10-K

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITITES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the Fiscal Year Ended December 31,2002
or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)

Commission File No 0-1743

(Exact name of registrant as specified in its charter)

Maryland	52-0735512
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
10275 Little Patuxent Parkway Columbia, Maryland	21044-3456
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code: (410) 992-6000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock (par value 1¢ per share)	New York Stock Exchange
91/4% Cumulative Quarterly Income Preferred Securities	New York Stock Exchange
Series B Convertible Preferred Stock (liquidation preference $50 per share)	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:
NONE

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes ý No o

        As of June 28, 2002, the aggregate market value of the voting and non-voting common equity held by nonaffiliates of the registrant (based on the closing price as reported in The Wall Street Journal, Eastern Edition) was approximately $2,818,200,132.

        As of March 17, 2003, there were outstanding 87,273,362 shares of the registrant's common stock, par value 1¢, which is the only class of common stock of the registrant.

Documents Incorporated by Reference

        The specified portions of the Annual Report to Shareholders for the fiscal year ended December 31, 2002 are incorporated by reference into Parts I, II and IV.

        Definitive Proxy Statement to be filed pursuant to Regulation 14A on or before April 8, 2003 is incorporated by reference into Part III.

Part I

Item 1. Business.

Item 1(a). General Development of Business.

        The Rouse Company ("we," "Rouse" or "us") was incorporated as a business corporation under the laws of the State of Maryland in 1956. Our principal offices are located at The Rouse Company Building, Columbia, Maryland 21044. Our telephone number is (410) 992-6000. Our website can be found on the Internet at www.therousecompany.com.

        We, through our subsidiaries and affiliates, are engaged in the ownership, management, acquisition and development of income-producing properties and other real estate in the United States, including retail centers, office and industrial buildings, mixed-use projects and community retail centers. We dispose of income-producing properties that are not consistent with our business strategies and/or that are not meeting or are not considered to have the potential to continue to meet our investment criteria. We also develop and sell land, primarily in and around Columbia, Maryland and the Las Vegas, Nevada metropolitan area for residential, commercial and industrial uses.

        We elected to be taxed as a real estate investment trust (REIT) pursuant to the Internal Revenue Code of 1986, as amended, effective January 1, 1998. In general, a corporation that distributes at least 90% of its REIT taxable income to shareholders in any taxable year and complies with certain other requirements (relating primarily to the nature of its assets and the sources of its revenues) is not subject to Federal income taxation to the extent of the income which it distributes. We believe that we met the qualifications for REIT status as of December 31, 2002 and intend to meet the qualifications in the future and to distribute at least 90% of our REIT taxable income (determined after taking into account any net operating loss deduction) to shareholders in 2003 and subsequent years. In 2001, we elected to treat certain subsidiaries as Taxable REIT Subsidiaries (TRS), which are subject to Federal and state income taxes. Except with respect to the TRS, we do not believe that we will be liable for significant income taxes at the Federal level or in most of the states in which we operate in future years.

        In 2001, we formed The Rouse Company LP, which we refer to as the "operating partnership". One of our wholly owned subsidiaries is the sole general partner and another wholly owned subsidiary is currently the sole limited partner of the operating partnership. In December 2001, we began the process of transferring some of our assets to the operating partnership. As part of this structuring process, as of December 30 and December 31, 2001, we merged or converted some of our corporate subsidiaries into single-member limited liability companies. As of January 2, 2002, we contributed our interests in these limited liability companies to the operating partnership. This structure, which we refer to as an "UPREIT structure," is designed to allow us to acquire properties in exchange for limited partnership interests in the operating partnership. Using the UPREIT structure, we could issue limited partnership interests of the operating partnership to persons transferring properties to us who wish to defer taxes on the transfer, but who want to receive a right to convert their limited partnership interests into our stock at a future date in a taxable transaction. We have agreed with lenders under some of our

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credit facilities that, when and if the operating partnership issues limited partnership interests to unrelated persons in exchange for properties, the operating partnership will become jointly and severally liable for all obligations under these credit facilities. Concurrently, we will cause the operating partnership to become jointly and severally liable for our obligations under all outstanding public debt issued by Rouse.

Developments in 2002 and 2003

        In January 2002, we, Simon Property Group, Inc. ("Simon") and Westfield America Trust ("Westfield") announced that affiliates of each (collectively, the "Purchasers") entered into a Purchase Agreement with Rodamco North America N.V. ("Rodamco") to purchase substantially all of the assets of Rodamco for an aggregate purchase price of approximately 2.48 billion euros and the assumption of substantially all of Rodamco's liabilities. In connection with the Purchase Agreement, affiliates of the Purchasers entered into a Joint Purchase Agreement that specified the assets each would acquire and set forth the basis upon which the portion of the aggregate purchase price to be paid to Rodamco by each Purchaser would be determined. On May 3, 2002, the purchase closed.

        The primary assets we acquired include direct or indirect ownership interests in eight regional retail centers, leased primarily to national retailers, which we intend to continue to operate, and are described below:

Property	Interest Acquired	Leasable Mall Square Feet	Department Store Square Feet	Location
Collin Creek (1)	70%	331,000	790,000	Plano, TX
Lakeside Mall	100%	516,000	961,000	Sterling Heights, MI
North Star (1)	96%	435,000	816,000	San Antonio, TX
Oakbrook Center (3)	47%	842,000	1,425,000	Oakbrook, IL
Perimeter Mall (1), (4)	50%	502,000	779,000	Atlanta, GA
The Streets at South Point (2)	94%	590,000	730,000	Durham, NC
Water Tower Place (3)	52%	310,000	510,000	Chicago, IL
Willowbrook (1)	62%	500,000	1,028,000	Wayne, NJ

Notes:

(1)

Properties were owned by existing joint ventures or through tenancies in common between Rodamco and us. As a result, we owned 100% interests in these properties upon acquisition.

(2)

Property began operations in March 2002.

(3)

Property also contains significant office space.

(4)

In October 2002, we contributed our ownership interest in Perimeter Mall to a joint venture in exchange for a 50% interest in that joint venture and a cash distribution of $67.1 million.

        Other primary assets we acquired include a 100% interest in a parcel of land and building at Collin Creek that is leased to Dillard's department store and a 99% noncontrolling limited partnership interest in an entity that leased land from us to redevelop a portion of Fashion Show (a retail center in Las Vegas, Nevada). The first phase of the redevelopment project

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opened in November 2002 and we acquired the controlling interest in the limited partnership prior to the opening.

The Purchasers also jointly acquired interests in several other assets, including:
	•	A 40% interest in River Ridge, a retail center in Lynchburg, VA,
	•	Sawmill Place Plaza, a retail center in Columbus, OH, that was sold by the Purchasers on November 15, 2002,
	•	A 50% interest in Durham Associates, a partnership that owned and operated South Square Mall, a regional shopping center in Durham, NC that was subject to a contract of sale at the closing date and was sold by the Purchasers on August 2, 2002,
	•	A 59.17% interest in Kravco Investments, L.P., a limited partnership that owns investments in retail centers, primarily in the greater Philadelphia area,
	•	Urban Retail Properties Co., a property management company that manages properties owned by others,
	•	Purchase money notes receivable that arose from the sales of other assets by Rodamco; and
	•	A 50% interest in Westin New York, a hotel in New York City that began operations in October 2002.

        Our share of these jointly held assets is 27.285%. The Purchasers intend to sell the interest in River Ridge, but plan to retain the other jointly held investments not previously sold.

        We paid approximately 605 million euros (approximately $546 million based on exchange rates then in effect) to Rodamco at closing. We also paid approximately $269 million to retire some of the obligations of Rodamco and to pay our share of transaction costs. Our share of the debt secured by the operating properties in which we acquired interests was approximately $675 million, including our share of debt of unconsolidated real estate ventures, and our share of subsidiary perpetual preferred stock assumed by the Purchasers was approximately $24 million. In addition, we acquired a limited partnership interest in an entity that was redeveloping a portion of Fashion Show in Las Vegas, Nevada. Our share of the debt of this entity at the time of acquisition was approximately $72 million. The debt encumbering jointly held assets totaled approximately $14 million. Our share of the purchase price was based on the allocated prices of the properties that we acquired, directly or indirectly, our share of the jointly held assets and our share of Rodamco's obligations retired and the transaction expenses. The aggregate purchase price was determined as a result of negotiations between Rodamco and the Purchasers; our portion of the aggregate purchase price was determined as a result of negotiations among the Purchasers.

        Funds for payment of our portion of the purchase price were provided as follows (in millions):

Sale of Columbia community retail centers		$	111.1
Sale of interest in Franklin Park			20.5
Issuance of common stock in January and February 2002			279.3
Borrowings under bridge loan facility			392.5
Cash on hand			11.9
	Cash required	$	815.3

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        In April 2002, we sold our interests in 12 community retail centers in Columbia for net proceeds of $111.1 million. In April 2002, we also sold our interest in Franklin Park, a retail center in Toledo, Ohio, and received cash proceeds of $20.5 million.

        We have a shelf registration statement for the sale of up to an aggregate of approximately $2.25 billion (based on the public offering price) of common stock, preferred stock and debt securities. In January and February 2002, we issued 16.675 million shares of common stock for net proceeds of $456.3 million ($27.40 per share less issuance costs) under the shelf registration statement. We used $279.3 million of the net proceeds to fund a portion of the acquisition costs of the assets from Rodamco. The remaining net proceeds were used primarily to repay property debt secured by the Columbia community retail centers and to reduce credit facility borrowings.

        In September 2002, we issued $400 million of 7.20% Notes due in 2012 for net proceeds of $396.9 million under the shelf registration statement. We used approximately $220.4 million of the net proceeds to repay a portion of the bridge loan facility. The remaining proceeds were used to reduce other corporate and property debt.

        We have issued approximately $1.22 billion in aggregate of common stock and debt securities under the shelf registration statement since 1998, with a remaining availability of approximately $1.03 billion.

        In connection with the Rodamco purchase, we borrowed $392.5 million under a bridge loan facility provided by Banc of America Securities, LLC and Banc of America Mortgage Capital Corporation. The facility provided for no additional availability and had an initial maturity of November 2002 which was extended to May 2003. We repaid the bridge loan facility during 2002 with a portion of the proceeds from the issuance of the 7.20% Notes, distribution proceeds from two unconsolidated real estate ventures, including Perimeter Mall described above, and proceeds from borrowings under our revolving credit facility.

        In November 2002, we acquired our partners' controlling financial interests in entities that own Ridgedale Center, a regional retail center in suburban Minneapolis, Minnesota, and Southland Center, a regional retail center in suburban Detroit, Michigan, for an aggregate purchase price of $215.8 million (cash of $63.1 million and assumption of our partners' share of debt of $152.7 million). We owned 10% noncontrolling interests in these entities prior to this transaction and upon acquisition, our controlling financial interest is 100%. We used our revolving credit facility to finance the acquisition.

        In March 2003, we agreed to sell interests in six retail centers in the Philadelphia metropolitan area. We also agreed to purchase a retail center in Delaware from an affiliate of the purchaser. These transactions are expected to close in the second quarter of 2003. We expect to use the proceeds from the sales towards the purchase of the retail center in Delaware and to repay property debt and borrowings under our revolving credit facility used for the acquisitions of the interests in Ridgedale Center and Southland Center. We expect to recognize gains in excess of $100 million on the sales of these centers.

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Item 1(b). Financial Information About Industry Segments.

        Information required by Item 1(b) is incorporated herein by reference to note 8 of the notes to consolidated financial statements included in the 2002 Annual Report to Shareholders.

        As noted in Item 1(a), we are a real estate company engaged, through our subsidiaries and affiliates, in several aspects of the real estate industry, including the management, acquisition, disposition and development of income-producing and other properties (retail and commercial) and community development. These business segments are further described below.

Item 1(c). Narrative Description of Business.

Retail Centers:

        At December 31, 2002, we owned, in whole or in part, and operated:

•

38 regional retail centers encompassing 42.2 million square feet, including 26.5 million square feet leased to or owned by department stores;

•

6 downtown specialty marketplaces with 1.2 million square feet of leasable space;

•

Retail components of 5 mixed-use projects aggregating 0.9 million square feet of leasable space;

•

3 community retail centers in Summerlin, Nevada with 0.4 million square feet of leasable space.

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        The activities involved in operating and managing retail centers include:

•

identifying and attracting desirable new tenants;

•

negotiating lease terms with existing and prospective tenants;

•

conducting local market and consumer research;

•

developing and implementing short-term and long-term merchandising and leasing plans;

•

maintaining the buildings and common areas; and

•

implementing appropriate security and safety programs.

Office and Other Properties:

        At December 31, 2002, we owned and managed:

•

Office components of 5 mixed-use projects with 2.0 million square feet of leasable space;

•

42 office and industrial buildings with 2.2 million square feet of leasable space and other properties in and around Las Vegas, Nevada;

•

18 office and industrial buildings with 1.4 million square feet of leasable space in Columbia, Maryland;

•

58 office and industrial buildings with 4.1 million square feet of leasable space primarily in the Baltimore-Washington corridor, but outside Columbia.

        The activities involved in operating and managing office and other properties include:

•

identifying and attracting desirable new tenants;

•

negotiating lease terms with existing and prospective tenants;

•

conducting local market research;

•

developing and implementing short-term and long-term leasing plans;

•

assisting tenants in the layout of their spaces;

•

maintaining the buildings and common areas; and

•

implementing appropriate security and safety programs.

Commercial Development:

        We renovate, expand and redevelop existing retail centers and develop suburban and urban retail centers, mixed-use projects and office and industrial buildings primarily for ourselves or ventures in which we have invested. The activities involved in these development activities include:

•

initial market and consumer research;

•

evaluating and controlling land sites;

•

identifying and obtaining department store commitments;

•

obtaining necessary public approvals;

•

obtaining municipal agreements;

•

engaging architectural and engineering firms to design projects;

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•

estimating and managing development costs;

•

developing and testing pro forma operating statements;

•

selecting a general contractor;

•

arranging construction and permanent financing;

•

negotiating lease terms;

•

negotiating partnership and joint venture agreements; and

•

promoting new, renovated and/or expanded retail centers, mixed-use projects and other projects.

        We are an investor in and the development manager for a joint venture which developed the Village of Merrick Park, a mixed-use project in Coral Gables, Florida, that opened in September 2002. We are redeveloping Fashion Show, in Las Vegas, Nevada. The first phase of this redevelopment opened in November 2002. We are also planning retail center expansions and are pursuing new retail center development in San Antonio, Texas, Dade County, Florida and Summerlin, Nevada. In addition, we are developing new office and industrial buildings in Summerlin.

Community Development:

        We are the developers of the master-planned communities of Columbia, Maryland and Summerlin, Nevada. Columbia is located in the Baltimore-Washington corridor and encompasses approximately 18,000 acres. We own approximately 1,100 saleable acres of land in and around Columbia, including the adjacent communities of Emerson and Stone Lake. Summerlin is located immediately north and west of Las Vegas and encompasses approximately 22,500 acres. We own approximately 6,500 saleable acres of land in Summerlin. We develop and sell land in both communities to builders and other developers for residential, commercial and other uses. We may also develop some of this land for our own purposes. We are an investor in a joint venture that is developing Fairwood, a new community in Prince George's County, Maryland. We are also holding for development an 87 acre parcel of land in California.

General

        In all aspects of our business pertaining to the ownership, management, acquisition, disposition or development of income-producing and other real estate, we operate in highly competitive markets. With respect to the leasing and operation or management of developed properties, each project faces market competition from existing and future developments in its geographical market area. We also face competition in and around Columbia, Maryland and Las Vegas, Nevada with respect to the development and sale of land for residential, commercial and industrial uses. Competition exists with other developers over tenants to occupy income-producing real estate and with other developers over builders to purchase building lots for homes. Rental rates and sales prices are affected by alternatives available to tenants and builders. Our profitability may be affected by our costs, such as acquisition costs, development expenses, financing and insurance costs, and management costs, that could be higher than those of competitors.

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        Neither our business, taken as a whole, nor any of our operating segments, is seasonal in nature.

        Our business is subject to Federal, state and local statutes and regulations relating to the protection of the environment. Future development opportunities may require additional capital and other expenditures in order to comply with such statutes and regulations. It is impossible at this time to predict with any certainty the magnitude of any such expenditures or the long-range effect, if any, on our operations. Compliance with such laws has had no material adverse effect on our operating results or competitive position in the past; we anticipate that they will have no material adverse effect on our future operating results or competitive position in the industry.

        None of our operating segments depends upon a single customer or a few customers, the loss of which would have a materially adverse effect on the segment. No customer accounts for 10% or more of our consolidated revenues.

        We believe department stores and other anchor tenants ("anchors") are instrumental in creating and maintaining customer traffic in our retail centers. Generally, higher levels of customer traffic will result in higher tenant sales, a greater demand for space by other tenants and, as a result, more favorable leasing terms (including higher minimum rents) for our space.

        Most anchors own their buildings, the land under them and, in some cases, adjacent parking areas. Some anchors enter into long-term lease agreements at rates that are generally lower than the rents charged to other tenants at the retail center. Accordingly, anchors do not provide a significant source of revenues in our operating results. Anchors typically enter into reciprocal easement agreements that cover items such as operational matters, initial construction and future expansion.

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        The following table summarizes, as of December 31, 2002, our anchor sites and identifies the owners of the anchors and the name plates on their sites within our portfolio (including our joint venture and managed properties):

Owner/Name Plate			Locations
May Company
	Lord & Taylor		11
	Strawbridge's		6
	Hecht's		5
	Foley's		5
	Robinsons-May		1
			28
JCPenney			21
Sears			19
Federated Department Stores
	Macy's		11
	Burdines		2
	Bloomingdale's		2
	Rich's		2
			17
Dillard's			15
Target Corporation
	Marshall Field's		7
	Mervyn's		4
			11
Nordstrom			9
Saks Incorporated
	Saks Fifth Avenue		4
	Younkers		1
			5
Boscov's			4
Neiman Marcus			3
AMC Theatres			3
Other occupied sites			9
Other unoccupied sites			8
		Total anchor sites	152

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        As of December 31, 2002, our largest tenants in terms of percentage of space leased in our retail centers (including our joint venture and managed properties) are as follows:

Tenant	Percentage of retail space leased
The Limited, Inc.	7.4%
The Gap, Inc.	6.5%
Venator Group	2.3%
Spiegel, inc.	1.8%
Abercrombie & Fitch, Inc.	1.7%
Casual Corner Group, Inc.	1.4%
Musicland Group, Inc.	1.2%
Williams-Sonoma, Inc.	1.2%
AE Stores Company	1.1%
Borders Group, Inc.	1.1%

        On March 17, 2003, Spiegel, Inc. announced that it had filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code. Spiegel, Inc. operates Eddie Bauer stores in several of our centers. We are uncertain as to whether or not Spiegel, Inc. will accept or reject existing leases at our centers. We believe, however, that the space occupied by Eddie Bauer stores in our centers is of high quality and we are confident that we will be able to re-lease the space should Eddie Bauer cease to operate.

        As of December 31, 2002, our largest tenants in terms of percentage of space leased in our office properties are as follows:

Tenant	Percentage of office space leased
Pinnacle West Capital Corp.	6.7%
Carefirst of Maryland	4.7%
Bechtel SAIC Company, LLC	2.7%
Highmark, Inc.	2.1%
Snell & Wilmer, LLP	1.8%

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        We sell land in our community development projects for residential, commercial and other purposes. Sales for residential purposes are generally to 5-10 builders in each community. In Summerlin, the most active purchasers of residential land were William Lyon Homes, Pulte Homes, KB Home and Woodside Homes. In 2002, sales to these four homebuilders accounted for 65% of all residential sales in Summerlin. In and around Columbia (including Fairwood), the most active purchasers of residential land were Goodier Builders, Williamsburg Builders, Ryland Homes, Nu Homes and Allan Homes. In 2002, sales to these five homebuilders accounted for 58% of all residential sales in our Maryland community development projects.

        We employed 3,453 full-time and part-time employees at December 31, 2002.

Item 1(d). Financial Information about Geographic Areas.

        Not Applicable

Item 1(e). Available Information

        Our website can be found on the Internet at www.therousecompany.com. The website contains information about us and our operations. Copies of each of our filings with the SEC on Form 10-K, Form 10-Q and Form 8-K and all amendments to those reports can be viewed and downloaded free of charge as soon as reasonably practicable after the reports and amendments are electronically filed with or furnished to the SEC by accessing www.therousecompany.com, entering Investor Relations into the search engine and clicking Go, then clicking first on SEC Filings and then on Click here to continue on to view SEC Filings.

        Any of the above documents, and any of our reports on Form 10-K, Form 10-Q and Form 8-K and all amendments to those reports, can also be obtained in print by any shareholder who requests them by writing or telephoning David L. Tripp, Vice President and Director of Investor Relations and Corporate Communications, The Rouse Company, 10275 Little Patuxent Parkway, Columbia, Maryland 21044-3456, Telephone: (410) 992-6000.

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Item 2. Properties.

        We rent our headquarters building (approximately 127,000 square feet) in Columbia, Maryland under a lease which expires in 2003 with options for two 15-year renewal periods. The lease on the headquarters building is accounted for as a capital lease.

        Information regarding our operating properties is incorporated herein by reference to the "Projects of The Rouse Company" table on pages 65 through 67 of Exhibit 13 to this Form 10-K. The ownership of substantially all properties is subject to mortgage financing. The table of projects includes properties managed by us for a fee. Excluding such managed properties, certain of the remaining properties are subject to leases which provide an option to purchase (or repurchase) the property and/or to renew the leases for one or more renewal periods. The years of expiration indicated below assume all options to extend the terms of leases are exercised. The operating properties subject to such leases in whole or part are as follows:

Property	Nature of interest	Year of expiration of lease
American City Building	Leasehold and fee	2020
Arizona Center	Leasehold	Various dates from 2017 to 2050
Augusta Mall	Leasehold	2068
Bayside Marketplace	Leasehold by joint venture	2062
Echelon Mall	Leasehold	2008
Faneuil Hall Marketplace	Leasehold	2074
Fashion Place Mall	Leasehold	2059
The Gallery at Market East	Leasehold	2082
Governor's Square	Leasehold	2054
Harborplace	Leasehold	2054
Highland Mall	Leasehold and fee by joint venture	2070
Hughes Center	Leasehold	2059
The Jacksonville Landing	Leasehold	2057
Mall St. Matthews	Leasehold	2053

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Pioneer Place	Leasehold	2076
Plymouth Meeting	Leasehold	2063
Riverwalk	Leasehold and fee by joint venture	2076
South Street Seaport	Leasehold	2031
Westdale Mall	Leasehold by joint venture	2035
Westlake Center	Leasehold	2043

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Item 3. Legal Proceedings.

        None.

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Item 4. Submission of Matters to a Vote of Security Holders.

        None.

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Executive Officers of the Registrant.

The executive officers of the Company as of March 17, 2003 are:

Executive Officer	Age	Present office and position with the Company	Date of election or appointment to present office	Business or professional experience during the past five years
Anthony W. Deering	58	Chairman of the Board, President and Chief Executive Officer	2/25/97 2/23/95 2/25/93	Chairman of the Board, President and Chief Executive Officer of the Company; formerly President and Chief Executive Officer of the Company
Thomas J. DeRosa	45	Vice Chairman and Chief Financial Officer	9/3/02	See Note
Duke S. Kassolis	51	Executive Vice President, Asset Management	9/26/02   7/1/99 9/23/93	Executive Vice President, Asset Management; formerly Senior Vice President and Director, Property Operations; and Senior Vice President and Director of Office and Mixed-Use Operations of the Company
Robert Minutoli	52	Executive Vice President and Director, New Business	9/26/02 9/23/93	Executive Vice President and Director, New Business; formerly Senior Vice President and Director of New Business of the Company
Alton J. Scavo	56	Executive Vice President and Director, Development	9/26/02 9/23/93	Executive Vice President and Director, Development; formerly Senior Vice President and Director of the Community Development Division of the Company and General Manager of Columbia

Notes:

Thomas J. DeRosa worked in the investment banking industry for more than 20 years before joining The Rouse Company. From 1996 to 1998 Mr. DeRosa was a Managing Director in the Real Estate Investment Banking Group of Alex. Brown & Sons (now Deutsche Bank) in Baltimore, Maryland. In 1998, Mr. DeRosa moved to Deutsche Bank's Health Care Investment Banking Group and was named its Global Co-Head in 1999. Mr. DeRosa worked in this capacity until joining The Rouse Company in September 2002 as a Vice Chairman and Chief Financial Officer. Neither Alex. Brown & Sons nor Deutsche Bank are affiliated with The Rouse Company.

Jerome D. Smalley, Vice Chairman and Chief Operating Officer, retired from the Company on February 28, 2003.

The term of office of each officer is until election of a successor or otherwise at the pleasure of the Board of Directors.

There is no arrangement or understanding between any of the above-listed officers and any other person pursuant to which any such officer was elected as an officer, except with respect to Anthony W. Deering, who has an employment contract with us.

None of the above-listed officers has any family relationship with any director or other executive officer.

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Part II

Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters.

Information required by Item 5 is incorporated herein by reference to page 41 of Exhibit 13.

Item 6. Selected Financial Data.

Information required by Item 6 is incorporated by reference to page 40 of Exhibit 13.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Information required by Item 7 is incorporated herein by reference to pages 42 through 62 of Exhibit 13.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

Information required by Item 7A is incorporated herein by reference to page 58 of Exhibit 13.

Item 8. Financial Statements and Supplementary Data.

Financial Statements required by Item 8 are set forth in the Index to Financial Statements and Schedules on page IV-6.

Supplementary data required by Item 8 are incorporated herein by reference to page 41 of Exhibit 13.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

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Part III

        Information called for by Item 10 regarding executive officers is contained in Part I to this filing. Information regarding securities authorized for issuance under equity compensation plans (called for by Item 12) and controls and procedures (called for by Item 14) is provided below. Other information required by Items 10, 11, 12 and 13 is incorporated herein by reference from the definitive proxy statement that we intend to file pursuant to Regulation 14A on or before April 8, 2003.

Item 12. Securities authorized for issuance under equity compensation plans

        We have several stock option plans in which options to purchase shares of common stock and stock appreciation rights may be awarded to our directors, officers and employees. Stock options:

•

are generally granted with an exercise price equal to the market price of the common stock on the date of the grant,

•

typically vest over a three- to five-year period, subject to certain conditions, and

•

have a maximum term of ten years.

        The following chart summarizes the outstanding options, the weighted-average price of outstanding options, and the remaining securities available for future issuance, at December 31, 2002:

Plan Category			Number of Shares of Common Stock to be Issued Upon Exercise of Outstanding Options	Weighted-average Exercise Price of Outstanding Options		Remaining Number of Shares Available for Future Issuance
Equity compensation plans approved by shareholders:
	1990 Stock Bonus Plan		182,764	$	21.10	—
	1994 Stock Incentive Plan		686,303		24.30	—
	1997 Stock Incentive Plan		3,893,216		27.47	421,900
	2001 Stock Incentive Plan		1,359,645		29.03	3,134,355
			6,121,928		27.27	3,556,255
Equity compensation plans not approved by shareholders:
	1999 Stock Incentive Plan (note)		4,002,076		25.87	2,200,405
		Total	10,124,004	$	26.72	5,756,660

Note: The 1999 Stock Incentive plan was authorized by the Board of Directors in June 1999. Under the plan, 7,000,000 shares of common stock are allowed to be issued pursuant to the exercise of stock options or the issuance of stock awards. All options granted under this plan are non-qualified options for purposes of the Internal Revenue Code of 1986, as amended. The other features of options granted under the plan (exercise prices, vesting periods, term) are similar to our other stock option plans described above. Options may be granted under the plan until June 3, 2009.

III-1

Item 14. Controls and Procedures.

(a)

Evaluation of disclosure controls and procedures. Within the 90 days prior to the date of this report, we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information (including our consolidated subsidiaries) required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934.



(b)

Changes in internal controls. There were no significant changes in our internal controls or in other factors that could significantly affect those controls subsequent to the date we carried out this evaluation.

III-2

Part IV

Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K.

(a)

1. and 2. Financial Statements and Schedules:

Reference is made to the Index to Financial Statements and Schedules on page IV-6.

(b)

Reports on Form 8-K:

None

(c)

Exhibits required by Item 601 of Regulation S-K.

Exhibit No.
3.1	Amended and Restated Articles of Incorporation (the "Charter") of The Rouse Company, dated May 27, 1988—incorporated by reference to the Exhibits to the Company's Form 10-K Annual Report for the fiscal year ended December 31, 1988 (see SEC File No. 0-1743).
3.2	Articles of Amendment to the Charter of The Rouse Company, which Articles of Amendment were effective January 10, 1991—incorporated by reference to the Exhibits to The Rouse Company's Form 10-K Annual Report for the fiscal year ended December 31, 1990 (see SEC File No. 0-1743).
3.3	Articles Supplementary to the Charter of The Rouse Company, dated February 17, 1993—incorporated by reference to the Exhibits to The Rouse Company's Form 10-K Annual Report for the fiscal year ended December 31, 1992 (see SEC File No. 0-1743).
3.4	Articles Supplementary to the Charter of The Rouse Company, dated September 26, 1994—incorporated by reference to the Exhibits to The Rouse Company's S-3 Registration Statement (No. 33-57707).
3.5	Articles Supplementary to the Charter of The Rouse Company, dated December 27, 1994—incorporated by reference to the Exhibits to The Rouse Company's S-3 Registration Statement (No. 33-57707).
3.6	Articles Supplementary to the Charter of The Rouse Company, dated June 5, 1996, relating to The Rouse Company's Increasing Rate Cumulative Preferred Stock, par value $0.01 per share—incorporated by reference to the Exhibits to The Rouse Company's S-3 Registration Statement (No. 333-20781).

IV-1

3.7	Articles Supplementary to the Charter of The Rouse Company, dated June 11, 1996, relating to The Rouse Company's 10.25% Junior Preferred Stock, 1996 Series, par value $0.01 per share—incorporated by reference to the Exhibits to The Rouse Company's Form S-3 Registration Statement (No. 333-20781).
3.8	Articles Supplementary to the Charter of The Rouse Company, dated February 21, 1997, relating to The Rouse Company's Series B Convertible Preferred Stock, par value $0.01 per share—incorporated by reference to the Exhibits to The Rouse Company's Current Report on Form 8-K, dated February 26, 1997 (see SEC File No. 0-1743).
3.9	Articles Supplementary to the Charter of The Rouse Company, dated February 24, 2000—incorporated by reference to the Exhibits to The Rouse Company's Current Report on Form 8-K, dated February 29, 2000 (see SEC File No. 0-1743).
3.10	Bylaws of The Rouse Company, as amended dated January 30, 1997—incorporated by reference to the Exhibits to The Rouse Company's Form S-3 Registration Statement (No. 333-20781).
3.11	Amendments to the Bylaws of The Rouse Company, effective February 24, 2000—incorporated by reference to the Exhibits to The Rouse Company's Current Report on Form 8-K, dated February 29, 2000 (see SEC File No. 0-1743).
10.1	The Rouse Company 1990 Stock Option Plan—incorporated by reference to The Rouse Company's definitive proxy statement filed pursuant to Regulation 14A on April 12, 1990 (see SEC File No. 0-1743).
10.2	mendment to The Rouse Company 1990 Stock Option Plan, effective as of May 12, 1994—incorporated by reference to The Rouse Company's Form 10-K Annual Report for the fiscal year ended December 31, 1994 (see SEC File No. 0-1743).
10.3	The Rouse Company 1990 Stock Bonus Plan—incorporated by reference to The Rouse Company's definitive proxy statement filed pursuant to Regulation 14A on April 12, 1990 (see SEC File No. 0-1743).
10.4	The Rouse Company 1994 Stock Incentive Plan—incorporated by reference to The Rouse Company's definitive proxy statement filed pursuant to Regulation 14A on April 5, 1994 (see SEC File No. 0-1743).

IV-2

10.5	Amended and Restated Supplemental Retirement Benefit Plan of The Rouse Company, made as of January 1, 1985 and further amended and restated as of September 24, 1992, March 4, 1994, and May 10, 1995—incorporated by reference to The Rouse Company's Form 10-K Annual Report for the fiscal year ended December 31, 1995 (see SEC File No. 0-1743).
10.6	Contingent Stock Agreement, effective as of January 1, 1996, by the Company in favor of and for the benefit of the Holders and Representatives named therein—incorporated by reference to the Exhibits to The Rouse Company's Form S-4 Registration Statement (No. 333-1693).
10.7	The Rouse Company Deferred Compensation Plan for Outside Directors (Amended and Restated), dated as of May 23, 1996—incorporated by reference to The Rouse Company's Form 10-K Annual Report for the fiscal year ended December 31, 1996 (see SEC File No. 0-1743).
10.8	1997 Stock Incentive Plan—incorporated by reference to The Rouse Company's definitive proxy statement filed pursuant to Regulation 14A on March 14, 1997 (see SEC File No. 0-1743).
10.9	The Rouse Company Special Option Plan, effective January 1, 1998—incorporated by reference to The Rouse Company's Form 10-K Annual Report for the year ended December 31, 1997 (see SEC File No. 0-1743).
10.10	Contribution Agreement, dated as of February 1, 1999, among The Rouse Company of Nevada, Inc., HRD Properties, Inc., Rouse-Bridgewater Commons, LLC, Rouse-Park Meadows Holding, LLC, Rouse-Towson Town Center LLC, Bridgewater Commons Mall, LLC, Rouse-Fashion Place, LLC, Rouse-Park Meadows LLC, Towson TC, LLC, TTC SPE, LLC and Fourmall Acquisition, LLC—incorporated by reference to The Rouse Company's Current Report on Form 8-K dated February 1, 1999 (see SEC File No. 0-1743).
10.11	Employment Agreement, dated September 24, 1998, between The Rouse Company and Anthony W. Deering—incorporated by reference to The Rouse Company's Form 10-K Annual Report for the fiscal year ended December 31, 1998 (see SEC File No. 0-1743).

IV-3

10.12	The Rouse Company 1999 Stock Incentive Plan, made as of June 3, 1999 and amended and restated as of February 22, 2001—incorporated by reference to The Rouse Company's Form 10-Q Quarterly Report for the quarterly period ended June 30, 2001 (see SEC File No. 0-1743).
10.13	Letter Agreement, dated July 12, 1999, between The Rouse Company and Anthony W. Deering—incorporated by reference to The Rouse Company's Form 10-Q Quarterly Report for the quarterly period ended September 30, 1999 (see SEC File No. 0-1743).
10.14	Executive Agreement, dated October 25, 1999, between The Rouse Company and Daniel C. Van Epp—incorporated by reference to The Rouse Company's Form 10-K Annual Report for the fiscal year ended December 31, 1999 (see SEC File No. 0-1743). The same Executive Agreement was entered into with Jeffrey H. Donahue, Duke S. Kassolis, Douglas A. McGregor, Robert Minutoli, Robert D. Riedy, Alton J. Scavo and Jerome D. Smalley.
10.15	Letter agreement, dated August 20, 2002, between The Rouse Company and Jeffrey H. Donahue—incorporated by reference to The Rouse Company's Form 10-Q Quarterly Report for the quarterly period ended September 30, 2002 (see SEC File No. 0-1743).
10.16	Executive Agreement, dated September 3, 2002, between The Rouse Company and Thomas John DeRosa—incorporated by reference to The Rouse Company's Form 10-Q Quarterly Report for the quarterly period ended September 30, 2002 (see SEC File No. 0-1743).
10.17	Letter agreement, dated September 12, 2002, between The Rouse Company and Douglas A. McGregor—incorporated by reference to The Rouse Company's Form 10-Q Quarterly Report for the quarterly period ended September 30, 2002 (see SEC File No. 0-1743).

IV-4

12.1*	Ratio of earnings to fixed charges
12.2*	Ratio of earnings to combined fixed charges and Preferred stock dividend requirements
13*	Annual report to security holders
21*	Subsidiaries of the Registrant
23*	Consent of KPMG LLP, Independent Auditors
24*	Power of Attorney
99	Additional Exhibits:
99.1*	Form 11-K Annual Report of The Rouse Company Savings Plan for the year ended December 31, 2002
99.2*	Factors affecting future operating results
99.3*	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

*

filed herewith

IV-5

The Rouse Company

Index to Financial Statements and Schedules

		Page
Independent Auditors' Report		IV-7
Financial Statements:
	Included on pages 1 through 41 of Exhibit 13 incorporated herein by reference:
	Consolidated Balance Sheets at December 31, 2002 and 2001
	Consolidated Statements of Operations and Comprehensive Income for the Years Ended December 31, 2002, 2001 and 2000
	Consolidated Statements of Changes in Shareholders' Equity for the Years Ended December 31, 2002, 2001 and 2000
	Consolidated Statements of Cash Flows for the Years Ended December 31, 2002, 2001 and 2000
	Notes to Consolidated Financial Statements
Schedules:
	Schedule II Valuation and Qualifying Accounts	IV-8
	Schedule III Real Estate and Accumulated Depreciation	IV-9

        All other schedules have been omitted as not applicable or not required, or because the required information is included in the related financial statements or notes thereto.

IV-6

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders
The Rouse Company:

        We have audited the consolidated financial statements of The Rouse Company and subsidiaries as listed in the accompanying index. In connection with our audits of the consolidated financial statements, we have also audited the financial statement schedules as listed in the accompanying index. These consolidated financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedules based on our audits.

        We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of The Rouse Company and subsidiaries as of December 31, 2002 and 2001, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related financial statement schedules referred to above, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

        As discussed in note 1(a) to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, and the provisions related to the rescission of SFAS No. 4 of SFAS No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections, in 2002.

Baltimore, Maryland
February 20, 2003,
    except as to note 18,
    which is as of March 7, 2003

IV-7

Schedule II

THE ROUSE COMPANY AND SUBSIDIARIES
Valuation and Qualifying Accounts
Years ended December 31, 2002, 2001 and 2000
(in thousands)

				Additions
Descriptions		Balance at beginning of year		Charged to costs and expenses		Charged to other accounts			Deductions			Balance at end of year
Year ended December 31, 2002:
	Allowance for doubtful receivables	$	27,206	$	9,059	$	—		$	9,068	(2)	$	27,197
	Deferred tax asset valuation allowance	$	6,076	$	3,039	$	—		$	—		$	9,115
	Preconstruction	$	7,528	$	6,967	$	—		$	5,941	(4)	$	8,554
Year ended December 31, 2001:
	Allowance for doubtful receivables	$	22,608	$	8,992	$	464	(1)	$	4,858	(2)	$	27,206
	Deferred tax asset valuation allowance	$	—	$	2,572	$	4,463	(1)	$	959	(3)	$	6,076
	Preconstruction	$	7,576	$	5,434	$	749	(1)	$	6,231	(4)	$	7,528
Year ended December 31, 2000:
	Allowance for doubtful receivables	$	23,570	$	6,683	$	—		$	7,645	(2)	$	22,608
	Preconstruction	$	5,247	$	4,691	$	—		$	2,362	(4)	$	7,576

Notes:

(1)

Balance acquired from The Rouse Company Incentive Compensation Statutory Trust. Reference is made to note 2 to the consolidated financial statements for information related to this acquisition.

(2)

Balances written off as uncollectible.

(3)

Recognition of deferred tax benefits previously provided for through the valuation allowance account.

(4)

Costs of unsuccessful projects written off and other deductions.

IV-8

Schedule III

THE ROUSE COMPANY AND SUBSIDIARIES
Real Estate and Accumulated Depreciation (notes 1 and 8)
December 31, 2002
(in thousands)

							Costs capitalized subsequent to acquisition
			Initial cost to Company								Gross amount at which carried at close of period										Life on which depreciation in latest income statement is computed
Description	Encumbrances		Land		Buildings and Improvements		Improvements		Carrying costs (note 2)		Land		Buildings and Improvements		Total		Accumulated depreciation and amortization		Date of completion of construction	Date acquired
Operating Properties:
Fashion Show Retail Center Las Vegas, NV	$	206,118	$	79,887	$	120,347	$	274,397	$	—	$	79,887	$	394,744	$	474,631	$	26,001	03/81	06/96	Note 6
North Star Retail Center San Antonio, TX		155,000		54,000		184,900		1,946		—		54,000		186,846		240,846		5,243	09/60	05/02	Note 6
Lakeside Mall Retail Center Sterling Heights, MI		—		51,300		188,033		570		—		51,300		188,603		239,903		4,565	03/76	05/02	Note 6
The Mall in Columbia Retail Center Columbia, MD		165,582		6,788		—		198,043		—		6,788		198,043		204,831		35,480	08/71	N/A	Note 6
The Streets at South Point Retail Center Durham, NC		134,586		18,266		153,182		19,293		—		18,266		172,475		190,741		4,425	03/02	05/02	Note 6
Pioneer Place Mixed-Use Project Portland, OR		131,238		2,813		—		180,716		—		2,813		180,716		183,529		42,131	03/90	N/A	Note 6
Willowbrook Retail Center Wayne, NJ		177,016		56,654		121,583		2,193		—		56,654		123,776		180,430		3,257	09/69	05/02	Note 6
Exton Square Retail Center Exton, PA		100,863		4,979		—		171,340		—		4,979		171,340		176,319		28,389	03/73	N/A	Note 6
South Street Seaport Retail Center New York, NY		27,850		—		—		158,692		—		—		158,692		158,692		41,174	07/83	N/A	Note 6
Ridgedale Center Retail Center Minneapolis, MN		105,000		20,216		134,829		356		—		20,216		135,185		155,401		1,059	01/89	11/02	Note 6
Arizona Center Mixed-Use Project Phoenix, AZ		60,025		98		—		155,115		—		98		155,115		155,213		47,463	07/83	N/A	Note 6
Woodbridge Center Retail Center Woodbridge, NJ		124,177		26,301		—		127,767		—		26,301		127,767		154,068		44,004	03/71	N/A	Note 6

IV-9

Paramus Park Retail Center Paramus, NJ	$	99,939	$	13,476	$	—	$	129,969	$	—	$	13,476	$	129,969	$	143,445	$	24,386	03/74	N/A	Note 6
Fashion Place Retail Center Salt Lake City, UT		69,620		19,379		119,715		2,645		—		19,379		122,360		141,739		9,113	03/72	10/98	Note 6
Beachwood Place Retail Center Cleveland, OH		112,760		10,673		—		130,939		—		10,673		130,939		141,612		22,004	08/78	N/A	Note 6
Oviedo Marketplace Retail Center Orlando, FL		56,550		9,594		—		130,335		—		9,594		130,335		139,929		13,050	03/98	N/A	Note 6
Owings Mills Retail Center Baltimore, MD		—		21,639		—		117,107		—		21,639		117,107		138,746		21,359	07/86	N/A	Note 6
Collin Creek Retail Center Plano, TX		74,993		26,420		108,554		706		—		26,420		109,260		135,680		2,368	09/95	05/02	Note 6
Moorestown Mall Retail Center Moorestown, NJ		61,509		10,256		68,889		56,139		—		10,256		125,028		135,284		13,445	03/63	12/97	Note 6
Westlake Center Mixed-Use Project Seattle, WA		69,902		10,582		—		105,053		—		10,582		105,053		115,635		35,343	10/88	N/A	Note 6
The Gallery at Harborplace Mixed-Use Project Baltimore, MD		92,383		6,648		—		106,661		—		6,648		106,661		113,309		33,512	09/87	N/A	Note 6
Mall St. Matthews Retail Center Louisville, KY		67,496		—		—		108,700		—		—		108,700		108,700		29,570	03/62	N/A	Note 6
Bayside Marketplace Retail Center Miami, FL		71,057		—		—		102,129		—		—		102,129		102,129		26,813	04/87	N/A	Note 6
Faneuil Hall Marketplace Retail Center Boston, MA		55,000		—		—		100,466		—		—		100,466		100,466		19,530	08/76	N/A	Note 6
White Marsh Retail Center Baltimore, MD		76,970		10,782		—		86,954		—		10,782		86,954		97,736		28,062	08/81	N/A	Note 6
Governor's Square Retail Center Tallahassee, FL		66,864		—		—		85,628		—		—		85,628		85,628		18,965	08/79	N/A	Note 6
Plymouth Meeting Retail Center Plymouth Meeting, PA		32,753		702		—		82,212		—		702		82,212		82,914		22,406	02/66	N/A	Note 6

IV-10

Oakwood Center Retail Center Gretna, LA	$	51,194	$	15,938	$	—	$	65,777	$	—	$	15,938	$	65,777	$	81,715	$	17,374	10/82	N/A	Note 6
Augusta Mall Retail Center Augusta, GA		54,460		4,697		—		76,839		—		4,697		76,839		81,536		12,047	08/78	N/A	Note 6
Cherry Hill Mall Retail Center Cherry Hill, NJ		74,248		14,767		—		64,938		—		14,767		64,938		79,705		26,246	10/61	N/A	Note 6
Southland Center Retail Center Taylor, MI		56,500		6,581		69,386		104		—		6,581		69,490		76,071		650	01/89	11/02	Note 6
Hulen Mall Retail Center Ft. Worth, TX		60,720		7,575		—		67,035		—		7,575		67,035		74,610		16,849	08/77	N/A	Note 6
Riverwalk Retail Center New Orleans, LA		11,840		—		—		74,531		—		—		74,531		74,531		17,840	08/86	N/A	Note 6
Harborplace Retail Center Baltimore, MD		32,986		—		—		60,692		—		—		60,692		60,692		14,480	07/80	N/A	Note 6
3800 Howard Hughes Pky Office Building/ Industrial Las Vegas, NV		36,235		3,622		38,438		4,116		—		3,622		42,554		46,176		10,663	11/86	06/96	Note 6
Blue Cross & Blue Shield Building I Office Building Baltimore, MD		20,831		1,000		—		44,377		—		1,000		44,377		45,377		14,528	07/89	N/A	Note 6
Village of Cross Keys Mixed-Use Project Baltimore, MD		13,676		925		—		34,728		—		925		34,728		35,653		13,162	09/65	N/A	Note 6
Westdale Mall Retail Center Cedar Rapids, IA		21,164		655		30,495		2,590		—		655		33,085		33,740		4,135	07/79	10/98	Note 6
3993 Howard Hughes Pky Office Building Las Vegas, NV		24,868		1,526		—		30,083		—		1,526		30,083		31,609		4,579	01/00	N/A	Note 6
Alexander & Alexander Building II Office Building Baltimore, MD		16,114		1,000		—		27,302		—		1,000		27,302		28,302		10,252	09/87	N/A	Note 6
3773 Howard Hughes Pky Office Building Las Vegas, NV		20,837		1,739		22,625		3,409		—		1,739		26,034		27,773		4,821	11/95	6/96	Note 6
Hunt Valley 75 Office Building Hunt Valley, MD		15,564		8,136		14,187		4,451		—		8,136		18,638		26,774		2,574	07/84	12/98	Note 6
3960 Howard Hughes Pky Office Building Las Vegas, NV		22,866		800		—		24,982		—		800		24,982		25,782		7,419	4/98	N/A	Note 6

IV-11

Seventy Columbia Corp Ctr Office Building Columbia, MD	$	20,717	$	857	$	—	$	24,672	$	—	$	857	$	24,672	$	25,529	$	8,473	06/92	N/A	Note 6
The Gallery at Market East Retail Center Philadelphia, PA		—		—		—		24,396		—		—		24,396		24,396		9,045	08/77	N/A	Note 6
Mondawmin Mall Retail Center Baltimore, MD		17,142		2,251		—		21,197		—		2,251		21,197		23,448		10,735	01/78	N/A	Note 6
Senate Plaza Office Building Camp Hill, PA		12,565		2,284		13,319		3,703		—		2,284		17,022		19,306		4,419	07/72	12/98	Note 6
Echelon Mall Retail Center Voorhees, NJ		54,750		6,160		—		11,318		—		6,160		11,318		17,478		1,519	09/70	N/A	Note 6
Blue Cross & Blue Shield Building II Office Building Baltimore, MD		7,598		1,000		—		16,433		—		1,000		16,433		17,433		5,032	08/90	N/A	Note 6
3753/3763 Howard Hughes Pky Office Building Las Vegas, NV		9,841		3,844		12,018		1,438		—		3,844		13,456		17,300		2,947	10/91	6/96	Note 6
Forty Columbia Corp Ctr Office Building Columbia, MD		10,978		636		—		15,981		—		636		15,981		16,617		7,401	06/87	N/A	Note 6
Alexander & Alexander Building I Office Building Baltimore, MD		9,074		650		—		15,886		—		650		15,886		16,536		6,779	11/88	N/A	Note 6
Fifty Columbia Corp Ctr Office Building Columbia, MD		11,390		463		—		15,866		—		463		15,866		16,329		6,282	11/89	N/A	Note 6
3930 Howard Hughes Pky Office Building Las Vegas, NV		4,200		3,108		11,279		1,367		—		3,108		12,646		15,754		4,395	12/94	06/96	Note 6
Canyon Center C&D Office Building/ Industrial Las Vegas, NV		124		1,723		—		13,979		—		1,723		13,979		15,702		4,094	06/98	N/A	Note 6
Centerpointe Office Building Baltimore, MD		6,316		3,855		11,302		423		—		3,855		11,725		15,580		1,454	07/87	12/98	Note 6
Sixty Columbia Corp Ctr Office Building Columbia, MD		14,067		1,050		—		14,523		—		1,050		14,523		15,573		1,781	02/99	N/A	Note 6
Canyon Center Office Building Las Vegas, NV		11,531		2,081		7,161		5,235		—		2,081		12,396		14,477		2,352	03/98	N/A	Note 6

IV-12

Schilling Plaza North Office Building Baltimore, MD	$	7,539	$	4,470	$	8,059	$	1,687	$	—	$	4,470	$	9,746	$	14,216	$	1,220	07/80	12/98	Note 6
Schilling Plaza South Office Building Baltimore, MD		5,596		5,000		7,402		1,326		—		5,000		8,728		13,728		1,842	07/87	12/98	Note 6
The Jacksonville Landing Retail Center Jacksonville, FL		10,000		—		—		13,307		—		—		13,307		13,307		164	06/87	N/A	Note 6
3980 Howard Hughes Pky Office Building Las Vegas, NV		9,823		879		5,583		6,302		—		879		11,885		12,764		2,190	04/97	06/96	Note 6
Crossing Business Center Phase III Office Building Las Vegas, NV		7,826		2,842		1,416		8,466		—		2,842		9,882		12,724		2,281	09/96	06/96	Note 6
Thirty Columbia Corp Ctr Office Building Columbia, MD		8,234		1,160		—		11,016		—		1,160		11,016		12,176		5,760	04/86	N/A	Note 6
3770 Howard Hughes Pky Office Building Las Vegas, NV		4,958		691		8,010		3,307		—		691		11,317		12,008		4,840	10/90	06/96	Note 6
American City Building Office Building Columbia, MD		—		—		—		11,630		—		—		11,630		11,630		9,921	03/69	N/A	Note 6
Twenty Columbia Corp Ctr Office Building Columbia, MD		3,705		927		—		10,266		—		927		10,266		11,193		5,500	06/81	N/A	Note 6
Inglewood Office II Office Building Landover, MD		5,738		2,233		7,304		1,339		—		2,233		8,643		10,876		1,564	07/86	12/98	Note 6
10000 W. Charleston Arbors Office Building Summerlin, NV		23,757		695		—		9,732		—		695		9,732		10,427		2,104	05/99	N/A	Note 6
201 International Circle Office Building Baltimore, MD		3,685		5,464		3,763		1,055		—		5,464		4,818		10,282		784	07/82	12/98	Note 6
Crossing Business Center Phase I Office Building Las Vegas, NV		6,961		1,326		7,951		707		—		1,326		8,658		9,984		1,801	12/94	06/96	Note 6
Metro Plaza Retail Center Baltimore, MD		—		202		—		9,605		—		202		9,605		9,807		5,116	N/A	12/82	Note 6
Inglewood Office Center I Office Building Landover, MD		4,629		2,245		5,867		1,294		—		2,245		7,161		9,406		1,136	07/82	12/98	Note 6

IV-13

10190 Covington Cross Office Building Las Vegas, NV	$	6,544	$	1,257	$	398	$	7,750	$	—	$	1,257	$	8,148	$	9,405	$	1,401	12/97	06/96	Note 6
Riverspark 2/ Building 2 Office Building/ Industrial Columbia, MD		1,357		2,783		6,594		—		—		2,783		6,594		9,377		783	07/87	12/98	Note 6
Ten Columbia Corp Ctr Office Building Columbia, MD		—		733		—		8,346		—		733		8,346		9,079		4,290	09/81	N/A	Note 6
USA Group Office Building/Industrial Las Vegas, NV		6,470		1,197		4,880		2,101		—		1,197		6,981		8,178		1,055	11/98	06/96	Note 6
Riverspark Building B Industrial Building Columbia, MD		2,805		2,117		2,545		3,330		—		2,117		5,875		7,992		577	07/85	12/98	Note 6
Other properties and related investments		106,868		67,729		103,478		124,078		—		67,729		227,556		295,285		69,903
Total Operating Properties	$	3,346,142	$	664,326	$	1,603,492	$	3,645,086	$	—	$	664,326	$	5,248,578	$	5,912,904	$	981,676

IV-14

THE ROUSE COMPANY AND SUBSIDIARIES
Real Estate and Accumulated Depreciation (notes 1 and 8)
December 31, 2002
(in thousands)

							Costs capitalized subsequent to acquisition
			Initial cost to Company								Gross amount at which carried at close of period
																					Life on which depreciation in latest income statement is computed
Description	Encumbrances		Land		Buildings and Improvements		Improvements		Carrying costs (note 2)		Land		Buildings and Improvements		Total		Accumulated depreciation and amortization		Date of completion of construction	Date acquired
Properties in Development:
Fashion Show Redevelopment of Retail Ctr Las Vegas, NV	$	—	$	—	$	—	$	45,952	$	—	$	—	$	45,952	$	45,952		N/A	N/A	N/A	N/A
The Shops at La Cantera New Retail Center San Antonio, TX		—		17,371		—		16,576		—		17,371		16,576		33,947		N/A	N/A	N/A	N/A
Kendall Town Center New Retail Center Dade County, FL		—		—		—		29,114		—		—		29,114		29,114		N/A	N/A	N/A	N/A
Summerlin Center New Retail Center Summerlin, NV		6,457		14,970		—		4,158		—		14,970		4,158		19,128		N/A	N/A	N/A	N/A
Arizona Center Developed/Developable Land Under Master Lease Phoenix, AZ		12,800		13,893		—		—		—		13,893		—		13,893		N/A	N/A	N/A	N/A
Fashion Place Expansion of Retail Center Salt Lake City, UT		—		—		—		7,485		—		—		7,485		7,485		N/A	N/A	N/A	N/A
Coral Gables Developed/Developable Land Coral Gables, FL		695		7,407		—		—		—		7,407		—		7,407		N/A	N/A	N/A	N/A
Other projects		135		1,635		—		17,653		—		1,635		17,653		19,288		N/A
Total Properties in Development	$	20,087	$	55,276	$	—	$	120,938	$	—	$	55,276	$	120,938	$	176,214		N/A
Investment Land and Land Held for Development and Sale:
Summerlin Investment Land and Land in Various Stages of Development Summerlin, NV	$	69,577	$	74,029	$	—	$	135,261	$	—	$	209,290	$	—	$	209,290		N/A	N/A	06/96	N/A
Columbia and Emerson Land in Various Stages of Development Howard County, MD		—		53,000		—		35,476		—		88,476		—		88,476		N/A	N/A	09/85	N/A
Canyon Springs Land Held for Development Riverside County, CA		—		12,872		—		11,014		—		23,886		—		23,886		N/A	N/A	07/89	N/A
Other		—		—		—		92		—		92		—		92		N/A
Total Investment Land And Land Held for Development and Sale		69,577		139,901		—		181,843		—		321,744		—		321,744		N/A
Total	$	3,435,806	$	859,503	$	1,603,492	$	3,947,867	$	—	$	1,041,346	$	5,369,516	$	6,410,862	$	981,676

IV-15

Notes:

(1)

Reference is made to notes 1, 3 and 6 to the consolidated financial statements. A notation of N/A within the date acquired column indicates properties that we owned at completion of construction.

(2)

The determination of these amounts is not practicable and, accordingly, they are included in improvements.

(3)

The changes in total cost of properties for the years ended December 31, 2002, 2001 and 2000 are as follows (in thousands):

	2002			2001			2000
Balance at beginning of year	$	4,986,380		$	3,945,223		$	3,926,370
Additions, at cost		347,464			330,211			220,364
Cost of properties acquired		1,535,002			802,720			44,685
Cost of land sales		(78,719	)		(87,382	)		—
Retirements, sales and other dispositions		(304,093	)		(4,392	)		(246,196	)
Provision for loss on operating properties (note 9)		(75,172	)		—			—
Balance at end of year	$	6,410,862		$	4,986,380		$	3,945,223

(4)

The changes in accumulated depreciation and amortization for the years ended December 31, 2002, 2001 and 2000 are as follows (in thousands):

	2002			2001		2000
Balance at beginning of year	$	888,615		$	635,551	$	549,005
Depreciation and amortization charged to operations		162,922			133,542		96,529
Retirements, sales and other, net		(36,813	)		778		(9,983	)
Provision for loss on operating properties (note 9)		(33,048	)		—		—
Accumulated depreciation on properties acquired from The Rouse Company Incentive Compensation Statutory Trust (note 7)		—			118,744		—
Balance at end of year	$	981,676		$	888,615	$	635,551

(5)

The aggregate cost of properties for Federal income tax purposes is approximately $4,401,837,000 at December 31, 2002.

(6)

Reference is made to note 1(c) to the consolidated financial statements for information related to depreciation.

(7)

Reference is made to note 2 to the consolidated financial statements for information related to the acquisition of properties (majority financial interest ventures) from The Rouse Company Incentive Compensation Statutory Trust.

(8)

In order to conform to general industry practice, we have reclassified certain building and land improvement costs that are recoverable from tenants from other assets to property. These costs and related accumulated depreciation were $56.7 million and $35.5 million, respectively, at December 31, 2001, $46.2 million and $27.5 million, respectively, at December 31, 2000; and $37.9 million and $21.3 million, respectively, at December 31, 1999.

(9)

Costs and accumulated depreciation and amortization are reduced by impairment losses on certain buildings and improvements. Reference is made to note 11 to the consolidated financial statements for information related to the losses.

(10)

Certain other amounts for prior years have been reclassified to conform to the presentation for 2002.

IV-16

SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

The Rouse Company
By:	/s/  ANTHONY W. DEERING Anthony W. Deering Chairman of the Board, President and Chief Executive Officer	March 26, 2003

        Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Principal Executive Officer:
/s/  ANTHONY W. DEERING Anthony W. Deering Chairman of the Board, President and Chief Executive Officer	March 26, 2003
Principal Financial Officer:
/s/  THOMAS J. DEROSA Thomas J. DeRosa Vice Chairman and Chief Financial Officer	March 26, 2003
Principal Accounting Officer:
/s/  MELANIE M. LUNDQUIST Melanie M. Lundquist Senior Vice President and Corporate Controller	March 26, 2003

Board of Directors:

        David H. Benson, Jeremiah E. Casey, Platt W. Davis, III, Anthony W. Deering, Rohit M. Desai, Juanita T. James, Hanne M. Merriman, Roger W. Schipke, John G. Schreiber, Mark R. Tercek and Gerard J. M. Vlak.

By: /s/  ANTHONY W. DEERING Anthony W. Deering
For himself and as Attorney-in-fact for the above-named persons March 26, 2003

IV-17

I, Anthony W. Deering, certify that:

1.

I have reviewed this annual report on Form 10-K of The Rouse Company;

2.

Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.

Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)

designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b)

evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and

c)

presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

a)

all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6.

The registrant's other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: March 26, 2003

/s/  ANTHONY W. DEERING Anthony W. Deering
Chairman of the Board,
President and Chief Executive Officer

IV-18

I, Thomas J. DeRosa, certify that:

1.

I have reviewed this annual report on Form 10-K of The Rouse Company;

2.

Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.

Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)

designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b)

evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and

c)

presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

a)

all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6.

The registrant's other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: March 26, 2003

/s/  THOMAS J. DEROSA Thomas J. DeRosa
Vice Chairman and Chief Financial Officer

IV-19

Exhibit Index

Exhibit No.
3.1	Amended and Restated Articles of Incorporation (the "Charter") of The Rouse Company, dated May 27, 1988—incorporated by reference to the Exhibits to the Company's Form 10-K Annual Report for the fiscal year ended December 31, 1988 (see SEC File No. 0-1743).
3.2	Articles of Amendment to the Charter of The Rouse Company, which Articles of Amendment were effective January 10, 1991—incorporated by reference to the Exhibits to The Rouse Company's Form 10-K Annual Report for the fiscal year ended December 31, 1990 (see SEC File No. 0-1743).
3.3	Articles Supplementary to the Charter of The Rouse Company, dated February 17, 1993—incorporated by reference to the Exhibits to The Rouse Company's Form 10-K Annual Report for the fiscal year ended December 31, 1992 (see SEC File No. 0-1743).
3.4	Articles Supplementary to the Charter of The Rouse Company, dated September 26, 1994—incorporated by reference to the Exhibits to The Rouse Company's S-3 Registration Statement (No. 33-57707).
3.5	Articles Supplementary to the Charter of The Rouse Company, dated December 27, 1994—incorporated by reference to the Exhibits to The Rouse Company's S-3 Registration Statement (No. 33-57707).
3.6	Articles Supplementary to the Charter of The Rouse Company, dated June 5, 1996, relating to The Rouse Company's Increasing Rate Cumulative Preferred Stock, par value $0.01 per share—incorporated by reference to the Exhibits to The Rouse Company's S-3 Registration Statement (No. 333-20781).
3.7	Articles Supplementary to the Charter of The Rouse Company, dated June 11, 1996, relating to The Rouse Company's 10.25% Junior Preferred Stock, 1996 Series, par value $0.01 per share—incorporated by reference to the Exhibits to The Rouse Company's Form S-3 Registration Statement (No. 333-20781).
3.8	Articles Supplementary to the Charter of The Rouse Company, dated February 21, 1997, relating to The Rouse Company's Series B Convertible Preferred Stock, par value $0.01 per share—incorporated by reference to the Exhibits to The Rouse Company's Current Report on Form 8-K, dated February 26, 1997 (see SEC File No. 0-1743).
3.9	Articles Supplementary to the Charter of The Rouse Company, dated February 24, 2000—incorporated by reference to the Exhibits to The Rouse Company's Current Report on Form 8-K, dated February 29, 2000 (see SEC File No. 0-1743).
3.10	Bylaws of The Rouse Company, as amended dated January 30, 1997—incorporated by reference to the Exhibits to The Rouse Company's Form S-3 Registration Statement (No. 333-20781).
3.11	Amendments to the Bylaws of The Rouse Company, effective February 24, 2000—incorporated by reference to the Exhibits to The Rouse Company's Current Report on Form 8-K, dated February 29, 2000 (see SEC File No. 0-1743).
10.1	The Rouse Company 1990 Stock Option Plan—incorporated by reference to The Rouse Company's definitive proxy statement filed pursuant to Regulation 14A on April 12, 1990 (see SEC File No. 0-1743).
10.2	Amendment to The Rouse Company 1990 Stock Option Plan, effective as of May 12, 1994—incorporated by reference to The Rouse Company's Form 10-K Annual Report for the fiscal year ended December 31, 1994 (see SEC File No. 0-1743).

10.3	The Rouse Company 1990 Stock Bonus Plan—incorporated by reference to The Rouse Company's definitive proxy statement filed pursuant to Regulation 14A on April 12, 1990 (see SEC File No. 0-1743).
10.4	The Rouse Company 1994 Stock Incentive Plan—incorporated by reference to The Rouse Company's definitive proxy statement filed pursuant to Regulation 14A on April 5, 1994 (see SEC File No. 0-1743).
10.5	Amended and Restated Supplemental Retirement Benefit Plan of The Rouse Company, made as of January 1, 1985 and further amended and restated as of September 24, 1992, March 4, 1994, and May 10, 1995—incorporated by reference to The Rouse Company's Form 10-K Annual Report for the fiscal year ended December 31, 1995 (see SEC File No. 0-1743).
10.6	Contingent Stock Agreement, effective as of January 1, 1996, by the Company in favor of and for the benefit of the Holders and Representatives named therein—incorporated by reference to the Exhibits to The Rouse Company's Form S-4 Registration Statement (No. 333-1693).
10.7	The Rouse Company Deferred Compensation Plan for Outside Directors (Amended and Restated), dated as of May 23, 1996—incorporated by reference to The Rouse Company's Form 10-K Annual Report for the fiscal year ended December 31, 1996 (see SEC File No. 0-1743).
10.8	1997 Stock Incentive Plan—incorporated by reference to The Rouse Company's definitive proxy statement filed pursuant to Regulation 14A on March 14, 1997 (see SEC File No. 0-1743).
10.9	The Rouse Company Special Option Plan, effective January 1, 1998—incorporated by reference to The Rouse Company's Form 10-K Annual Report for the year ended December 31, 1997 (see SEC File No. 0-1743).
10.10	Contribution Agreement, dated as of February 1, 1999, among The Rouse Company of Nevada, Inc., HRD Properties, Inc., Rouse-Bridgewater Commons, LLC, Rouse-Park Meadows Holding, LLC, Rouse-Towson Town Center LLC, Bridgewater Commons Mall, LLC, Rouse-Fashion Place, LLC, Rouse-Park Meadows LLC, Towson TC, LLC, TTC SPE, LLC and Fourmall Acquisition, LLC—incorporated by reference to The Rouse Company's Current Report on Form 8-K dated February 1, 1999 (see SEC File No. 0-1743).
10.11	Employment Agreement, dated September 24, 1998, between The Rouse Company and Anthony W. Deering—incorporated by reference to The Rouse Company's Form 10-K Annual Report for the fiscal year ended December 31, 1998 (see SEC File No. 0-1743).
10.12	The Rouse Company 1999 Stock Incentive Plan, made as of June 3, 1999 and amended and restated as of February 22, 2001—incorporated by reference to The Rouse Company's Form 10-Q Quarterly Report for the quarterly period ended June 30, 2001 (see SEC File No. 0-1743).
10.13	Letter Agreement, dated July 12, 1999, between The Rouse Company and Anthony W. Deering—incorporated by reference to The Rouse Company's Form 10-Q Quarterly Report for the quarterly period ended September 30, 1999 (see SEC File No. 0-1743).
10.14	Executive Agreement, dated October 25, 1999, between The Rouse Company and Daniel C. Van Epp—incorporated by reference to The Rouse Company's Form 10-K Annual Report for the fiscal year ended December 31, 1999 (see SEC File No. 0-1743). The same Executive Agreement was entered into with Jeffrey H. Donahue, Duke S. Kassolis, Douglas A. McGregor, Robert Minutoli, Robert D. Riedy, Alton J. Scavo and Jerome D. Smalley.

10.15	Letter agreement, dated August 20, 2002, between The Rouse Company and Jeffrey H. Donahue—incorporated by reference to The Rouse Company's Form 10-Q Quarterly Report for the quarterly period ended September 30, 2002 (see SEC File No. 0-1743).
10.16	Executive Agreement, dated September 3, 2002, between The Rouse Company and Thomas John DeRosa—incorporated by reference to The Rouse Company's Form 10-Q Quarterly Report for the quarterly period ended September 30, 2002 (see SEC File No. 0-1743).
10.17	Letter agreement, dated September 12, 2002, between The Rouse Company and Douglas A. McGregor—incorporated by reference to The Rouse Company's Form 10-Q Quarterly Report for the quarterly period ended September 30, 2002 (see SEC File No. 0-1743).
12.1*	Ratio of earnings to fixed charges
12.2*	Ratio of earnings to combined fixed charges and Preferred stock dividend requirements
13*	Annual report to security holders
21*	Subsidiaries of the Registrant
23*	Consent of KPMG LLP, Independent Auditors
24*	Power of Attorney
99	Additional Exhibits:
99.1*	Form 11-K Annual Report of The Rouse Company Savings Plan for the year ended December 31, 2002
99.2*	Factors affecting future operating results
99.3*	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Purusant to Section 906 of the Sarbanes-Oxley Act of 2002

*

filed herewith

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Part I

Item 1. Business.
Item 1(a). General Development of Business.
Item 1(b). Financial Information About Industry Segments.
Item 1(c). Narrative Description of Business.
Item 1(d). Financial Information about Geographic Areas.
Item 1(e). Available Information

Item 2. Properties.
Item 3. Legal Proceedings.
Item 4. Submission of Matters to a Vote of Security Holders.

Part II

Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters.
Item 6. Selected Financial Data.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
Item 8. Financial Statements and Supplementary Data.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Part III

Item 12. Securities authorized for issuance under equity compensation plans
Item 14. Controls and Procedures.

Part IV

Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K.

The Rouse Company Index to Financial Statements and Schedules
INDEPENDENT AUDITORS' REPORT

Schedule II

THE ROUSE COMPANY AND SUBSIDIARIES Valuation and Qualifying Accounts Years ended December 31, 2002, 2001 and 2000 (in thousands)
Schedule II
THE ROUSE COMPANY AND SUBSIDIARIES Real Estate and Accumulated Depreciation (note 1 and 9)
THE ROUSE COMPANY AND SUBSIDIARIES Real Estate and Accumulated Depreciation (notes 1 and 8) December 31, 2002 (in thousands)
SIGNATURES
Exhibit Index

EX-12.1

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Exhibit 12.1

The Rouse Company and Subsidiaries

Computation of Ratio of Earnings to Fixed Charges
(dollars in thousands)

				Year ended December 31,
				2002			2001			2000			1999			1998
Earnings (loss) before income taxes, equity in earnings of unconsolidated real estate ventures, net gains (losses) on operating properties, discontinued operations and cumulative effect of change in accounting principle				$	102,722		$	107,377		$	8,680		$	(7,410	)	$	15,819
Equity in earnings of unconsolidated real estate ventures					33,259			32,561			128,045			99,790			99,997
Net gains (losses) on operating properties					6,823			(432	)		33,844			63,092			(6,109	)
Fixed charges:
	Interest costs				283,526			259,849			254,149			250,223			216,047
	Distributions on preferred securities				14,303			12,719			12,719			12,719			12,719
	Portion of rental expense representative of interest factor (1)				7,542			8,453			9,254			9,086			5,818
Adjustments to earnings:
	Minority interest in earnings of majority-owned subsidiaries having fixed charges				2,961			1,571			1,172			1,079			1,787
	Decrease (increase) in undistributed earnings of unconsolidated real estate ventures (2)				5,763			(4,151	)		(36,457	)		(44,480	)		(55,015	)
	Capitalized interest				(38,205	)		(36,563	)		(19,653	)		(19,719	)		(19,511	)
	Previously capitalized interest amortized into earnings:
		Depreciation of operating properties and other investments (3)			5,658			5,287			4,929			4,554			4,192
		Cost of land sales (4)			4,942			5,431			—			—			—
			Earnings available for fixed charges	$	429,294		$	392,102		$	396,682		$	368,934		$	275,744
Fixed charges:
	Interest costs			$	283,526		$	259,849		$	254,149		$	250,223		$	216,047
	Distributions on preferred securities				14,303			12,719			12,719			12,719			12,719
	Portion of rental expense representative of interest factor (1)				7,542			8,453			9,254			9,086			5,818
			Total fixed charges	$	305,371		$	281,021		$	276,122		$	272,028		$	234,584
Ratio of earnings to fixed charges (5)					1.41			1.40			1.44			1.36			1.18

(1)

Includes (a) 80% of minimum rentals, the portion of such rentals considered to be a reasonable estimate of the interest factor and (b) 100% of contingent rentals of $2.2 million, $2.5 million, $3.8 million, $4.5 million and $1.6 million, for the years ended December 31, 2002, 2001, 2000, 1999 and 1998, respectively.

(2)

Includes undistributed earnings of certain unconsolidated real estate ventures, formed December 31, 1997, in which we held substantially all (at least 98%) of the financial interest but did not own a majority voting interest. In January 2001, we acquired all of the shares of voting stock (91%) of these ventures that we did not own, and from the date of acquisition, these ventures are included in our consolidated financial statements. Our share of undistributed earnings of these ventures was $31.7 million in 2000, $32.5 million in 1999 and $42.5 million in 1998.

(3)

Represents an estimate of depreciation of capitalized interest costs based on our established depreciation policy and an analysis of interest costs capitalized since 1971.

(4)

Represents 10% of the cost of Columbia land sales and 5% of the cost of Summerlin land sales, the portions of such costs considered to be reasonable estimates of the interest factor. On December 31, 1997, certain wholly owned subsidiaries, including those that conducted substantially all of our land sales and community development activities, issued 91% of their voting common stock to a trust, of which certain employees are beneficiaries. These sales were made at fair value and as part of our plan to meet the qualifications for REIT status. We retained the remaining voting stock of the ventures and held shares of nonvoting common and/or preferred stock which, taken together, comprised substantially all (at least 98%) of the financial interest in them. As a result of our disposition of the majority voting interests in the ventures, we began accounting for our investment in them using the equity method effective December 31, 1997. In January 2001, we acquired all of the shares of voting stock (91%) in these ventures that we did not own, and from the date of acquisition, these ventures are included in our consolidated financial statements. As a result of these transactions, no adjustment for the interest portion of the cost of land sales has been included for the period from January 1, 1998 through December 31, 2000.

(5)

The computation and the resulting ratio excludes the effect of discontinued operations.

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Exhibit 12.1

The Rouse Company and Subsidiaries Computation of Ratio of Earnings to Fixed Charges (dollars in thousands)

EX-12.2

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Exhibit 12.2

The Rouse Company and Subsidiaries

Computation of Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividend Requirements
(dollars in thousands)

				Year ended December 31,
				2002			2001			2000			1999			1998
Earnings (loss) before income taxes, equity in earnings of unconsolidated real estate ventures, net gains (losses) on operating properties, discontinued operations and cumulative effect of change in accounting principle				$	102,722		$	107,377		$	8,680		$	(7,410	)	$	15,819
Equity in earnings of unconsolidated real estate ventures					33,259			32,561			128,045			99,790			99,997
Net gains (losses) on operating properties					6,823			(432	)		33,844			63,092			(6,109	)
Fixed charges:
	Interest costs				283,526			259,849			254,149			250,223			216,047
	Distributions on preferred securities				14,303			12,719			12,719			12,719			12,719
	Portion of rental expense representative of interest factor (1)				7,542			8,453			9,254			9,086			5,818
Adjustments to earnings:
	Minority interest in earnings of majority-owned subsidiaries having fixed charges				2,961			1,571			1,172			1,079			1,787
	Decrease (increase) in undistributed earnings of unconsolidated real estate ventures (2)				5,763			(4,151	)		(36,457	)		(44,480	)		(55,015	)
	Capitalized interest				(38,205	)		(36,563	)		(19,653	)		(19,719	)		(19,511	)
	Previously capitalized interest amortized into earnings:
		Depreciation of operating properties and other investments (3)			5,658			5,287			4,929			4,554			4,192
		Cost of land sales (4)			4,942			5,431			—			—			—
			Earnings available for fixed charges and Preferred stock dividend requirements	$	429,294		$	392,102		$	396,682		$	368,934		$	275,744
Combined fixed charges and Preferred stock dividend requirements:
	Interest costs			$	283,526		$	259,849		$	254,149		$	250,223		$	216,047
	Distributions on preferred securities				14,303			12,719			12,719			12,719			12,719
	Portion of rental expense representative of interest factor (1)				7,542			8,453			9,254			9,086			5,818
	Preferred stock dividend requirements				12,150			12,150			12,150			12,150			12,150
			Total combined fixed charges and Preferred stock dividend requirements	$	317,521		$	293,171		$	288,272		$	284,178		$	246,734
Ratio of earnings to combined fixed charges and Preferred stock dividend requirements (5)					1.35			1.34			1.38			1.30			1.12

(1)

Includes (a) 80% of minimum rentals, the portion of such rentals considered to be a reasonable estimate of the interest factor and (b) 100% of contingent rentals of $2.2 million, $2.5 million, $3.8 million, $4.5 million and $1.6 million, for the years ended December 31, 2002, 2001, 2000, 1999 and 1998, respectively.

(2)

Includes undistributed earnings of certain unconsolidated real estate ventures, formed December 31, 1997, in which we held substantially all (at least 98%) of the financial interest but did not own a majority voting interest. In January 2001, we acquired all of the shares of voting stock (91%) of these ventures that we did not own, and from the date of acquisition, these ventures are included in our consolidated financial statements. Our share of undistributed earnings of these ventures was $31.7 million in 2000, $32.5 million in 1999 and $42.5 million in 1998.

(3)

Represents an estimate of depreciation of capitalized interest costs based on our established depreciation policy and an analysis of interest costs capitalized since 1971.

(4)

Represents 10% of the cost of Columbia land sales and 5% of the cost of Summerlin land sales, the portions of such costs considered to be reasonable estimates of the interest factor. On December 31, 1997, certain wholly owned subsidiaries, including those that conducted substantially all of our land sales and community development activities, issued 91% of their voting common stock to a trust, of which certain employees are beneficiaries. These sales were made at fair value and as part of our plan to meet the qualifications for REIT status. We retained the remaining voting stock of the ventures and held shares of nonvoting common and/or preferred stock which, taken together, comprised substantially all (at least 98%) of the financial interest in them. As a result of our disposition of the majority voting interests in the ventures, we began accounting for our investment in them using the equity method effective December 31, 1997. In January 2001, we acquired all of the shares of voting stock (91%) in these ventures that we did not own, and from the date of acquisition, these ventures are included in our consolidated financial statements. As a result of these transactions, no adjustment for the interest portion of the cost of land sales has been included for the period from January 1, 1998 through December 31, 2000.

(5)

The computation and the resulting ratio excludes the effect of discontinued operations.

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Exhibit 12.2

The Rouse Company and Subsidiaries Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividend Requirements (dollars in thousands)

EX-13

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Exhibit 13

Annual report to security holders

        The annual report to shareholders has not been completed as of this filing and will be furnished to the Securities and Exchange Commission in its entirety on or before April 8, 2003.

        The financial section of the annual report, which is incorporated by reference, is final and is enclosed as Exhibit 13. This financial section includes all the information incorporated by reference in Parts I, II and IV of this Form 10-K Annual Report for the fiscal year ended December 31, 2002.

The Rouse Company and Subsidiaries
MANAGEMENT'S STATEMENT ON RESPONSIBILITIES FOR ACCOUNTING,
AUDITING AND FINANCIAL REPORTING

        The financial statements and other information included in the financial review section of this annual report to shareholders have been prepared by management. Financial information presented elsewhere in this report is consistent with the data presented in the financial review section.

        The consolidated financial statements have been prepared using accounting principles generally accepted in the United States of America considered appropriate in the circumstances. Preparation of the financial statements and other financial information requires the use of estimation and judgment. We have made these estimates and judgments based on extensive experience and substantive understanding of relevant events and transactions. The primary objective of financial reporting is to provide users of financial statements with sufficient, relevant information to enable them to evaluate our financial position and results of operations.

        In fulfilling our responsibility for the reliability and integrity of financial information, we have established and maintain a system of internal control. We believe that this system provides reasonable assurance regarding achievement of our objectives with respect to the reliability of financial reporting, the effectiveness and efficiency of operations and compliance with applicable laws and regulations. This system is supported by our business ethics policy and is regularly tested by internal auditors. The independent auditors also consider the system of internal control to the extent necessary to determine the nature, timing and extent of their audit procedures.

        The Audit Committee of the Board of Directors is composed of directors who are neither officers nor employees of the Company. The Committee meets periodically with management, our internal auditors and the independent auditors to review the work and conclusions of each. The internal auditors and the independent auditors have full and free access to the Audit Committee and meet with it, with and without management present, to discuss accounting, auditing and financial reporting matters. The Audit Committee recommends, and the Board of Directors appoints, the independent auditors.

1

The Rouse Company and Subsidiaries
CONSOLIDATED BALANCE SHEETS
December 31, 2002 and 2001
(in thousands, except common share data)

			2002			2001
Assets
Property:
	Operating properties:
		Property and deferred costs of projects	$	5,912,904		$	4,484,183
		Less accumulated depreciation and amortization		981,676			888,615
				4,931,228			3,595,568
	Properties in development			176,214			217,906
	Investment land and land held for development and sale			321,744			284,291
		Total property		5,429,186			4,097,765
Investments in and advances to unconsolidated real estate ventures				442,405			269,573
Prepaid expenses, receivables under finance leases and other assets				383,914			371,072
Accounts and notes receivable				56,927			87,753
Investments in marketable securities				32,103			22,157
Cash and cash equivalents				41,633			32,123
		Total assets	$	6,386,168		$	4,880,443
Liabilities
Debt:
	Property debt not carrying a Parent Company guarantee of repayment		$	3,271,437		$	2,709,699
	Parent Company debt and debt carrying a Parent Company guarantee of repayment:
		Property debt		158,258			69,389
		Other debt		1,011,782			709,732
				1,170,040			779,121
		Total debt		4,441,477			3,488,820
Accounts payable, accrued expenses and other liabilities				696,267			599,298
Company-obligated mandatorily redeemable preferred securities of a trust holding solely Parent Company subordinated debt securities				136,340			136,965
Commitments and contingencies
Shareholders' equity
Series B Convertible Preferred stock with a liquidation preference of $202,500				41			41
Common stock of 1¢ par value per share; 250,000,000 shares authorized; issued 86,909,700 shares in 2002 and 69,354,169 shares in 2001				869			694
Additional paid-in capital				1,234,848			763,351
Accumulated deficit				(109,740	)		(102,425	)
Accumulated other comprehensive income (loss):
	Minimum pension liability adjustment			(3,665	)		(2,915	)
	Unrealized net losses on derivatives designated as cash flow hedges			(10,269	)		(3,386	)
		Total shareholders' equity		1,112,084			655,360
		Total liabilities and shareholders' equity	$	6,386,168		$	4,880,443

The accompanying notes are an integral part of these statements.

2

The Rouse Company and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
Years ended December 31, 2002, 2001 and 2000
(in thousands, except per share data)

				2002			2001			2000
Revenues				$	1,104,734		$	947,057		$	624,425
Operating expenses, exclusive of provision for bad debts, depreciation and amortization					548,523			477,227			282,135
Interest expense					245,321			223,286			234,496
Provision for bad debts					8,994			8,685			6,193
Depreciation and amortization					161,333			129,666			95,121
Other provisions and losses (gains), net					37,841			816			(2,200	)
	Earnings before income taxes, equity in earnings of unconsolidated real estate ventures, net gains (losses) on operating properties, discontinued operations and cumulative effect of change in accounting principle				102,722			107,377			8,680
Income tax provision—primarily deferred					29,975			27,367			254
Equity in earnings of unconsolidated real estate ventures					33,259			32,561			128,045
	Earnings before net gains (losses) on operating properties, discontinued operations and cumulative effect of change in accounting principle				106,006			112,571			136,471
Net gains (losses) on operating properties					6,823			(432	)		33,844
	Earnings from continuing operations				112,829			112,139			170,315
Discontinued operations					27,022			(1,022	)		170
Cumulative effect at January 1, 2001 of change in accounting for derivative instruments and hedging activities					—			(411	)		—
	Net earnings				139,851			110,706			170,485
Other items of comprehensive income (loss):
	Minimum pension liability adjustment				(750	)		(9	)		(2,435	)
	Unrealized net losses on derivatives designated as cash flow hedges				(6,883	)		(3,386	)		—
	Comprehensive income			$	132,218		$	107,311		$	168,050
	Net earnings applicable to common shareholders			$	127,701		$	98,556		$	158,335
Earnings per share of common stock
	Basic:
		Continuing operations		$	1.17		$	1.45		$	2.27
		Discontinued operations			.32			(.02	)		—
		Cumulative effect of change in accounting principle			—			(.01	)		—
			Net	$	1.49		$	1.42		$	2.27
	Diluted:
		Continuing operations		$	1.15		$	1.43		$	2.24
		Discontinued operations			.32			(.02	)		—
		Cumulative effect of change in accounting principle			—			(.01	)		—
			Net	$	1.47		$	1.40		$	2.24

The accompanying notes are an integral part of these statements.

3

The Rouse Company and Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Years ended December 31, 2002, 2001 and 2000
(in thousands, except per share data)

		Series B Preferred stock		Common stock			Additional paid-in capital			Accumulated deficit			Accumulated other comprehensive income (loss)			Total
Balance at December 31, 1999		$	41	$	707		$	808,277		$	(169,974	)	$	(471	)	$	638,580
Net earnings			—		—			—			170,485			—			170,485
Other comprehensive income (loss)			—		—			—			—			(2,435	)		(2,435	)
Dividends declared:
	Common stock — $1.32 per share		—		—			—			(91,376	)		—			(91,376	)
	Preferred stock — $3.00 per share		—		—			—			(12,150	)		—			(12,150	)
Purchases of common stock			—		(51	)		(126,264	)		—			—			(126,315	)
Common stock issued pursuant to Contingent Stock Agreement			—		18			42,612			—			—			42,630
Proceeds from exercise of stock options			—		5			8,056			—			—			8,061
Lapse of restrictions on common stock awards			—		—			2,988			—			—			2,988
Balance at December 31, 2000			41		679			735,669			(103,015	)		(2,906	)		630,468
Net earnings			—		—			—			110,706			—			110,706
Other comprehensive income (loss)			—		—			—			—			(3,395	)		(3,395	)
Dividends declared:
	Common stock — $1.42 per share		—		—			—			(97,966	)		—			(97,966	)
	Preferred stock — $3.00 per share		—		—			—			(12,150	)		—			(12,150	)
Purchases of common stock			—		(11	)		(28,188	)		—			—			(28,199	)
Common stock issued pursuant to Contingent Stock Agreement			—		16			40,804			—			—			40,820
Proceeds from exercise of stock options			—		9			8,863			—			—			8,872
Common stock issued in acquisition of voting interests in majority financial interest ventures			—		1			3,499			—			—			3,500
Lapse of restrictions on common stock awards			—		—			2,704			—			—			2,704
Balance at December 31, 2001			41		694			763,351			(102,425	)		(6,301	)		655,360
Net earnings			—		—			—			139,851			—			139,851
Other comprehensive income (loss)			—		—			—			—			(7,633	)		(7,633	)
Dividends declared:
	Common stock — $1.56 per share		—		—			—			(135,016	)		—			(135,016	)
	Preferred stock — $3.00 per share		—		—			—			(12,150	)		—			(12,150	)
Purchases of common stock			—		(7	)		(21,181	)		—			—			(21,188	)
Common stock issued pursuant to Contingent Stock Agreement			—		6			19,350			—			—			19,356
Proceeds from exercise of stock options			—		9			14,339			—			—			14,348
Other common stock issuances			—		167			456,180			—			—			456,347
Lapse of restrictions on common stock awards			—		—			2,809			—			—			2,809
Balance at December 31, 2002		$	41	$	869		$	1,234,848		$	(109,740	)	$	(13,934	)	$	1,112,084

The accompanying notes are an integral part of these statements.

4

The Rouse Company and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 2002, 2001 and 2000
(in thousands)

			2002			2001			2000
Cash flows from operating activities
Rents and other revenues received			$	863,166		$	743,394		$	619,552
Proceeds from land sales and notes receivable from land sales				231,220			193,064			14,553
Interest received				9,883			6,711			6,686
Operating expenditures				(427,155	)		(353,972	)		(274,007	)
Land development expenditures				(105,199	)		(99,407	)		—
Interest paid				(233,403	)		(213,781	)		(233,714	)
Income taxes paid				(1,409	)		(2,665	)		(251	)
Dividends, interest and other operating distributions from unconsolidated real estate ventures				39,041			28,410			128,421
		Net cash provided by operating activities		376,144			301,754			261,240
Cash flows from investing activities
Expenditures for properties in development				(172,718	)		(146,103	)		(165,298	)
Expenditures for improvements to existing properties				(53,751	)		(48,473	)		(52,676	)
Expenditures for acquisitions of interests in properties and other assets				(889,776	)		—			(22,245	)
Proceeds from dispositions of interests in operating properties				252,036			4,594			221,864
Other distributions from other unconsolidated real estate ventures				44,853			109,329			—
Expenditures for investments in other unconsolidated ventures				(35,715	)		(45,955	)		(10,704	)
Net payments received on loans to unconsolidated majority financial interest ventures				—			—			24,410
Other				(8,640	)		13			4,374
		Net cash used by investing activities		(863,711	)		(126,595	)		(275	)
Cash flows from financing activities
Proceeds from issuance of property debt				195,164			259,401			155,863
Repayments of property debt:
	Scheduled principal payments			(76,058	)		(58,681	)		(55,467	)
	Other payments			(209,453	)		(234,381	)		(186,679	)
Proceeds from issuance of other debt				812,691			28,000			54,750
Repayments of other debt				(509,689	)		(37,872	)		(15,811	)
Purchases of common stock				(21,188	)		(28,199	)		(126,315	)
Proceeds from issuance of common stock				456,347			—			—
Proceeds from exercise of stock options				14,348			8,872			8,061
Dividends paid				(147,166	)		(110,116	)		(103,526	)
Other				(17,919	)		15,198			(4,589	)
		Net cash provided (used) by financing activities		497,077			(157,778	)		(273,713	)
Net increase (decrease) in cash and cash equivalents				9,510			17,381			(12,748	)
Cash and cash equivalents at beginning of year				32,123			14,742			27,490
Cash and cash equivalents at end of year			$	41,633		$	32,123		$	14,742

The accompanying notes are an integral part of these statements.

5

The Rouse Company and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 2002, 2001 and 2000
(in thousands)

		2002			2001			2000
Reconciliation of Net Earnings to Net Cash Provided by Operating Activities
Net earnings		$	139,851		$	110,706		$	170,485
Adjustments to reconcile net earnings to net cash provided by operating activities:
	Depreciation and amortization		162,922			133,542			96,529
	Change in undistributed earnings of unconsolidated real estate ventures		5,763			(4,151	)		(36,457	)
	Net losses (gains) on operating properties		(39,835	)		432			(33,150	)
	Certain other provisions and losses (gains), net		18,168			451			(2,200	)
	Cumulative effect of change in accounting principle		—			411			—
	Participation expense pursuant to Contingent Stock Agreement		52,870			32,904			35,322
	Debt assumed by purchasers of land		(16,186	)		(24,634	)		—
	Land development expenditures in excess of cost of land sales		(33,668	)		(12,025	)		—
	Provision for bad debts		9,059			8,992			6,683
	Deferred income taxes		27,242			25,402			—
	Decrease in accounts and notes receivable		24,049			11,213			10,392
	Decrease in other assets		8,393			5,571			414
	Increase (decrease) in accounts payable, accrued expenses and other liabilities		2,212			15,399			(59	)
	Other, net		15,304			(2,459	)		13,281
Net cash provided by operating activities		$	376,144		$	301,754		$	261,240
Schedule of Noncash Investing and Financing Activities
Common stock issued pursuant to Contingent Stock Agreement		$	19,356		$	40,820		$	42,630
Capital lease obligations incurred			12,720			3,359			4,189
Lapse of restrictions on common stock awards			2,809			2,704			2,988
Debt assumed by purchasers of land and other assets			16,656			24,634			—
Debt and other liabilities assumed and consolidated in acquisition of assets from Rodamco North America N.V. and partners' interests in unconsolidated real estate ventures			915,976			547,531			—
Property and other assets contributed to unconsolidated real estate ventures			196,920			—			184,926
Debt and other liabilities related to property and other assets contributed to unconsolidated real estate ventures			129,801			—			76,577
Debt assumed or issued in other acquisitions of assets			—			105,195			23,823
Common stock issued in acquisition of voting interests in majority financial interest ventures			—			3,500			—
Property and other assets obtained in acquisition of majority financial interest ventures			—			884,572			—

The accompanying notes are an integral part of these statements.

6

The Rouse Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2002, 2001 and 2000

(1) Summary of significant accounting policies

(a) Basis of presentation

        The consolidated financial statements include the accounts of The Rouse Company, our subsidiaries and partnerships ("we," "Rouse" or "us") in which we have a majority voting interest and control. We account for investments in other ventures using the equity or cost methods as appropriate in the circumstances. Significant intercompany balances and transactions are eliminated in consolidation.

        The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosures of contingencies at the date of the financial statements and revenues and expenses recognized during the reporting period. Significant estimates are inherent in the preparation of our financial statements in a number of areas, including evaluation of impairment of long-lived assets (including operating properties and properties held for development or sale), evaluation of collectibility of accounts and notes receivable and the cost and completion percentages used for land sales. Actual results could differ from those and other estimates.

        In October 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," and Accounting Principles Board ("APB") Opinion No. 30, "Reporting the Results of Operations — Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions." The Statement does not change the fundamental provisions of SFAS No. 121; however, it resolves various implementation issues of SFAS No. 121 and establishes a single accounting model for long-lived assets to be disposed of by sale. It retains the requirement of APB Opinion No. 30 to report separately discontinued operations, and extends that reporting for all periods presented to a component of an entity that, subsequent to or on January 1, 2002, either has been disposed of (by sale, abandonment, or in distribution to owners) or is classified as held for sale. Additionally, SFAS No. 144 requires that assets and liabilities of components held for sale, if material, be disclosed separately in the balance sheet. We adopted SFAS No. 144 effective January 1, 2002.

        We sold 11 community retail centers in April 2002 and Tampa Bay Center in December 2002 (see note 11). We decided to sell these properties because they did not meet one of our primary business strategies of owning and operating large-scale premier shopping centers. In December 2002, we also sold a newly constructed community retail center that opened in August 2002 in Summerlin, Nevada. We constructed this property with the intention of selling it. Under the provisions of SFAS No. 144, we reclassified the operating results of these properties to discontinued operations for all periods

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presented. The operating results of these properties do not materially affect the reported segment results in note 8 and are summarized as follows (in thousands):

		2002		2001			2000
Revenues		$	5,401	$	19,280		$	8,959
Operating expenses, exclusive of provision for bad debts, depreciation and amortization			3,692		9,122			5,460
Interest expense			2,146		5,479			2,248
Provision for bad debts			65		307			490
Depreciation and amortization			1,589		3,876			1,408
Other provisions and losses			5,136		—			—
Net gains (losses) on operating properties			33,012		—			(694	)
Deferred income tax benefit (provision)			1,237		(1,518	)		—
Equity in earnings of unconsolidated real estate ventures			—		—			1,511
	Discontinued operations	$	27,022	$	(1,022	)	$	170

        In order to conform to general industry practice, we have also reclassified certain building and land improvement costs that are recoverable from tenants from other assets to property. These costs and related accumulated depreciation were $89.0 million and $45.9 million, respectively, at December 31, 2002 and $56.7 million and $35.5 million, respectively, at December 31, 2001. Depreciation of these assets was reclassified from operating expenses to depreciation. Depreciation of these assets for 2002, 2001 and 2000 was $12.7 million, $8.0 million and $6.2 million, respectively.

        In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections." Upon adoption of SFAS No. 145, we are required to apply the criteria in APB Opinion No. 30 in determining the classification of gains and losses resulting from the early extinguishment of debt.

        SFAS No. 145 is effective for us on January 1, 2003 with early adoption of the provisions related to the rescission of SFAS No. 4 encouraged. We adopted the provisions relating to the rescission of SFAS No. 4 in 2002, determined that gains and losses we previously recognized on early extinguishments of debt were not extraordinary items under the criteria of APB 30 and reclassified them as follows (in thousands):

	2001		2000
Other provisions and losses (gains), net	$	451	$	(2,200	)
Equity in earnings of unconsolidated real estate ventures		245		—
Amount previously reported as extraordinary items	$	696	$	(2,200	)

        Certain other amounts for prior years have been reclassified to conform to the presentation methods used for 2002.

(b) Description of business

        Through our subsidiaries and affiliates, we acquire, develop and manage income-producing properties located throughout the United States and develop and sell land for residential, commercial and other uses. The income-producing properties consist of retail centers, office and industrial buildings and mixed-use and other properties. The retail centers are primarily regional shopping centers in suburban market areas, but also include specialty marketplaces in certain downtown areas and several community retail centers. The office and industrial properties are located primarily in the Columbia, Baltimore and Las Vegas market areas or are components of large-scale mixed-use properties (which include retail, parking and other uses) located in other urban markets. We dispose of income-producing

8

properties that are not consistent with our business strategies and/or that are not meeting or are not considered to have the potential to continue to meet our investment criteria. Land development and sales operations are predominantly related to large-scale, long-term community development projects in and around Columbia, Maryland and Summerlin, Nevada.

(c) Property

        Properties to be developed or held and used in operations are carried at cost reduced for impairment losses, where appropriate. Acquisition, development and construction costs of properties in development are capitalized including, where applicable, salaries and related costs, real estate taxes, interest and preconstruction costs. The preconstruction stage of development of an operating property (or an expansion of an existing property) includes efforts and related costs to secure land control and zoning, evaluate feasibility and complete other initial tasks which are essential to development. Provisions are made for costs of potentially unsuccessful preconstruction efforts by charges to operations. Development and construction costs and costs of significant improvements, replacements and renovations at operating properties are capitalized, while costs of maintenance and repairs are expensed as incurred.

        Direct costs associated with financing and leasing of operating properties are capitalized as deferred costs and amortized using the interest or straight-line methods, as appropriate, over the periods benefited by the expenditures.

        Depreciation of operating properties is computed using the straight-line method. The annual rate of depreciation for most of the retail centers is based on a 55-year composite life and a salvage value of approximately 10%. The other retail centers, all office buildings and other properties are generally depreciated using composite lives of 40 years.

        If events or circumstances indicate that the carrying value of an operating property to be held and used may be impaired, a recoverability analysis is performed based on estimated undiscounted future cash flows to be generated from the property. If the analysis indicates that the carrying value is not recoverable from future cash flows, the property is written down to estimated fair value and an impairment loss is recognized. Fair values are determined based on estimated future cash flows using appropriate discount and capitalization rates.

        Properties held for sale are carried at the lower of their carrying values (i.e., cost less accumulated depreciation and any impairment loss recognized, where applicable) or estimated fair values less costs to sell. The net carrying values of operating properties are classified as properties held for sale when the properties are actively marketed, their sale is considered probable within one year and various other criteria relating to their disposition are met. Depreciation of these properties is discontinued at that time, but operating revenues, interest and other operating expenses continue to be recognized until the date of sale. If active marketing ceases or the properties no longer meet the criteria to be classified as held for sale, the properties are reclassified as operating, depreciation is resumed, depreciation for the period the properties were classified as held for sale is recognized and deferred selling costs, if any, are charged to earnings.

(d) Sales of property

        Gains from sales of operating properties and revenues from land sales are recognized using the full accrual method provided that various criteria relating to the terms of the transactions and any subsequent involvement by us with the properties sold are met. Gains or revenues relating to transactions that do not meet the established criteria are deferred and recognized when the criteria are met or using the installment or cost recovery methods, as appropriate in the circumstances. For land sale transactions under the terms of which we are required to perform additional services and incur

9

significant costs after title has passed, revenues and cost of sales are recognized on a percentage of completion basis.

        Cost of land sales is generally determined as a specified percentage of land sales revenues recognized for each land development project. The cost ratios used are based on actual costs incurred and estimates of development costs and sales revenues to completion of each project. The ratios are reviewed regularly and revised periodically for changes in estimates or development plans. Significant changes in these estimates or development plans, whether due to changes in market conditions or other factors, could result in changes to the cost ratio used for a specific project. The specific identification method is used to determine cost of sales for certain parcels of land.

(e) Leases

        Leases which transfer substantially all the risks and benefits of ownership to tenants are considered finance leases and the present values of the minimum lease payments and the estimated residual values of the leased properties, if any, are accounted for as receivables. Leases which transfer substantially all the risks and benefits of ownership to us are considered capital leases and the present values of the minimum lease payments are accounted for as assets and liabilities.

        In general, minimum rent revenues are recognized when due from tenants; however, estimated collectible minimum rent revenues under leases which provide for varying rents over their terms are averaged over the terms of the leases. Rents based on tenant sales are recognized when tenant sales exceed any contractual threshold.

(f) Income taxes

        We elected to be taxed as a real estate investment trust ("REIT") pursuant to the Internal Revenue Code of 1986, as amended, effective January 1, 1998. In general, a corporation that distributes at least 90% of its REIT taxable income to shareholders in any taxable year and complies with certain other requirements (relating primarily to the nature of its assets and the sources of its revenues) is not subject to Federal income taxation to the extent of the income which it distributes. We believe that we met the qualifications for REIT status as of December 31, 2002 and intend to meet the qualifications in the future and to distribute at least 90% of our REIT taxable income (determined after taking into account any net operating loss deduction) to shareholders in 2003 and subsequent years. As discussed in notes 2 and 9, we acquired all of the voting stock of the majority financial interest ventures owned by a trust, of which certain employees are beneficiaries ("Trust") in 2001. We and these subsidiaries made a joint election to treat the subsidiaries as taxable REIT subsidiaries ("TRS"), which are subject to Federal and state income taxes. Except with respect to the TRS, we do not believe that we will be liable for significant income taxes at the Federal level or in most of the states in which we operate in 2003 and future years.

        Deferred income taxes relate primarily to the TRS and are accounted for using the asset and liability method. Under this method, deferred income taxes are recognized for temporary differences between the financial reporting bases of assets and liabilities of the TRS and their respective tax bases and for their operating loss and tax credit carryforwards based on enacted tax rates expected to be in effect when such amounts are realized or settled. However, deferred tax assets are recognized only to the extent that it is more likely than not that they will be realized based on consideration of available evidence, including tax planning strategies and other factors.

(g) Investments in marketable securities and cash and cash equivalents

        Our investment policy defines authorized investments and establishes various limitations on the maturities, credit quality and amounts of investments held. Authorized investments include U.S.

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government and agency obligations, certificates of deposit, bankers acceptances, repurchase agreements, commercial paper, money market mutual funds and corporate debt and equity securities.

        Debt security investments with maturities at dates of purchase in excess of three months are classified as marketable securities and carried at amortized cost as it is our intention to hold these investments until maturity. Short-term investments with maturities at dates of purchase of three months or less are classified as cash equivalents, except that any such investments purchased with the proceeds of loans which may be expended only for specified purposes are classified as investments in marketable securities. Investments in marketable equity securities are classified as trading securities and are carried at market value with changes in values recognized in earnings.

(h) Derivative financial instruments

        Our use of derivative financial instruments is designed to reduce risk associated with movements in interest rates. We may choose to reduce cash flow and earnings volatility associated with interest rate risk exposure on variable-rate borrowings and/or forecasted fixed-rate borrowings. In some instances, lenders may require us to do so. In order to limit interest rate risk on variable-rate borrowings, we may enter into interest rate swaps or interest rate caps to hedge specific risks. In order to limit interest rate risk on forecasted borrowings, we may enter into forward-rate agreements, forward starting swaps, interest rate locks and interest rate collars. We may also use derivative financial instruments to reduce risk associated with movements in currency exchange rates if and when we are exposed to such risk. We do not use derivative financial instruments for speculative purposes.

        Under interest rate cap agreements, we make initial premium payments to the counterparties in exchange for the right to receive payments from them if interest rates exceed specified levels during the agreement period. Under interest rate swap agreements, we and the counterparties agree to exchange the difference between fixed-rate and variable-rate interest amounts calculated by reference to specified notional principal amounts during the agreement period. Notional principal amounts are used to express the volume of these transactions, but the cash requirements and amounts subject to credit risk are substantially less.

        Parties to interest rate exchange agreements are subject to market risk for changes in interest rates and risk of credit loss in the event of nonperformance by the counterparty. We do not require any collateral under these agreements but deal only with highly rated financial institution counterparties (which, in certain cases, are also the lenders on the related debt) and do not expect that any counterparties will fail to meet their obligations.

        Prior to 2001, derivative financial instruments were designated as hedges and, accordingly, changes in their fair values were not recognized in the financial statements provided that defined correlation and effectiveness criteria were met at inception and thereafter. Instruments that ceased to qualify for hedge accounting were marked-to-market with gains and losses recognized in income. Premiums paid on interest rate cap agreements were amortized to interest expense over the terms of the agreements and payments receivable from the counterparties were accrued as reductions of interest expense. Amounts receivable or payable under swap agreements were accounted for as adjustments to interest expense on the related debt. Effective January 1, 2001, we adopted SFAS No. 133, "Accounting for Derivative Financial Instruments and Hedging Activities," as amended, which requires, among other things, that all derivative instruments be measured at fair value and recognized as assets or liabilities in the balance sheet. Derivative instruments held by us at January 1, 2001 consisted solely of interest rate cap agreements designated as hedges of interest rates on specific loans. The cumulative effect at January 1, 2001 of the change in accounting for derivative financial instruments and hedging activities was to increase liabilities and reduce net earnings by approximately $0.4 million. The effect of the change on net earnings was not material for 2001. The effect of the change on other comprehensive income (loss) was a loss of approximately $3.4 million in 2001.

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        All of the interest rate swap agreements we used in 2002 and 2001 qualified as cash flow hedges under SFAS No. 133 and hedged our exposure to forecasted interest payments on variable-rate LIBOR-based debt. Accordingly, the effective portion of the swaps' gains or losses are reported as a component of other comprehensive income and reclassified into earnings when the related forecasted transaction affects earnings. Amounts receivable or payable under interest rate cap and swap agreements are accounted for as adjustments to interest expense on the related debt.

(i) Other information about financial instruments

        Fair values of financial instruments approximate their carrying values in the financial statements except for debt and Company-obligated mandatorily redeemable preferred securities, for which fair value information is provided in notes 6 and 7.

(j) Earnings per share of common stock

        Basic earnings per share ("EPS") is computed by dividing net earnings applicable to common shareholders by the weighted-average number of common shares outstanding. Diluted EPS is computed after adjusting the numerator and denominator of the basic EPS computation for the effects of all dilutive potential common shares during the period. The dilutive effects of convertible securities are computed using the "if-converted" method and the dilutive effects of options, warrants and their equivalents (including fixed awards and nonvested stock issued under stock-based compensation plans) are computed using the "treasury stock" method.

(k) Stock-based compensation

        We apply the intrinsic value-based method of accounting prescribed by APB Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations to account for stock-based, employee compensation plans. Under this method, compensation cost is recognized for awards of shares of common stock or stock options to our directors, officers and employees only if the quoted market price of the stock at the grant date (or other measurement date, if later) is greater than the amount the grantee must pay to acquire the stock. The following table summarizes the pro forma effects on net earnings (in thousands) and earnings per share of common stock of using an optional fair value-based method, rather than the intrinsic value-based method, to account for stock-based compensation awards made since 1995.

		2002			2001			2000
Net earnings, as reported		$	139,851		$	110,706		$	170,485
Add: Stock-based employee compensation expense included in reported net earnings, net of related tax effects and amounts capitalized			3,235			1,379			1,549
Deduct: Total stock-based employee compensation expense determined under fair value- based method, net of related tax effects and amounts capitalized			(10,237	)		(6,268	)		(5,237	)
Pro forma net earnings		$	132,849		$	105,817		$	166,797
Earnings per share of common stock:
Basic:
	As reported	$	1.49		$	1.42		$	2.27
	Pro forma	$	1.41		$	1.35		$	2.22
Diluted:
	As reported	$	1.47		$	1.40		$	2.24
	Pro forma	$	1.39		$	1.35		$	2.20

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        The per share weighted-average estimated fair values of options granted during 2002, 2001 and 2000 were $3.48, $3.41 and $3.46, respectively. These fair values were estimated on the dates of each grant using the Black-Scholes option-pricing model with the following assumptions:

	2002		2001		2000
Risk-free interest rate	4.4	%	5.1	%	6.6	%
Dividend yield	5.5		5.5		5.5
Volatility factor	20.0		20.0		20.0
Expected life in years	6.7		6.4		6.6

(2) Unconsolidated real estate ventures

        Investments in and advances to unconsolidated real estate ventures at December 31, 2002 and 2001 were $442.4 million and $269.6 million, respectively. Our equity in earnings of unconsolidated real estate ventures is summarized, based on the level of our financial interest, as follows (in thousands):

		2002		2001		2000
Majority financial interest ventures		$	—	$	—	$	86,637
Other unconsolidated real estate ventures			33,259		32,561		41,408
	Total	$	33,259	$	32,561	$	128,045

(a) Majority financial interest ventures

        Relying on the REIT Modernization Act (as more fully discussed in note 9), we negotiated an agreement to acquire the voting stock of the ventures owned by a trust, of which certain employees are beneficiaries ("Trust"), an entity which is neither owned nor controlled by us. On January 2, 2001, we exchanged 137,928 shares of common stock for the Trust's shares of voting common stock in the ventures. The voting shares acquired by us constituted all of the Trust's interests in the ventures. The fair value of the consideration exchanged was approximately $3.5 million. As a result of this transaction, we own 100% of the voting common stock of the ventures and, accordingly, the ventures are consolidated in our financial statements from the date of the acquisition. Subsequently, the Trust contributed the majority of the common stock to a charitable foundation.

        The majority financial interest ventures were initiated on December 31, 1997, when certain wholly owned subsidiaries issued 91% of their voting common stock to the Trust. These sales were made at fair value and were part of our plan to meet the qualifications for REIT status. We retained the remaining voting stock of the ventures and held shares of nonvoting common and/or preferred stock and, in certain cases, mortgage loans receivable from the ventures which, taken together, comprised substantially all (at least 98%) of the financial interest in them. As a result of our disposition of the majority voting interest in the ventures, we began accounting for our investment in them using the equity method effective December 31, 1997. Due to our continuing financial interest in the ventures, we recognized no gain on the sales of stock for financial reporting purposes. The assets of the ventures consisted primarily of land to be developed and sold as part of community development projects in and around Columbia and Summerlin, other investment land, primarily in Nevada, certain office and retail properties, primarily in Columbia, investments in properties owned jointly with us and contracts to manage various operating properties.

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        The combined statement of operations of these ventures for the year ended December 31, 2000 is summarized as follows (in thousands):

Revenues		$	295,791
Operating expenses			152,980
Interest expense, excluding interest on borrowings from Rouse			5,684
Interest expense on borrowings from Rouse			52,449
Depreciation and amortization			13,534
Loss on early extinguishment of debt			22,082
Equity in earnings of unconsolidated real estate ventures			3,736
Income taxes, primarily deferred			18,430
Discontinued operations			1,511
	Net earnings	$	35,879

        In December 2000, one of the ventures partially repaid a loan from us prior to its scheduled maturity. We charged the venture a prepayment penalty of $22.1 million. The effect of the transaction was eliminated in our equity in earnings of majority financial interest ventures.

        Our share of the net earnings of these ventures for the year ended December 31, 2000 is summarized as follows (in thousands):

Share of net earnings based on ownership interest		$	35,520
Participation by others in our share of earnings			(35,322	)
Interest on loans and advances, net			52,449
Prepayment penalty on loan from Rouse			22,082
Discontinued operations			(1,511	)
Eliminations and other, net			13,419
	Equity in earnings of majority financial interest ventures	$	86,637

(b) Other unconsolidated real estate ventures

        We own interests in other unconsolidated real estate ventures that own and/or develop properties. We use these ventures to limit our risk associated with individual properties and to reduce our capital requirements. We may also contribute our interests in properties to unconsolidated ventures for cash distributions and interests in the ventures to provide liquidity as an alternative to outright property sales. These ventures are accounted for using the equity or cost method, as appropriate. At December 31, 2002 and 2001, these ventures were primarily partnerships and corporations which own retail centers. Most of these properties are managed by our affiliates. Certain agreements relating to these properties provide for preference returns to us when operating results or sale or refinancing proceeds exceed specified levels. One of these ventures owns and operates the Village of Merrick Park, a large-scale mixed-use project that opened in September 2002.

        In May 2002, we acquired partial, noncontrolling ownership interests in Oakbrook Center, Water Tower Place and certain other assets from Rodamco North America N.V. ("Rodamco") (see note 16). We report these interests as investments in unconsolidated real estate ventures. Additionally, we acquired from Rodamco the remaining interests in properties (Collin Creek, North Star, Perimeter Mall and Willowbrook) in which we previously owned noncontrolling interests. As a result, we consolidated these properties in our financial statements from the date of the acquisition. Prior to this acquisition, we reported our interests in these properties in unconsolidated real estate ventures. As a result of this transaction, the net increase in investments in unconsolidated real estate ventures was $248.9 million.

        We received $44.9 million and $109.3 million of distributions of financing proceeds from unconsolidated real estate ventures in 2002 and 2001, respectively.

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        In October 2002, we contributed our ownership interest in Perimeter Mall to a joint venture in exchange for a 50% interest in the venture and a distribution of $67.1 million. As a result, we report our interest in this property in unconsolidated real estate ventures from the date of contribution.

        In November 2002, we acquired our partners' controlling financial interests in entities that own Ridgedale Center, a regional retail center in suburban Minneapolis, Minnesota, and Southland Center, a regional retail center in suburban Detroit, Michigan, for an aggregate purchase price of $215.8 million (cash of $63.1 million and assumption of our partners' share of debt of $152.7 million). We owned 10% noncontrolling interests in these entities prior to this transaction and our interests were reported in unconsolidated real estate ventures. We consolidated these properties in our financial statements from the date of acquisition. We used our revolving credit facility to finance the acquisition.

        The condensed, combined balance sheets of ventures accounted for using the equity method as of December 31, 2002 and 2001 and the condensed, combined statements of operations of these ventures and others during periods that they were accounted for using the equity method during 2002, 2001 and 2000 are summarized as follows (in thousands):

		2002		2001
Net property		$	2,075,720	$	1,705,140
Investments in unconsolidated real estate ventures			78,717		—
Accounts and notes receivable			20,502		14,689
Prepaid expenses and other assets			40,633		60,792
Cash and cash equivalents			38,729		25,336
	Total assets	$	2,254,301	$	1,805,957
Nonrecourse property debt		$	1,195,359	$	1,313,498
Property debt guaranteed by us			175,180		54,075
Accounts payable and other liabilities			134,206		129,225
Venturers' equity			749,556		309,159
	Total liabilities and venturers' equity	$	2,254,301	$	1,805,957

		2002		2001		2000
Revenues		$	307,486	$	322,646	$	333,999
Equity in earnings of unconsolidated investments			9,651		—		—
Operating and interest expenses			207,263		219,183		228,669
Depreciation and amortization			49,020		41,105		39,741
Loss on early extinguishment of debt			260		556		—
Cumulative effect of change in accounting principle			—		292		—
	Net earnings	$	60,594	$	61,510	$	65,589

        We have guaranteed the repayment of a construction loan of the unconsolidated real estate venture that developed the Village of Merrick Park. The maximum amount that may be borrowed under the loan is $200 million. The amount of the guarantee may be reduced to a minimum of 20% upon the achievement of certain lender requirements. Our venture partners have provided guarantees to us for their share (60%) of the construction loan.

        Distributions, primarily from financing proceeds, from several of these ventures exceed our investments in them. At December 31, 2002 and 2001, these balances aggregated $26.3 million and $89.7 million, respectively, and were included in other liabilities.

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(3) Property

        Operating properties and deferred costs of projects at December 31, 2002 and 2001 are summarized as follows (in thousands):

		2002		2001
Buildings and improvements		$	5,019,394	$	3,931,166
Land			664,326		408,122
Deferred costs			201,959		123,917
Furniture and equipment			27,225		20,978
	Total	$	5,912,904	$	4,484,183

        Depreciation expense for 2002, 2001 and 2000 was $144.9 million, $115.8 million and $86.4 million, respectively. Amortization expense for 2002, 2001 and 2000 was $16.4 million, $13.9 million and $8.7 million, respectively.

        Properties in development include construction and development in progress and preconstruction costs. Construction and development in progress includes land and land improvements of $55.3 million and $67.9 million at December 31, 2002 and 2001, respectively.

        Investment land and land held for development and sale at December 31, 2002 and 2001 is summarized as follows (in thousands):

		2002		2001
Land under development		$	208,675	$	171,460
Finished land			63,753		62,707
Investment and raw land			49,316		50,124
	Total	$	321,744	$	284,291

(4) Accounts and notes receivable

        Accounts and notes receivable at December 31, 2002 and 2001 are summarized as follows (in thousands):

		2002		2001
Accounts receivable, primarily rents and income under tenant leases		$	66,853	$	70,522
Notes receivable from sales of properties			538		3,294
Notes receivable from sales of land			16,733		41,143
			84,124		114,959
Less allowance for doubtful receivables			27,197		27,206
	Total	$	56,927	$	87,753

        Accounts and notes receivable due after one year were $8.8 million and $7.5 million at December 31, 2002 and 2001, respectively.

        Credit risk with respect to receivables from tenants is not highly concentrated due to the large number of tenants and the geographic diversification of our operating properties. We perform credit evaluations of prospective new tenants and require security deposits or bank letters of credit in certain circumstances. Tenants' compliance with the terms of their leases is monitored closely, and the allowance for doubtful receivables is established based on analyses of the risk of loss on specific tenant

16

accounts, historical trends and other relevant information. Notes receivable from sales of land are primarily attributable to land sales in Las Vegas and Summerlin, Nevada. We perform credit evaluations of the builders and generally require substantial down payments (at least 20%) on all land sales that we finance. These notes and notes from sales of operating properties are generally secured by first liens on the related properties.

(5) Pension, postretirement and deferred compensation plans

        We have a defined benefit pension plan ("funded plan") covering substantially all employees and separate, nonqualified unfunded retirement plans ("unfunded plans") covering directors and participants in the funded plan whose defined benefits exceed the plan's limits. Benefits under the pension plans are based on the participants' years of service and compensation. We also have a retiree benefits plan that provides postretirement medical and life insurance benefits to full-time employees who meet minimum age and service requirements. We pay a portion of the cost of participants' life insurance coverage and make contributions to the cost of participants' medical insurance coverage based on years of service, subject to a maximum annual contribution.

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        Information relating to the obligations, assets and funded status of the plans at December 31, 2002 and 2001 and for the years then ended is summarized as follows (dollars in thousands):

		Pension Plans
														Postretirement Plan
		Funded						Unfunded
		2002			2001			2002			2001			2002			2001
Change in benefit obligations:
Benefit obligations at beginning of year		$	64,208		$	55,480		$	21,767		$	19,857		$	23,551		$	18,471
Service cost			4,744			3,981			1,069			909			342			451
Interest cost			4,592			4,230			1,663			1,489			1,070			1,553
Plan amendment			2,398			67			96			(126	)		(6,598	)		—
Actuarial loss (gain)			4,532			7,419			2,315			701			(646	)		3,666
Benefits paid			(226	)		(6,969	)		(135	)		(1,063	)		(987	)		(590	)
	Benefit obligations before special events		80,248			64,208			26,775			21,767			16,732			23,551
Special events — settlements			(9,757	)		—			(6,976	)		—			—			—
	Benefit obligations at end of year		70,491			64,208			19,799			21,767			16,732			23,551
Change in plan assets:
Fair value of plan assets at beginning of year			57,808			57,501			—			—			—			—
Actual return on plan assets			(8,183	)		(2,492	)		—			—			—			—
Employer contribution			24,165			9,768			8,056			1,063			987			590
Benefits paid			(226	)		(6,969	)		(135	)		(1,063	)		(987	)		(590	)
Settlements			(9,939	)		—			(7,921	)		—			—			—
	Fair value of plan assets at end of year		63,625			57,808			—			—			—			—
Funded status			(6,866	)		(6,400	)		(19,799	)		(21,767	)		(16,732	)		(23,551	)
Unrecognized net actuarial loss			39,925			30,176			4,823			4,574			3,729			4,460
Unamortized prior service cost			5,655			4,128			4,919			5,490			(2,692	)		—
Unrecognized transition obligation			199			267			—			—			—			3,665
	Net amount recognized	$	38,913		$	28,171		$	(10,057	)	$	(11,703	)	$	(15,695	)	$	(15,426	)
Amounts recognized in the balance sheets consist of:
Prepaid benefit cost		$	38,913		$	28,171		$	—		$	—		$	—		$	—
Accrued benefit liability			—			—			(18,641	)		(20,108	)		(15,695	)		(15,426	)
Intangible asset			—			—			4,919			5,490			—			—
Accumulated other comprehensive income item —minimum pension liability adjustment			—			—			3,665			2,915			—			—
	Net amount recognized	$	38,913		$	28,171		$	(10,057	)	$	(11,703	)	$	(15,695	)	$	(15,426	)
Weighted-average assumptions as of December 31:
Discount rate			6.50	%		7.25	%		6.50	%		7.25	%		6.50	%		7.25	%
Lump sum rate			6.50			6.50			6.50			6.50			—			—
Expected rate of return on plan assets			8.00			8.00			—			—			—			—
Rate of compensation increase			4.50			4.50			4.50			4.50			4.50			4.50

        The assets of the funded plan consist primarily of fixed income and marketable equity securities. We increased our employer contributions during 2002 to fund accumulated benefit obligations and to pay settlements related to the organizational changes and early retirement program discussed in note

18

10. The organizational changes and early retirement program also resulted in a settlement loss which is included in our 2002 net pension cost.

        The amendment to the pension plans in 2002 changed the compensation base on which pension benefits are calculated. The amendment to the postretirement plan in 2002 reduced certain medical and life insurance benefits.

        The net pension cost includes the following components (in thousands):

		2002			2001			2000
Service cost		$	5,813		$	4,890		$	4,419
Interest cost on projected benefit obligations			6,255			5,719			4,945
Expected return on funded plan assets			(4,690	)		(4,622	)		(4,737	)
Prior service cost recognized			1,538			1,554			1,587
Net actuarial loss recognized			2,525			1,712			237
Amortization of transition obligation			68			201			201
	Net pension cost before special events		11,509			9,454			6,652
Special events — settlement loss			8,324			—			—
	Net pension cost	$	19,833		$	9,454		$	6,652

        The net postretirement benefit cost includes the following components (in thousands):

		2002			2001		2000
Service cost		$	342		$	451	$	484
Interest cost on accumulated benefit obligations			1,070			1,553		1,312
Net actuarial loss recognized			85			115		—
Amortization of prior service cost			(241	)		—		—
Amortization of transition obligation			—			333		333
	Net postretirement benefit cost	$	1,256		$	2,452	$	2,129

        Assumed health care cost trend rates have an effect on the amounts reported for the postretirement plan. A one-percentage-point change in assumed health care cost trend rates would have the following effects (in thousands):

	1% Increase		1% Decrease
Effect on total of service and interest cost components	$	15	$	14
Effect on postretirement benefit obligation	$	242	$	220

        In 2000, employees of the majority financial interest ventures participated in the pension and postretirement plans. These ventures reimbursed us $2.1 million for their share of the annual benefit cost of the plans.

        We also have a deferred compensation program which permits directors and certain of our management employees to defer portions of their compensation on a pretax basis. Compensation expense related to this program was insignificant in 2002, 2001 and 2000.

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(6) Debt

        Debt is classified as follows:

(a)

"Property debt not carrying a Parent Company guarantee of repayment" which is subsidiary company debt having no express written obligation which would require us to repay the principal amount of such debt during the full term of the loan ("nonrecourse loans"); and

(b)

"Parent Company debt and debt carrying a Parent Company guarantee of repayment" which is our debt and subsidiary company debt with our express written obligation to repay the principal amount of such debt during the full term of the loan ("Company and recourse loans").

        With respect to nonrecourse loans, we have in the past and may in the future, under some circumstances, support those subsidiary companies whose annual expenditures, including debt service, exceed their operating revenues. At December 31, 2002 and 2001, nonrecourse loans include $278.2 million and $134.8 million, respectively, of subsidiary companies' mortgages and bonds which are subject to agreements with lenders requiring us to provide support for operating and debt service costs, where necessary, for defined periods or until specified conditions relating to the operating results of the related properties are met. At December 31, 2002, approximately $1.2 billion of the total debt was payable to one lender.

        Debt at December 31, 2002 and 2001 is summarized as follows (in thousands):

		2002		2001
Mortgages and bonds		$	3,410,257	$	2,717,898
Medium-term notes			48,500		51,500
Credit facility borrowings			242,690		222,000
Other loans			740,030		497,422
	Total	$	4,441,477	$	3,488,820

        Mortgages and bonds are secured by deeds of trust or mortgages on properties and general assignments of rents. This debt matures at various dates through 2021 and, at December 31, 2002, bears interest at a weighted-average effective rate of 6.3%. At December 31, 2002 and 2001, approximately $83.2 million and $84.0 million, respectively, of this debt provided for payments of additional interest based on operating results of the related properties in excess of stated levels.

        We have issued unsecured, medium-term notes. The notes bear interest at fixed interest rates. The notes outstanding at December 31, 2002 mature at various dates from 2005 to 2015, bear interest at a weighted-average effective rate of 8.3% and have a weighted-average maturity of three years.

        We have a credit facility with a group of lenders that provides for unsecured borrowings. During 2002, the maximum amount that may be borrowed under this facility increased from $375 million to $450 million. Advances under the facility bear interest at a variable-rate of LIBOR plus 1% (2.4% at December 31, 2002). The facility is available to December 2003, subject to a one-year renewal option.

        Other loans at December 31, 2002 include $400 million of 7.20% Notes due in 2012 which we issued in September 2002 for net proceeds of $396.9 million under our effective shelf registration statement. We used $220.4 million of the proceeds to repay a portion of the bridge loan facility used to fund the acquisition of the assets of Rodamco (see note 16). We used $116.2 million of the proceeds to repay $114.2 million of other debt (with prepayment penalties of $2.0 million) that was due in January 2003. We used the remaining proceeds and additional funds to repay $61 million of property debt due in 2003. Other loans also include $200 million of 8% Notes due in 2009, various property acquisition loans and certain other borrowings. These loans include aggregate unsecured borrowings of $733.5

20

million and $490.1 million at December 31, 2002 and 2001, respectively, and at December 31, 2002, bear interest at a weighted-average effective rate of 7.5%.

        The agreements relating to various loans impose limitations on us. The most restrictive of these limit the levels and types of debt we and our affiliates may incur and require us and our affiliates to maintain specified minimum levels of debt service coverage and net worth. The agreements also impose restrictions on the dividend payout ratio and on sale, lease and certain other transactions, subject to various exclusions and limitations. These restrictions have not limited our normal business activities.

        The annual maturities of debt at December 31, 2002 are summarized as follows (in thousands):

		Nonrecourse Loans		Company and Recourse Loans		Total
2003		$	295,484	$	252,957	$	548,441
2004			424,180		125,480		549,660
2005			409,919		103,417		513,336
2006			388,330		12,502		400,832
2007			532,884		6,710		539,594
Subsequent to 2007			1,220,640		668,974		1,889,614
	Total	$	3,271,437	$	1,170,040	$	4,441,477

        The annual maturities reflect the terms of existing loan agreements except where refinancing commitments from outside lenders have been obtained. In these instances, maturities are based on the terms of the refinancing commitments. The debt due in 2003 consists of $242.7 million of borrowings under the credit line facility, $229.4 million of balloon payments on mortgages on two retail centers and three office buildings and $76.3 million of regularly scheduled principal payments. The credit line facility may be extended for one year at our option. We expect to make balloon payments at or before the scheduled maturity dates of the related loans from proceeds of property refinancings (including refinancings of the maturing mortgages), credit facility borrowings or other available corporate funds. The regularly scheduled principal payments will be paid from operating cash flows.

        We have approximately $1.2 billion of variable interest rate debt ("variable-rate debt") at December 31, 2002. The interest rate on a portion of this variable-rate debt is based on LIBOR plus a margin (typically between 1% and 2%). At December 31, 2002, the LIBOR rate was 1.4%. We had interest rate swap agreements and forward-starting swap agreements in place at December 31, 2002 and we entered into similar agreements in January 2003. These swap agreements and forward-starting swap

21

agreements effectively fix the LIBOR rate on a portion of our variable-rate debt and are summarized as follows:

Notional Amount		Fixed LIBOR Rate		Term
$	34.4 million	3.53	%	December 2001 – December 2003
	200.0 million	4.24		January 2003 – December 2003
	26.3 million	4.67		January 2002 – December 2006
	55.0 million	1.52		February 2003 – December 2003
	432.0 million	1.37		February 2003 – June 2003
	150.0 million	1.39		February 2003 – August 2003
	40.0 million	1.78		February 2003 – June 2004
	432.0 million	1.63		July 2003 – December 2003
	150.0 million	1.84		September 2003 – March 2004
	161.5 million	2.35		January 2004 – July 2004
	135.0 million	2.20		January 2004 – May 2004
	135.0 million	2.85		June 2004 – October 2004
	161.5 million	3.16		July 2004 – January 2005

        In accordance with SFAS No. 133, the net unrealized losses on derivatives designated as cash flow hedges (including our share of unrealized gains on derivatives held by unconsolidated real estate ventures accounted for using the equity method) of $6.9 million and $3.4 million for 2002 and 2001, respectively, have been recognized as items of other comprehensive income (loss). We expect $7.4 million of the amount recorded in other comprehensive income (loss) at December 31, 2002 to be recognized in net earnings during 2003 and the remainder before December 2006. Interest rate exchange agreements did not have a material effect on the weighted-average effective interest rates on debt at December 31, 2002, 2001 and 2000 or interest expense for 2002, 2001 and 2000. The fair value of our derivative financial instruments was a liability of approximately $8.0 million at December 31, 2002. The fair value of interest rate cap agreements was insignificant at December 31, 2002.

        Total interest costs were $283.5 million in 2002, $259.9 million in 2001 and $254.2 million in 2000, of which $38.2 million, $36.6 million and $19.7 million were capitalized, respectively.

        We recognized losses on the early extinguishment of debt of $2.5 million in 2002 and $0.5 million in 2001. In 2000, we recognized a net gain of $2.2 million related to the substantial modification of terms of certain property debt and to the extinguishment of debt prior to scheduled maturity. The sources of funds used to pay the debt and fund the prepayment penalties, where applicable, were refinancings of properties and, in 2002, the issuance of the 7.20% Notes.

        The estimated fair value of debt is determined based on quoted market prices for publicly-traded debt and on the discounted estimated future cash payments to be made for other debt. The discount rates used approximate current market rates for loans or groups of loans with similar maturities and credit quality. The estimated future payments include scheduled principal and interest payments and lenders' participations in operating results, where applicable.

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        The carrying amount and estimated fair value of our debt at December 31, 2002 and 2001 are summarized as follows (in thousands):

		2002				2001
		Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Fixed-rate debt		$	3,216,998	$	3,409,037	$	2,874,985	$	2,930,729
Variable-rate debt			1,224,479		1,224,479		613,835		613,835
	Total	$	4,441,477	$	4,633,516	$	3,488,820	$	3,544,564

        Fair value estimates are made at a specific point in time, are subjective in nature and involve uncertainties and matters of significant judgment. Settlement of our debt obligations at fair value may not be possible and may not be a prudent management decision.

(7) Company-obligated mandatorily redeemable preferred securities

        The redeemable preferred securities consist of 5,453,600 and 5,478,600 Cumulative Quarterly Income Preferred Securities (preferred securities) at December 31, 2002 and 2001, respectively, with a liquidation amount of $25 per security, which were issued in November 1995 by a statutory business trust. The trust used the proceeds of the preferred securities and other assets to purchase at par $141.8 million of our junior subordinated debentures ("debentures") due in November 2025, which are the sole assets of the trust.

        Payments to be made by the trust on the preferred securities are dependent on payments that we have undertaken to make, particularly the payments to be made by us on the debentures. Our compliance with our undertakings, taken together, would have the effect of providing a full, irrevocable and unconditional guarantee of the trust's obligations under the preferred securities.

        Distributions on the preferred securities are payable from interest payments received on the debentures and are due quarterly at an annual rate of 9.25% of the liquidation amount, subject to deferral for up to five years under certain conditions. Distributions payable are included in operating expenses. Redemptions of the preferred securities are payable at the liquidation amount from redemption payments received on the debentures.

        We may redeem the debentures at par at any time, but redemptions at or prior to maturity are payable only from the proceeds of issuance of our capital stock or of securities substantially comparable in economic effect to the preferred securities. During 1998, we repurchased 21,400 of the preferred securities for approximately $0.6 million. During 2002, we repurchased 25,000 of the preferred securities for approximately $0.6 million.

        The estimated fair value of the redeemable preferred securities was $216.7 million and $174.7 million at December 31, 2002 and 2001, respectively. Fair value estimates are made at a specific point in time, are subjective in nature and involve uncertainties and matters of significant judgment. Settlement of the redeemable preferred securities at fair value may not be possible and may not be a prudent management decision.

(8) Segment information

        We have five business segments: retail centers, office and other properties, community development, commercial development and corporate. The retail centers segment includes the operation and management of regional shopping centers, downtown specialty marketplaces, the retail components of mixed-use projects and community retail centers. The office and other properties segment includes the operation and management of office and industrial properties and the nonretail components of the mixed-use projects. The community development segment includes the development

23

and sale of land, primarily in large-scale, long-term community development projects in and around Columbia and Summerlin. The commercial development segment includes the evaluation of all potential new projects (including expansions of existing properties) and acquisition opportunities and the management of them through the development or acquisition process. The corporate segment is responsible for shareholder and director services, financial management, strategic planning and management and certain other general and support functions. Our business segments offer different products or services and are managed separately because each requires different operating strategies or management expertise.

        The operating measure used to assess operating results for the business segments is Net Operating Income ("NOI"). Effective January 1, 2002, we revised our definition of NOI to exclude ground rent expense and depreciation attributable to building and land improvement costs that are recoverable from tenants. NOI for all years has been presented in conformity with the revised definition. We define NOI as segment revenues (exclusive of corporate interest income) less operating expenses (including provisions for bad debts, certain current income taxes and net losses (gains) on sales of properties developed for sale, but excluding ground rent expense, distributions on Company-obligated mandatorily redeemable preferred securities and other subsidiary preferred stock and real estate depreciation and amortization). Additionally, discontinued operations, equity in earnings of unconsolidated real estate ventures and minority interests are adjusted to reflect NOI on the same basis.

        The accounting policies of the segments are the same as those described in note 1, except that:

•

we account for real estate ventures in which we have joint interest and control and certain other minority interest ventures ("proportionate share ventures") using the proportionate share method rather than the equity method;

•

we include our share of NOI less interest expense and ground rent expense of other unconsolidated minority interest ventures ("other ventures") in revenues; and

•

we accounted for the majority financial interest ventures on a consolidated basis rather than using the equity method in 2000.

        Operating results for the segments are summarized as follows (in thousands):

			Retail Centers		Office and Other Properties		Community Development		Commercial Development			Corporate			Total
2002
	Revenues		$	775,513	$	205,191	$	240,992	$	—		$	—		$	1,221,696
	Operating expenses*			305,869		80,214		155,771		12,986			16,368			571,208
		NOI	$	469,644	$	124,977	$	85,221	$	(12,986	)	$	(16,368	)	$	650,488
2001
	Revenues		$	637,211	$	203,716	$	218,322	$	—		$	—		$	1,059,249
	Operating expenses*			261,561		75,772		143,336		6,872			13,171			500,712
		NOI	$	375,650	$	127,944	$	74,986	$	(6,872	)	$	(13,171	)	$	558,537
2000
	Revenues		$	631,703	$	216,231	$	215,459	$	—		$	—		$	1,063,393
	Operating expenses*			263,593		77,587		148,679		7,701			9,365			506,925
		NOI	$	368,110	$	138,644	$	66,780	$	(7,701	)	$	(9,365	)	$	556,468

*

Operating expenses include provisions for bad debts, certain current income taxes and net losses (gains) on sales of properties developed for sale, and exclude ground rent expense, distributions on Company-obligated mandatorily redeemable preferred securities and other subsidiary preferred stock and real estate depreciation and amortization.

24

        Reconciliations of the total revenues and expenses reported above to the related amounts in the consolidated financial statements and of NOI reported above to earnings before net gains (losses) on operating properties, discontinued operations and cumulative effect of change in accounting principle in the consolidated financial statements are summarized as follows (in thousands):

			2002			2001			2000
Revenues:
	Total reported above		$	1,221,696		$	1,059,249		$	1,063,393
	Our share of revenues of unconsolidated real estate ventures			(117,123	)		(97,789	)		(414,966	)
	Revenues of discontinued operations, including discontinued operations of majority financial interest ventures in 2000			(5,401	)		(19,280	)		(25,224	)
	Other			5,562			4,877			1,222
		Total in consolidated financial statements	$	1,104,734		$	947,057		$	624,425
Operating expenses, exclusive of provision for bad debts, depreciation and amortization:
	Total reported above		$	571,208		$	500,712		$	506,925
	Our share of operating expenses of unconsolidated real estate ventures			(36,924	)		(27,979	)		(190,769	)
	Participation by others in our share of earnings of majority financial interest ventures			—			—			(35,322	)
	Operating expenses of discontinued operations, including discontinued operations of majority financial interest ventures			(3,757	)		(9,429	)		(12,030	)
	Other			17,996			13,923			13,331
		Total in consolidated financial statements	$	548,523		$	477,227		$	282,135
Operating results:
	NOI reported above		$	650,488		$	558,537		$	556,468
	Interest expense			(245,321	)		(223,286	)		(234,496	)
	NOI of discontinued operations			(5,968	)		(9,851	)		(13,194	)
	Depreciation and amortization			(161,333	)		(129,666	)		(95,121	)
	Deferred and certain current income taxes			(28,479	)		(24,267	)		—
	Other provisions, losses and gains, net			(37,841	)		(816	)		2,200
	Our share of interest expense, depreciation and amortization, gains (losses) on operating properties, gains (losses) on early extinguishment of debt and deferred income taxes of unconsolidated real estate ventures, net			(46,940	)		(37,249	)		(58,021	)
	Other			(18,600	)		(20,831	)		(21,365	)
		Earnings before net gains (losses) on operating properties, discontinued operations and cumulative effect of change in accounting principle in consolidated financial statements	$	106,006		$	112,571		$	136,471

25

        The assets by segment at December 31, 2002, 2001 and 2000 are summarized as follows (in thousands):

		2002		2001		2000
Retail centers		$	5,181,205	$	3,457,956	$	3,372,114
Office and other properties			1,105,656		1,053,840		1,086,187
Community development			461,403		472,226		374,668
Commercial development			67,228		134,503		72,673
Corporate			148,070		124,232		119,609
	Total	$	6,963,562	$	5,242,757	$	5,025,251

        Total segment assets exceed total assets reported in the financial statements primarily because of the inclusion of our share of the assets of the proportionate share ventures and, in 2000, the consolidation of the majority financial interest ventures. The increase in total segment assets in 2002 is primarily attributable to the acquisition of assets from Rodamco (see note 16).

        Additions to long-lived assets of the segments are summarized as follows (in thousands):

		2002		2001		2000
Retail centers:
	Redevelopment, expansions and renovations	$	128,660	$	126,171	$	143,874
	Improvements for tenants and other		36,813		44,274		32,854
	Acquisitions		864,776		—		13,569
			1,030,249		170,445		190,297
Office and other properties:
	Improvements for tenants and other		19,381		14,894		16,196
	Acquisitions		25,000		—		8,676
			44,381		14,894		24,872
Community development — land development expenditures			109,139		116,753		95,156
Commercial development — costs of new projects			98,873		77,025		81,614
	Total	$	1,282,642	$	379,117	$	391,939

        Approximately $75.0 million, $70.6 million and $150.1 million of the additions (exclusive of acquisitions) in 2002, 2001 and 2000, respectively, relate to property owned by unconsolidated real estate ventures.

(9) Income taxes

        The REIT Modernization Act ("RMA") was included in the Tax Relief Extension Act of 1999 ("Act"), which was enacted into law on December 17, 1999. RMA includes numerous amendments to the provisions governing the qualification and taxation of REITs, and these amendments were effective January 1, 2001. One of the principal provisions included in the Act provides for the creation of taxable REIT subsidiaries ("TRS"). TRS are corporations that are permitted to engage in nonqualifying REIT activities. A REIT is permitted to own up to 100% of the voting stock of a TRS. Previously, a REIT could not own more than 10% of the voting stock of a corporation conducting nonqualifying activities. Relying on this legislation, in January 2001, we acquired all of the voting stock of the majority financial interest ventures owned by a trust, of which certain employees are beneficiaries. Information related to the acquisition is included in note 2. We and these subsidiaries made a joint election to treat the subsidiaries as TRS for Federal and certain state income tax purposes beginning January 2, 2001.

26

        As a REIT, we generally will not be subject to corporate level Federal income tax on taxable income we distribute currently to our stockholders. If we fail to qualify as a REIT in any taxable year, we will be subject to Federal income taxes at regular corporate rates (including any applicable alternative minimum tax) and may not be able to qualify as a REIT for four subsequent taxable years. Even if we qualify for taxation as a REIT, we may be subject to certain state and local taxes on our income and property and to Federal income and excise taxes on our undistributed taxable income. In addition, taxable income of a TRS is subject to Federal, state and local income taxes. Current Federal income taxes of the TRS are likely to increase in future years as we exhaust the net loss carryforwards of certain TRS and complete certain land development projects. These increases could be significant.

        In connection with our election to be taxed as a REIT, we have also elected to be subject to the "built-in gain" rules on the assets of our Qualified REIT Subsidiaries ("QRS"). Under these rules, taxes will be payable at the time and to the extent that the net unrealized gains on our assets at the date of conversion to REIT status are recognized in taxable dispositions of such assets in the ten-year period following conversion. Such net unrealized gains were approximately $2.5 billion. We believe that we will not be required to make significant payments of taxes on built-in gains throughout the ten-year period due to the availability of our net operating loss carryforward to offset built-in gains which might be recognized and the potential for us to make nontaxable dispositions through like-kind exchanges, if necessary. It may be necessary to recognize a liability for such taxes in the future if our plans and intentions with respect to QRS asset dispositions, or the related tax laws, change.

        The income tax provisions (benefits) for the years ended December 31, 2002 and 2001 are summarized as follows (in thousands):

		2002								2001
		Current		Deferred			Total			Current		Deferred		Total
Continuing operations:
	Operating income	$	1,496	$	28,479		$	29,975		$	3,483	$	23,884	$	27,367
	Gains on dispositions		—		2,010			2,010			—		—		—
Discontinued operations:
	Operating income		—		(1,237	)		(1,237	)		—		1,518		1,518
	Gains on dispositions		—		17,938			17,938			—		—		—
		$	1,496	$	47,190		$	48,686		$	3,483	$	25,402	$	28,885

        Income tax expense attributable to continuing operations is reconciled to the amount computed by applying the Federal corporate tax rate as follows (in thousands):

		2002			2001
Tax at statutory rate on earnings before income taxes, net gains (losses) on operating properties and discontinued operations		$	47,593		$	48,978
Increase in valuation allowance			3,039			1,613
State income taxes, net of Federal income tax benefit			1,056			1,376
Tax at statutory rate on earnings of QRS and other			(21,713	)		(24,600	)
	Income tax expense	$	29,975		$	27,367

27

        A net deferred tax liability is included in other liabilities at December 31, 2002 and 2001 and is summarized as follows (in thousands):

		2002			2001
Total deferred tax assets		$	27,713		$	36,054
Total deferred tax liabilities			(111,010	)		(75,200	)
Valuation allowance			(9,115	)		(6,076	)
	Net deferred tax liability	$	(92,412	)	$	(45,222	)

        The tax effects of temporary differences and loss carryforwards included in the net deferred tax liability at December 31, 2002 and 2001 are summarized as follows (in thousands):

		2002			2001
Property, primarily differences in depreciation and amortization, the tax basis of land assets and treatment of interest and certain other costs		$	(90,639	)	$	(39,113	)
Operating loss and tax credit carryforwards			13,111			16,713
Other			(14,884	)		(22,822	)
	Total	$	(92,412	)	$	(45,222	)

        As indicated above, the deferred tax assets relate primarily to differences in the book and tax bases of property (particularly land assets) and to operating loss carryforwards for Federal income tax purposes. A valuation allowance has been established due to the uncertainty of realizing operating loss carryforwards of certain TRS. Based on projections of future taxable income, management believes that it is more likely than not that the deferred tax assets, net of the valuation allowance, will be realized. The amount of the deferred tax assets considered realizable could be reduced in the near term; however, if estimates of future taxable income are reduced. Deferred income taxes will become payable as temporary differences reverse (primarily due to the completion of land development projects) and net operating loss carryforwards are exhausted.

        At December 31, 2002, the income tax bases of our assets and liabilities were approximately $5.0 billion and $5.8 billion, respectively. The REIT net operating loss carryforward at December 31, 2002 for Federal income tax purposes aggregated approximately $218.1 million and will expire from 2005 to 2011. The TRS net operating losses carried forward from December 31, 2002 for Federal income tax purposes aggregated approximately $44.1 million and will begin to expire in 2007.

(10) Other provisions and losses (gains), net

        Other provisions and losses (gains), net are summarized as follows (in thousands):

	2002			2001		2000
Net losses (gains) on early extinguishment of debt	$	2,543		$	451	$	(2,200	)
Provision for organizational changes, including early retirement and related costs		21,816			—		—
Impairment of investment in MerchantWired		11,623			—		—
Net gain on foreign exchange derivatives		(1,134	)		—		—
Other		2,993			365		—
Other provisions and losses (gains), net	$	37,841		$	816	$	(2,200	)

        We recognized losses of $2.5 million and $0.5 million in 2002 and 2001, respectively, related to the extinguishment of debt prior to scheduled maturity. In 2000, we recognized a net gain of $2.2 million

28

related to the substantial modification of terms of certain property debt and to the extinguishment of debt prior to scheduled maturity.

        The provision for organizational changes for 2002 related primarily to our consolidation of the management of our Property Operations and Commercial and Office Development divisions into a single Asset Management Group. In connection with this organizational change, we initiated a plan to reduce the size of our workforce (including executive management) and adopted a voluntary early retirement program in which employees who met certain criteria were eligible to participate. The costs relating to these organizational changes and the early retirement program, primarily severance and other benefit costs, aggregated $21.8 million (including $12.5 million related to changes in executive management) in 2002.

        MerchantWired was an unconsolidated joint venture with other real estate companies to provide broadband telecommunication services to tenants. In the second quarter of 2002, we and the other real estate companies decided to discontinue the operations of MerchantWired. Accordingly, we recorded an impairment provision for the entire amount of our net investment in the venture.

        A portion of the purchase price for the acquisition of assets from Rodamco (see note 16) was payable in euros. In January 2002, we acquired options to purchase 601 million euros at a weighted-average per euro price of $0.8819. These transactions were executed to reduce our exposure to movements in currency exchange rates between the date of the purchase agreement and the closing date. The contracts were scheduled to expire in May 2002 and had an aggregate cost of $11.3 million. In April 2002, we sold the contracts for net proceeds of $10.2 million and recognized a loss of $1.1 million. We also executed and subsequently sold a euro forward contract and realized a gain of $2.2 million. As of December 31, 2002, we owned no foreign currency or financial instruments that exposed us to risk of movements in currency exchange rates.

        In 2002, we agreed to pay $3.0 million of costs incurred by an entity that sold us a portfolio of office and industrial buildings in 1998 to pay certain tax-related costs arising from the transaction.

(11) Net gains (losses) on operating properties

        Net gains (losses) on operating properties are summarized as follows (in thousands):

			2002			2001			2000
Continuing operations:
	Sales of interests in unconsolidated real estate ventures:
		Community retail center	$	4,316		$	—		$	—
		Regional retail centers		42,582			—			37,082
	Impairment losses on retail centers			(42,124	)		(374	)		(6,870	)
	Other, net			2,049			(58	)		3,632
				6,823			(432	)		33,844
Discontinued operations:
	Community retail centers			30,469			—			—
	Regional retail center			2,543			—			(694	)
				33,012			—			(694	)
		Total	$	39,835		$	(432	)	$	33,150

        The net gains on operating properties in 2002 related primarily to gains recorded on the sale of our interests in retail centers. In April 2002, we sold our interests in 12 community retail centers for net proceeds of $111.1 million. We recorded a gain on this transaction of approximately $32.0 million, net of deferred income taxes of $18.4 million. Our interests in one of the community retail centers

29

were reported in unconsolidated real estate ventures and the gain on the sale of our interests in this property ($4.3 million, net of deferred income taxes of $2.0 million) is included in continuing operations. The remaining gain on this transaction ($27.7 million, net of deferred income taxes of $16.4 million) is classified as a component of discontinued operations (see note 1). In April 2002, we sold our interest in Franklin Park, a regional retail center in Toledo, Ohio, for $20.5 million and the buyer assumed our share of the center's debt ($44.7 million). Our interest in this property was reported in unconsolidated real estate ventures and, accordingly, the gain of $42.6 million that we recorded on this transaction is included in continuing operations. In December 2002, we sold our interest in Tampa Bay Center and our interest in a Summerlin community retail center for net proceeds of $22.8 million and $25.1 million, respectively. We recorded gains of $2.5 million and $2.8 million (net of deferred income taxes of $1.5 million), respectively, on these transactions and the gains are classified as a component of discontinued operations (see note 1). These gains were partially offset by impairment losses on two retail centers ($42.1 million). In 2002, we changed our plans and intentions as to the manner in which these retail centers would be operated in the future and revised estimates of the most likely holding periods. As a result, we evaluated the recoverability of the carrying amounts of the centers, determined that the carrying amounts of the centers were not recoverable from future cash flows and recognized impairment losses.

        The net losses on operating properties in 2001 consisted primarily of an additional impairment provision we recorded on our investment in a retail center (Randhurst) that we and the other venturer intend to dispose ($0.4 million).

        The net gains on operating properties in 2000 related primarily to the transfer to a joint venture controlled by Rodamco (in which we maintained a minority interest) of our ownership interest in a retail center (North Star) ($37.1 million). This gain was partially offset by an impairment provision recorded by us on our investment in a retail center (Randhurst) that we and the other venturer intend to dispose ($6.9 million) and an impairment loss on Tampa Bay Center ($0.7 million). We deferred recognition of gains of approximately $25 million on the North Star transaction and approximately $15 million in connection with an unrelated transaction due to our continuing involvement with the ventures. During 2002, we reacquired all of the interests in North Star in connection with the Rodamco transaction and reclassified the deferred gain as a reduction in the cost basis of the property.

(12) Preferred stock

        We have authorized 50,000,000 shares of Preferred stock of 1¢ par value per share of which (a) 4,505,168 shares have been classified as Series A Convertible Preferred; (b) 4,600,000 shares have been classified as Series B Convertible Preferred; (c) 10,000,000 shares have been classified as Increasing Rate Cumulative Preferred; and (d) 37,362 shares have been classified as 10.25% Junior Preferred, Series 1996.

        The shares of Series B Convertible Preferred stock have a liquidation preference of $50 per share and earn dividends at an annual rate of 6% of the liquidation preference. At the option of the holders, each share of the Series B Convertible Preferred stock is convertible into shares of our common stock at a conversion rate of approximately 1.311 shares of common stock for each share of Preferred stock, subject to adjustment in certain circumstances. In addition, these shares of Preferred stock are redeemable for shares of common stock at our option, subject to certain conditions. There were 4,050,000 shares of Preferred stock issued and outstanding at December 31, 2002 and 2001.

        Shares of the Increasing Rate Cumulative Preferred stock are issuable only to former Hughes owners or their successors pursuant to the Contingent Stock Agreement described in note 13. These shares are issuable only in limited circumstances and no shares have been issued. There were no shares of the Series A Convertible Preferred stock or 10.25% Junior Preferred stock, Series 1996, outstanding at December 31, 2002 and 2001.

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(13) Common stock

        At December 31, 2002, shares of authorized and unissued common stock are reserved as follows: (a) 11,590,148 shares for issuance under the Contingent Stock Agreement discussed below; (b) 15,880,664 shares for issuance under our stock option and stock bonus plans and (c) 5,309,955 shares for conversion of the Series B Convertible Preferred stock.

        In connection with the acquisition of The Hughes Corporation ("Hughes") in 1996, we entered into a Contingent Stock Agreement ("Agreement") for the benefit of the former Hughes owners or their successors ("beneficiaries"). Under terms of the Agreement, additional shares of common stock (or in certain circumstances, Increasing Rate Cumulative Preferred stock) are issuable to the beneficiaries based on the appraised values of four defined groups of acquired assets at specified "termination dates" to 2009 and/or cash flows generated from the development and/or sale of those assets prior to the termination dates ("earnout periods"). The distributions of additional shares, based on cash flows, are determined and payable semiannually as of June 30 and December 31. At December 31, 2002, approximately 683,000 shares ($21.1 million) were issuable to the beneficiaries, representing their share of cash flows for the semiannual period ended December 31, 2002.

        The Agreement is, in substance, an arrangement under which we and the beneficiaries will share in cash flows from development and/or sale of the defined assets during their respective earnout periods, and we will issue additional shares of common stock to the beneficiaries based on the value, if any, of the defined asset groups at the termination dates. We account for the beneficiaries' shares of earnings from the assets subject to the agreement as an operating expense. In 2000, substantially all of the remaining assets in the four defined asset groups were owned by the majority financial interest ventures. However, we retained full responsibility for our obligations under the Agreement and, accordingly, we accounted for the beneficiaries' share of earnings from the assets as a reduction of our equity in the earnings of the related ventures. We will account for any distributions to the beneficiaries as of the termination dates as additional investments in the related assets (i.e., contingent consideration). At the time of acquisition of Hughes, we reserved 20,000,000 shares of common stock for possible issuance under the Agreement. The number of shares reserved was determined based on estimates in accordance with the provisions of the Agreement. The actual number of shares issuable will be determined only from events occurring over the term of the Agreement and could differ significantly from the number of shares reserved.

        In 1999, our Board of Directors authorized the repurchase of common shares for up to $250 million, subject to certain pricing restrictions. During 2000, we repurchased approximately 2.8 million shares for $66 million. The average per share repurchase price was $23.57. No shares were repurchased under this program in 2002 or 2001. Other shares of common stock repurchased in 2002, 2001 and 2000 were subsequently issued pursuant to the Contingent Stock Agreement.

        In January and February 2002, we issued 16.675 million shares of common stock for net proceeds of $456.3 million ($27.40 per share less issuance costs) under our effective shelf registration statement. We used the proceeds of the stock issuance to repay property and other debt and to fund a portion of the purchase price of the acquisition of the assets of Rodamco (see note 16).

        Under our stock option plans, options to purchase shares of common stock and stock appreciation rights may be awarded to our directors, officers and employees. Stock options are generally granted with an exercise price equal to the market price of the common stock on the date of grant, typically vest over a three- to five-year period, subject to certain conditions, and have a maximum term of ten

31

years. We have not granted any stock appreciation rights. Changes in options outstanding under the plans are summarized as follows:

	2002				2001				2000
	Shares		Weighted- average Exercise Price		Shares		Weighted- average Exercise Price		Shares		Weighted- average Exercise Price
Balance at beginning of year	8,813,085		$	25.58	7,841,881		$	24.78	6,263,228		$	25.54
Options granted	2,769,932			29.14	2,370,888			25.97	2,576,499			22.00
Options exercised	(1,307,854	)		24.06	(1,296,434	)		21.64	(758,904	)		20.67
Options expired or cancelled	(151,159	)		27.32	(103,250	)		23.15	(238,942	)		27.76
Balance at end of year	10,124,004		$	26.72	8,813,085		$	25.58	7,841,881		$	24.78

        Information about stock options outstanding at December 31, 2002 is summarized as follows:

Options Outstanding						Options Exercisable
Range of Exercise Prices		Shares	Weighted- average Remaining Life (Years)	Weighted- average Exercise Price		Shares	Weighted- average Exercise Price
$	18.00—22.75	2,604,833	6.3	$	21.61	1,124,345	$	21.24
$	23.31—28.05	4,135,397	8.1		26.64	759,047		26.67
$	28.14—33.29	3,383,774	5.2		30.75	2,883,774		30.45
		10,124,004	6.7	$	26.72	4,767,166	$	27.68

        At December 31, 2001 and 2000, options to purchase 3,728,711 and 2,934,907 shares, respectively, were exercisable at per share weighted-average prices of $26.95 and $25.18, respectively.

        The option prices were greater than or equal to the market prices at the date of grant for all of the options granted in 2002, 2001 and 2000 and, because we use the intrinsic value-based method of accounting for stock options, no compensation cost has been recognized for stock options granted to our directors, officers and employees. Expense recognized for stock options granted to employees of our unconsolidated ventures was insignificant.

        Under our stock bonus plans, shares of common stock may be awarded to our directors, officers and employees. Shares awarded under the plans are typically subject to forfeiture restrictions which lapse at defined annual rates. Awards granted in 2002, 2001 and 2000 aggregated 146,950 shares, 266,850 shares and 89,700 shares, respectively, with a weighted-average market value per share of $28.14, $24.84 and $21.62, respectively. In connection with certain stock bonus plan awards, we made loans (when permissible) to the recipients for the payment of related income taxes, which loans were forgiven (when permissible) subject to the recipients' continued employment. The total loans outstanding at December 31, 2002, 2001 and 2000 were $0.1 million, $0.5 million and $1.3 million, respectively. We recognize amortization of the fair value of the stock awarded and any forgiven loans as compensation costs on a straight-line basis over the terms of the awards. Such costs amounted to $5.5 million in 2002, $3.2 million in 2001 and $3.9 million in 2000.

        The tax status of dividends per share of common stock was as follows:

		2002		2001		2000
Ordinary income		$	1.56	$	1.27	$	1.32
Return of capital			—		0.15		—
	Total	$	1.56	$	1.42	$	1.32

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(14) Earnings per share

        Information relating to the calculations of earnings per share ("EPS") of common stock is summarized as follows (in thousands):

		2002						2001						2000
		Basic			Diluted			Basic			Diluted			Basic			Diluted
Earnings from continuing operations		$	112,829		$	112,829		$	112,139		$	112,139		$	170,315		$	170,315
Dividends on unvested common stock awards and other			(860	)		(860	)		(679	)		(502	)		(437	)		(321	)
Dividends on convertible Preferred stock			(12,150	)		(12,150	)		(12,150	)		(12,150	)		(12,150	)		(12,150	)
Interest on convertible property debt			—			—			—			—			—			3,076
Adjusted earnings from continuing operations		$	99,819		$	99,819		$	99,310		$	99,487		$	157,728		$	160,920
Weighted-average shares outstanding			84,954			84,954			68,637			68,637			69,475			69,475
Dilutive securities:
	Options, unvested common stock awards and other		—			1,492			—			1,057			—			659
	Convertible property debt		—			—			—			—			—			1,930
Adjusted weighted-average shares used in EPS computation			84,954			86,446			68,637			69,694			69,475			72,064

        Effects of potentially dilutive securities are presented only in periods in which they are dilutive. In 2002, the convertible property debt was repaid.

(15) Leases

        We, as lessee, have entered into operating leases, primarily for land at operating properties, expiring at various dates through 2076. Rents under such leases aggregated $8.9 million in 2002, $9.1 million in 2001 and $10.8 million in 2000, including contingent rents, based on the operating performance of the related properties, of $2.2 million, $2.5 million and $3.8 million, respectively. In addition, we are responsible for real estate taxes, insurance and maintenance expenses. Minimum rent payments due under operating leases in effect at December 31, 2002 are summarized as follows (in thousands):

2003		$	6,034
2004			6,091
2005			6,120
2006			6,120
2007			6,120
Subsequent to 2007			254,436
	Total	$	284,921

        We lease space in our operating properties to tenants primarily under operating leases. In addition to minimum rents, the majority of the retail center leases provide for percentage rents when the tenants' sales volumes exceed stated amounts, and the majority of the retail center and office leases

33

provide for other rents which reimburse us for certain of our operating expenses. Rents from tenants are summarized as follows (in thousands):

		2002		2001		2000
Minimum rents		$	533,483	$	448,301	$	399,622
Percentage rents			11,327		9,553		10,820
Other rents, primarily reimbursements of operating expenses			256,673		209,520		181,386
	Total	$	801,483	$	667,374	$	591,828

Minimum rents to be received from tenants under operating leases in effect at December 31, 2002 are summarized as follows (in thousands):

2003		$	524,959
2004			473,633
2005			418,517
2006			353,833
2007			297,459
Subsequent to 2007			837,515
	Total	$	2,905,916

        Rents under finance leases aggregated $8.7 million in 2002 and 2001 and $7.8 million in 2000. The net investment in finance leases at December 31, 2002 and 2001 is summarized as follows (in thousands):

		2002			2001
Total minimum rent payments to be received over lease terms		$	103,113		$	111,848
Estimated residual values of leased properties			788			788
Unearned income			(38,857	)		(44,452	)
	Net investment in finance leases	$	65,044		$	68,184

        Minimum rent payments to be received from tenants under finance leases in effect at December 31, 2002 are summarized as follows (in thousands):

2003		$	8,735
2004			8,931
2005			8,970
2006			8,472
2007			8,444
Subsequent to 2007			59,561
	Total	$	103,113

(16) Acquisition of assets from Rodamco

        In January 2002, we, Simon Property Group, Inc. ("Simon") and Westfield America Trust ("Westfield") announced that affiliates of each (collectively, the "Purchasers") entered into a Purchase Agreement with Rodamco North America N.V. ("Rodamco") to purchase substantially all of the assets of Rodamco for an aggregate purchase price of approximately 2.48 billion euros and the assumption of substantially all of Rodamco's liabilities. In connection with the Purchase Agreement, affiliates of the Purchasers entered into a Joint Purchase Agreement that specified the assets each would acquire and

34

set forth the basis upon which the portion of the aggregate purchase price to be paid to Rodamco by each Purchaser would be determined. On May 3, 2002, the purchase closed.

        The primary assets we acquired include direct or indirect ownership interests in eight regional retail centers, leased primarily to national retailers, which we intend to continue to operate, and are described below:

Property	Interest Acquired	Leasable Mall Square Feet	Department Store Square Feet	Location
Collin Creek (1)	70%	331,000	790,000	Plano, TX
Lakeside Mall	100%	516,000	961,000	Sterling Heights, MI
North Star (1)	96%	435,000	816,000	San Antonio, TX
Oakbrook Center (3)	47%	842,000	1,425,000	Oakbrook, IL
Perimeter Mall (1), (4)	50%	502,000	779,000	Atlanta, GA
The Streets at South Point (2)	94%	590,000	730,000	Durham, NC
Water Tower Place (3)	52%	310,000	510,000	Chicago, IL
Willowbrook (1)	62%	500,000	1,028,000	Wayne, NJ

Notes:

(1)

Properties were owned by existing joint ventures or through tenancies in common between Rodamco and us. As a result, we owned 100% interests in these properties upon acquisition.

(2)

Property began operations in March 2002.

(3)

Property also contains significant office space.

(4)

In October 2002, we contributed our ownership interest in Perimeter Mall to a joint venture in exchange for a 50% interest in that joint venture and a cash distribution of $67.1 million.

        Other primary assets we acquired include a 100% interest in a parcel of land and building at Collin Creek that is leased to Dillard's department store and a 99% noncontrolling limited partnership interest in an entity that leased land from us to redevelop a portion of Fashion Show (a retail center in Las Vegas, Nevada). The first phase of the redevelopment project opened in November 2002. A subsidiary of a trust, of which certain employees are beneficiaries (an entity that we neither own nor control), owned the controlling interest in the limited partnership. Prior to opening, we acquired the controlling interest for $0.1 million. In connection with the acquisition, we consolidated the accounts of the limited partnership, including $100.8 million of property debt.

        The Purchasers also jointly acquired interests in several other assets, including:

•

A 40% interest in River Ridge, a retail center in Lynchburg, VA,

•

Sawmill Place Plaza, a retail center in Columbus, OH, that was sold by the Purchasers on November 15, 2002,

•

A 50% interest in Durham Associates, a partnership that owned and operated South Square Mall, a regional shopping center in Durham, NC that was subject to a contract of sale at the closing date and was sold by the Purchasers on August 2, 2002,

•

A 59.17% interest in Kravco Investments, L.P., a limited partnership that owns investments in retail centers, primarily in the greater Philadelphia area,

•

Urban Retail Properties Co., a property management company that manages properties owned by others,

•

Purchase money notes receivable that arose from the sales of other assets by Rodamco; and

•

A 50% interest in Westin New York, a hotel in New York City that began operations in October 2002.

        Our share of these jointly held assets is 27.285%. The Purchasers intend to sell the interest in River Ridge, but plan to retain the other jointly held investments.

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        The allocation of the purchase cost is summarized as follows (in thousands):

Property and deferred costs of projects		$	1,156,987
Properties in development			2,059
Investments in and advances to unconsolidated real estate ventures			248,928
Prepaid expenses, receivables under finance leases and other assets			57,894
Accounts and notes receivable			1,998
	Total assets		1,467,866
Less—Debt and other liabilities			652,577
	Cash required	$	815,289

        We paid approximately 605 million euros (approximately $546 million based on exchange rates then in effect) to Rodamco at closing. We also paid approximately $269 million to retire some of the obligations of Rodamco and to pay our share of transaction costs. Our share of the debt secured by the operating properties in which we acquired interests was approximately $675 million, including our share of debt of unconsolidated real estate ventures, and our share of subsidiary perpetual preferred stock assumed by the Purchasers was approximately $24 million. In addition, we acquired a limited partnership interest in an entity that was redeveloping a portion of Fashion Show in Las Vegas, Nevada. Our share of the debt of this entity at the time of acquisition was approximately $72 million. The debt encumbering jointly held assets totaled approximately $14 million. Our share of the purchase price was based on the allocated prices of the properties that we acquired, directly or indirectly, our share of the jointly held assets and our share of Rodamco's obligations retired and the transaction expenses. The aggregate purchase price was determined as a result of negotiations between Rodamco and the Purchasers; our portion of the aggregate purchase price was determined as a result of negotiations among the Purchasers.

        Funds for payment of our portion of the purchase price were provided as follows (in thousands):

Sale of Columbia community retail centers		$	111,120
Sale of interest in Franklin Park			20,500
Issuance of common stock in January and February 2002			279,347
Borrowings under bridge loan facility			392,500
Cash on hand			11,822
	Cash required	$	815,289

        In connection with the purchase, we borrowed $392.5 million under a bridge loan facility provided by Banc of America Securities, LLC and Banc of America Mortgage Capital Corporation. The facility provided for no additional availability and had an initial maturity of November 2002 which was extended to May 2003. We repaid approximately $220.4 million of the bridge loan facility with a portion of the proceeds from the issuance of the 7.20% Notes in September 2002 (see note 6). Additionally, in October 2002, we repaid $111.2 million of the facility with the distribution proceeds from two unconsolidated real estate ventures (see note 2). In November and December 2002, we repaid the remaining borrowings under the facility using proceeds from borrowings under our revolving credit facility.

        The consolidated statement of operations for the year ended December 31, 2002 includes revenues and costs and expenses of the assets acquired from Rodamco from the date of acquisition. We prepared pro forma consolidated results of operations for the years ended December 31, 2002 and 2001, assuming the acquisition of assets from Rodamco and the sales of assets used to fund a portion of the cash requirement of the acquisition occurred on January 1, 2001. The net gains related to the

36

sales of assets are excluded from the pro forma results. The unaudited pro forma results are summarized as follows (in thousands, except per share data):

				2002		2001
Revenues				$	1,156,751	$	1,091,844
Equity in earnings of unconsolidated real estate ventures					32,995		35,073
Earnings before net gains (losses) on operating properties, discontinued operations and cumulative effect of change in accounting principle					115,968		134,988
Net earnings					77,438		130,890
Earnings per share of common stock
	Basic:
		Continuing operations		$	.73	$	1.54
		Discontinued operations			.02		(.04	)
		Cumulative effect of change in accounting principle			—		(.01	)
			Net earnings	$	.75	$	1.49
	Diluted:
		Continuing operations		$	.72	$	1.52
		Discontinued operations			.02		(.04	)
		Cumulative effect of change in accounting principle			—		(.01	)
			Net earnings	$	.74	$	1.47

        The pro forma revenues, equity in earnings of unconsolidated real estate ventures and net earnings summarized above are not necessarily indicative of the results that would have occurred if the acquisition and sales had been consummated at January 1, 2001 or of future results of operations.

(17) Other commitments and contingencies

        Other commitments and contingencies (that are not reflected in the consolidated balance sheet) at December 31, 2002 are summarized as follows (in millions):

Guarantee of debt of unconsolidated real estate ventures:
	Village of Merrick Park	$	175.2
	Hughes Airport-Cheyenne Centers		28.8
Construction contracts for properties in development:
	Consolidated subsidiaries, primarily related to Fashion Show		51.4
	Our share of unconsolidated real estate ventures, primarily related to the Village of Merrick Park		15.4
Construction contracts for land development			36.0
Contract to purchase land			20.8
Our share of long-term ground lease obligations of unconsolidated real estate ventures			58.6
Bank letters of credit			9.9
		$	396.1

        We have guaranteed the repayment of a construction loan of the unconsolidated real estate venture that owns the Village of Merrick Park. The maximum amount that may be borrowed under the loan is $200 million. The amount of the guarantee may be reduced to a minimum of 20% upon the achievement of certain lender requirements. Our venture partners have provided guarantees to us for their share (60%) of the construction loan. The construction loan is due in October 2003. The venture

37

plans to repay the loan with proceeds from a new mortgage secured by the Village of Merrick Park. We and our venture partners may provide similar guarantees related to this new mortgage.

        We purchased 158 acres of land in January 2003 related to our Kendall Town Center property in development for approximately $20.8 million pursuant to a purchase commitment that existed at December 31, 2002.

        At December 31, 2002, we had a shelf registration statement for the future sale of up to an aggregate of $1.03 billion (based on the public offering price) of common stock, Preferred stock and debt securities. Securities may be issued pursuant to this registration statement in amounts and on terms to be determined at the time of offering. In January and February 2002, we issued additional shares of common stock under this registration statement (see note 13). In September 2002, we issued additional debt under this registration statement (see note 6).

        We and certain of our subsidiaries are defendants in various litigation matters arising in the ordinary course of business, some of which involve claims for damages that are substantial in amount. Some of these litigation matters are covered by insurance. We are also aware of claims arising from disputes in the ordinary course of business. In our opinion, adequate provision has been made for losses with respect to litigation matters and other claims, where appropriate, and the ultimate resolution of these matters is not likely to have a material effect on our consolidated financial position. It is not possible to predict, however, whether the resolution of these matters is likely to have a material effect on our net earnings in any period, and it is possible that the resolution of these matters could have such an effect in any future quarter or year.

(18) Subsequent events

        In February 2003, our Board of Directors approved modifications to curtail our defined benefit pension plans so that covered employees will not earn additional benefits for future services. In a related action, our Board also approved a new defined contribution plan under which we intend to make discretionary contributions to covered employees' retirement accounts. We expect additional settlements in 2003 related to the early retirement program offered in 2002 and a change in the senior management organizational structure. Accordingly, during 2003, we expect to recognize curtailment and settlement losses associated with the defined benefit pension plans that could range from $15 million to $20 million.

        On March 7, 2003, we entered into an agreement to sell six retail centers in the Philadelphia metropolitan area. We also agreed to purchase a retail center in Delaware from an affiliate of the purchaser. These transactions are expected to close in the second quarter of 2003. We expect to recognize gains in excess of $100 million on the sales of these centers.

(19) New financial accounting standards not yet adopted

        In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." SFAS No. 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and clarifies Emerging Issues Task Force Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity." SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. The provisions of SFAS No. 146 are effective for exit or disposal activities that are initiated after December 31, 2002. Management does not expect that the adoption of this statement will have a material effect on our results of operations or financial condition.

        In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others." For 2002, the Interpretation requires certain disclosures which we have included in note 17. Beginning

38

in 2003, the Interpretation requires recognition of liabilities at their fair value for newly issued guarantees. We do not anticipate that adoption of Interpretation No. 45 will have a material effect on our financial statements.

        In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation — Transition and Disclosure." SFAS No. 148 amends SFAS No. 123, "Accounting for Stock-Based Compensation." SFAS No. 148 provides alternative methods of transition for a voluntary change to the fair value-based method of accounting for stock-based compensation and requires disclosure in both annual and interim financial statements about the method of accounting for stock-based compensation and the effect of the method used on reported results. We have adopted the disclosure provisions of SFAS No. 148. We have not determined whether we will change to the fair value-based method of accounting for stock-based compensation and, if so, which of the alternative methods of transition we would adopt.

        In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities." This Interpretation addresses the consolidation of variable interest entities ("VIEs") in which the equity investors lack one or more of the essential characteristics of a controlling financial interest or where the equity investment at risk is not sufficient for the entity to finance its activities without subordinated financial support from other parties. The Interpretation applies to VIEs created after January 31, 2003 and to VIEs in which we acquire an interest after that date. Effective July 1, 2003, it also applies to VIEs in which we acquired an interest before February 1, 2003. We may apply the Interpretation prospectively, with a cumulative effect adjustment as of July 1, 2003, or by restating previously issued financial statements with a cumulative effect adjustment as of the beginning of the first year restated. We are in the process of evaluating the effects of applying Interpretation No. 46 in 2003. Based on our preliminary analysis, we believe that we may be required to consolidate certain of our unconsolidated real estate ventures that we have accounted for using the equity method; however, we do not expect that this will involve any cumulative effect adjustment.

39

Five Year Comparison of Selected Financial Data (Notes 1, 2 and 3)
Years ended December 31, (in thousands, except per share data)

			2002			2001			2000			1999			1998
Operating results data:
	Revenues from continuing operations		$	1,104,734		$	947,057		$	624,425		$	624,494		$	602,532
	Earnings from continuing operations			112,829			112,139			170,315			155,258			109,798
	Basic earnings from continuing operations applicable to common shareholders per share of common stock			1.17			1.45			2.27			1.99			1.43
	Diluted earnings from continuing operations applicable to common shareholders per share of common stock			1.15			1.43			2.24			1.96			1.41
Balance sheet data:
	Total assets			6,386,168			4,880,443			4,175,538			4,233,101			5,033,331
	Debt and capital leases			4,461,901			3,501,398			3,058,038			3,155,312			3,943,902
	Shareholders' equity			1,112,084			655,360			630,468			638,580			628,926
	Shareholders' equity per share of common stock (note 4)			12.06			8.78			8.61			8.40			8.11
Other selected data:
	Net cash provided (used) by:
		Operating activities		376,144			301,754			261,240			197,288			268,065
		Investing activities		(863,711	)		(126,595	)		(275	)		28,629			(1,027,040	)
		Financing activities		497,077			(157,778	)		(273,713	)		(237,389	)		720,611
Dividends per share of common stock				1.56			1.42			1.32			1.20			1.12
Dividends per share of convertible Preferred stock				3.00			3.00			3.00			3.00			3.00
Market price per share of common stock at year end				31.70			29.29			25.50			21.25			27.50
Market price per share of convertible Preferred stock at year end				46.03			43.50			36.63			32.63			43.38
Weighted-average common shares outstanding (basic)				84,954			68,637			69,475			71,705			67,874
Weighted-average common shares outstanding (diluted)				86,446			69,694			72,064			75,787			68,859

Notes:

(1)

Reference is made to note 16 of the consolidated financial statements for information related to the acquisition of properties and other assets from Rodamco in 2002.

(2)

Reference is made to note 2 of the consolidated financial statements for information related to the acquisition of the majority financial interest ventures in 2001.

(3)

Reference is made to note 1 of the consolidated financial statements for information related to the reclassification of prior year operating results to discontinued operations.

(4)

Shareholders' equity per share of common stock assumes conversion of the Series B Convertible Preferred stock issued in 1997.

40

Interim Financial Information (Unaudited)
Interim consolidated results of operations are summarized as follows (in thousands, except per share data):

			Quarter ended
			2002											2001
			December 31			September 30			June 30		March 31			December 31			September 30		June 30		March 31
Revenues			$	313,425		$	298,863		$	253,444	$	239,002		$	234,207		$	223,957	$	242,509	$	246,384
Operating income				32,444			32,966			23,754		16,842			24,993			29,544		25,843		32,191
Earnings (loss) from continuing operations				(9,718	)		33,127			71,464		17,956			24,735			29,609		26,005		31,790
Net earnings (loss)				(5,300	)		32,299			98,149		14,703			24,270			29,249		25,927		31,260
Earnings per common share
Basic:
	Continuing operations		$	(.15	)	$	.35		$	.79	$	.18		$	.32		$	.38	$	.33	$	.42
	Discontinued operations			.05			(.01	)		.31		(.04	)		(.01	)		—		—		—
	Cumulative effect of change in accounting principle			—			—			—		—			—			—		—		(.01	)
		Total	$	(.10	)	$	.34		$	1.10	$	.14		$	.31		$	.38	$	.33	$	.41
Diluted:
	Continuing operations		$	(.15	)	$	.34		$	.76	$	.18		$	.31		$	.37	$	.33	$	.41
	Discontinued operations			.05			(.01	)		.28		(.04	)		(.01	)		—		—		—
	Cumulative effect of change in accounting principle			—			—			—		—			—			—		—		(.01	)
		Total	$	(.10	)	$	.33		$	1.04	$	.14		$	.30		$	.37	$	.33	$	.40

Note:
Quarterly amounts have been restated to reflect consolidated properties that we sold in 2002, and where we did not have a continuing involvement, as discontinued operations. Net earnings for the second quarter of 2002 includes a gain on the disposition of our interest in a retail center (Franklin Park) of $42.6 million ($0.50 per share basic, $0.45 per share diluted). Net earnings for the fourth quarter of 2002 includes impairment losses on two retail centers of $42.1 million ($0.49 per share basic and diluted).

Price of Common Stock and Dividends

        Our common stock is traded on the New York Stock Exchange. The prices and dividends per share were as follows:

	Quarter ended
	2002								2001
	December 31		September 30		June 30		March 31		December 31		September 30		June 30		March 31
High	$	31.79	$	32.70	$	33.35	$	30.98	$	30.16	$	29.35	$	29.00	$	28.00
Low		28.25		28.47		31.16		27.50		23.82		24.00		25.14		24.53
Dividends		.39		.39		.39		.39		.355		.355		.355		.355

Number of Holders of Common Stock

        The number of holders of record of our common stock as of March 17, 2003 was 2,245.

41

The Rouse Company and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

General

        Through our subsidiaries and affiliates, we acquire, develop and manage a diversified portfolio of income-producing properties located throughout the United States and develop and sell land for residential, commercial and other uses, primarily in master-planned communities.

Income-Producing Properties

        Our primary business strategies relating to income-producing properties include (1) owning and operating premier properties — shopping centers and large-scale mixed-use projects in major markets across the United States and (2) owning and operating geographically concentrated office and industrial buildings, principally complementing community development activities. In order to execute these strategies, we evaluate opportunities to acquire or develop properties and to redevelop, expand and/or renovate properties in our portfolio. We have made and plan to continue making substantial investments to acquire, develop and expand and/or renovate properties as follows:

•

We acquired interests in eight high-quality operating properties and other assets in May 2002 from Rodamco North America N.V. ("Rodamco").

•

We acquired our partners' interests in Ridgedale Center and Southland Center, regional retail centers, in November 2002.

•

We are an investor in a joint venture that owns the Village of Merrick Park, a large-scale mixed-use project in Coral Gables, Florida, that opened on September 27, 2002.

•

We are redeveloping Fashion Show, a retail center on "the Strip" in Las Vegas, Nevada, and opened the first phase of this project on November 1, 2002. The second phase of this project is expected to open in late 2003 or early 2004.

•

We are an investor in a joint venture that is developing The Shops at LaCantera, a regional retail center in San Antonio, Texas.

        We continually assess whether properties in which we own interests are consistent with our business strategies. We have disposed of interests in more than 40 retail centers and numerous other properties since 1993 (primarily using tax-deferred exchanges or joint ventures) and may continue to dispose of selected properties that are not meeting or are not considered to have the potential to continue to meet our investment criteria. We may also dispose of interests in properties for other reasons. In April 2002, we sold our interests in 12 community retail centers in Columbia for net proceeds of $111.1 million. In anticipation of this transaction, we repaid $58.1 million of debt secured by these properties in March 2002 and incurred a loss on this repayment of $3.2 million (net of income tax benefits of $2.1 million). Also in April 2002, we sold our interest in Franklin Park, a retail center in Toledo, Ohio, for $20.5 million and the buyer assumed our share of the center's debt ($44.7 million). In October 2002, we contributed our ownership interest in Perimeter Mall (a regional retail center in Atlanta, Georgia) to a joint venture in exchange for a 50% interest in the venture and a distribution of $67.1 million. The net proceeds from these transactions were used to fund a portion of the costs (including a partial repayment of a related bridge loan facility) of the assets acquired from Rodamco. In 2000, we sold several office and industrial properties in the Baltimore-Washington corridor and contributed our ownership interests in industrial properties in two Las Vegas business parks to a real estate venture in exchange for a cash distribution and a minority interest in the venture. Disposition decisions and related transactions and changes in expected holding periods may cause us to recognize gains or losses that could have material effects on reported net earnings in future quarters or fiscal years, and, taken together with the use of sales proceeds, may have a material effect on our overall consolidated financial position.

Community Development

        Our primary business strategy relating to community development projects is to develop and sell land in our planned communities in a manner that increases the value of the remaining land to be developed and sold and to provide current cash flows. Our major land development projects include communities in and around Columbia in Howard County, Maryland and in Summerlin, Nevada. In addition, we are an investor in an unconsolidated real estate venture that is developing Fairwood, a planned community in Prince George's County, Maryland. To leverage our experience and provide further growth, we are continuing to seek and evaluate opportunities to acquire new and/or existing community development projects. In addition to being a viable business segment for us, the net cash flows from community development operations provide an additional source of funding for our other activities.

42

2002 Acquisitions

        In January 2002, we, Simon Property Group, Inc. ("Simon") and Westfield America Trust ("Westfield") announced that affiliates of each (collectively, the "Purchasers") entered into a Purchase Agreement with Rodamco to purchase substantially all of the assets of Rodamco for an aggregate purchase price of approximately 2.48 billion euros and the assumption of substantially all of Rodamco's liabilities. In connection with the Purchase Agreement, affiliates of the Purchasers entered into a Joint Purchase Agreement that specified the assets each would acquire and set forth the basis upon which the portion of the aggregate purchase price to be paid to Rodamco by each Purchaser would be determined. On May 3, 2002, the purchase closed.

        The primary assets we acquired include direct or indirect ownership interests in eight regional retail centers, leased primarily to national retailers, which we intend to continue to operate, and are described below:

Property	Interest Acquired	Leasable Mall Square Feet	Department Store Square Feet	Location
Collin Creek (1)	70%	331,000	790,000	Plano, TX
Lakeside Mall	100%	516,000	961,000	Sterling Heights, MI
North Star (1)	96%	435,000	816,000	San Antonio, TX
Oakbrook Center (3)	47%	842,000	1,425,000	Oakbrook, IL
Perimeter Mall (1), (4)	50%	502,000	779,000	Atlanta, GA
The Streets at South Point (2)	94%	590,000	730,000	Durham, NC
Water Tower Place (3)	52%	310,000	510,000	Chicago, IL
Willowbrook (1)	62%	500,000	1,028,000	Wayne, NJ

Notes:

(1)

Properties were owned by existing joint ventures or through tenancies in common between Rodamco and us. As a result, we owned 100% interests in these properties upon acquisition.

(2)

Property began operations in March 2002.

(3)

Property also contains significant office space.

(4)

In October 2002, we contributed our ownership interest in Perimeter Mall to a joint venture in exchange for a 50% interest in that joint venture and a cash distribution of $67.1 million.

        Other primary assets acquired include a 100% interest in a parcel of land and building at Collin Creek that is leased to Dillard's department store and a 99% noncontrolling limited partnership interest in an entity that leased land from us to redevelop a portion of Fashion Show (a retail center in Las Vegas, Nevada). The first phase of the redevelopment project opened in November 2002. A subsidiary of a trust, of which certain employees are beneficiaries (an entity that we neither own nor control), owned the controlling interest in the limited partnership. Prior to opening, we acquired the controlling interest for $0.1 million. In connection with this acquisition, we consolidated the accounts of the limited partnership, including $100.8 million of property debt.

        The Purchasers also jointly acquired interests in several other assets, including:

•

A 40% interest in River Ridge, a retail center in Lynchburg, VA,

•

Sawmill Place Plaza, a retail center in Columbus, OH, that was sold by the Purchasers on November 15, 2002,

•

A 50% interest in Durham Associates, a partnership that owned and operated South Square Mall, a regional shopping center in Durham, NC that was subject to a contract of sale at the closing date and was sold by the Purchasers on August 2, 2002,

•

A 59.17% interest in Kravco Investments, L.P., a limited partnership that owns investments in retail centers, primarily in the greater Philadelphia area,

43

•

Urban Retail Properties Co., a property management company that manages properties owned by others,

•

Purchase money notes receivable that arose from the sales of other assets by Rodamco; and

•

A 50% interest in Westin New York, a hotel in New York City that began operations in October 2002.

        Our share of these jointly held assets is 27.285%. The Purchasers intend to sell the interest in River Ridge, but plan to retain the other jointly held investments.

        We paid approximately 605 million euros (approximately $546 million based on exchange rates then in effect) to Rodamco at closing. We also paid approximately $269 million to retire some of the obligations of Rodamco and to pay our share of transaction costs. Our share of the debt secured by the operating properties in which we acquired interests was approximately $675 million, including our share of debt of unconsolidated real estate ventures, and our share of subsidiary perpetual preferred stock assumed by the Purchasers was approximately $24 million. In addition, we acquired a limited partnership interest in an entity that was redeveloping a portion of Fashion Show in Las Vegas, Nevada. Our share of the debt of this entity at the time of acquisition was approximately $72 million. The debt encumbering jointly held assets totaled approximately $14 million. Our share of the purchase price was based on the allocated prices of the properties that we acquired, directly or indirectly, our share of the jointly held assets and our share of Rodamco's obligations retired and the transaction expenses. The aggregate purchase price was determined as a result of negotiations between Rodamco and the Purchasers; our portion of the aggregate purchase price was determined as a result of negotiations among the Purchasers.

        Funds for payment of our portion of the purchase price were provided as follows (in millions):

Sale of Columbia community retail centers		$	111.1
Sale of interest in Franklin Park			20.5
Issuance of common stock in January and February 2002			279.3
Borrowings under bridge loan facility			392.5
Cash on hand			11.9
	Cash required	$	815.3

        In connection with the purchase, we borrowed $392.5 million under a bridge loan facility provided by Banc of America Securities, LLC and Banc of America Mortgage Capital Corporation. The facility provided for no additional availability and had an initial maturity of November 2002 which was extended to May 2003. We repaid approximately $220.4 million of the facility with a portion of the proceeds from the issuance of the 7.20% Notes in September 2002. Additionally, in October 2002, we repaid $111.2 million of the facility with distribution proceeds from two unconsolidated real estate ventures. In November and December 2002, we repaid the remaining borrowings under the facility using proceeds from borrowings under our revolving credit facility.

        We also acquired our partners' controlling financial interests in entities that own Ridgedale Center and Southland Center. Ridgedale Center, a regional retail center in suburban Minneapolis, Minnesota, has 343,000 square feet of leasable mall space and four department stores with space totaling 693,000 square feet. Southland Center, a regional retail center in suburban Detroit, Michigan, has 322,000 square feet of leasable mall space and three department stores with space totaling 583,000 square feet. These retail centers were acquired for cash of $63.1 million and our assumption of $152.7 million of our partners' share of mortgage debt.

44

Summary of portfolio changes

        We believe that space in high-quality, dominant retail centers in densely populated, affluent areas will continue to be in demand by retailers and that these retail centers are better able to withstand difficult conditions in the overall economy and the real estate and retail industries. In addition to the acquisitions and dispositions noted above, during 2002, 2001 and 2000 we completed other acquisitions, numerous redevelopment/expansion projects, the development of new operating properties and several disposition transactions (including contributions of interests in properties to unconsolidated real estate ventures) designed to upgrade the overall quality of the income-producing property portfolio or to provide liquidity for acquisitions, development costs, and other uses.

        Our 2002, 2001 and 2000 acquisition, disposition and development activity is summarized as follows:

Acquisitions

Retail Centers	Interest Acquired	Interest After Acquisition	Acquisition Date
Westdale Mall	65%	85%	August 2000
Collin Creek	70%	100%	May 2002
Lakeside Mall	100%	100%	May 2002
North Star	96%	100%	May 2002
Oakbrook Center (1)	47%	47%	May 2002
Perimeter Mall (2)	50%	100%	May 2002
The Streets at South Point (3)	94%	94%	May 2002
Water Tower Place (1)	52%	52%	May 2002
Willowbrook	62%	100%	May 2002
Ridgedale Center	90%	100%	November 2002
Southland Center	90%	100%	November 2002

Notes:

(1)

Property also contains significant office space.

(2)

We subsequently disposed of this acquired interest and owned a 50% interest in the retail center at December 31, 2002.

(3)

Property began operations in March 2002.

Dispositions

Retail Centers	Disposition Date	Office and Other Properties	Disposition Date
North Star (1)	July 2000	Hunt Valley Business Center	June 2000
Midtown Square	October 2000	(1 building)
The Grand Avenue	November 2000	Midtown Office	October 2000
12 Community Retail Centers     in Columbia, Maryland	April 2002	Owen Brown I & II Hughes Airport Center	November 2000 December 2000
Franklin Park	April 2002	(34 buildings) (2)
Tampa Bay Center	December 2002	Hughes Cheyenne Center     (3 buildings) (2) Hunt Valley Business Center     (2 buildings) Hunt Valley Business Center     (1 building)	December 2000 December 2000 April 2001

45

Notes:

(1)

We contributed our interest to a venture in which we obtained a minority interest. We subsequently reacquired all of the interests in connection with the Rodamco transaction.

(2)

We contributed our interests to ventures in which we obtained minority interests.

Development projects

Retail Centers	Date Opened	Office and Other Properties	Date Opened
Moorestown Mall Expansion Pioneer Place Expansion	March 2000 March 2000	Summerlin Town Center     (1 building)	January 2001 February 2001
Exton Square Expansion	May 2000	Summerlin Town Center
Perimeter Mall Expansion	July 2000	(1 building)
Oviedo Marketplace Expansion	October 2000
The Mall in Columbia Expansion	May 2001
Centerpointe Plaza (1)	September 2001
Village of Merrick Park (2)	September 2002
Fashion Show     Redevelopment – Phase I	November 2002
Canyon Pointe – Summerlin     Community Retail Center (3)	August 2002

Notes:

(1)

We have a 50% interest in this village center in Summerlin, Nevada.

(2)

We have a 40% interest in this project in Coral Gables, Florida. Project also has office and parking operations.

(3)

We sold our interest in the project in December 2002.

Operating results

        The following discussion and analysis of operating results covers each of our five business segments as management believes that a segment analysis provides the most effective means of understanding our business. It also provides information about other elements of the consolidated statement of operations that are not included in the segment results. You should refer to the consolidated statements of operations, note 8 to the consolidated financial statements and the Five Year Summary of Net Operating Income ("NOI") and Net Earnings on page 63 when reading this discussion and analysis. As discussed in note 8, segment operating data are reported using the accounting policies used for internal reporting to management, which differ in certain respects from those used for reporting under accounting principles generally accepted in the United States of America. The differences affect only the reported revenues and expenses of the segments and have no effect on our reported net earnings or NOI. Revenues and operating expenses reported for the segments are reconciled to the related amounts reported in the consolidated statements of operations in note 8.

        Comparisons of NOI and net earnings from one year to another are affected significantly by the property acquisition, disposition and development activity summarized above. As discussed in more detail below, other factors that have contributed to our operating results in 2002, 2001 and 2000 include the following:

•

maintenance of high occupancy levels in retail properties;

•

higher rents on re-leased space;

•

strong demand for land in and around Columbia and Summerlin;

•

refinancings of project-related debt at lower interest rates;

•

a decline in average interest rates on variable-rate debt;

46

•

repayments of debt;

•

cost reduction measures; and

•

costs related to organizational changes.

Impact of the terrorist attacks of September 11, 2001:

        We were largely spared direct losses caused by the terrorist attacks of September 11, 2001. Operations were disrupted only at South Street Seaport, a retail center in lower Manhattan that we own and operate. The center was closed for a week following the attacks for use as a staging and rest area for rescue workers. It did not sustain significant physical damage. Customer traffic, tenant sales and rents at South Street Seaport are generally affected by the level of pedestrian and other traffic and other commercial activity in lower Manhattan. It is difficult to predict with certainty when, if ever, customer traffic, tenant sales and rents will return to historical levels. Customer traffic at our other retail centers was lighter than usual for several days after the attacks but has generally returned to normal levels at our suburban properties. Traffic at our urban specialty marketplaces is more dependent on tourism and continues to be lighter than usual at most of these properties. There can be no assurance that visitor activity at our urban specialty marketplaces will return to levels experienced before the attacks. Las Vegas, where we have a substantial concentration of assets, experienced a significant decline in visitor activity in the weeks immediately following the attacks but has since largely recovered.

Business Segment Information

        Income-producing Properties:    We report the results of our income-producing properties in two segments: (1) retail centers and (2) office and other properties. Our tenant leases provide the foundation for the performance of our operating properties. In addition to minimum rents, the majority of retail and office tenant leases provide for other rents which reimburse us for certain operating expenses. Substantially all of our retail leases also provide for additional rent (percentage rent) based on tenant sales in excess of stated levels. As leases expire, space is re-leased, minimum rents are generally adjusted to market rates, expense reimbursement provisions are updated and new percentage rent levels are established for retail leases.

        Some portions of our discussion and analysis focus on "comparable" properties. In general, comparable properties exclude those that have been acquired or disposed of, newly developed or undergone significant expansion in either of the two years being compared.

        Retail Centers:    Operating results of retail centers are summarized as follows (in millions):

		2002		2001		2000
Revenues		$	775.5	$	637.2	$	631.7
Operating expenses, exclusive of ground rent expense and depreciation and amortization			305.9		261.6		263.6
	NOI	$	469.6	$	375.6	$	368.1

        The $138.3 million increase in revenues in 2002 was attributable primarily to:

•

the acquisitions of interests in properties and other assets in 2002 ($135.0 million);

•

the openings of the first phase of Fashion Show expansion and Village of Merrick Park ($6.9 million);

•

higher rents on re-leased space at comparable retail centers; and

•

the receipt of a management contract termination payment for Town & Country Center in Miami, Florida ($4.8 million).

47

        These increases were partially offset by the effects of the sales of interests in properties in 2002 ($20.1 million) and lower lease termination income ($2.2 million) at comparable properties. Our comparable properties had average occupancy levels of approximately 92.4% during 2002 and 2001.

        The $5.5 million increase in revenues in 2001 was attributable primarily to:

•

properties opened or expanded in 2001 and 2000 ($16.7 million);

•

the acquisition of an additional interest in a retail center in 2000 ($4.5 million);

•

higher rents on released space; and

•

higher lease termination income ($5.6 million) at comparable properties.

        These increases were partially offset by the following:

•

the dispositions of interests in properties in 2000 ($17.0 million);

•

lower average occupancy levels at comparable properties (93.0% in 2001 as compared to 94.4% in 2000); and

•

lower revenues at South Street Seaport where customer traffic, tenant sales and rents declined significantly in the aftermath of the terrorist attacks of September 11, 2001 ($2.1 million).

        The $44.3 million increase in operating expenses, exclusive of ground rent expense and depreciation and amortization, in 2002 was attributable primarily to:

•

the acquisitions of interests in properties and other assets in 2002 ($46.4 million); and

•

the openings of the first phase of Fashion Show expansion and the Village of Merrick Park ($3.6 million). These increases were partially offset by the effects of lower expenses due to the sale of interests in properties in 2002 ($7.5 million).

        The $2.0 million decrease in operating expenses, exclusive of ground rent expense and depreciation and amortization, in 2001 was attributable primarily to the dispositions of interests in properties in 2000 ($9.2 million). These decreases were partially offset by the following:

•

properties opened or expanded in 2001 and 2000 ($4.0 million); and

•

the acquisition of an additional interest in a retail center in 2000 ($2.7 million).

        In summary, the $94 million increase in NOI in 2002 was attributable primarily to:

•

interests in properties acquired ($88.6 million),

•

the openings of the first phase of Fashion Show expansion and the Village of Merrick Park ($3.3 million),

•

the receipt of a management contract termination fee ($4.8 million); and

•

increase in NOI at the remaining properties ($9.9 million), primarily due to higher rents on re-leased space and stable average occupancy levels. The effects of these higher rents were partially offset by lower lease termination payments received ($1.8 million).

        These increases in NOI were partially offset by dispositions of interests in properties ($12.6 million).

        We believe that the ability to increase rents and maintain high average occupancy levels at our comparable retail centers in spite of difficult economic conditions is indicative of the high demand that retailers have for our space.

        We anticipate continued growth in NOI from retail centers in 2003, as we should continue to benefit from the properties acquired from Rodamco, the September 2002 opening of the Village of Merrick Park and the November 2002 opening of the first phase of the Fashion Show redevelopment. Additionally, we are achieving higher average rents on the leasing commitments that we have secured related to leases that expire in 2003.

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        Office and Other Properties:    Operating results of office and other properties are summarized as follows (in millions):

		2002		2001		2000
Revenues		$	205.2	$	203.7	$	216.2
Operating expenses, exclusive of ground rent expense and depreciation and amortization			80.2		75.8		77.6
	NOI	$	125.0	$	127.9	$	138.6

        Revenues increased $1.5 million in 2002 and decreased $12.5 million in 2001. The increase in 2002 was attributable to the acquisition of assets from Rodamco ($4.5 million) and higher rents on re-leased space, partially offset by decreases due to lower average occupancy levels at comparable properties (88.4% in 2002 versus 91.9% in 2001). The decrease in 2001 was attributable primarily to dispositions of interests in properties in 2000 ($21.4 million) and was partially offset by higher rents on re-leased space.

        Total operating expenses, exclusive of ground rent expense and depreciation and amortization, increased $4.4 million in 2002 and decreased $1.8 million in 2001. The increase in 2002 was attributable to the acquisition of assets from Rodamco ($2.5 million) and higher general and administrative expenses. The decrease in 2001 was attributable to dispositions of interests in properties in 2000 ($4.4 million). The decrease was partially offset by higher general and administrative expenses.

        Difficult general economic conditions and weakening office demand led to higher vacancy rates in our office portfolio. We expect NOI from our office and other properties segment to decline in 2003, as we believe the national trend of weakened demand for office space will continue.

        Community Development:    Community development relates primarily to the communities of Summerlin, Nevada, Columbia, Emerson and Stone Lake in Howard County, Maryland, and Fairwood in Prince George's County, Maryland. Generally, revenues and operating income from land sales are affected by such factors as the availability to purchasers of construction and permanent mortgage financing at acceptable interest rates, consumer and business confidence, availability of saleable land for particular uses and our decisions to sell, develop or retain land.

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        Operating results of community development are summarized as follows (in millions):

				2002		2001		2000
Nevada Operations:
	Revenues:
		Summerlin		$	129.7	$	148.7	$	114.4
		Other			46.2		5.6		17.3
	Operating costs and expenses:
		Summerlin			94.0		108.8		95.5
		Other			37.4		5.4		16.5
			NOI	$	44.5	$	40.1	$	19.7
Columbia Operations:
	Revenues			$	65.1	$	64.0	$	83.8
	Operating costs and expenses				24.4		29.1		36.7
			NOI	$	40.7	$	34.9	$	47.1
Total:
	Revenues			$	241.0	$	218.3	$	215.5
	Operating costs and expenses				155.8		143.3		148.7
			NOI	$	85.2	$	75.0	$	66.8

        Revenues and NOI from land sales in Summerlin decreased $19.0 million and $4.2 million, respectively, in 2002. These decreases were attributable to a lower supply of saleable residential land in 2002 due to our decision to temporarily reduce land development expenditures in anticipation of reduced demand for residential land following the events of September 11, 2001. In the second half of 2002, we resumed our development pace and expect residential land available for sale to increase in 2003. Revenues and NOI from land sales in Summerlin increased $34.3 million and $21.0 million, respectively, in 2001. These increases were attributable primarily to higher levels of land sold for residential purposes. The increase in operating margins in 2002 and 2001 was due primarily to the effects of favorable pricing resulting from higher demand. Our revenues and NOI relating to other Nevada operations land holdings in 2002 were attributable to sales of investment land and the recognition of deferred revenue upon the collection of a subordinated note receivable from a 1997 sale of land in California. Our revenues and NOI relating to other Nevada operations land holdings in 2000 were attributable primarily to land sales at master planned business parks in Las Vegas.

        Revenues and NOI from Columbia operations land sales increased $1.1 million and $5.8 million, respectively, in 2002. Revenues and NOI increased $2.6 million from our share of earnings from residential sales at Fairwood, a planned community in Prince George's County, Maryland. Land sales at the community began in the fourth quarter of 2001. This increase in revenues was partially offset by a decrease in residential land sales in our other community development projects. This decrease was primarily attributable to a lower supply of saleable land as we began new development in the communities of Emerson and Stone Lake. However, due to the sale of certain parcels of land with low cost bases and lower current taxes resulting from tax planning strategies, our NOI increased despite the lower revenues from these communities. Revenues and NOI from Columbia operations land sales decreased $19.8 million and $12.2 million, respectively, in 2001. The decreases in 2001 were attributable primarily to the effects of a sale of land in New Jersey in 2000 ($14.0 million in revenues and $7.5 million in NOI). We have no additional saleable land at the New Jersey site. The remaining decreases in revenues and NOI for 2001 were attributable primarily to lower levels of sales for commercial uses in Columbia. Operating costs and expenses as a percentage of sales increased in 2001 due to an increase in current income taxes, partially offset by higher profit margins on land sales resulting from favorable pricing.

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        We expect that results of community development should remain strong in 2003, assuming continued favorable market conditions in the Las Vegas and Howard County regions.

        Commercial Development:    Commercial development expenses were $13.0 million in 2002, $6.9 million in 2001 and $7.7 million in 2000. These costs consist primarily of preconstruction expenses and new business costs, net of gains on sales of properties we developed for sale.

        Preconstruction expenses relate to retail and office and other property development opportunities which may not go forward to completion. Preconstruction expenses were $7.0 million in 2002, $3.1 million in 2001 and $4.7 million in 2000. The higher level of expenses in 2002 was primarily attributable to costs for retail project opportunities which we decided not to pursue.

        New business costs relate primarily to the evaluation of potential acquisition and development projects and the management of acquisition transactions. These costs were $10.3 million in 2002, $5.5 million in 2001 and $3.0 million in 2000. New business costs increased in 2002 primarily as a result of internal effort costs related to the Rodamco transaction.

        In 2002, we recognized a gain of $4.3 million (excluding related deferred income taxes) on the sale of a community retail center in Summerlin that we developed with the intent of selling. In 2001, we recognized a gain of $1.5 million (excluding related deferred income taxes) on a build-to-suit office building that we sold upon completion of construction.

        Corporate:    Corporate operating expenses consist of costs associated with Company-wide activities which include shareholder relations, the Board of Directors, financial management, strategic planning and management, and equity in operating results of corporate investments (primarily MerchantWired). We invested in MerchantWired (an unconsolidated joint venture formed with other real estate companies to provide broadband telecommunication services to tenants) and began recognizing our share of its operating results in the third quarter of 2000. In 2002, we and our joint venture partners decided to discontinue the operations of MerchantWired. Accordingly, we recorded an impairment provision for the entire amount of our net investment in the venture (this impairment loss is included in other provisions and losses (gains), net).

        Corporate operating expenses were $16.4 million in 2002, $13.2 million in 2001 and $9.4 million in 2000. The increases in 2002 and 2001 were attributable primarily to costs incurred for strategic planning and management initiatives and to our equity in losses of MerchantWired.

Other Operating Information

        As discussed in note 2 to the consolidated financial statements, in January 2001, we acquired all of the shares of voting stock (91%) of the majority financial interest ventures that we did not own. As a result of this transaction, we consolidated these ventures in our financial statements in 2001. In 2000, we accounted for our interests in them using the equity method. This change does not affect comparisons of the operating results of our business segments because, as discussed in note 8 to the consolidated financial statements, we have consolidated the ventures for segment reporting purposes in 2000. As discussed below, the change affects comparisons of certain other elements of our operating results significantly.

        Interest:    Interest expense was $245.3 million in 2002, $223.3 million in 2001 and $234.5 million in 2000. The increase in 2002 was attributable primarily to an increase in the average debt balance (primarily resulting from the Rodamco transaction), partially offset by lower average interest rates on variable-rate debt. The decrease in 2001 was attributable primarily to lower average interest rates on both variable-rate debt and debt that was refinanced in 2001 and 2000. This decrease was partially offset by interest expense of the acquired majority financial interest ventures.

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        Depreciation and Amortization:    Depreciation and amortization expense increased $31.7 million and $34.5 million in 2002 and 2001, respectively. In 2002, the increase was attributable primarily to the acquisition of properties from Rodamco. In 2001, this change was attributable primarily to the consolidation of the majority financial interest ventures and to the net effect of the changes in our portfolio of properties referred to above.

        Other Provisions and Losses (Gains), Net:    Other provisions and losses (gains), net are summarized as follows (in millions):

	2002			2001		2000
Net losses (gains) on early extinguishment of debt	$	2.5		$	0.5	$	(2.2	)
Provision for organizational changes, including early retirement and related costs		21.8			—		—
Impairment of investment in MerchantWired		11.6			—		—
Net gain on foreign exchange derivatives		(1.1	)		—		—
Other		3.0			0.3		—
Other provisions and losses (gains), net	$	37.8		$	0.8	$	(2.2	)

        We recognized losses of $2.5 million and $0.5 million in 2002 and 2001, respectively, related to the extinguishment of debt prior to scheduled maturity. In 2000, we recognized a net gain of $2.2 million related to the substantial modification of terms of certain property debt and to the extinguishment of debt prior to scheduled maturity.

        The provision for organizational changes and early retirement costs for 2002 related primarily to our consolidation of the management of our Property Operations and Commercial and Office Development divisions into a single Asset Management Group. In connection with this organizational change, we executed a plan to reduce the size of our workforce (including executive management) and adopted a voluntary early retirement program in which employees who met certain criteria were eligible to participate. The costs relating to these organizational changes and the early retirement program, primarily severance and other benefit costs, aggregated $21.8 million (including $12.5 million related to changes in executive management) in 2002.

        MerchantWired was an unconsolidated joint venture with other real estate companies to provide broadband telecommunication services to tenants. In the second quarter of 2002, we and the other real estate companies decided to discontinue the operations of MerchantWired. Accordingly, we recorded an impairment provision for the entire amount of our net investment in the venture.

        A portion of the purchase price for the acquisition of assets from Rodamco was payable in euros. In January 2002, we acquired options to purchase 601 million euros at a weighted-average per euro price of $0.8819. These transactions were executed to reduce our exposure to movements in currency exchange rates between the date of the purchase agreement and the closing date. The contracts were scheduled to expire in May 2002 and had an aggregate cost of $11.3 million. In April 2002, we sold the contracts for net proceeds of $10.2 million and recognized a loss of $1.1 million. We also executed and subsequently sold a euro forward contract and realized a gain of $2.2 million. As of December 31, 2002, we owned no foreign currency or financial instruments that exposed us to risk of movements in currency exchange rates.

        In 2002, we agreed to pay $3.0 million of costs incurred by an entity that sold us a portfolio of office and industrial buildings in 1998 to pay certain tax-related costs arising from the transaction.

        Income Taxes:    As discussed in notes 2 and 9 to the consolidated financial statements, in January 2001, we acquired all of the voting stock of the majority financial interest ventures owned by a trust, of which certain employees are beneficiaries. On January 2, 2001, we and these subsidiaries made a joint election to treat the subsidiaries as taxable REIT subsidiaries ("TRS") for Federal and certain state

52

income tax purposes. With respect to the TRS, we are liable for income taxes at the Federal and state levels. The income tax provisions from continuing operations (excluding taxes related to gains on sales of operating properties) were $30.0 million and $27.4 million in 2002 and 2001, respectively, and related primarily to the earnings of TRS.

        At December 31, 2002, our net deferred tax liability was approximately $92.4 million. Deferred income taxes will become payable as temporary differences reverse (primarily due to the completion of land development projects) and net operating loss carryforwards are exhausted.

        Equity in Earnings of Unconsolidated Real Estate Ventures:    For segment reporting purposes and in this analysis, our share of the NOI of unconsolidated real estate ventures is included in the operating results of retail centers, office and other properties, community development and commercial development. Equity in earnings of the unconsolidated real estate ventures increased $0.7 million in 2002 and decreased $95.5 million in 2001. In 2002, the increase was primarily attributable to the Rodamco transaction. As a result of this transaction, we acquired interests in several properties and other investments that are accounted for as unconsolidated real estate ventures (Oakbrook Center, Water Tower Place, River Ridge, Kravco Investments, L.P. and Westin Hotel). The increase in equity in earnings from these properties and other investments was partially offset by the acquisition from Rodamco of the remaining interests in properties (Collin Creek, North Star, Perimeter Mall and Willowbrook) in which we previously had a noncontrolling interest and accounted for as unconsolidated real estate ventures. The 2002 change also reflects the effects of the opening of the Village of Merrick Park in September 2002, the disposition of a 50% interest in Perimeter Mall in October 2002, and the acquisition of the controlling financial interests in Ridgedale Center and Southland Center in November 2002. The decrease in 2001 was due primarily to the consolidation of the majority financial interest ventures and the effects of a disposition of a substantial portion of our interest in a retail center (North Star) in 2000.

        Net Gains (Losses) on Operating Properties:    Net gains (losses) on operating properties are summarized as follows (in millions):

			2002			2001			2000
Continuing operations:
	Sales of interests in unconsolidated real estate ventures:
		Community retail center	$	4.3		$	—		$	—
		Regional retail centers		42.6			—			37.1
	Impairment losses on retail centers			(42.1	)		(0.4	)		(6.9	)
	Other, net			2.0			—			3.6
				6.8			(0.4	)		33.8
Discontinued operations:
	Community retail centers			30.5			—			—
	Regional retail center			2.5			—			(0.7	)
				33.0			—			(0.7	)
		Total	$	39.8		$	(0.4	)	$	33.1

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        The net gains on operating properties in 2002 related primarily to gains recorded on the sale of our interests in retail centers. In April 2002, we sold our interests in 12 community retail centers for net proceeds of $111.1 million. We recorded a gain on this transaction of approximately $32.0 million, net of deferred income taxes of $18.4 million. Our interests in one of the community retail centers were reported in unconsolidated real estate ventures and the gain on the sale of our interests in this property ($4.3 million, net of deferred income taxes of $2.0 million) is included in continuing operations. The remaining gain on this transaction ($27.7 million, net of deferred income taxes of $16.4 million) is classified as a component of discontinued operations. In April 2002, we sold our interest in Franklin Park, a regional retail center in Toledo, Ohio, for $20.5 million and the buyer assumed our share of the center's debt ($44.7 million). Our interest in this property was reported in unconsolidated real estate ventures and, accordingly, the gain of $42.6 million that we recorded on this transaction is included in continuing operations. In December 2002, we sold our interest in Tampa Bay Center and our interest in a Summerlin community retail center for net proceeds of $22.8 million and $25.1 million, respectively. We recorded gains of $2.5 million and $2.8 million (net of deferred income taxes of $1.5 million), respectively, on these transactions and these gains are classified as a component of discontinued operations. These gains were partially offset by impairment losses on two retail centers ($42.1 million). In 2002, we changed our plans and intentions as to the manner in which these retail centers would be operated in the future and revised estimates of the most likely holding periods. As a result, we evaluated the recoverability of the carrying amounts of the centers, determined that the carrying amounts of the centers were not recoverable from future cash flows and recognized impairment losses. We are negotiating with the holder of a mortgage secured by one of these properties in an effort to settle the mortgage for less than its carrying amount.

        The net losses on operating properties in 2001 consisted primarily of an additional impairment provision we recorded on our investment in a retail center (Randhurst) that we and the other venturer intend to dispose ($0.4 million).

        The net gains on operating properties in 2000 related primarily to the transfer to a joint venture controlled by Rodamco (in which we maintained a minority interest) of our ownership interest in a retail center (North Star) ($37.1 million). This gain was partially offset by an impairment provision recorded by us on our investment in a retail center (Randhurst) that we and the other venturer intend to dispose ($6.9 million) and an impairment loss on Tampa Bay Center ($0.7 million). We deferred recognition of gains of approximately $25 million on the North Star transaction and approximately $15 million in connection with an unrelated transaction due to our continuing involvement with the ventures. During 2002, we reacquired all of the interests in North Star in connection with the Rodamco transaction and reclassified the deferred gain of $25 million as a reduction in the cost basis of the property.

        Discontinued Operations:    Discontinued operations includes the operating results of 11 community retail centers in Columbia, Maryland and Tampa Bay Center, net gains (losses) on their sales as discussed above and the effects of the sale of a newly constructed community retail center in Summerlin, Nevada. We constructed this property with the intention of selling it. For segment reporting purposes, our share of the NOI of the properties classified in discontinued operations is included in the operating results of retail centers and the gain on the sale of the community retail center in Summerlin (excluding related deferred income taxes) is included in commercial development, as discussed above.

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The operating results of properties classified as discontinued operations are summarized as follows (in thousands):

		2002		2001			2000
Revenues		$	5,401	$	19,280		$	8,959
Operating expenses, exclusive of provision for bad debts, depreciation and amortization			3,692		9,122			5,460
Interest expense			2,146		5,479			2,248
Provision for bad debts			65		307			490
Depreciation and amortization			1,589		3,876			1,408
Other provisions and losses			5,136		—			—
Net gains (losses) on operating properties			33,012		—			(694	)
Deferred income tax benefit (provision)			1,237		(1,518	)		—
Equity in earnings of unconsolidated real estate ventures			—		—			1,511
	Discontinued operations	$	27,022	$	(1,022	)	$	170

        Net Earnings:    Net earnings were $139.9 million in 2002, $110.7 million in 2001 and $170.5 million in 2000. Net earnings for each year were affected by acquisition and disposition transactions and unusual and/or nonrecurring items discussed above in other provisions and losses (gains), net gains (losses) on operating properties and discontinued operations.

Financial condition, liquidity and capital resources

        We believe that our liquidity and capital resources are adequate for our near-term and longer-term requirements. We had cash and cash equivalents and investments in marketable securities totaling $73.7 million and $54.3 million at December 31, 2002 and 2001, respectively. Net cash provided by operating activities was $376.1 million, $301.8 million and $261.2 million in 2002, 2001 and 2000, respectively. The changes in net cash provided by operating activities were due primarily to the factors discussed above in the analysis of operating results, including the effects of the Rodamco transaction in 2002 and the majority financial interest ventures acquisition in 2001. The level of net cash provided by operating activities is also affected by the timing of receipt of rents and other revenues, including proceeds of land sales and the payment of operating and interest expenses and land development costs. The level of cash provided by operating distributions from unconsolidated real estate ventures is affected by the timing of receipt of their revenues (including land sales revenues), payment of operating and interest expenses and other sources and uses of cash.

        We rely primarily on fixed-rate, nonrecourse loans from private institutional lenders to finance our operating properties. We have also made use of the public equity and debt markets to meet our capital needs, principally to repay or refinance corporate and project-related debt and to provide funds for project development and acquisition costs and other corporate purposes. We have a credit facility with a group of lenders that provides for unsecured borrowings of up to $450 million. The facility is available to December 2003, subject to a one-year renewal option. We are continually evaluating sources of capital and believe that there are satisfactory sources available for all requirements. Selective dispositions of properties and interests in properties are expected to provide capital resources in 2003 and may also provide them in subsequent years.

        Most of our debt consists of mortgages collateralized by operating properties. Scheduled principal payments on property debt were $76.1 million, $58.7 million and $55.5 million in 2002, 2001 and 2000, respectively.

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        Our contractual cash obligations and construction cost commitments are summarized as follows at December 31, 2002 (in millions):

			2003		2004		2005		2006		2007		After 2007
Debt:
	Scheduled principal payments (through 2007)		$	76	$	79	$	78	$	59	$	50	$	—
	Balloon payments and scheduled principal payments after 2007			472		471		435		342		490		1,889
		Total debt		548		550		513		401		540		1,889
Capital lease obligations				4		3		1		1		1		10
Operating leases				6		6		6		6		6		256
Land purchase commitment				21		—		—		—		—		—
Construction commitments:
	Properties in development			48		3		—		—		—		—
	Land development			36		—		—		—		—		—
		Total	$	663	$	562	$	520	$	408	$	547	$	2,155

        The balloon payments due in 2003 consist of $229 million of mortgages on two retail centers and three office buildings and $243 million of borrowings due under the credit facility. The balloon payments due in 2004 consist of $471 million of debt related primarily to five retail centers and one office building. We expect to repay the mortgages with proceeds from property refinancings, credit facility borrowings, proceeds from property dispositions or other available corporate funds. We also have an option to extend the credit facility to December 2004.

        We expect to spend more than $200 million (including the construction commitments set forth above) for new developments, expansions and improvements to existing properties in 2003. A substantial portion of these expenditures relates to new retail properties and retail center redevelopment/expansions, and it is expected that most of these costs will be financed by debt, including borrowings under existing property-specific construction loans and/or our credit facility. In addition, we are an investor in several unconsolidated joint ventures that are developing certain projects, with the other venturers funding a portion of development costs. We expect to invest approximately $21 million in these joint ventures in 2003.

        Expenditures for properties in development and improvements to existing properties were $226.5 million, $194.6 million and $218.0 million in 2002, 2001 and 2000, respectively. These expenditures related primarily to project development activity, primarily retail property redevelopment/expansions and development of new office and industrial properties in Las Vegas. A substantial portion of the costs of properties in development was financed with construction or similar loans and/or credit facility borrowings. In some cases, long-term fixed-rate debt financing is arranged before completion of construction. Improvements to existing properties consist primarily of costs of renovation and remerchandising programs and other tenant improvement costs.

        Expenditures for investments in other unconsolidated real estate ventures were approximately $35.7 million in 2002, $46.0 million in 2001 and $10.7 million in 2000 and consisted primarily of investments in unconsolidated ventures developing the Village of Merrick Park and the community of Fairwood.

        Expenditures for acquisitions of interests in properties were $889.8 million in 2002 and $22.2 million in 2000. The acquisitions in 2002 consisted primarily of the Rodamco transaction and the acquisition of the other partners' interests in Ridgedale Center and Southland Center. The acquisitions in 2000 consisted primarily of commercial sites adjacent to the Village of Merrick Park and department store sites at existing properties.

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        In addition to our unrestricted cash and cash equivalents and investments in marketable securities, we have other sources of capital. Availability under our credit facility was $207 million at December 31, 2002. This credit facility can be used for various purposes, including land and project development costs, property acquisitions, liquidity and other corporate needs. Also, we have an effective shelf registration statement for the sale of up to an aggregate of approximately $2.25 billion (based on the public offering price) of common stock, Preferred stock and debt securities. At December 31, 2002, we had issued approximately $1.22 billion of common stock and debt securities under the shelf registration statement. In January and February of 2002, we issued 16.675 million shares of common stock for net proceeds of $456.3 million ($27.40 per share less issuance costs) under the shelf registration statement. We used these proceeds to fund a portion of the purchase price of the acquisition of the assets of Rodamco. In September 2002, we issued $400 million of 7.20% Notes due in 2012 for net proceeds of $396.9 million under our effective shelf registration statement. We used $220.4 million of the proceeds to repay a portion of the bridge loan facility used to fund the acquisition of the assets of Rodamco. We used $116.2 million of the proceeds to repay $114.2 million of other debt (with prepayment penalties of $2.0 million) that was due in January 2003. We used the remaining proceeds and other funds to repay $61 million of property debt due in 2003. We had approximately $1.03 billion of availability under the shelf registration statement at December 31, 2002.

        Proceeds from dispositions of interests in operating properties were $252.0 million in 2002, $4.6 million in 2001 and $221.9 million in 2000. Proceeds from these transactions in 2002 related to the sales of our interests in 12 community retail centers in Columbia, Maryland, Franklin Park and Tampa Bay Center and distributions from a venture to which we contributed the ownership interest in Perimeter Mall in October 2002. We also received a 50% interest in the venture. Proceeds from these transactions in 2001 related primarily to the sale of an office building. Proceeds from these transactions in 2000 consisted primarily of cash distributions from ventures to which we contributed ownership interests in a retail center (North Star), industrial buildings in two business parks (Hughes Airport Center and Hughes Cheyenne Center) and a property under development (Village of Merrick Park). We also received minority interests in the ventures.

        At December 31, 2002, we were not holding any income-producing properties for sale, but we may sell interests in properties as opportunities arise. We also consider certain investment and other land assets as significant sources of liquidity.

        Net proceeds from the issuance of other debt were $303.0 million in 2002 and $38.9 million in 2000. Net repayments of other debt were $9.9 million in 2001. The net proceeds in 2002 consisted primarily of the issuance of $400 million of 7.20% Notes due in 2012 under our shelf registration statement, partially offset by the repayment of other corporate debt that was due in January 2003.

        Net repayments of property debt, excluding scheduled principal repayments, were $14.3 million in 2002 and $30.8 million in 2000. The net repayments in 2002 and 2000 consisted primarily of repayments associated with the sales of the properties securing the debt, partially offset by borrowings on construction loans on retail properties in development. In 2002, we also repaid $61 million of property debt due in 2003 primarily using proceeds from the issuance of 7.20% Notes due in 2012. In 2000, we also had repayments associated with the substantial modification of terms of certain loans. Excluding scheduled principal payments, net proceeds of property debt were $25.0 million in 2001 and consisted primarily of proceeds from the issuance of Special Improvement District bonds used to fund community development costs in Summerlin. We also received distributions of financing proceeds from unconsolidated real estate ventures of $44.9 million in 2002 and $109.3 million in 2001.

        In 1999, our Board of Directors authorized the repurchase, subject to certain pricing restrictions, of up to $250 million of common stock. As of December 31, 2002, we had repurchased approximately 4.4 million shares under this program for approximately $101 million, including purchases of approximately 2.8 million shares for approximately $66 million in 2000. We did not repurchase shares

57

under this program in 2002 or 2001. The average per share repurchase price was $23.57 in 2000. Other shares of common stock purchased in 2002, 2001 and 2000 were subsequently issued pursuant to the Contingent Stock Agreement.

        The agreements relating to various loans impose limitations on us. The most restrictive of these limit the levels and types of debt we may incur and require us to maintain specified minimum levels of debt service coverage and net worth. The agreements also impose restrictions on our dividend payout ratio and on sale, lease and certain other transactions, subject to various exclusions and limitations. These restrictions have not limited our normal business activities and are not expected to do so in the foreseeable future.

Unconsolidated ventures

        We have interests in unconsolidated real estate ventures that own and/or develop properties. We use these ventures to limit our risk associated with individual properties and to reduce capital requirements. We may also contribute our interests in properties to unconsolidated ventures for cash distributions and interests in the ventures to provide liquidity as an alternative to outright property sales. These ventures are accounted for using the equity or cost methods as appropriate. Summarized financial statements for these ventures accounted for using the equity method and information about our investments in them is included in note 2 to the consolidated financial statements. In general, these ventures own retail centers managed by us for a fee and are controlled jointly by our venture partners and us.

        At December 31, 2002, we had other commitments and contingencies related to unconsolidated ventures. These commitments and contingencies are detailed as follows (in millions):

Guarantee of debt:
	Village of Merrick Park	$	175.2
	Hughes Airport-Cheyenne Centers		28.8
Construction contracts for properties in development			15.4
Long-term ground lease obligations			58.6
		$	278.0

        We have guaranteed the repayment of the construction loan of the venture that developed the Village of Merrick Park. The maximum amount that may be borrowed under the loan is $200 million. The amount of the guarantee may be reduced to a minimum of 20% upon the achievement of certain lender requirements. Our partners in the venture have provided guarantees to us for their share (60%) of the construction loan. The construction loan is due in October 2003. The venture plans to repay the loan with proceeds from a new mortgage secured by the Village of Merrick Park. We and our venture partners may provide similar guarantees related to this new mortgage loan.

Market risk information

        The market risk associated with financial instruments and derivative financial and commodity instruments is the risk of loss from adverse changes in market prices or rates. Our market risk arises primarily from interest rate risk relating to variable-rate borrowings used to maintain liquidity (e.g., credit facility advances) or finance project development costs (e.g., construction loan advances). Our interest rate risk management objective is to limit the impact of interest rate changes on earnings and cash flows. In order to achieve this objective, we rely primarily on long-term, fixed-rate nonrecourse loans from institutional lenders to finance our operating properties. We also use interest rate exchange agreements, including interest rate swaps and caps, to mitigate our interest rate risk on variable-rate debt. The fair value of these and other derivative financial instruments was a liability of approximately

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$8.0 million at December 31, 2002. We do not enter into interest rate exchange agreements for speculative purposes.

        Our interest rate risk is monitored closely by management. The table below presents the annual maturities, weighted-average interest rates on outstanding debt at the end of each year (based on a LIBOR rate of 1.4%) and fair values required to evaluate our expected cash flows under debt agreements and our sensitivity to interest rate changes at December 31, 2002. Information relating to debt maturities is based on expected maturity dates and is summarized as follows (in millions):

	2003			2004			2005			2006			2007			Thereafter			Total			Fair Value
Fixed-rate debt	$	138		$	288		$	241		$	387		$	279		$	1,884		$	3,217		$	3,409
Average interest rate		7.5	%		7.5	%		7.4	%		7.3	%		7.3	%		7.3	%		7.3	%
Variable-rate LIBOR debt	$	410		$	262		$	272		$	14		$	261		$	5		$	1,224		$	1,224
Average interest rate		3.0	%		3.0	%		2.6	%		2.6	%		3.3	%		3.3	%		3.3	%

        At December 31, 2002, approximately $322 million of our variable-rate LIBOR debt relates to borrowings under construction loans that we expect to repay with proceeds of long-term, fixed-rate debt in 2003 and 2004 when we expect to complete construction of the related projects.

        We have approximately $1.2 billion of variable interest rate debt ("variable-rate debt") at December 31, 2002. The interest rate on a portion of this variable-rate debt is based on LIBOR plus a margin (typically between 1% and 2%). At December 31, 2002, the LIBOR rate was 1.4%. We had interest rate swap agreements and forward-starting swap agreements in place at December 31, 2002 and we entered into similar agreements in January 2003. These swap agreements and forward-starting swap agreements effectively fix the LIBOR rate on a portion of our variable-rate debt and are summarized as follows:

Notional Amount		Fixed LIBOR Rate		Term
$	34.4 million	3.53	%	December 2001 – December 2003
	200.0 million	4.24		January 2003 – December 2003
	26.3 million	4.67		January 2002 – December 2006
	55.0 million	1.52		February 2003 – December 2003
	432.0 million	1.37		February 2003 – June 2003
	150.0 million	1.39		February 2003 – August 2003
	40.0 million	1.78		February 2003 – June 2004
	432.0 million	1.63		July 2003 – December 2003
	150.0 million	1.84		September 2003 – March 2004
	161.5 million	2.35		January 2004 – July 2004
	135.0 million	2.20		January 2004 – May 2004
	135.0 million	2.85		June 2004 – October 2004
	161.5 million	3.16		July 2004 – January 2005

2003 developments

        In February 2003, our Board of Directors approved modifications to curtail our defined benefit pension plans so that covered employees will not earn additional benefits for future services. In a related action, our Board also approved a new defined contribution plan under which we intend to make discretionary contributions to covered employees' retirement accounts. We expect additional settlements in 2003 related to the early retirement program offered in 2002 and a change in the senior management organizational structure. Accordingly, during 2003, we expect to recognize curtailment and settlement losses associated with the defined benefit pension plans that could range from $15 million to $20 million.

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        On March 7, 2003, we entered into an agreement to sell six retail centers in the Philadelphia metropolitan area. We also agreed to purchase a retail center in Delaware from an affiliate of the purchaser. These transactions are expected to close in the second quarter of 2003. We expect to use the proceeds from the sales towards the purchase of the retail center in Delaware and to repay property debt and borrowings under our revolving credit facility. We expect to recognize gains in excess of $100 million on the sales of these centers.

Critical accounting policies

        Critical accounting policies are those that are both important to the presentation of our financial condition and results of operations and require management's most difficult, complex or subjective judgments. Our critical accounting policies are those applicable to the evaluation of impairment of long-lived assets, the evaluation of the collectibility of accounts and notes receivable and profit recognition on land sales.

        Impairment of long-lived assets:    If events or changes in circumstances indicate that the carrying values of operating properties, properties in development or land held for development and sale may be impaired, a recovery analysis is performed based on the estimated undiscounted future cash flows to be generated from the property. If the analysis indicates that the carrying value of the tested property is not recoverable from estimated future cash flows, the property is written down to estimated fair value and an impairment loss is recognized. Fair values are determined based on estimated future cash flows using appropriate discount and capitalization rates. The estimated cash flows used for the impairment analyses and to determine estimated fair values are based on our plans for the tested asset and our views of market and economic conditions. The estimates consider matters such as current and historical rental rates, occupancies for the tested property and comparable properties and recent sales data for comparable properties. Changes in estimated future cash flows due to changes in our plans or views of market and economic conditions could result in recognition of impairment losses which, under the applicable accounting guidance, could be substantial.

        Properties held for sale, including land held for sale, are carried at the lower of their carrying values (i.e., cost less accumulated depreciation and any impairment loss recognized, where applicable) or estimated fair values less costs to sell. Accordingly, decisions by us to sell certain operating properties, properties in development or land held for development and sale will result in impairment losses if carrying values of the specific properties exceed their estimated fair values less costs to sell. The estimates of fair value consider matters such as recent sales data for comparable properties and, where applicable, contracts or the results of negotiations with prospective purchasers. These estimates are subject to revision as market conditions and our assessment of them change.

        Collectibility of accounts and notes receivable:    The allowance for doubtful accounts and notes receivable is established based on quarterly analysis of the risk of loss on specific accounts. The analysis places particular emphasis on past-due accounts and considers information such as the nature and age of the receivables, the payment history of the tenants or other debtors, the financial condition of the tenants and management's assessment of their ability to meet their lease obligations, the basis for any disputes and the status of related negotiations, among other things. Our estimate of the required allowance is subject to revision as these factors change and is sensitive to the effects of economic and market conditions on tenants.

        Profit recognition on land sales:    Cost of land sales is determined as a specified percentage of land sales revenues recognized for each development project. The cost ratios are based on actual costs incurred and estimates of development costs and sales revenues to completion of each project and are reviewed regularly and revised periodically for changes in estimates or development plans. Significant changes in these estimates or development plans, whether due to changes in market conditions or other factors, could result in changes to the cost ratio used for a specific project.

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New accounting standards not yet adopted

        In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." SFAS No. 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and clarifies Emerging Issues Task Force Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity." SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. The provisions of SFAS No. 146 are effective for exit or disposal activities that are initiated after December 31, 2002. Management does not expect that the adoption of this statement will have a material effect on our results of operations or financial condition.

        In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others." For 2002, the Interpretation requires certain disclosures which we have included in note 17 to the consolidated financial statements. Beginning in 2003, the Interpretation requires recognition of liabilities at their fair value for certain newly issued guarantees. We do not anticipate that adoption of Interpretation No. 45 will have a material effect on our financial statements.

        In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation — Transition and Disclosure." SFAS No. 148 amends SFAS No. 123, "Accounting for Stock-Based Compensation." SFAS No. 148 provides alternative methods of transition for a voluntary change to the fair value-based method of accounting for stock-based compensation and requires disclosure in both annual and interim financial statements about the method of accounting for stock-based compensation and the effect of the method used on reported results. We have adopted the disclosure provisions of SFAS No. 148. We have not determined whether we will change to the fair value-based method of accounting for stock-based compensation and, if so, which of the alternative methods of transition we will adopt.

        In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities." This Interpretation addresses the consolidation of variable interest entities ("VIEs") in which the equity investors lack one or more of the essential characteristics of a controlling financial interest or where the equity investment at risk is not sufficient for the entity to finance its activities without subordinated financial support from other parties. The Interpretation applies to VIEs created after January 31, 2003 and to VIEs in which we acquire an interest after that date. Effective July 1, 2003, it also applies to VIEs in which we acquired an interest before February 1, 2003. We may apply the Interpretation prospectively, with a cumulative effect adjustment as of July 1, 2003, or by restating previously issued financial statements with a cumulative effect adjustment as of the beginning of the first year restated. We are in the process of evaluating the effects of applying Interpretation No. 46 in 2003. Based on our preliminary analysis, we believe that we may be required to consolidate certain of our unconsolidated real estate ventures that we have accounted for using the equity method; however, we do not expect that this will involve any cumulative effect adjustment.

Impact of inflation

        The major portion of our operating properties, our retail centers, are substantially protected from declines in the purchasing power of the dollar. Retail leases generally provide for minimum rents plus percentage rents based on sales over a minimum base. In many cases, increases in tenant sales (whether due to increased unit sales or increased prices from demand or general inflation) will result in increased rental revenue. A substantial portion of the tenant leases (retail and office) also provide for other rents which reimburse us for certain operating expenses; consequently, increases in these costs do not have a significant impact on our operating results. We have a significant amount of fixed-rate debt which, in a period of inflation, will result in a holding gain since debt will be paid off with dollars having less purchasing power.

Information relating to forward-looking statements

        This Annual Report to Shareholders includes forward-looking statements which reflect our current views with respect to future events and financial performance. Such forward-looking statements include, among others, statements regarding demand for retail space, expectations as to operating results from our retail centers, our office and other properties, and our community development activities, expectations relating to the opening of the second phase of our Fashion Show redevelopment project, expectations regarding income taxes in future years and our beliefs as to our liquidity and capital resources and as to our expenditures for new developments, expansions and improvements.

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        Forward-looking statements are subject to certain risks and uncertainties, including those identified below which could cause actual results to differ materially from historical results or those anticipated. The words "will," "plan," "believe", "expect", "anticipate," "target" and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The following are among the factors that could cause actual results to differ materially from historical results or those anticipated: (1) changes in the economic climate; (2) dependence on rental income from real property; (3) lack of geographical diversification; (4) possible environmental liabilities; (5) real estate development and investment risks; (6) effect of uninsured loss; (7) cost and adequacy of insurance; (8) liquidity of real estate investments; (9) competition; (10) real estate investment trust risks; (11) changes in tax laws or regulations; and (12) risks associated with the acquisition of assets from Rodamco. Further, domestic or international incidents could affect general economic conditions and our business. For a more detailed discussion of these and other factors, see Exhibit 99.2 of our Form 10-K for the fiscal year ended December 31, 2002.

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The Rouse Company and Subsidiaries
FIVE YEAR SUMMARY OF NET OPERATING INCOME AND
NET EARNINGS
Years ended December 31, (in thousands)

		2002			2001			2000			1999			1998
Revenues:
Retail centers:
	Minimum and percentage rents	$	454,277		$	367,756		$	369,253		$	363,233		$	336,531
	Other rents and other revenues		321,236			269,455			262,450			264,103			250,567
			775,513			637,211			631,703			627,336			587,098
	Office and other properties:
	Minimum and percentage rents		156,407			157,831			167,033			159,158			115,836
	Other rents and other revenues		48,784			45,885			49,198			46,264			46,702
			205,191			203,716			216,231			205,422			162,538
Community development			240,992			218,322			215,459			197,159			198,786
			1,221,696			1,059,249			1,063,393			1,029,917			948,422
Operating expenses, exclusive of depreciation and amortization:
Retail centers			305,869			261,561			263,593			262,160			259,861
Office and other properties			80,214			75,772			77,587			74,703			64,259
Community development			155,771			143,336			148,679			146,097			150,749
Commercial development			12,986			6,872			7,701			3,707			7,383
Corporate			16,368			13,171			9,365			9,051			14,759
			571,208			500,712			506,925			495,718			497,011
Net operating income by segment:
Retail centers			469,644			375,650			368,110			365,176			327,237
Office and other properties			124,977			127,944			138,644			130,719			98,279
Community development			85,221			74,986			66,780			51,062			48,037
Commercial development			(12,986	)		(6,872	)		(7,701	)		(3,707	)		(7,383	)
Corporate			(16,368	)		(13,171	)		(9,365	)		(9,051	)		(14,759	)
Net Operating Income (note 1)		$	650,488		$	558,537		$	556,468		$	534,199		$	451,411

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Reconciliation to net earnings:
Net operating income (note 1)	$	650,488		$	558,537		$	556,468		$	534,199		$	451,411
Ground rent, interest and other financing expenses (note 2)		(293,233	)		(274,786	)		(295,745	)		(291,464	)		(244,741	)
Depreciation and amortization		(161,333	)		(129,666	)		(95,121	)		(100,067	)		(83,466	)
Deferred income taxes applicable to operations		(28,479	)		(23,884	)		—			—			—
Certain current income taxes		—			(383	)		—			—			—
Net gains (losses) on operating properties		6,823			(432	)		33,844			63,092			(6,109	)
Our share of depreciation and amortization, gains (losses) on operating properties, gains (losses) on early extinguishment of debt and deferred income taxes of unconsolidated real estate ventures and discontinued operations, net		3,426			(17,453	)		(31,161	)		(55.465	)		(13,034	)
Other (provisions and losses) gains, net		(37,841	)		(816	)		2,200			(14,998	)		5,470
Cumulative effect at January 1, 2001 of change in accounting for derivative instruments and hedging activities		—			(411	)		—			—			—
Cumulative effect at January 1, 1998 of change in accounting for participating mortgages		—			—			—			—			(4,629	)
Net earnings	$	139,851		$	110,706		$	170,485		$	135,297		$	104,902

Notes:

(1)

Operating and Net Operating Income ("NOI") data included in this five-year summary are presented by segment. Consistent with the requirements of Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information," segment data are reported using the performance measure and accounting policies used for internal reporting to management. The performance measure is Net Operating Income. We define NOI as net earnings (computed in accordance with accounting principles generally accepted in the United States of America), excluding cumulative effects of changes in accounting principles, net gains (losses) on early extinguishment of debt, net gains (losses) on operating properties not developed for sale net of income taxes, other provisions and losses, real estate depreciation and amortization, deferred and certain current income taxes and interest and other financing expenses. Other financing expenses are defined in note 2. The accounting policies of the segments are the same as those of the Company, except that the majority financial interest ventures were accounted for on a consolidated basis rather than using the equity method; real estate ventures in which we have joint interest and control and certain other minority interest ventures are accounted for using the proportionate share method rather than the equity method and our share of NOI less interest expense of other unconsolidated minority interest ventures is included in revenues. These differences affect the reported revenues and operating and interest expenses of the segments and have no effect on our reported net earnings or NOI.

(2)

Interest and other financing expenses include distributions on Company-obligated mandatorily redeemable preferred securities and other subsidiary preferred stock, ground rent expense and certain preference returns to partners, net of interest income earned on corporate investments, and are determined using the segment accounting policies discussed in note 1.

(3)

NOI is not a measure of operating results or cash flows from operating activities as defined by accounting principles generally accepted in the United States of America. Additionally, NOI is not indicative of cash available to fund cash needs, including the payment of dividends, and should not be considered as an alternative to cash flows as a measure of liquidity.

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Exhibit 13

PROJECTS OF THE ROUSE COMPANY

			Retail Square Footage
Consolidated Retail Centers (Note 1)	Date of Opening or Acquisition	Department Stores/Anchor Tenants
			Total Center	Mall Only
Augusta Mall, Augusta, GA	8/78	Rich's; JCPenney; Sears; Dillard's	1,074,000	323,000
The Shops at Arizona Center, Phoenix, AZ	11/90	AMC Arizona Center 24	189,000	189,000
Bayside Marketplace, Miami, FL	4/87	—	227,000	227,000
Beachwood Place, Cleveland, OH	8/78	Saks Fifth Avenue; Dillard's; Nordstrom	930,000	350,000
Cherry Hill Mall, Cherry Hill, NJ (Note 3)	10/61	Strawbridge's; Macy's; JCPenney	1,283,000	534,000
Collin Creek, Plano, TX	9/95	Dillard's; Foley's; JCPenney; Sears; Mervyn's	1,121,000	331,000
The Mall in Columbia, Columbia, MD	8/71	Nordstrom; Hecht's; JCPenney; Sears; Lord & Taylor; L.L.Bean	1,335,000	510,000
Echelon Mall, Voorhees, NJ (Note 3)	9/70	Strawbridge's; Boscov's	1,141,000	429,000
Exton Square, Exton, PA (Note 3)	3/73	Strawbridge's; Boscov's; Sears; JCPenney	994,000	369,000
Faneuil Hall Marketplace, Boston, MA	8/76	—	208,000	208,000
Fashion Place, Salt Lake City, UT	10/98	Dillard's; Nordstrom; Sears	905,000	291,000
Fashion Show, Las Vegas, NV	6/96	Neiman Marcus; Saks Fifth Avenue; Macy's; Dillard's; Robinsons-May; Nordstrom; Bloomingdale's Home	1,587,000	372,000
The Gallery at Harborplace, Baltimore, MD	9/87	—	145,000	145,000
The Gallery at Market East, Philadelphia, PA (Note 3)	8/77	Strawbridge's; Kmart	1,009,000	193,000
Governor's Square, Tallahassee, FL	8/79	Burdines; Dillard's; Sears; JCPenney	1,043,000	339,000
Harborplace, Baltimore, MD	7/80	—	138,000	138,000
Hulen Mall, Ft. Worth, TX	8/77	Foley's; Dillard's; Sears	938,000	327,000
The Jacksonville Landing, Jacksonville, FL	6/87	—	125,000	125,000
Lakeside Mall, Sterling Heights, MI	5/02	Marshall Fields Men & Home; Marshall Field's Women; Lord & Taylor; Sears; JCPenney	1,477,000	516,000
Mall St. Matthews, Louisville, KY	3/62	Dillard's (two stores); JCPenney; Lord & Taylor	1,110,000	361,000
Mondawmin Mall/Metro Plaza, Baltimore, MD	1/78; 12/82	—	434,000	434,000
Moorestown Mall, Moorestown, NJ (Note 3)	12/97	Strawbridge's; Boscov's; Sears; Lord & Taylor	1,030,000	339,000
North Star Mall, San Antonio, TX	5/02	Saks Fifth Avenue; Macy's; Foley's; Dillard's; Mervyn's	1,251,000	435,000
Oakwood Center, Gretna, LA	10/82	Sears; Dillard's; JCPenney; Mervyn's; Marshalls	960,000	359,000
Oviedo Marketplace, Orlando, FL	3/98	Dillard's; Burdines; Sears; Regal Cinemas 22	965,000	335,000
Owings Mills, Baltimore, MD	7/86	Macy's; Hecht's; JCPenney; AMC Owings Mills 17	1,223,000	410,000
Paramus Park, Paramus, NJ	3/74	Macy's; Sears; Fortunoff	784,000	317,000
Pioneer Place, Portland, OR	3/90	Saks Fifth Avenue	374,000	314,000
Plymouth Meeting, Plymouth Meeting, PA (Note 3)	2/66	Strawbridge's; Boscov's; AMC Plymouth Meeting 12	802,000	377,000
Ridgedale Center, Minneapolis, MN	1/89	Marshall Field's Men & Home; Marshall Field's Women; JCPenney; Sears	1,036,000	343,000
Riverwalk, New Orleans, LA	8/86	—	197,000	197,000
South Street Seaport, New York, NY	7/83	—	260,000	260,000
Southland Center, Taylor, MI	1/89	Marshall Field's; Mervyn's; JCPenney	889,000	306,000
The Streets at South Point, Durham, NC	5/02	Nordstrom; Hecht's; Belk; Sears; JCPenney	1,320,000	590,000
Village of Cross Keys, Baltimore, MD	9/65	—	81,000	81,000
Westdale Mall, Cedar Rapids, IA	10/98	JCPenney; Von Maur; Younkers	910,000	381,000
Westlake Center, Seattle, WA	10/88	—	111,000	111,000
White Marsh, Baltimore, MD	8/81	Macy's; JCPenney; Hecht's; Sears; Lord & Taylor	1,161,000	372,000
Willowbrook, Wayne, NJ	9/69	Bloomingdale's; Lord & Taylor; Macy's; Sears	1,528,000	500,000
Woodbridge Center, Woodbridge, NJ	3/71	Lord & Taylor; Sears; Macy's; JCPenney; Fortunoff	1,540,000	554,000
		Total Consolidated Centers in Operation	33,835,000	13,292,000

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			Retail Square Footage
Proportionate Share Retail Centers (Note 2)	Date of Opening or Acquisition	Department Stores/Anchor Tenants
			Total Center	Mall Only
Bridgewater Commons, Bridgewater, NJ	12/98	Bloomingdale's; Lord & Taylor; Macy's	887,000	384,000
Highland Mall, Austin, TX	8/71	Dillard's (two stores); Foley's; JCPenney	1,085,000	367,000
Oakbrook Center, Oak Brook, IL	5/02	Nieman Marcus; Nordstrom; Marshall Field's; Lord & Taylor; Sears	2,027,000	842,000
Park Meadows, Littleton, CO	7/98	Dillard's; Foley's; Lord & Taylor; Nordstrom; JCPenney; Galyan's	1,571,000	610,000
Perimeter Mall, Atlanta, GA	8/71	Rich's; Macy's; Nordstrom	1,281,000	502,000
Towson Town Center, Baltimore, MD	10/98	Hecht's; Nordstrom	968,000	538,000
Village Centers in Summerlin, NV (3)	—	—	383,000	383,000
Village of Merrick Park, Coral Gables, FL	9/02	Nieman Marcus; Nordstrom	712,000	385,000
Water Tower Place, Chicago, IL	5/02	Marshall Field's; Lord & Taylor	737,000	300,000
		Total Proportionate Share Centers in Operation	9,651,000	4,311,000
Other
Staten Island Mall, Staten Island, NY	11/80	Sears; Macy's; JCPenney	1,229,000	622,000
		Total Retail Centers in Operation	44,715,000	18,225,000

Office and Other Properties in Operation Consolidated Office and Other Properties (Note 1)		Location	Square Feet
Arizona Center		Phoenix, AZ
	Garden Office Pavilion		104,000
	One Arizona Center Office Tower		327,000
	Two Arizona Center Office Tower		453,000
The Gallery at Harborplace		Baltimore, MD
	Office Tower		265,000
	Renaissance Hotel		622 rooms
Pioneer Place		Portland, OR
	Office Tower		286,000
Village of Cross Keys		Baltimore, MD
	Village Square Offices		69,000
	Quadrangle Offices		110,000
Westlake Center		Seattle, WA
	Office Tower		342,000
Columbia Office (12 buildings)		Columbia, MD	1,137,000
Columbia Industrial (6 buildings)		Columbia, MD	307,000
Hughes Center (16 buildings)		Las Vegas, NV	1,175,000
Summerlin Commercial (26 buildings)		Summerlin, NV	1,000,000
Owings Mills Town Center (4 buildings)		Baltimore, MD	729,000
Inglewood Business Center (7 buildings)		Prince George's County, MD	538,000
Hunt Valley Business Center (20 buildings)		Baltimore, MD	1,483,000
Rutherford Business Center (20 buildings)		Baltimore, MD	783,000
Other Office Projects (5 buildings)		Various	305,000
		Total Consolidated Office and Other Properties	9,413,000

Proportionate Share Office and Other Properties (Note 2)	Location	Square Feet
Oakbrook Center Office	Oakbrook, IL	240,000
Water Tower Place Office	Chicago, IL	93,000
	Total Proportionate Share Office and Other Properties	333,000
	Total Office and Other Properties in Operation	9,746,000

Note 1—Includes projects wholly owned by subsidiaries of the Company and projects in which the Company has a majority interest and control.
Note 2—Includes projects owned by joint ventures or partnerships in which the Company's interest is at least 30%.
Note 3—In March 2003, the Company entered into an agreement to sell our interests in these properties.

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		Project Square Footage
Projects Under Construction or in Development	Department Stores/Anchor Tenants	Total	Tenant Space
Bridgewater Commons Expansion, Bridgewater, NJ	Bloomingdale's Home	250,000	100,000
Fashion Show, Las Vegas, NV (Phase II)	Las Vegas Boulevard Promenade; Lord & Taylor	255,000	115,000
Kendall Town Center, Miami, FL	Dillard's; Sears	1,200,000	350,000
The Mall in Columbia, Columbia, MD	AMC Theatres	65,000	65,000
Perimeter Mall, Atlanta, GA	Dillard's	200,000	—
The Shops at La Cantera, San Antonio, TX	Neiman Marcus; Nordstrom; Dillard's; Foley's	1,300,000	380,000
Staten Island Mall, Staten Island, NY	Macy's Home Store	50,000	50,000
Summerlin Centre, Summerlin, NV (Phase I)	Robinsons-May; Lord & Taylor; Dillard's; Macy's	1,050,000	350,000
Village of Merrick Park, Coral Gales, FL (Phase II)	Retail	55,000	55,000
Village of Merrick Park, Coral Gables, FL	Office	110,000	110,000
Woodbridge Center, Woodbridge, NJ	Galyan's	100,000	100,000
Corporate Pointe, Summerlin, NV	Office/Industrial	115,000	115,000
The Crossing Business Center, Summerlin, NV	Office/Industrial	55,000	55,000
	Total Projects Under Construction or in Development	4,805,000	1,845,000

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QuickLinks

Exhibit 13

Annual report to security holders
The Rouse Company and Subsidiaries MANAGEMENT'S STATEMENT ON RESPONSIBILITIES FOR ACCOUNTING, AUDITING AND FINANCIAL REPORTING
The Rouse Company and Subsidiaries CONSOLIDATED BALANCE SHEETS December 31, 2002 and 2001 (in thousands, except common share data)
The Rouse Company and Subsidiaries CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME Years ended December 31, 2002, 2001 and 2000 (in thousands, except per share data)
The Rouse Company and Subsidiaries CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY Years ended December 31, 2002, 2001 and 2000 (in thousands, except per share data)
The Rouse Company and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended December 31, 2002, 2001 and 2000 (in thousands)
The Rouse Company and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended December 31, 2002, 2001 and 2000 (in thousands)
The Rouse Company and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2002, 2001 and 2000
The Rouse Company and Subsidiaries MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Business Segment Information
Other Operating Information
The Rouse Company and Subsidiaries FIVE YEAR SUMMARY OF NET OPERATING INCOME AND NET EARNINGS Years ended December 31, (in thousands)

Exhibit 13

PROJECTS OF THE ROUSE COMPANY

EX-21

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Exhibit 21

Subsidiaries of the Registrant

The Registrant had no parent at December 31, 2002.

As of December 31, 2002, The Rouse Company owned 100% of the voting securities of the following domestic and foreign corporations included in the consolidated financial statements:

Subsidiary		State of Incorporation
Directly owned subsidiaries of the Company. All shares are Common Stock unless otherwise noted.
	Hermes, Incorporated	Maryland
	Howard Hughes Properties, Inc. (Note 1)	Nevada
	HRD Properties, Inc. (Note 2)	Maryland
	HRD Remainder, Inc. (Note 3)	Maryland
	Hughes Corporation, The (Note 4)	Delaware
	Rouse Capital (Note 5)	Delaware
	The Rouse Company Business Trust	Maryland
	Rouse Property Management, Inc. (Note 6)	Maryland
	TRC Property Holdings, Inc. (Note 9)	Maryland
	TRCGP, Inc.	Maryland

As of December 31, 2002, TRCGP, Inc. owned all of the outstanding units of membership interest of Terrapin Acquisition, LLC, a Maryland limited liability company, and is the sole general partner of The Rouse Company LP, a Delaware limited partnership. As of December 31, 2002, The Rouse Company LP owned 61% of Exton Square Property LLC, Gallery at Market East LLC and Plymouth Meeting Property LLC, Delaware limited liability companies, and 100% of the voting securities or member interests of the following domestic corporations and limited liability companies included in the consolidated financial statements:

Subsidiary		State of Incorporation
	American City Company, LLC, The	Maryland
	Baltimore Center, LLC	Delaware
	Beachwood Property Holdings, LLC	Maryland
	Charlottetown, LLC	Maryland
	Charlottetown North, LLC	Maryland
	Chesapeake Investors, LLC (Note 10)	Delaware
	Community Research and Development, LLC	Maryland
	Cuyahoga Land Company, LLC	Maryland
	Exton Shopping, LLC	Maryland
	Four Owings Mills Corporate Center, LLC	Maryland
	Franklin Park Mall Company, LLC	Maryland
	Gallery Maintenance, LLC (Note 11)	Maryland
	Gallery II Trustee, LLC	Maryland
	Harborplace Management Company, LLC	Maryland
	Hermes, LLC	Maryland
	Huntington Properties, LLC	Maryland
	Louisville Shopping Center, LLC	Kentucky
	Mondawmin Company, LLC	Maryland
	O. M. Guaranty, LLC	Maryland
	O. M. Land Development, LLC	Maryland
	One Owings Mills Corporate Center, LLC	Maryland
	Owings Mills Finance Company, LLC	Maryland

Plymouth Meeting Food Court, LLC	Maryland
PT Funding, LLC	Maryland
Rouse-Camden Warehouse, LLC	Maryland
Rouse-Columbus, LLC	Maryland
Rouse Company at Owings Mills, LLC, The	Maryland
Rouse Company Financial Services, LLC, The	Maryland
Rouse Company of Alabama, LLC, The (Note 12)	Alabama
Rouse Company of Alaska, LLC, The	Maryland
Rouse Company of Arkansas, LLC, The	Maryland
Rouse Company of California, LLC, The (Note 13)	Maryland
Rouse Company of Colorado, LLC, The	Maryland
Rouse Company of Connecticut, LLC, The	Delaware
Rouse Company of Florida, LLC, The (Note 14)	Florida
Rouse Company of Georgia, LLC, The (Note 15)	Georgia
Rouse Company of Idaho, LLC, The	Maryland
Rouse Company of Illinois, LLC, The	Maryland
Rouse Company of Iowa, LLC, The	Maryland
Rouse Company of Kentucky, LLC, The	Maryland
Rouse Company of Louisiana, LLC, The (Note 16)	Maryland
Rouse Company of Maine, LLC, The	Maryland
Rouse Company of Massachusetts, LLC, The (Note 17)	Maryland
Rouse Company of Michigan, LLC, The (Note 18)	Maryland
Rouse Company of Minnesota, LLC, The (Note 19)	Maryland
Rouse Company of Mississippi, LLC, The	Maryland
Rouse Company of Montana, LLC, The	Maryland
Rouse Company of Nevada, LLC, The (Note 20)	Nevada
Rouse Company of New Hampshire, LLC, The	Maryland
Rouse Company of New Jersey, LLC, The (Note 21)	New Jersey
Rouse Company of New Mexico, LLC, The	Maryland
Rouse Company of New York, LLC, The (Note 22)	New York
Rouse Company of North Carolina, LLC, The (Note 23)	Maryland
Rouse Company of North Dakota, LLC, The	Maryland
Rouse Company of Ohio, LLC, The (Note 24)	Ohio
Rouse Company of Oklahoma, LLC, The	Maryland
Rouse Company of Oregon, LLC, The (Note 25)	Maryland
Rouse Company of Pennsylvania, LLC, The (Note 26)	Pennsylvania
Rouse Company of Rhode Island, LLC, The	Maryland
Rouse Company of South Carolina, LLC, The	Maryland
Rouse Company of South Dakota, LLC, The	Maryland
Rouse Company of Tennessee, LLC, The (Note 27)	Maryland
Rouse Company of Texas, LLC, The (Note 28)	Texas
Rouse Company of the District of Columbia, LLC, The	Maryland
Rouse Company of Utah, LLC, The	Maryland
Rouse Company of Vermont, LLC, The	Maryland
Rouse Company of Virginia, LLC, The (Note 29)	Maryland
Rouse Company of Washington, LLC, The (Note 30)	Maryland
Rouse Company of West Virginia, LLC, The	Maryland
Rouse Company of Wisconsin, LLC, The	Maryland
Rouse Company of Wyoming, LLC, The	Maryland
Rouse Company Protective Trust, Inc., The	Delaware
Rouse-Coral Gables Development, LLC	Maryland
Rouse-Coral Gables Property, LLC	Maryland

Rouse Fashion Show Management, LLC	Maryland
Rouse Gallery II Management, LLC	Maryland
Rouse Holding Company, LLC, The	Maryland
Rouse Holding Company of Arizona, LLC, The (Note 31)	Maryland
Rouse-Inglewood, LLC	Maryland
Rouse Investing Company, LLC (Note 32)	Maryland
Rouse Management, LLC	Maryland
Rouse Management Services Company, LLC	Maryland
Rouse Metro Plaza, LLC	Maryland
Rouse-Metro Shopping Center, LLC	Maryland
Rouse-Milwaukee, LLC	Maryland
Rouse-Milwaukee Garage Maintenance, LLC	Maryland
Rouse Missouri Holding Company, LLC (Note 33)	Maryland
Rouse Oakbrook, LLC (Note 33-1)	Delaware
Rouse-Oakwood Shopping Center, LLC	Maryland
Rouse-Oakwood Two, LLC	Maryland
Rouse Office Management, LLC	Maryland
Rouse Office Management of Pennsylvania, LLC	Maryland
Rouse Owings Mills Management Company, LLC	Maryland
Rouse-Phoenix Cinema, LLC	Maryland
Rouse-Randhurst Shopping Center, LLC	Maryland
Rouse Service Company, LLC, The	Maryland
Rouse SI Shopping Center, LLC	Maryland
Rouse Tri-Party Miscellaneous, LLC	Maryland
Rouse Tristate Venture, LLC	Texas
Rouse-Urban Acquisition, LLC	Maryland
Rouse-Urban, LLC	Maryland
Rouse-Wates, LLC (Note 34)	Delaware
RREF Holding, LLC (Note 35)	Texas
RSE Preferred Acquisitions, LLC	Maryland
Salem Mall, LLC	Maryland
Six Owings Mills Corporate Center, LLC	Maryland
SMPL Management, LLC	Maryland
Terrapin Acquisition, LLC	Maryland
The Rouse Company Protective Trust, Inc.	Delaware
Three Owings Mills Corporate Center, LLC	Maryland
TRC Central, LLC	Maryland
TRCD, LLC (Note 36)	Delaware
TRC Exton Plymouth 1 through 39, LLC (Note 7)	Delaware
TRC Gallery at Market East 1 through 39, LLC (Note 8)	Delaware
TRC Holding Company of Washington, D.C., LLC	Maryland
TRC Property Management, LLC	Maryland
TRC Purchasing, LLC	Maryland
Two Owings Mills Corporate Center, LLC	Maryland
White Marsh Equities Company, LLC	Maryland

Notes:

1.

Howard Hughes Properties, Inc. owns all of the outstanding common stock or units of membership interest of the following entities:

10000 West Charleston Boulevard, LLC, a Nevada limited liability company
Howard Hughes Canyon Pointe Q3, LLC, a Nevada limited liability company
Howard Hughes Canyon Pointe Q4, LLC, a Nevada limited liability company

Howard Hughes Centerpoint, LLC, a Nevada limited liability company
Howard Hughes Properties IV, LLC, a Delaware limited liability company
Howard Hughes Properties V, LLC, a Delaware limited liability company
Howard Hughes Properties VI, LLC, a Nevada limited liability company
Howard Hughes Properties VII, LLC, a Nevada limited liability company
HRD-HHP Holdings, LLC, a Nevada limited liability company
Rouse Westin, Inc., a Maryland corporation

2.

HRD Properties, Inc. owns all of the outstanding common stock or units of membership interest of the following entities:

BCI Holdings, Inc., a Maryland corporation
Greengate Mall, Inc., a Pennsylvania corporation
Philadelphia Gallery II, a Pennsylvania business trust
RREF Hotel Holdings, Inc., a Maryland corporation
Rouse-Abbey, LLC, a Maryland limited liability company
Rouse-Kravco, LLC, a Maryland limited liability company
VCK Holdings, Inc., a Maryland corporation

BCI Holdings, Inc. owns all of the outstanding common stock of Rouse-Brandywood, Inc., a Maryland corporation.

RREF Hotel Holdings, Inc. owns all of the outstanding common stock of Rouse-Fairwood Development Corporation, a Maryland corporation.

Rouse-Fairwood Development Corporation is the general partner of Rouse-Fairwood Development Limited Partnership, which owns all of the outstanding units of membership interest of Fairwood-Prospect Front-Foot Benefit Company, LLC, a Maryland limited liability company.

VCK Holdings, Inc. owns all of the outstanding common stock of Rouse-Canyon Springs, Inc. and The Rouse Development Company of California, Inc., both Maryland corporations.

3.

HRD Remainder, Inc. owns 57.6% of the outstanding common stock of The Howard Research And Development Corporation, a Maryland corporation, and all of the outstanding common stock or units of membership interest of the following Maryland entities:

The Howard Research And Development Holdings Corporation
North Star Mall II, LLC
West Kendall Holdings, LLC
Willowbrook II, LLC

The Howard Research And Development Corporation owns all of the outstanding common stock or units of membership interest of the following Maryland entities:

Columbia Land Holdings, Inc.
Emerson Corporation
ExecuCentre, LLC
HRD Commercial Properties, Inc.
HRD Investment, Inc.
Rouse-MerchantWired, Inc.
Rouse Properties, Inc.
Rouse Transportation, LLC
Stansfield-Laurel, Inc.
Stone Lake Corporation

The Howard Research And Development Holdings Corporation owns 40.6% of the outstanding common stock of The Howard Research And Development Corporation and all

of the outstanding common stock or units of membership interest of the following Maryland entities:

Columbia Crossing, Inc.
Columbia Gateway, Inc.
Columbia Management, Inc.
Dorsey's Search Village Center, Inc.
Eighty Columbia Corporate Center, Inc.
Fashion Show II, LLC
Fifty Columbia Corporate Center, Inc.
Forty Columbia Corporate Center, Inc.
Gateway Investor, LLC
Gateway Retail Center, Inc.
GEAPE III, Inc.
Hickory Ridge Village Center, Inc.
HRD Parking, Inc.
King's Contrivance Village Center, Inc.
Lakefront North Parking, Inc.
Oakland Ridge Commercial, Inc.
Oakland Ridge Industrial Development Corporation
Pointer's Run Builders Group, Inc.
Rouse-Phoenix Hotel Corporation
Rouse-Phoenix Hotel Parking, Inc.
Rouse-River Hill Village Center, Inc.
Sixty Columbia Corporate Center, Inc.

Fashion Show II, LLC owns 0.06% of Rouse Fashion Show, LLC, a Nevada limited liability company.

Eighty Columbia Corporate Center, Inc. is the Sole Member of Eighty Columbia Corporate Center, LLC, a Maryland limited liability company.

GEAPE III, Inc. owns 1.8% of the outstanding common stock of The Howard Research And Development Corporation and owns all of the outstanding common stock of GEAPE Land Holdings, Inc., a Maryland corporation.

GEAPE Land Holdings, Inc. owns all of the outstanding common stock of The Columbia Development Corporation, a Maryland corporation.

The Columbia Development Corporation owns all of the outstanding common stock of the following Maryland corporations:

Columbia Mall, Inc.
Dobbin Road Commercial, Inc.
Guilford Industrial Center, Inc.

Columbia Mall, Inc. owns all of the outstanding common stock of the following Maryland corporations and is sole trustee of the following Maryland business trusts:

Columbia Mall Business Trust
Harper's Choice Village Center, Inc.
Seventy Columbia Corporate Center, Inc.

Columbia Mall Business Trust is the Sole Member of Columbia Mall SPE, LLC, a Maryland limited liability company.

Rouse Columbia Contribution, LLC, a Maryland limited liability company, is owned by various subsidiaries and affiliates of The Howard Research And Development Holdings Corporation.

Rouse Columbia Contribution, LLC owns all of the outstanding units of membership interest of Lakeside Mall, LLC, a Michigan limited liability company.

4.

The Hughes Corporation owns all of the outstanding common stock or units of membership interest of The Howard Hughes Corporation, a Delaware corporation, Howard Hughes Realty, Inc., a Nevada corporation, and THC-HRE, LLC, a Maryland limited liability company.

The Howard Hughes Corporation owns all of the outstanding common stock or units of membership interest of the following entities:

HHC LP Corp., a Delaware corporation
HHP-California Corporation, a Nevada corporation
Hughes Properties, Inc., a Nevada corporation
H-Tex, Incorporated, a Texas corporation
Red Rock Investment, LLC, a Nevada limited liability company
Summa Corporation, a Delaware corporation
Summerlin Corporation, a Delaware corporation

The Howard Hughes Corporation is the General Partner of Howard Hughes Properties, Limited Partnership ("HHPLP"), a Delaware limited partnership, which owns approximately 13% of the units of membership interest of S-R Nevada Properties LLC, a Nevada limited liability company, which is the sole member of Summerlin Center, LLC, a Delaware limited liability company. HHPLP owns 70.15% of Rouse Fashion Show, LLC, a Nevada limited liability company. In addition, HHPLP owns all of the outstanding units of membership interest of the following Nevada limited liability companies:

Howard Hughes Properties I, LLC
Howard Hughes Properties II, LLC
Howard Hughes Properties III, LLC

5.

Rouse Capital is a statutory business trust formed under Delaware law. All of the Common Securities of Rouse Capital are owned by the Company. The Preferred Securities of Rouse Capital were sold in a public registered offering in 1995.

6.

Rouse Property Management, Inc. owns 35% of the outstanding common stock of Four State Facility Corporation, a Delaware corporation, and all of the outstanding common stock or units of membership interest of the following Maryland entities:

Faneuil Hall Beverage, LLC
Harborplace, Inc.
Rouse Development Management, LLC
Rouse-West Dade, Inc.

Rouse-West Dade, Inc. owns 50.2% of the outstanding common stock of
West Kendall REIT, Inc.

7.

TRC Exton Plymouth 1 through TRC Exton Plymouth 39, LLC each owns 1% of Exton Square Property LLC and Plymouth Meeting Property LLC, both Delaware limited liability companies.

8.

TRC Gallery at Market East 1 through TRC Gallery at Market East 39, LLC each owns 1% of Gallery at Market East LLC, a Delaware limited liability company.

9.

TRC Property Holdings, Inc. owns all of the outstanding common stock of Rouse Tri-Party TRS, Inc., a Maryland corporation.

10.

Chesapeake Investors, LLC owns all of the outstanding common stock of Rouse Commercial Properties, LLC, a Maryland limited liability company:

Rouse Commercial Properties, LLC owns all of the outstanding common stock of the following Maryland entities:

Hunt Valley Title Holding Company, LLC
Rouse Acquisition Finance, LLC
Rouse Commercial Finance, LLC

Hunt Valley Title Holding Company, LLC owns 5% of the outstanding common stock of Rouse-Teachers Holding Company, a Nevada corporation.

Rouse-Teachers Holding Company owns all of the outstanding common stock of Rouse-Teachers Land Holdings, Inc., a Maryland corporation.

11.

Gallery Maintenance, LLC owns all of the outstanding common stock of Rouse Gallery Management, LLC, a Maryland limited liability company.

12.

The Rouse Company of Alabama, LLC owns all of the outstanding units of membership interest of Rouse-Liberty Park, LLC, a Maryland limited liability company.

13.

The Rouse Company of California, LLC owns all of the outstanding common stock of each of the following Maryland limited liability companies:

Rouse-Palm Springs II, LLC
Rouse-Sacramento, LLC

14.

The Rouse Company of Florida, LLC owns all of the outstanding units of membership interest of each of the following entities:

Governor's Square, LLC, a Florida limited liability company
Howard Retail Investment Company, LLC, a Maryland limited liability company
New River Center, LLC, a Florida limited liability company
Rouse-Bayside, LLC, a Maryland limited liability company
Rouse-Coral Gables, LLC, a Maryland corporation
Rouse-Duval, LLC, a Maryland limited liability company
Rouse-East Jacksonville, LLC, a Maryland limited liability company
Rouse-Fort Myers, LLC, a Maryland limited liability company
Rouse-Governor's Square, LLC, a Maryland corporation
Rouse-Jacksonville, LLC, a Delaware limited liability company
Rouse Kendall Management Company, LLC, a Maryland limited liability company
Rouse-Miami, LLC, a Delaware limited liability company
Rouse-Orlando, LLC, a Delaware limited liability company
Rouse-Osceola, LLC, a Maryland limited liability company
Rouse-Tampa, LLC, a Florida limited liability company

Rouse-Bayside, LLC is the Sole Member of the following Maryland limited liability companies: Rouse-Tampa Acquisition, LLC, Rouse-Tampa Bay, LLC and Rouse-Tampa S Acquisition, LLC.

Rouse-Coral Gables, LLC owns all of the outstanding units of membership interest of Rouse-Coral Gables Property, LLC, a Maryland limited liability company.

15.

The Rouse Company of Georgia, LLC owns 50% of the outstanding units of membership interest of Perimeter Mall Facilities, LLC and Perimeter Mall Venture, LLC, both Delaware limited liability companies, and all of the outstanding units of membership interest of each of the following Maryland limited liability companies:

Augusta Mall, LLC
Outlet Square of Atlanta, LLC
Perimeter Center, LLC
Perimeter Mall, LLC
Perimeter Mall Management Company, LLC
Rouse-Atlanta, LLC
Rouse Columbus Square, LLC
Rouse Development Management Company, LLC
Rouse-Forsyth, LLC
Rouse South DeKalb, LLC
South DeKalb Mall Management Company, LLC

16.

The Rouse Company of Louisiana, LLC owns all of the outstanding units of membership interest of Rouse-New Orleans, LLC, a Maryland limited liability company.

17.

The Rouse Company of Massachusetts, LLC owns all of the outstanding units of membership interest of each of the following limited liability companies:

Faneuil Hall Marketplace, LLC, a Delaware limited liability company
Marketplace Grasshopper, LLC, a Maryland limited liability company
Rouse-Eastfield, LLC, a Maryland limited liability company

18.

The Rouse Company of Michigan, LLC owns all of the outstanding units of membership interest of each of the following Maryland limited liability companies:

Rouse-Ann Arbor, LLC
Rouse Southland, LLC
Rouse Southland Management Company, LLC
Southland Security, LLC

Rouse Southland, LLC owns 10% of the outstanding units of membership interest of Southland Center Holding, LLC, a Maryland limited liability company.

Southland Center Holding, LLC owns all of the outstanding units of membership interest of Southland Center, LLC, a Delaware limited liability company.

19.

The Rouse Company of Minnesota, LLC owns all of the outstanding units of membership interest of each of the following Maryland limited liability companies:

Ridgedale Shopping Center, LLC
Rouse-Maple Grove, LLC
Rouse Ridgedale Holding, LLC
Rouse Ridgedale Management Company, LLC
Rouse-St. Elmo, LLC

Rouse Ridgedale Holding, LLC owns all of the outstanding units of membership interest of Rouse Ridgedale, LLC, a Delaware limited liability company.

20.

The Rouse Company of Nevada, LLC owns 35% of Four State Properties, LLC, 29.79% of Rouse Fashion Show, LLC and all of the outstanding units of membership interest of each of the following entities:

10450 West Charleston Boulevard, LLC, a Nevada limited liability company
Cherry Hill Center, LLC, a Maryland limited liability company
Echelon Holding Company, LLC, a Delaware limited liability company
Echelon Mall, LLC, a Maryland limited liability company
Fashion Show Construction Management, LLC, a Nevada limited liability company
Harborplace, LLC, a Maryland limited liability company
One Willow Company, LLC, a Delaware limited liability company
Paramus Equities, LLC, a Texas limited liability company
Paramus Park, LLC, a Maryland limited liability company
Rouse F.S., LLC, a Maryland limited liability company
Rouse-Fashion Outlet, LLC, a Maryland limited liability company
Rouse-Las Vegas, LLC, a Nevada limited liability company
Rouse-Moorestown, LLC, a Maryland limited liability company
Rouse-Moorestown II, LLC, a Maryland limited liability company
Rouse-Valley Fair, LLC, a Maryland limited liability company
Rouse-Westdale, LLC, a Maryland limited liability company
Rouse-Wincopin, LLC, a Maryland limited liability company
TTC Member, LLC, a Maryland limited liability company
Two Willow Company, LLC, a Delaware limited liability company
The Village of Cross Keys, LLC, a Maryland limited liability company
White Marsh Mall, LLC, a Maryland limited liability company
Woodbridge Center, LLC, a Maryland limited liability company

One Willow Company, LLC owns all of the outstanding units of membership interest of Three Willow Company, LLC, a Delaware limited liability company.

Rouse F.S., LLC owns all of the outstanding common stock of FS Entertainment, Inc., a Nevada corporation.

FS Entertainment, Inc. owns all of the outstanding units of membership interest of FS Entertainment, LLC, a Nevada limited liability company.

TTC Member, LLC owns 1% of the outstanding units of membership interest of TTC SPE, LLC, a Maryland limited liability company, and 0.5% of the outstanding units of membership interest of Towson TC, LLC, a Maryland limited liability company.

The Village of Cross Keys, LLC is the sole trustee and shareholder of Mondawmin Business Trust and VCK Business Trust, both Maryland business trusts.

Mondawmin Business Trust is the Sole Member of Mondawmin, LLC, a Maryland limited liability company.

Four State Properties, LLC owns 99% of the outstanding units of membership interest in TTC SPE, LLC and owns all of the outstanding units of membership interest of each of the following Maryland limited liability companies:

Rouse-Bridgewater Commons, LLC
Rouse-Fashion Place, LLC
Rouse-Park Meadows Holding, LLC
Rouse-Towson Town Center, LLC

Rouse-Bridgewater Commons, LLC owns all of the outstanding units of membership interest of Bridgewater Commons Mall, LLC, a Maryland limited liability company.

Bridgewater Commons Mall, LLC owns all of the outstanding units of membership interest of Bridgewater Commons Mall Development, LLC, a Maryland limited liability company and Bridgewater Commons Mall II, LLC, a Delaware limited liability company.

Rouse-Park Meadows Holding, LLC owns all of the outstanding units of membership interest of Rouse-Park Meadows, LLC, a Maryland limited liability company.

Rouse-Towson Town Center, LLC owns 99.5% of the outstanding units of membership interest of Towson TC, LLC.

Towson TC, LLC owns all of the outstanding units of membership interest of Rouse-TTC Funding, LLC, a Maryland limited liability company.

21.

The Rouse Company of New Jersey, LLC owns all of the outstanding units of membership interest of each of the following Maryland limited liability companies:

Echelon Urban Center, LLC
Paramus Equities II, LLC
Paramus Mall Management Company, LLC
Rouse-Burlington, LLC
The Willowbrook Company, LLC
Willmall Holdings, LLC
Willowbrook Management Company, LLC

22.

The Rouse Company of New York, LLC owns all of the outstanding units of membership interest of the following Maryland limited liability companies:

Rouse SI Shopping Management, LLC
Seaport Marketplace, LLC
Seaport Marketplace Theatre, LLC
Seaport Theatre Management Company, LLC

23.

The Rouse Company of North Carolina, LLC owns all of the outstanding units of membership interest of Rouse-Charlotte, LLC, a Maryland limited liability company.

24.

The Rouse Company of Ohio, LLC owns all of the outstanding units of membership interest of each of the following entities:

Beachwood Place, LLC, a Maryland limited liability company
Cuyahoga Development Company, LLC, a Maryland limited liability company
Franklin Park Mall Company, LLC, a Maryland limited liability company
Franklin Park Mall Management Company, LLC, a Maryland limited liability company
Rouse-Cincinnati, LLC, a Maryland limited liability company

25.

The Rouse Company of Oregon, LLC owns all of the outstanding units of membership interest of each of the following Maryland limited liability companies:

Rouse Office Management of Oregon, LLC
Rouse-Portland, LLC

Rouse-Portland, LLC owns all of the outstanding units of membership interest of Pioneer Place Condominium Management, LLC, an Oregon limited liability company.

26.

The Rouse Company of Pennsylvania, LLC owns all of the outstanding units of membership interest of Whiteland I, LLC and Whiteland II, LLC, both Maryland limited liability companies.

27.

The Rouse Company of Tennessee, LLC owns all of the outstanding units of membership interest of Rouse-Brentwood, LLC, a Maryland limited liability company.

28.

The Rouse Company of Texas, LLC owns all of the outstanding units of membership interest of each of the following entities:

AU Management Company, LLC, a Texas limited liability company
Austin Mall, LLC, a Maryland limited liability company
Collin Creek, LLC, a Delaware limited liability company
Collin Creek Mall Management Company, LLC, a Maryland limited liability company
Collin Creek Plano, LLC, a Delaware limited liability company
North Star Mall, LLC, a Texas limited liability company
NS Management Company, LLC, a Texas limited liability company
Rouse Fort Worth, LLC, a Maryland limited liability company
Rouse-Highland, LLC, a Delaware limited liability company
Rouse Holding Company of Texas, LLC, a Texas limited liability company
Rouse-San Antonio, LLC, a Maryland limited liability company
Rouse-Southlake, LLC, a Maryland limited liability company
Rouse-Tarrant, LLC, a Maryland limited liability company
SDK Mall, LLC, a Texas limited liability company
South DeKalb Mall, LLC, a Texas limited liability company

29.

The Rouse Company of Virginia, LLC owns all of the outstanding units of membership interest of Rouse-Richmond, LLC, a Maryland limited liability company.

30.

The Rouse Company of Washington, LLC owns all of the outstanding common stock of Rouse-Seattle, LLC, a Delaware LLC.

31.

The Rouse Holding Company of Arizona, LLC owns all of the outstanding common stock or units of membership interest of each of the following Maryland limited liability companies:

Rouse-Arizona Center, LLC
Rouse Office Management of Arizona, LLC
Rouse-Phoenix Development Company, LLC
Rouse-Phoenix Parking, LLC
Rouse-Phoenix Parking Two, LLC
Rouse-Phoenix Two Corporate Center, LLC

32.

Rouse Investing Company owns all of the outstanding units of membership interest of Rouse-Wilmington Homes, LLC, a North Carolina limited liability company.

33.

Rouse Missouri Holding Company, LLC owns all of the outstanding units of membership interest of The Rouse Company of Missouri, LLC, a Maryland limited liability company.

The Rouse Company of Missouri, LLC owns all of the outstanding units of membership interest of The Rouse Company of St. Louis, LLC, a Maryland limited liability company.

33-1.    Rouse Oakbrook, LLC owns 50% of the outstanding units of membership interest of UC Oakbrook GenPar, LLC, a
            Delaware limited liability company.

34.

Rouse-Wates, LLC ("Rouse-Wates") and its consolidated subsidiaries are accounted for as a discontinued operation in the consolidated financial statements. Rouse-Wates owns all of the outstanding units of membership interest of Owen Brown B Development Company, LLC, a Maryland limited liability company.

35.

RREF Holding, LLC owns all of the outstanding units of membership interest of RII Holding, LLC, a Texas limited liability company.

36.

TRCD, LLC owns all of the outstanding units of membership interest of the following Delaware limited liability companies:

Austin Mall Company, LLC
Collin Creek Property, LLC
The Franklin Park Company, LLC
Mall St. Matthews Company, LLC
North Star Mall Company, LLC
One Franklin Park Company, LLC
One Gallery Company, LLC
Rouse Funding Company, LLC
Rouse Funding Two, LLC
TRCDE, LLC
TRCDE Two, LLC
TRCDF, LLC
Two Franklin Park Company, LLC
Two Gallery Company, LLC
Willowbrook Mall Company, LLC

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Exhibit 21

Subsidiaries of the Registrant

EX-23

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Exhibit 23

CONSENT OF INDEPENDENT AUDITORS

The Board of Directors
The Rouse Company:

        We consent to the incorporation by reference in the Registration Statements of The Rouse Company on Form S-3 (File Nos. 2-78898, 2-95596, 33-52458, 33-57707 and 333-67137), Form S-8 (File Nos. 2-83612, 33-56231, 33-56233, 33-56235, 333-32277 and 333-72256) and Form S-4 (File No. 333-01693) of our report dated February 20, 2003, except as to note 18, which is as of March 7, 2003, relating to the consolidated balance sheets of The Rouse Company and subsidiaries as of December 31, 2002 and 2001, and the related consolidated statements of operations and comprehensive income, changes in shareholders' equity and cash flows for each of the years in the three-year period ended December 31, 2002, and related schedules, which report appears in the December 31, 2002 Annual Report on Form 10-K of The Rouse Company.

Our report refers to the adoption by the Company of Statement of Financial Accounting Standards ("SFAS") No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, and the provisions related to the rescission of SFAS No. 4 of SFAS 145, Rescission of FASB Statements No. 4, 44 and 64 and Amendment of FASB Statement No. 13 and Technical Corrections, in 2002.

Baltimore, Maryland
March 25, 2003

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Exhibit 23

CONSENT OF INDEPENDENT AUDITORS

EX-24

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Exhibit 24

THE ROUSE COMPANY
POWER OF ATTORNEY

        KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned directors of THE ROUSE COMPANY, a Maryland corporation, constitute and appoint ANTHONY W. DEERING, THOMAS J. DEROSA and GORDON H. GLENN, or any one of them, the true and lawful agents and attorneys-in-fact of the undersigned, with full power of substitution and resubstitution, and with full power and authority (i) to sign for the undersigned, and in their respective names as directors of the Company, the Company's Annual Report on Form 10-K for the Fiscal Year Ended December 31, 2002 that is to be filed with the Securities and Exchange Commission, Washington, D.C., under the Securities Exchange Act of 1934, as amended, and the regulations promulgated thereunder, and any amendment or amendments to such Annual Report on Form 10-K, and (ii) to file the same, with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all acts taken by such agents and attorneys-in-fact, as herein authorized.

Dated: February 20, 2003

/s/  DAVID H. BENSON David H. Benson	(SEAL)
/s/  JEREMIAH E. CASEY Jeremiah E. Casey	(SEAL)
/s/  PLATT W. DAVIS, III Platt W. Davis, III	(SEAL)
/s/  ANTHONY W. DEERING Anthony W. Deering	(SEAL)
/s/  ROHIT M. DESAI Rohit M. Desai	(SEAL)
/s/  JUANITA T. JAMES Juanita T. James	(SEAL)
/s/  HANNE M. MERRIMAN Hanne M. Merriman	(SEAL)
/s/  ROGER W. SCHIPKE Roger W. Schipke	(SEAL)
/s/  JOHN G. SCHREIBER John G. Schreiber	(SEAL)
/s/  MARK R. TERCEK Mark R. Tercek	(SEAL)
/s/  GERARD J. M. VLAK Gerard J. M. Vlak	(SEAL)

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Exhibit 24

THE ROUSE COMPANY POWER OF ATTORNEY

EX-99.1

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Exhibit 99.    Additional Exhibits

        99.1    Form 11-K Annual Report of The Rouse Company Savings Plan for the year ended December 31, 2002

        99.2    Factors affecting future operating results

        99.3    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley
                    Act of 2002

Exhibit 99.1

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 11-K

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ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the fiscal year ended December 31, 2002 or

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TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from                  to                 

Commission File Number 0-1743

A.

Full title of the plan and address of the plan:

The Rouse Company Savings Plan
c/o Human Resources Division
The Rouse Company Building
10275 Little Patuxent Parkway
Columbia, Maryland 21044

B.

Name of issuer of the securities held pursuant to the plan and the address of its principal executive offices:

The Rouse Company
The Rouse Company Building
10275 Little Patuxent Parkway
Columbia, Maryland 21044

REQUIRED INFORMATION

        Since The Rouse Company Savings Plan (the "Plan") is subject to the Employee Retirement Income Security Act of 1974, the Plan financial statements for the fiscal year ended December 31, 2002 will be filed on or before June 30, 2003.

SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the Plan) have duly caused this annual report to be signed by the undersigned hereunto duly authorized.

	THE ROUSE COMPANY SAVINGS PLAN
Date:	March 26, 2003	By	/s/  KATHLEEN M. HART Kathleen M. Hart, Administrator
		and
Date:	March 26, 2003	By	/s/  PATRICIA H. DAYTON Patricia H. Dayton, Trustee

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Exhibit 99.1

FORM 11-K

EX-99.2

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Exhibit 99.2

FACTORS AFFECTING FUTURE OPERATING RESULTS

        This Form 10-K, our Forms 10-Q, our Annual Report to Shareholders or any Form 8-K of ours or any other written or oral statements made by or on behalf of us may include forward-looking statements that reflect our current views with respect to future events and financial performance. These forward-looking statements are subject to certain risks and uncertainties, including, but not limited to, those discussed below that could cause actual results to differ materially from historical results or anticipated results. The words "will," "plan," "believe," "expect," "anticipate," "target" and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The following are among the factors that could cause our actual results to differ materially from historical results or anticipated results:

Risks Related to Our Business

Our real property portfolio is affected by economic conditions, local real estate considerations and other factors

        The revenues and cash flow generated by, and the value of, our properties may be adversely affected by general economic conditions and local economic and real estate conditions, including:

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the perceptions of prospective tenants or purchasers of the attractiveness of a particular property;



•

the inability to collect rent due to bankruptcy or insolvency of tenants or otherwise; and



•

the level of operating costs.

        Other factors, including changes in tax laws, interest rates and the availability of financing, may also negatively affect revenues, cash flows and values.

        Decreases in consumer spending because of recessionary economic conditions, tight consumer credit policies or other factors could adversely affect our results of operations and cash flows. In addition, a portion of our rental revenue is derived from our tenant leases in retail centers which provide for rental payments based upon tenant sales in excess of specified levels, and decreases in consumer spending could reduce this rental revenue.

        Our business and operating results may be affected by a change in general economic conditions. For example, an increase in interest rates will affect the interest payable on our outstanding floating rate debt and may also result in increased interest expense if fixed rate debt is refinanced at higher interest rates. In addition, domestic or international incidents, such as terrorist attacks, could affect general economic conditions and our business.

We are dependent upon rental income from our retail centers and office/industrial buildings

        Our results of operations and cash flows are substantially dependent upon rental income from tenants in our retail centers and office/industrial buildings. We would be adversely affected if a significant number of our tenants were unable to meet their obligations or if we were unable to lease a significant amount of space in our properties on economically favorable terms. When a tenant defaults, we may experience delays in enforcing our rights as a landlord and may incur substantial costs in protecting our investment. In addition, the bankruptcy or insolvency or departure of a major tenant at one or more of our properties may have an adverse effect on those properties and could, among other things, make those properties less attractive to consumers or prospective tenants.

Uncertainty resulting from terrorist attacks and a decline in equity markets could hurt our operating results

        Following the September 11, 2001 terrorist attacks, there was considerable uncertainty in world financial markets. The full effect of these events, as well as concerns about future terrorist attacks, on the financial markets is not yet known but could include, among other things, increased volatility in the prices of securities. In addition, there have been significant declines in share prices on United States equity markets. These market conditions, together with the need for heightened security across the country, could contribute to a decrease in consumer confidence and a general slowdown in economic growth. If these circumstances reduce traffic flow at our retail centers, we could experience lower occupancy rates and rents in the future. These uncertainties could also materially adversely affect our ability to refinance maturing indebtedness or obtain favorable financing for our development activities.

        We were largely spared direct losses caused by the terrorist attacks of September 11, 2001. Operations were disrupted only at South Street Seaport, a retail center in lower Manhattan that we own and operate. The center was closed for a week following the attacks for use as a staging and rest area for rescue workers. It did not sustain significant physical damage. Customer traffic, tenant sales and rents at South Street Seaport are generally affected by the level of pedestrian and other traffic and other commercial activity in lower Manhattan. It is difficult to predict with certainty when, if ever, customer traffic, tenant sales and rents will return to historical levels. Customer traffic at our other retail centers was lighter than usual for several days after the attacks but has generally returned to normal levels at our surburban properties. Traffic at our urban specialty marketplaces is more dependent on tourism and continues to be lighter than historical levels. There can be no assurance that visitor activity at our urban specialty marketplaces will return to levels experienced before the attacks. Las Vegas, where we have a substantial concentration of assets, experienced a significant decline in visitor activity in the weeks immediately following the attacks but has since largely recovered.

Some of our properties are geographically concentrated and, as a result, are sensitive to local economic and real estate conditions

        Some of our properties are geographically concentrated. As a result, our results of operations from our office and industrial buildings and land sales depend on local economic and real estate conditions, including the availability of comparable, competing buildings and land. Most of our office and industrial buildings are located in the Baltimore-Washington region, including Columbia, Maryland, and in the Las Vegas, Nevada metropolitan area. Our land sales also relate primarily to land in and around Columbia, Maryland, and Las Vegas, Nevada. These office and industrial buildings and land sales are affected by economic developments in the Baltimore-Washington region and the greater Las Vegas, Nevada metropolitan area, and by local real estate conditions and factors such as applicable zoning laws and the availability of financing for residential and commercial development.

We are subject to extensive environmental regulation which could impose higher costs or liabilities on us

        We, as an owner, operator and manager of real property, are subject to extensive regulation under federal, state and local environmental laws. These laws are subject to change from time to time and could impose higher costs or liabilities on us.

        Under various environmental laws, a current or previous owner or operator of real property may become liable for the costs of the investigation, removal and remediation of hazardous or toxic substances on, under, in or migrating from that property. These laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the presence of the hazardous or toxic substances. The presence of hazardous or toxic substances, or the failure to

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remediate hazardous or toxic substances when present, may impair our ability to sell or rent the real property or to borrow using that property as collateral.

        Persons who arrange for the disposal or treatment of hazardous or toxic wastes may also be liable for the costs of the investigation, removal and remediation of such wastes at the disposal or treatment facility, regardless of whether the facility is owned or operated by that person. Other environmental laws require abatement or removal of asbestos-containing materials when demolishing, renovating or remodeling, impose worker protection and notification requirements and govern emissions of and exposure to asbestos fibers in the air.

        Environmental laws also strictly regulate underground storage tanks to prevent leakage or other releases of hazardous substances into the environment. We could be held liable for costs associated with the release of regulated substances or related claims because of our ownership, operation and/or management of properties containing underground storage tanks. In addition to remediation actions brought by governmental agencies, the presence of hazardous substances on a property could result in personal injury or similar claims by private plaintiffs. These claims could result in costs or liabilities which could exceed the value of that property.

        We generally conduct environmental reviews of properties that we acquire and develop. However, these reviews may fail to identify all environmental or similar problems prior to acquisition. We are not aware of any environmental condition, or notification by any private party or governmental authority of any non-compliance, liability or other claim related to any environmental condition at any of our properties that would require material expenditures by us. However, we could become subject to such claims or liabilities in the future.

Our Nevada properties are vulnerable to special local economic and environmental conditions

        We own significant properties in Nevada, including the following: approximately 2.2 million rentable square feet of office and industrial space primarily around Las Vegas; Fashion Show, a 1,518,000 square foot regional shopping center located on "the Strip" in Las Vegas, which is currently being redeveloped, and approximately 6,500 saleable acres of development and investment land located primarily in Summerlin.

        The Las Vegas metropolitan area is a desert environment where the ability to develop real estate is largely dependent on the continued availability of water. The Las Vegas metropolitan area has a limited supply of water to service future development, and it may not be successful in obtaining new sources of water. If new sources of water prove to be inadequate, our development activities could be adversely affected.

        The Las Vegas valley is classified as a serious PM-10 nonattainment area by the U.S. Environmental Protection Agency, or EPA. Both PM-10 and carbon monoxide are pollutants for which the EPA has established National Ambient Air Quality Standards. State Implementation Plans, known as "SIPs", have been developed by the Clark County Air Quality Management Board to maintain EPA standards for carbon monoxide and to achieve EPA standards for PM-10. The SIPs will affect the cost of development but are not expected to have a material impact. The SIPs have been deemed complete by the EPA and are subject to EPA approval. In the event the EPA does not approve the SIPs, federal sanctions for nonattainment or the imposition of a Federal Implementation Plan could adversely affect our real estate development activities in the Las Vegas valley.

        The rate of growth in the Las Vegas metropolitan area has been straining the capacity of the existing infrastructure, particularly schools, water delivery systems, transportation systems, flood control programs and sewage treatment facilities. Federal, state and local government agencies finance the construction of infrastructure improvements through various means, including general obligation bond issues, some of which require voter approval. The failure of these agencies to obtain financing for, or

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to complete, infrastructure improvements could materially delay our development efforts in the area or materially increase our development costs through the imposition of impact fees and other fees and taxes, or by requiring us to construct or fund portions of infrastructure.

        On February 15, 2002, President George W. Bush notified Congress that, based upon the recommendation of the Secretary of Energy, he recommended the Yucca Mountain site in Nevada to be a suitable location for a repository site for highly radioactive materials. Yucca Mountain is located approximately 100 miles from Las Vegas. In April 2002, the State of Nevada disapproved the site; however, under the applicable legislation, that disapproval was overridden when the site was approved by the U.S. House of Representatives on May 8, 2002 and by the U.S. Senate on July 9, 2002. For the project to proceed other approvals are necessary, including a license from the U.S. Nuclear Regulatory Commission. The location of a repository site at Yucca Mountain could have an adverse effect on the Las Vegas economy and on our properties in the Las Vegas area.

        A number of other states have legalized casino gaming and other forms of gambling. A number of states have also negotiated compacts with Indian tribes under the U.S. Indian Gaming Regulatory Act of 1988 that permit gaming on Indian lands. These additional gaming venues create alternative destinations for gamblers and tourists who might otherwise visit Las Vegas. These gaming venues could have an adverse effect on the Las Vegas economy and on our properties in the Las Vegas area.

        We understand that Nevada Power Company, the electric utility provider in Southern Nevada, is struggling to recover costs incurred when wholesale energy prices soared in the summer of 2001. In April 2002, the Public Utilities Commission of Nevada disallowed $437 million of a $922 million rate increase application filed by Nevada Power Company. We also understand, based on reports in the financial press, that Nevada Power Company may be experiencing some financial difficulties, which could impair its ability to do business. In addition to providing electricity, Nevada Power Company constructs infrastructure, such as transformer substations and distribution lines that serve development and investment land located in Summerlin. Any delay or failure of Nevada Power Company to construct infrastructure improvements or provide other utility services could materially delay our development efforts in the area and materially increase our development costs.

Our development projects are dependent on financing and governmental approvals and vulnerable to unforeseen costs, delays and uncertain revenue streams

        Our new development projects are dependent on:

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the availability of financing; and



•

the receipt of zoning, occupancy and other required governmental permits and authorizations.

        These projects may be vulnerable to:

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construction delays or cost overruns that may increase project costs;



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the failure to achieve anticipated occupancy or sales levels or to sustain anticipated occupancy or sales levels; and



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decisions not to proceed with projects, which will result in the write-off of costs.

We may develop new properties, and this activity is subject to various risks

        We intend to continue to pursue development and expansion activities as opportunities arise. In connection with any development or expansion, we will be subject to various risks, including the following:

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we may abandon development or expansion opportunities that we explore;

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construction costs of a project may exceed original estimates or available financing, possibly making the project unprofitable;



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we may not be able to obtain financing or to refinance construction loans, which generally have full recourse to us;



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we may not be able to obtain zoning, occupancy and other required governmental permits and authorizations;



•

rents and operating costs at a completed project may not meet projections and, therefore, the project may not be profitable; and



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we may not be able to obtain anchor, mortgage lender and property partner approvals, if applicable, for expansion activities.

        If a development project is unsuccessful, our loss could exceed our investment in the project.

Our properties are uninsured against certain catastrophic losses

        We carry liability, fire, flood, extended coverage and rental loss insurance on our properties with insurance limits and policy specifications that we believe are customary for similar properties. However, certain losses of a catastrophic nature, such as wars, earthquakes or other similar catastrophic events, may be either uninsurable or, in our judgment, not insurable on a financially reasonable basis. Since September 11, 2001, losses related to terrorism have become harder and more expensive to insure against, and we have generally not been able to obtain all risk insurance policies covering our real estate that include general coverage for terrorist acts. Rather, we now insure our properties against terrorism with an aggregate total limit of $100 million which is a lower level of coverage than before September 11, 2001. If a major uninsured loss occurs, we could lose both our invested capital in and anticipated profits from the affected property. Therefore, we are at risk for financial loss in excess of these limited amounts for terrorist acts as defined by the policies, which loss could be material.

        Many of our debt instruments, including our mortgage loans secured by our properties, which are generally non-recourse to us, and our revolving credit agreement, contain customary covenants requiring us to maintain insurance. The lenders under these instruments may take the position that our coverage for losses due to terrorist acts fails to meet covenant requirements and therefore is a breach of these debt instruments that allows the lenders to declare an event of default and accelerate repayment of the debt. In addition, lenders' requirements regarding coverage for these risks could adversely affect our ability to finance or refinance our properties and to expand our portfolio.

We invest in real estate investments which may be illiquid

        Real estate investments are relatively illiquid, and some of our properties are subject to restrictions on transfer. This illiquidity tends to limit our ability to vary our portfolio promptly in response to changes in economic or other conditions. In addition, significant expenditures associated with each real estate investment, such as mortgage payments, real estate taxes and maintenance costs, are generally not reduced when circumstances cause a reduction in revenue from the investment. If revenue from a property declines while the related expenses do not decline, our earnings, cash flow from operations, and cash flow available for distribution to our stockholders would be adversely affected. A significant portion of our properties are mortgaged to secure payment of indebtedness, and if we were unable to meet our mortgage payments, we could lose money as a result of foreclosure on the properties by the various mortgagees. In addition, if it becomes necessary or desirable for us to dispose of one or more of the mortgaged properties, we might not be able to obtain a release of the lien on the mortgaged property without payment of the associated debt. We own several of our properties jointly with other partners. Contractual arrangements with joint owners may also limit our ability to transfer, sell or refinance these properties without the consent of third parties.

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We are subject to competition from other participants in the real estate industry

        We face considerable competition from other developers, managers and owners of real estate in pursuing leasing and management revenues, land for development, property acquisitions and tenants for properties. We may not be successful in responding to or addressing competitive conditions.

We are a real estate investment trust and will continue to be subject to complex current and future tax requirements

        We began operating as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended, on January 1, 1998. We may in the future become owned and organized, or operate, in a manner so as to disqualify us as a REIT. In order to qualify for and maintain our REIT status, we must meet organizational and operational requirements. We believe that our organization and method of operation enable us to meet the current tax law requirements for qualification as a REIT. However, qualification for REIT status requires compliance with complex limitations on the type and amount of income and assets that a REIT may receive or hold.

        In order to maintain our REIT qualification, we must make distributions to our stockholders, aggregating annually at least 90% of our REIT taxable income (which does not include net capital gains). The actual amount of our future distributions to our stockholders will be based on the cash flows from operations, from properties and from any future investments and on our net taxable income. We could have taxable income without sufficient funds to enable us to meet the distribution requirements applicable to a REIT. As a result, we may have to borrow funds or sell investments on less than favorable terms or pay taxable stock dividends to meet distribution requirements.

        If we fail to maintain our qualification, as a REIT, we would have to pay federal income tax, including any applicable alternative minimum tax, on our taxable income at corporate rates. In addition, under current law distributions to our stockholders would no longer be deductible. Unless entitled to relief under statutory provisions, we would also be disqualified from treatment as a REIT for the four taxable years following the year in which qualification was lost. This treatment would reduce our cash flow, as well as net earnings available for investment or distribution to stockholders, because of the additional tax liabilities for the year or years involved. Moreover, during any period of disqualification, we would no longer be required by the Internal Revenue Code to make any distributions as a condition to REIT qualification. To the extent that distributions to stockholders would have been made in anticipation of our continuing to qualify as a REIT, we might be required to borrow funds or liquidate investments on adverse terms to pay the applicable tax.

        Future economic, market, legal, tax or other considerations may cause us to determine that it is in our best interest and the best interest of our shareholders to revoke our REIT election. We would then be disqualified from electing treatment as a REIT for the four taxable years following the year of the revocation.

Stock market fluctuations may affect the value of the assets in our qualified defined benefit pension plan and we may elect to make additional contributions to the plan to maintain or improve the funded status of the plan

        In February 2003, our Board of Directors approved modifications to curtail our defined benefit pension plans so that covered employees will not earn additional benefits for future services. However, benefits that covered employees have earned through the modification date are payable upon separation or retirement from the Company. A portion of the assets that will be used to satisfy earned benefits of our qualified defined benefit pension plans include marketable equity securities. Stock market declines may affect the value of these marketable equity securities and may require us to make additional discretionary contributions to fund the pension liabilities or pay benefits.

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Risks Related to the Acquisition of Assets From Rodamco

Properties designated for sale which were acquired jointly may not be sold on the anticipated time schedule or at the prices expected

        We, Simon Property Group, Inc. ("Simon") and Westfield America Trust ("Westfield") have agreed to own jointly some of the properties acquired in the acquisition of assets from Rodamco. We and the other two purchasers have designated some of these jointly-owned properties for sale or other disposition. We will not have independent control over the timing and manner of the sales of the remaining properties, but rather will have to make decisions jointly with the other two purchasers. These sales will be, in many cases, subject to consent or first refusal rights that may delay the sale or reduce the expected price. As a result, we cannot be certain as to the timing or terms of any potential sale of these assets.

We share control of some of the acquired properties with the other two purchasers and may have conflicts of interest with those purchasers

        We own a number of the acquired properties jointly with Simon and Westfield. The consent of each of the other purchasers could be required with respect to managing, financing, encumbering, expanding or selling any of these properties. We might not have the same interests as the other purchasers in relation to these properties. Accordingly, we might not be able to favorably resolve any of these issues, or we might have to provide financial or other inducement to the other purchasers to obtain a favorable resolution.

        In addition, various restrictive provisions and approval rights apply to sales or transfers of interests in the jointly-owned properties. Among other things, we might be required to make decisions about buying or selling interests in a property or properties at a time that is disadvantageous to us.

We may be responsible for unknown material liabilities

        We may be exposed to liabilities relating to Rodamco that we may have failed to discover prior to completion of the acquisition of assets from Rodamco. These liabilities may include liabilities that arise from noncompliance with environmental laws by prior owners for which we, as a successor owner, will be responsible. Our purchase agreement with Rodamco does not provide for indemnification of us by Rodamco. Rodamco has already distributed to its shareholders substantially all of the proceeds paid to Rodamco for the assets and is currently winding up operations in connection with its dissolution.

We acquired partnership interests with existing partners who have tax protection arrangements in place

        We acquired our interests in some former Rodamco properties by acquiring interests in existing partnerships. These existing partnerships have arrangements in place that protect the deferred tax situation of existing third party limited partners. Violation of these arrangements could impose costs on us. As a result, we may be restricted with respect to decisions such as financing, encumbering, expanding or selling these properties.

We may not be able to achieve the anticipated financial and operating results from our newly acquired assets

        We believe that the acquisition from Rodamco will enhance our future financial performance, including our net earnings, cash flow from operations and Net Operating Income. This belief is subject to risks, uncertainties and other factors, many of which are beyond our control, that could cause actual results to differ materially from anticipated results. In addition, this belief is based on certain

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assumptions, many of which are forward-looking and uncertain in nature, including assumptions regarding our ability to:

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integrate and manage our new properties in a way that will allow us to realize cost savings and synergies;



•

increase the occupancy rates and rents at our new properties;



•

dispose of the assets which are intended to be sold within the periods and on the terms we currently anticipate; and



•

raise long-term financing that will allow us to implement a capital structure at a cost of capital consistent with our objectives and expectations.

        Factors that could cause our actual results to differ from our beliefs include the factors discussed in this Exhibit. As a result of the risks and uncertainties attendant with the forward-looking statements described above and their underlying assumptions, investors should not rely upon our forward-looking statements as predictions of actual results.

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Exhibit 99.2

FACTORS AFFECTING FUTURE OPERATING RESULTS

EX-99.3

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Exhibit 99.3

Certification Pursuant
to 18 U.S.C. Section 1350,
as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002

        In connection with the Annual Report of The Rouse Company (the "Company") on Form 10-K for the period ended December 31, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Anthony W. Deering, Chief Executive Officer of the Company, certify to the best of my knowledge after a review of the Report, and pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

        A signed original of this written statement required by Section 906 has been provided to The Rouse Company and will be retained by The Rouse Company and furnished to the Securities and Exchange Commission or its staff upon request.

/s/  ANTHONY W. DEERING Anthony W. Deering
Chairman of the Board,
President and Chief Executive Officer
March 26, 2003

Certification Pursuant
to 18 U.S.C. Section 1350,
as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002

        In connection with the Annual Report of The Rouse Company (the "Company") on Form 10-K for the period ended December 31, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Thomas J. DeRosa, Chief Financial Officer of the Company, certify to the best of my knowledge after a review of the Report, and pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

        A signed original of this written statement required by Section 906 has been provided to The Rouse Company and will be retained by The Rouse Company and furnished to the Securities and Exchange Commission or its staff upon request.

/s/  THOMAS J. DEROSA Thomas J. DeRosa
Vice Chairman and Chief Financial Officer
March 26, 2003

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Exhibit 99.3

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002