquidation value of $50.00 per share. Beginning October 1,
2012, the rate increases to 9.89% per annum. Management intends to redeem the
Series C Preferred Shares prior to October 1, 2012. Beginning September 30,
2007, SPG Properties, Inc. may redeem the Series C Preferred Shares in whole or
in part, using only the sale proceeds of other capital stock of SPG Properties,
Inc., at a liquidation value of $50.00 per share, plus accrued and unpaid
distributions, if any, thereon. Additionally, the Series C Preferred Shares have
no stated maturity and are not subject to any mandatory redemption provisions,
nor are they convertible into any other securities of SPG Properties, Inc. The
SPG Operating Partnership pays a preferred distribution to SPG Properties, Inc.
equal to the dividends paid on the preferred stock.

     SPG Properties, Inc. also has outstanding 8,000,000 shares of 8.75% Series
B Cumulative Redeemable Preferred Stock, which it may redeem any time on or
after September 29, 2006, at a liquidation value of $25.00 per share, plus
accrued and unpaid dividends. The liquidation value (other than the portion
thereof consisting of accrued and unpaid dividends) is payable solely out of the
sale proceeds of other capital shares of SPG Properties, Inc., which may include
other series of preferred shares. The SPG Operating Partnership pays a preferred
distribution to SPG Properties, Inc. equal to the dividends paid on the
preferred stock.

          Limited Partners' Preferred Interests in the SPG Operating Partnership

     In connection with the NED Acquisition, the SPG Operating Partnership
issued two new series of preferred Units during 1999 as a component of the
consideration for the Properties acquired. The SPG Operating Partnership
authorized 2,700,000, and issued 2,584,227, 7.00% Cumulative Convertible
Preferred Units (the "7.00% Preferred Units") having a liquidation value of
$28.00 per Unit. The 7.00% Preferred Units accrue cumulative dividends at a rate
of $1.96 annually, which is payable quarterly in arrears. The 7.00% Preferred
Units are convertible at the holders' option on or after August 27, 2004, into
either a like number of shares of 7.00% Cumulative Convertible Preferred Stock
of SPG with terms substantially identical to the 7.00% Preferred Units or Paired
Units at a ratio of 0.75676 to one provided that the closing stock price of
SPG's Paired Shares exceeds $37.00 for any three consecutive trading days prior
to the conversion date. The SPG Operating Partnership may redeem the 7.00%
Preferred Units at their liquidation value plus accrued and unpaid distributions
on or after August 27, 2009, payable in Paired Units. In the event of the death
of a holder of the 7.00% Preferred Units, or the occurrence of certain tax
triggering events applicable to a holder, the SPG Operating Partnership may be
required to redeem the 7.00% Preferred Units at liquidation value payable at the
option of the SPG Operating Partnership in either cash (the payment of which may
be made in four equal annual installments) or Paired Shares.

     The SPG Operating Partnership also authorized 2,700,000, and issued
2,584,227, 8.00% Cumulative Redeemable Preferred Units (the "8.00% Preferred
Units") having a liquidation value of $30.00. The 8.00% Preferred Units accrue
cumulative dividends at a rate of $2.40 annually, which is payable quarterly in
arrears. The 8.00% Preferred Units are each paired with one 7.00% Preferred Unit
or with the Units into which the 7.00% Preferred Units may be converted. The SPG
Operating Partnership may redeem the 8.00% Preferred Units at their liquidation
value plus accrued and unpaid distributions


                                       40
<PAGE>

on or after August 27, 2009, payable in either new preferred units of the SPG
Operating Partnership having the same terms as the 8.00% Preferred Units, except
that the distribution coupon rate would be reset to a then determined market
rate, or in Paired Units. The 8.00% Preferred Units are convertible at the
holders' option on or after August 27, 2004, into 8.00% Cumulative Redeemable
Preferred Stock of SPG with terms substantially identical to the 8.00% Preferred
Units. In the event of the death of a holder of the 8.00% Preferred Units, or
the occurrence of certain tax triggering events applicable to a holder, the SPG
Operating Partnership may be required to redeem the 8.00% Preferred Units owned
by such holder at their liquidation value payable at the option of the SPG
Operating Partnership in either cash (the payment of which may be made in four
equal annual installments) or Paired Shares.

          Notes Receivable from Former CPI Shareholders

     Notes receivable of $27,168 from former CPI shareholders, which result from
securities issued under CPI's executive compensation program and were assumed in
the CPI Merger, are reflected as a deduction from capital in excess of par value
in the statements of shareholders' equity in the accompanying combined financial
statements and SPG's financial statements. Certain of such notes totaling $9,519
bear interest at rates ranging from 5.31% to 6.00% and become due during the
period 2000 to 2002. The remainder of the notes do not bear interest and become
due at the time the underlying shares are sold.

          The Simon Property Group 1998 Stock Incentive Plan

     Simon Group has a stock incentive plan (the "1998 Plan"), which provides
for the grant of equity-based awards during a ten-year period, in the form of
options to purchase Paired Shares ("Options"), stock appreciation rights
("SARs"), restricted stock grants and performance unit awards (collectively,
"Awards"). Options may be granted which are qualified as "incentive stock
options" within the meaning of Section 422 of the Code and Options which are not
so qualified. The Companies have reserved for issuance 6,300,000 Paired Shares
under the 1998 Plan. Additionally, the partnership agreements require the
Companies to sell Paired Shares to the Operating Partnerships, at fair value,
sufficient to satisfy the exercising of stock options, and for the Companies to
purchase Paired Units for cash in an amount equal to the fair market value of
such Paired Shares.

     Administration. The 1998 Plan is administered by SPG's Compensation
Committee (the "Committee"). The Committee, in its sole discretion, determines
which eligible individuals may participate and the type, extent and terms of the
Awards to be granted to them. In addition, the Committee interprets the 1998
Plan and makes all other determinations deemed advisable for the administration
of the 1998 Plan. Options granted to employees ("Employee Options") become
exercisable over the period determined by the Committee. The exercise price of
an Employee Option may not be less than the fair market value of the Paired
Shares on the date of grant. Employee Options generally vest over a three-year
period and expire ten years from the date of grant.

     Director Options. The 1998 Plan provides for automatic grants of Options to
directors ("Director Options") of the Companies who are not also employees of
the SPG Operating Partnership or its "affiliates" ("Eligible Directors"). Under
the 1998 Plan, each Eligible Director is automatically granted Director Options
to purchase 5,000 Paired Shares upon the director's initial election to the
Board of Directors, and upon each reelection, an additional 3,000 Director
Options multiplied by the number of calendar years that have elapsed since such
person's last election to the Board of Directors. The exercise price of the
options is equal to the fair market value of the Paired Shares on the date of
grant. Director Options become vested and exercisable on the first anniversary
of the date of grant or at such earlier time as a "change in control" of the
Companies (as defined in the 1998 Plan). Director Options terminate 30 days
after the optionee ceases to be a member of the Board of Directors.

     Restricted Stock. The 1998 Plan also provides for shares of restricted
common stock of the Companies to be granted to certain employees at no cost to
those employees, subject to growth targets established by the Compensation
Committee (the "Restricted Stock Program"). Restricted stock vests annually in
four installments of 25% each beginning on January 1 following the year in which
the restricted stock is awarded. During 1999, 1998 and 1997, a total of 537,861;
495,131 and 448,753 Paired Shares, respectively, net of forfeitures, were
awarded under the Restricted Stock Program and predecessor programs. Through
December 31, 1999 a total of 1,825,086 Paired Shares, net of forfeitures, were
awarded. Approximately $10,601, $9,463 and $5,386 relating to these awards were
amortized in 1999, 1998 and 1997, respectively. The cost of restricted stock
grants, which is based upon the stock's fair market value at the time such stock
is earned, awarded and issued, is charged to shareholders' equity and
subsequently amortized against earnings of Simon Group over the vesting period.

                                       41
<PAGE>

     Simon Group accounts for stock-based compensation programs using the
intrinsic value method, which measures compensation expense as the excess, if
any, of the quoted market price of the stock at the grant date over the amount
the employee must pay to acquire the stock. During 1999, Simon Group awarded
159,000 additional options to directors and employees. Director options vest
over a twelve-month period, while 62,500 of the employee options granted during
1999 vest over two years, and 37,500 vested immediately. The impact on pro forma
net income and earnings per share as a result of applying the fair value method,
as prescribed by SFAS No. 123, Accounting for Stock-Based Compensation, which
requires entities to measure compensation costs measured at the grant date based
on the fair value of the award, was not material.

     The fair value of the options at the date of grant was estimated using the
Black-Scholes option pricing model with the following assumptions:

<TABLE>
<CAPTION>
                                                                               December 31,
                                       -------------------------------------------------------------------------------------------
                                                    1999                            1998                           1997
                                       ----------------------------      --------------------------      -------------------------
<S>                                      <C>                             <C>                             <C>
Weighted Average Fair Value per
  Option                                                      $3.27                           $7.24                         $ 3.18
Expected Volatility                                  19.78 - 19.89%                  30.83 - 41.79%                         17.63%
Risk-Free Interest Rate                                5.25 - 5.78%                    4.64 - 5.68%                          6.82%
Dividend Yield                                         5.32 - 6.43%                    6.24 - 6.52%                           6.9%
Expected Life                                              10 years                        10 years                       10 years
</TABLE>

     The weighted average remaining contract life for options outstanding as of
December 31, 1999 was 6.0 years.

     Information relating to Director Options and Employee Options from
December 31, 1996 through December 31, 1999 is as follows:

<TABLE>
<CAPTION>
                                                               Director Options                         Employee Options
                                                  ---------------------------------------    -------------------------------------
                                                                            Option Price                             Option Price
                                                          Options          per Share (1)           Options          per Share (1)
                                                  ------------------     ----------------    ----------------     ----------------
<S>                                                   <C>                  <C>                 <C>                  <C>
Shares under option at December 31, 1996                      85,080               $24.49           1,622,983               $23.00
                                                  ------------------     ----------------    ----------------     ----------------

Granted                                                        9,000                29.31                  --                  N/A

Exercised                                                     (8,000)               23.62            (361,902)               23.29

Forfeited                                                         --                  N/A             (13,484)               23.99

                                                  ------------------     ----------------    ----------------     ----------------
Shares under option at December 31, 1997                      86,080               $24.12           1,247,597               $22.90
                                                  ------------------     ----------------    ----------------     ----------------

Granted                                                           --                  N/A             385,000                30.40

CPI Options Assumed                                               --                  N/A             304,209                25.48

Exercised                                                     (8,000)               26.27             (38,149)               23.71

Forfeited                                                     (3,000)               29.31              (4,750)               25.25

                                                  ------------------     ----------------    ----------------     ----------------
Shares under option at December 31, 1998                      75,080               $24.11           1,893,907               $24.82
                                                  ==================     ================    ================     ================

Granted                                                       59,000                26.79             100,000                25.29

Exercised                                                     (5,000)               22.25             (77,988)               23.21

Forfeited                                                         --                  N/A             (58,253)               23.48

                                                  ------------------     ----------------    ----------------     ----------------
Shares under option at December 31, 1999                     129,080               $25.41           1,857,666               $24.95
                                                  ==================     ================    ================     ================
Options exercisable at December 31, 1999                     108,080               $24.69           1,636,833               $24.46
                                                  ==================     ================    ================     ================
</TABLE>

(1) Represents the weighted average price when multiple prices exist.

                                       42
<PAGE>

          Exchange Rights

     Limited partners in the Operating Partnerships have the right to exchange
all or any portion of their Units for shares of common stock on a one-for-one
basis or cash, as selected by the Board of Directors. The amount of cash to be
paid if the exchange right is exercised and the cash option is selected will be
based on the trading price of the Companies' common stock at that time. The
Companies have reserved 65,444,680 Paired Shares for possible issuance upon the
exchange of Paired Units.

12. Employee Benefit Plans

     Simon Group maintains a tax-qualified retirement 401(k) savings plan. Under
the plan, eligible employees can participate in a cash or deferred arrangement
permitting them to defer up to a maximum of 12% of their compensation, subject
to certain limitations. Participants' salary deferrals are matched at specified
percentages, and the plan provides annual contributions of 1.5% of eligible
employees' compensation. Simon Group contributed $3,189, $2,581 and $2,727 to
the plan in 1999, 1998 and 1997, respectively.

     Except for the 401(k) plan, Simon Group offers no other postretirement or
postemployment benefits to its employees.

13. Commitments and Contingencies

          Litigation

     Triple Five of Minnesota, Inc., a Minnesota corporation, v. Melvin Simon,
et. al. On or about November 9, 1999, Triple Five of Minnesota, Inc. ("Triple
Five") commenced an action in the District Court for the State of Minnesota,
Fourth Judicial District, against, among others, Mall of America, certain
members of the Simon family and entities allegedly controlled by such
individuals, and Simon Group. Two transactions form the basis of the complaint:
(i) the sale by Teachers Insurance and Annuity Association of America of one-
half of its partnership interest in Mall of America Company and Minntertainment
Company to the SPG Operating Partnership and related entities (the "Teachers
Sale"); and (ii) a financing transaction involving a loan in the amount of
$312,000 obtained from The Chase Manhattan Bank ("Chase") that is secured by a
mortgage placed on Mall of America's assets (the "Chase Mortgage").

     The complaint, which contains twelve counts, seeks remedies of damages,
rescission, constructive trust, accounting, and specific performance. Although
the complaint names all defendants in several counts, Simon Group is
specifically identified as a defendant in connection with the Teachers Sale.

     The SPG Operating Partnership has agreed to indemnify Chase and other
nonparties to the litigation that are related to the offering of certificates
secured by the Chase Mortgage against, among other things, (i) any and all
litigation expenses arising as a result of litigation or threatened litigation
brought by Triple Five, or any of its owners or affiliates, against any person
regarding the Chase Mortgage, the Teachers Sale, any securitization of the Chase
Mortgage or any transaction related to the foregoing and (ii) any and all
damages, awards, penalties or expenses payable to or on behalf of Triple Five
(or payable to a third party as a result of such party's obligation to pay
Triple Five) arising out of such litigation. These indemnity obligations do not
extend to liabilities covered by title insurance.

     Simon Group believes that the Triple Five litigation is without merit and
intends to defend the action vigorously. To that end, all defendants have
removed the action to federal court and have served a motion, which is pending,
to dismiss Triple Five's complaint in its entirety on the grounds that the
complaint fails to state a claim. Simon Group believes that neither the Triple
Five litigation nor any potential payments under the indemnity, if any, will
have a material adverse effect on Simon Group. Given the early stage of the
litigation it is not possible to provide an assurance of the ultimate outcome of
the litigation or an estimate of the amount or range of potential loss, if any.

     Carlo Angostinelli et al. v. DeBartolo Realty Corp. et al. On October 16,
1996, a complaint was filed in the Court of Common Pleas of Mahoning County,
Ohio, captioned Carlo Angostinelli et al. v. DeBartolo Realty Corp. et al. The
named defendants are SD Property Group, Inc., an indirect 99%-owned subsidiary
of SPG, and DeBartolo Properties Management, Inc., a subsidiary of the
Management Company, and the plaintiffs are 27 former employees of the
defendants. In the complaint, the plaintiffs alleged that they were recipients
of deferred stock grants under the DeBartolo Realty Corporation ("DRC") Stock
Incentive Plan (the "DRC Plan") and that these grants immediately vested under
the DRC Plan's "change in control" provision as a result of the DRC Merger.
Plaintiffs asserted that the defendants' refusal to issue them approximately
542,000 shares of DRC common stock, which is equivalent to approximately 370,000
Paired Shares computed at the 0.68

                                      43
<PAGE>

exchange ratio used in the DRC Merger, constituted a breach of contract and a
breach of the implied covenant of good faith and fair dealing under Ohio law.
Plaintiffs sought damages equal to such number of shares of DRC common stock, or
cash in lieu thereof, equal to all deferred stock ever granted to them under the
DRC Plan, dividends on such stock from the time of the grants, compensatory
damages for breach of the implied covenant of good faith and fair dealing, and
punitive damages. The plaintiffs and the defendants each filed motions for
summary judgment. On October 31, 1997, the Court of Common Pleas entered a
judgment in favor of the defendants granting their motion for summary judgment.
The plaintiffs appealed this judgment to the Seventh District Court of Appeals
in Ohio. On August 18, 1999, the District Court of Appeals reversed the summary
judgement order in favor of the defendants entered by the Common Pleas Court and
granted plaintiffs' cross motion for summary judgement, remanding the matter to
the Common Pleas Court for the determination of plaintiffs' damages. The
defendants petitioned the Ohio Supreme Court asking that they exercise their
discretion to review and reverse the Appellate Court decision, but the Ohio
Supreme court issued an order changing jurisdiction. The case has been remanded
to the Court of Common Pleas of Mahoning County, Ohio, to calculate Plaintiffs'
damages and rule upon counterclaims asserted by Simon Group. As a result of the
appellate court's decision, Simon Group recorded a $12,000 loss in 1999 related
to this litigation in the accompanying combined statements of operations as an
unusual item.

     Roel Vento et al v. Tom Taylor et al. An affiliate of Simon Group is a
defendant in litigation entitled Roel Vento et al v. Tom Taylor et al., in the
District Court of Cameron County, Texas, in which a judgment in the amount of
$7,800 was entered against all defendants. This judgment includes approximately
$6,500 of punitive damages and is based upon a jury's findings on four separate
theories of liability including fraud, intentional infliction of emotional
distress, tortious interference with contract and civil conspiracy arising out
of the sale of a business operating under a temporary license agreement at Valle
Vista Mall in Harlingen, Texas. Simon Group appealed the verdict and on May 6,
1999, the Thirteenth Judicial District (Corpus Christi) of the Texas Court of
Appeals issued an opinion reducing the trial court verdict to $3,364 plus
interest. Simon Group filed a petition for a writ of certiorari to the Texas
Supreme Court requesting that they review and reverse the determination of the
Appellate Court. The Texas Supreme Court has not yet determined whether it will
take the matter up on appeal. Management, based upon the advice of counsel,
believes that the ultimate outcome of this action will not have a material
adverse effect on Simon Group.

     Simon Group currently is not subject to any other material litigation other
than routine litigation and administrative proceedings arising in the ordinary
course of business. On the basis of consultation with counsel, management
believes that such routine litigation and administrative proceedings will not
have a material adverse impact on Simon Group's financial position or its
results of operations.

          Lease Commitments

     As of December 31, 1999, a total of 35 of the consolidated Properties are
subject to ground leases. The termination dates of these ground leases range
from 2000 to 2090. These ground leases generally require payments by Simon Group
of a fixed annual rent, or a fixed annual rent plus a participating percentage
over a base rate. Ground lease expense incurred by Simon Group for the years
ended December 31, 1999, 1998 and 1997, was $13,365, $13,618 and $10,511,
respectively.

     Future minimum lease payments due under such ground leases for each of the
next five years ending December 31 and thereafter are as follows:

<TABLE>
<S>                         <C>    <C>
                            2000          $  7,544
                            2001             7,645
                            2002             7,925
                            2003             7,864
                            2004             7,407
                                           495,963
                                   ------------------
                                          $534,348
                                   ==================
</TABLE>

          Long-term Contract

     On September 30, 1999, Simon Group entered into a five year contract with
Enron Energy Services for Enron to supply or manage all of the energy commodity
requirements throughout Simon Group's portfolio. The contract includes
electricity, natural gas and maintenance of energy conversion assets and
electrical systems including lighting. Simon Group

                                      44
<PAGE>

has committed to pay Enron a fixed percentage of the Portfolio's historical
energy costs for these services over the term of the agreement.

          Environmental Matters

     Nearly all of the Properties have been subjected to Phase I or similar
environmental audits. Such audits have not revealed nor is management aware of
any environmental liability that management believes would have a material
adverse impact on the Company's financial position or results of operations.
Management is unaware of any instances in which it would incur significant
environmental costs if any or all Properties were sold, disposed of or
abandoned.

14. Related Party Transactions

     Until April 15, 1999, when the Three Dag Hammarskjold building was sold,
the SRC Operating Partnership received a substantial amount of its rental income
from the SPG Operating Partnership for office space under lease. During the
period prior to the CPI Merger, such rent was received from CPI.

     In preparation for the CPI Merger, on July 31, 1998, CPI, with the
assistance of the SPG Operating Partnership, completed the sale of the General
Motors Building in New York, New York for approximately $800,000. The SPG
Operating Partnership and certain third-party affiliates each received a $2,500
fee from CPI in connection with the sale.

15. New Accounting Pronouncement

     On June 15, 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities ("SFAS 133"). SFAS 133 establishes accounting
and reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. SFAS
133 requires that changes in the derivative's fair value be recognized currently
in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income statement, and requires
that a company formally document, designate, and assess the effectiveness of
transactions that receive hedge accounting.

     SFAS 133 will be effective for Simon Group beginning with the 2001 fiscal
year and may not be applied retroactively. Management is currently evaluating
the impact of SFAS 133, which it believes could increase volatility in earnings
and other comprehensive income.

     On December 3, 1999, the Securities and Exchange Commission issued
Staff Accounting Bulletin No. 101 ("SAB 101"), which addressed certain revenue
recognition policies, including the accounting for overage rent by a landlord.
SAB 101 requires overage rent to be recognized as revenue only when each
tenant's sales exceeds their sales threshold. Simon Group currently recognizes
overage rent based on reported and estimated sales through the end of the
period, less the applicable prorated base sales amount. Simon Group will adopt
SAB 101 effective January 1, 2000. Management is currently evaluating the impact
of applying SAB 101 and expects to record a loss from the cumulative effect of a
change in accounting principle of approximately $13,000 in the first quarter of
2000. In addition, SAB 101 will impact the timing in which overage rent is
recognized throughout each year, but will not have a material impact on the
total overage rent recognized in each full year.

                                      45
<PAGE>

16. Quarterly Financial Data (Unaudited)

Combined summarized quarterly 1999 and 1998 data is as follows:

<TABLE>
<CAPTION>
                                            First             Second              Third             Fourth             Annual
1999                                       Quarter            Quarter            Quarter            Quarter            Amount
-----------------------------------    ---------------    ---------------    ---------------    ---------------    ---------------
<S>                                      <C>               <C>               <C>                <C>               <C>
Total revenue                            $    446,093       $    454,006      $    471,171       $    521,433      $  1,892,703
Operating income                              196,898            206,643           214,782            235,922           854,245
Income before unusual and
 extraordinary items                           67,388             67,338            87,125             94,249           316,100

Net income available to common
 shareholders                                  34,954             38,462            42,435             51,463           167,314

Net income before extraordinary
 items per Paired Share (1)              $       0.21       $       0.22      $       0.25       $       0.32      $       1.00

Net income per Paired Share (1)          $       0.21       $       0.22      $       0.24       $       0.30      $       0.97
Weighted average Paired Shares
 outstanding                              168,986,602        173,342,399       173,471,352        173,167,054       172,088,590

Diluted net income before
 extraordinary items per Paired
 Share (1)                               $       0.21       $       0.22      $       0.25       $       0.32      $       1.00

Diluted net income per Paired
 Share (1)                               $       0.21       $       0.22      $       0.24       $       0.30      $       0.97

Diluted weighted average Paired
 Shares outstanding                       169,168,474        173,609,740       173,542,183        173,182,994       172,225,592

</TABLE>

<TABLE>
<CAPTION>
1998
-----------------------------------
<S>                                      <C>                <C>               <C>                <C>               <C>
Total revenue                            $    300,257       $    310,375      $    322,338       $    472,589      $  1,405,559
Operating income                              133,667            145,226           147,537            215,782           642,212
Income before unusual and
 extraordinary items                           45,124             43,514            52,851             94,741           236,230

Net income available to common
 shareholders                                  23,948             27,467            28,966             53,217           133,598

Net income before extraordinary
 items per Paired Share (1)              $       0.22       $       0.21      $       0.25       $       0.32      $       1.02

Net income per Paired Share (1)          $       0.22       $       0.25      $       0.25       $       0.32      $       1.06
Weighted average Paired Shares
 outstanding                              109,684,252        111,954,695       117,149,600        166,775,975       126,522,228

Diluted net income before
 extraordinary items per Paired
 Share                                   $       0.22       $       0.21      $       0.25       $       0.32      $       1.02


Diluted net income per Paired Share
                                         $       0.22       $       0.25      $       0.25       $       0.32      $       1.06
Diluted weighted average Paired
 Shares outstanding                       110,071,475        112,381,667       117,474,932        167,077,557       126,879,377

</TABLE>

(1) Primarily due to the cyclical nature of earnings available for common stock
    and the issuance of additional shares of common stock during the periods,
    the sum of the quarterly earnings per Paired Share varies from the annual
    earnings per Paired Share.

                                       46